This is my first visit to Brazil. Hard though it is to believe, it is also the first bilateral visit by a serving British Prime Minister.
Brazil is a country of superlatives. Resources and ambitions of continental proportions. Diversity and talents the rest of the world can only envy. Here in Sao Paulo, the largest Japanese population outside of Japan. To the North, the world's largest and richest rainforest. Rivers to rival the greatest in the world; unsurpassed natural beauty and a vibrant and unique culture.
But Brazil, like Britain, is above all a dynamic entrepreneurial society. Trade and investment have brought us together. As the world's fourth and ninth largest economies, we are partners in the international community.
Our links go back nearly five centuries, almost to the first discovery by Europeans of Brazil itself. In 1530, one of my more enterprising countrymen, John Hawkins, landed in Brazil. Then, the journey took 50 days of hazardous navigation. Today, the same trip takes an overnight flight.
In times of need, Britain and Brazil have stood side by side. In the darkest days of the Battle for the Atlantic, when German U-Boats threatened Britain's very lifeline to the New World, the Brazilian navy took part in the hazardous Atlantic convoys, shepherding vital supplies to the Allied forces in Europe. And Brazilian pilots flew with distinction alongside Allied colleagues.
But trade and investment have been the common thread in the enduring relationship between our two countries. British companies have been in Brazil for years; in the case of Lloyds and Rothschilds over a century. For over a hundred years, the British invested in Brazil's railways, ports, power plants, communications, mining, insurance and banking; partners in Brazil's industrial revolution.
Today, trade between our countries is worth ??2 billion a year. Brazil is our largest trade partner in Latin America. 18 British trade missions came here last year alone. Over 100 British companies attended the Oil and Gas Show in Rio. Ours is a strong partnership, based on business co-operation.
Let me give you some examples. British oil companies are today applying North Sea expertise to assist Petrobas with deep-sea drilling. Enterprise Oil's US$600 million investment in the Bijupira Salema field will help contribute US$2.9 billion to Brazil's GDP. The Anglo-Dutch oil company Shell and the BG Group were both involved in building the Brazil-Bolivia gas pipeline.
In manufacturing, Rolls Royce supplies the engines for Brazil's world-beating Embraer aircraft which I will be seeing tomorrow. The engine for the new Mini, that icon of British industrial design, is being built in Curitiba. And the quintessentially British Landrover is now assembled here in Sao Paulo.
British companies are showing their confidence by investing in Brazil. Two investments alone - HSBC's purchase of Banco Bamerindus and BG Group's of Comgas - were worth US$1 billion each. In 1998 Glaxo opened a US$200 million pharmaceutical plant in Brazil.
Twenty years ago, the British-Brazilian relationship was very different. Britain was a mature economy dealing with the consequences of industrial change. Brazil was a promising developing country.
But today, President Cardoso and I are tackling many of the same challenges. Promoting both economic dynamism and social justice. Reforming the education system so that all children have the same chances in life. Modernising the healthcare system so that it provides choice and high quality care to everyone. Extending opportunity to all and not just the privileged few - because no country in today's world can afford to squander the natural talents of its people.
These are the priorities of reforming centre left governments across Europe, Latin America, Asia and elsewhere. The values of the centre left remain the same, but the approach is less ideological, more pragmatic. In this new politics, the market is an ally not an enemy. We understand the benefits of open markets. We have seen how they boost growth, create jobs, raise living standards. How they develop and strengthen the middle classes who underpin political pluralism, democracy and the rule of law. But we believe also in an active civic society, founded on the basis of solidarity, that provides a helping hand for people to realise their potential.
That is why progressive governments in Europe and Latin America are responding to the challenges of globalisation not by resisting change, but by pushing ahead with economic reform.
Here in Brazil, the renewed British commercial interest is a testament to the reforms the government has driven through in recent years. You embraced change courageously. President Cardoso's Real Plan provided the foundation for economic stability. Inflation is down from four digits to one, and Brazil's markets are more open to trade and investment than ever before. Your government continues to tackle the barriers to business - and I know that British business is keen to see this extend to the complexities in the taxation system, the regulatory regime and the labour markets.
I know how tough the conditions imposed by the energy shortage are right now in Brazil. The path to economic development is never smooth. Yet the combination of short and long term measures announced a few weeks ago is surely right. Reform, not retreat into the past, is the answer; opening up new sources of energy and a new energy market.
Economic reform is now the agenda for European economic policy also.
The best way to reach full employment is not state intervention. It is by focusing on training, education, human capital; reforming welfare systems so they provide a hand up not a hand out; pursuing policies that make it easier for entrepreneurs to start businesses, not harder.
