From November 2008, Tim Harcourt, Austrade’s Chief Economist will have a special column at the ABCC Newsletter: “The Airport Economist Goes to Rio“. We thank Tim for his passion for the Latin American Region and for his monthly articles.
By Tim Harcourt
Chief Economist
Australian Trade Commission
Sydney
www.austrade.gov.au/economistscorner
My first visit to Brazil was to Porto Alegre, the host city of the ‘World Social Forum’ – a sort of development focussed version of the World Economic Forum meetings at Davos. All the leading lights were there including famous intellectuals like Noam Chomsky, as were many NGOs, environmental groups and social activists. One speaker I met at the Forum was a metal worker union leader from the favellas named Luis de la Silva, who was quite an impressive orator.
As it happens, that same union leader went on to become Brazil’s President. President de la Silva (better known as ‘Lula’) led his PT (Workers party) to victory taking over from the two-term Social Democrat President Fernando Cardoso. Despite some initial market jitters Lula has carried on the fiscal responsibility of his predecessor and has combined market-based reform with progressive social policies.
As a result, Brazil has experienced falling unemployment and a steady growth rate of between three and four per cent per annum, which is about average for the Latin American region. Lula has also been keen to press for more trade negotiations – particularly within the Americas – and to provide economic leadership within the region and at the WTO.
So how has Australia benefited from Brazil’s economic development? Of course primary industry has been dominant in terms of agriculture, mining and related services and technologies. In addition, Australia also has links with Brazil’s vast manufacturing sector (in areas such as food and beverage and metals engineering).
Infrastructure is also an important area for Australian business in Brazil. For instance, Australian railway industry executives regularly visit Brazil’s freight railways which are owned by mining companies rather than the states. There are also opportunities for joint projects in ethanol, as well education, logistics, telecommunications and professional services.
According to Mark Argar, of Austrade Sao Paulo, it won’t take much for Australia to be further involved in the Latin American giant: “Brazil has an explosive energy, and with its sheer size in terms of geography and industrial capacity, there’s plenty of scope for Australian businesses to get a slice of the action. Agribusiness, mining, food and beverage, infrastructure, environmental management and education are key areas for Australian exporters in Brazil in particular and Latin America as a whole,” he explained.
This year, Lula won re-election as Brazil’s first working class President. And unlike in 2002, Brazil did not win the world cup so there’s was no football fever effect to take political advantage of (which is a big deal in such a football-mad country). This time, Lula had to rely on Brazil’s credentials in economic performance not football wizardry. Let’s hope Brazil’s economic resurgence continues so that more Australian exporters ‘go to Rio’ in the future.
Tim Harcourt is chief economist at Austrade and author of Beyond Our Shores
www.austrade.gov.au/economistscorner
