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Renewed UK interest in South America

In political terms, apart from the Falkland Islands issue, UK relations with South America have been generally positive and “recent visits from U.K. government representatives hint at a renewed interest in South America”, according to Juliana Bertazzo, an associate at the London School of Economics and an associate fellow at the Institute for the Study of the Americas at the University of London.

“The most significant recent event is a new rapprochement between the UK and individual South American countries after Argentina’s latest attempt to gather multilateral support for its Falklands/Malvinas Islands claim”, points out Ms Bertazzo.

The government of President Cristina Fernandez has expressed outrage at the UK decision to support the Falklands’ offshore oil and natural gas exploration round and military exercises around the Islands, and has managed Mercosur and the Union of South American Nations (UNASUR) declarations in support of Argentina’s claims.

Furthermore individual nations promised to deny entry to their ports for UK ships bound to or from the Falklands, and to report shipments of oil and natural gas from the Islands.

“However, the British government has been successful at establishing cooperation, for instance, with Colombia, in the fight against drug trafficking, with Bolivia and with Brazil, on a number of issues, including business opportunities involved in hosting the Olympic Games”, indicates Ms Bertazzo.

But in spite of the diplomatic overture, UK is still lacking strongly in trade terms. The UK share of trade with Brazil, Latin America’s largest economy is a modest 2% compared for example to the 20% of the country with China and the US. And trade relations with Argentina, the second economy in South America, are even more insignificant.

“About half of the exports from South American countries to the UK are commodities, but the other half includes valuable semi-manufactured and manufactured goods, such as airplanes, which are one of the top 20 products that Brazil exports to the U.K”, said Ms Bertazzo adding that “the U.K. in turn exports the fungicides and machines that keep agriculture going in Brazil, as well as mechanical parts and automobiles made from the mining goods imported from Brazil”.

However, when it comes to Argentina, the second-largest country in South America, “the U.K. has little to show in terms of trade, even after the U.K. lifted its arms embargo on Argentina in 1998, bilateral trade did not grow very much”.

Political scientist Bertazzo adds that the UK recently singled out Brazil as one of the “High Growth Markets” where it hopes to do more business since Brazil is the largest trading partner of the Mercosur countries (Argentina, Paraguay and Uruguay) and also of other South American countries, except for those that have free trade agreements with the US or NAFTA.

But so far, UK does not compare well with other major actors in terms of trade: “while the UK share of Brazilian trade is roughly 2%, the U.S. and China have a combined share of around 20% of the balance of trade and are close competitors for first place”. Brazil is China’s 10th largest trade partner, and the volume of their bilateral trade by far exceeds that of UK-China trade.

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Uruguay and Chile, providing expert advice on property acquisition and investment tours.

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