Barcelona next year is make or break for economic reform in Europe - a real test of our collective European leadership. We already have a strong package of structural reforms, to modernise Europe, increase employment and promote growth. But we need to deliver it.
The key goals the UK will seek are:
* Opening up of European networks, in energy, technology and through the single sky;
* Cutting the cost of investment capital, through financial services liberalisation and pension reform;
* More competition, lower prices and less red tape;
* More jobs, through labour mobility and labour market reforms;
* More innovation, by building European networks of excellence in frontier technologies such as biotechnology; and
* More open trade, including with key regional groups like Mercosul.
Progress in all these areas is essential to build a successful knowledge-based economy in Europe, with full employment and social justice.
Mercosul is a natural partner for the EU. Mercosul is already the world's fourth largest integrated market. Economic growth has averaged 3.5% a year. Intra-regional trade has risen by some 200 per cent in the past five years.
But along with reform within our regional blocs, we need improved trade between them.
Britain has been one of the strongest advocates within Europe of a Free Trade Agreement between the EU and Mercosul. It is an ambitious goal, but a serious one. And serious negotiations are underway. I hope that we will see substantial progress by the next EU/Latin America Summit in Madrid next May.
And just as EU/Mercosul trade talks make sense, the EU/US trade relationship also stands to gain from further liberalisation. As I set out in the speech I gave in Ottawa in February, and as Gordon Brown reiterated in New York last week, we need to think how to strengthen this relationship even further. We also need to find ways of improving how we tackle the inevitable trade disputes which occur. EU/US trade tensions can affect not just the bilateral relationship, but the wider trade environment as well.
A successful Free Trade Agreement of the Americas will, too, have a huge impact on liberating trade in your Hemisphere.
So what we are seeing is an expanding network of more stable and open trading relationships within and between regions. This stability and openness will make it easier to manage economic change, not only in Brazil and Argentina but across Latin America.
But some of the biggest prizes can only be gained through a new global Round of trade negotiations. A global Round will extend the benefits of freer trade to all countries - building on this network of regional agreements. And only a global Round can provide the context for real liberalisation of agriculture markets - the big prize for countries like Brazil. The UK is a longstanding advocate of agricultural reform in Europe. We will continue to press for major change to the CAP - phasing out price support and putting European farming on a truly sustainable footing. But the launch of a new trade Round in Doha this November would give a major boost to this process.
Britain and Brazil have a common interest in working to realise the estimated $400 billion increase in global income which a new Round may bring - something all the more important at a time of possible slow-down in the world economy. This is why the EU and Brazil are working together to get the new Round launched.
Trade above all illustrates the benefits of international co-operation. Over the past half a century successive world trade rounds have led to greater prosperity and a more level playing field for developed and developing countries alike.
And the benefits of international co-operation go beyond trade.
Take climate change, an issue that knows no borders. The only effective response is global. The agreement reached in Bonn last week on the Kyoto protocol is a significant step forward for controlling and reducing emissions of greenhouse gases. It demonstrates what can be achieved when we act together.
For our part, Britain stands ready to ratify Kyoto and meet its targets, demanding though they are.
Here in Brazil, the Clean Development Mechanism of the Kyoto Protocol will provide financial incentives for UK and other companies to invest in renewable energy and energy efficiency. Brazil will get a more secure energy supply while at the same time helping to prevent global climate change.
It is only by working together globally that we can hope to address the global issues. That is why I reject the arguments of those who demonstrate against the G8, the WTO, the EU - and in some cases use violence to try to prevent their meetings.
Democracy, economic liberalisation, stability and regional leadership are the hallmarks of modern Brazil, and the reasons why my country, and international investors, regard you as such an important partner and I want to pay fulsome tribute to Fernando Henrique Cardoso's role in this achievement.
Change has been hard. There will be more change, more challenges, in the years ahead. But through change, Brazil and the region will grow stronger.
Today, Brazil is one of the European Union's leading partners. In the years ahead, Mercosul and the EU will, I believe, co-operate ever more closely. More and more, the issues that concern us in Europe and Latin America will be the same. And increasingly, the ways of tackling them will be through international co-operation, within regions and between regions.
Just looking a few months ahead, the relationship between the EU and Mercosul will be crucial both to launching the next trade round and in making a success of next year's Rio+10 Environment Conference.
And as the European Union and Latin America play an ever greater role in international affairs, Britain will be at the heart of that growing relationship.
There are many challenges ahead. But I am proud to say that increasingly, Britain and Brazil will face them together.