By Professor Trevor Grigg
Queensland has traditionally been the most active State in Australia in terms of engagement with Latin America at both the State Government and business levels. The University of Queensland (UQ) has also long acknowledged the important synergies and potential for collaborative research, capacity building, and student mobility with the region and is actively engaged with a number of Latin American countries including Chile, Brazil, Peru, Colombia and Mexico.
UQ has established a Latin America Reference Group (LARG) which seeks to coordinate UQ activity across the region in a strategic way. This is being achieved through a business development model based on the following:
Collaborative research capacity development
Human Resource capacity development
English language capacity building
Regional development capacity building
Social capital capacity building.
The UQ relationship with Brazil is long standing and was initially focused around the enthusiasm and contacts of several UQ Brazilian academics especially in earth sciences, mining and metallurgy and engineering. In more recent years the level of engagement has been strengthened through a coordinated, whole of UQ engagement.
The engagement strategy has included the signing of several key agreements with a number of selective research intensive Brazilian universities and the key Brazilian Agricultural Research Corporation (EMBRAPA). More recently UQ has been developing a strong relationship with the State of Minas Gerais as part of a sister State relationship between the Queensland State Government and the State of Minas Gerais. The early focus of collaborative activity is mining and metallurgy where Queensland and Minas Gerais have strong synergies.
UQ has also been actively developing research linkages with Brazil under the DEEWR funded International Science Linkages Program. Brazil is the first Latin American country to be a beneficiary under this program with the respective governments agreeing to research collaboration in agriculture, biotechnology, mining, bio fuels and nanotechnology.
In late October 2008, EMBRAPA and UQ re signed an MOU in the presence of The Australian Ambassador to Brazil, HE Neil Mules. The Agreement identified specific areas for future collaboration and the signing of the MOU will provide an important platform in this regard. UQ has recently opened a $33 million state-of-the-art Centre for Advanced Animal Science (CAAS) in partnership with the Queensland Government Department of Primary Industries and Fisheries at its Gatton campus. The University has also commenced construction of major new education and research facilities for its School of Veterinary Science at this campus at a total estimated cost of around $100 million. Both facilities are of strong collaborative interest to Embrapa.
UQ is committed to continuing to develop targeted strong relationships with Brazil at the government, university and industry level. The Agreement with EMBRAPA is particularly important given the strong synergies in agriculture and animal production between Queensland, Australia and Brazil. These synergies provide many opportunities for identification and development of joint research projects. The University of Queensland has a long tradition of leading edge research in agriculture and animal production and more recently in some of the newer areas including nanotechnology and plant biotechnology. Brazil also has leading edge research and technology especially in bio fuels and there is considerable potential for mutually beneficial research, knowledge and technology transfer.
Student mobility is also an important focus of UQ’s engagement with Brazil with the majority of Brazilian students at UQ undertaking higher research degrees. A lack of fluency in the Portuguese language is a barrier to outward mobility by UQ students looking to study in Brazil however in the future it is anticipated that this will change, especially where Brazilian universities are offering subjects taught in English.
UQ’s engagement with Brazil is underpinned by strong government and diplomatic support, through the assistance of the Brazilian Ambassador to Australia and the Brazil Australia Chamber of Commerce and the ongoing level of pro activity by the Queensland State Government in Brazil.
Ambition: The Emerging Foreign Policy of the Rudd Government
In a new Lowy Institute Analysis, Allan Gyngell, the Executive Director of the Lowy Institute, examines the Rudd Government’s foreign policy after 12 months. He sees its defining feature as its ambition. It seeks for Australia a shaping role in addressing a number of urgent international challenges. These include the creation of new global and regional institutions, the reinvigoration of nuclear disarmament and the successful negotiation of a new instrument to address climate change. Kevin Rudd dominates the formulation of Australian foreign policy more securely than any of his predecessors. He came to office with a well developed world-view, centered on the consequences for Australia of the emergence of an ‘Asia Pacific century’. He is the first Australian Prime Minister born after the Second World War and the first whose views have been shaped essentially by the rise of China. Rudd’s foreign policy includes strong elements of continuity. But in contrast with the strategy of the Howard Government, which sought to advance Australia’s interests by leveraging a few key relationships with large partners, Rudd’s strategy requires extensive coalition building and a diplomacy with global reach to support it. The final judgments about its success will rest on whether the Government can get the balance between ambition and implementation right.
The analysis can be downloaded at http://www.lowyinstitute.org/
BLOG: http://www.lowyinterpreter.org/
The Airport Economist goes to Rio:
Latin lessons from the global financial crisis
By Tim Harcourt
Chief Economist
Australian Trade Commission Sydney
www.austrade.gov.au/economistscorner
The Global Financial Crisis – a tale of two road shows.
2008 has been the year of living dangerously for the global economy. In fact, the extent of how much has changed on the global economic front can be book marked by two road shows I have participated with two eminent American economists over the past 12 months.
The first road show was with Stephen Roach of Morgan Stanley Asia in December 2007. At that stage we had just heard the beginning on the sub-prime story (I first heard about it at the OECD from Dr Adrian Blundell-Wignall a well known Australian economist) and the thesis the Roach was tackling was ‘Asian Decoupling’ – the view that East Asia (and Australia) could somehow escape from the downturn in the US and possibly Europe. Roach believed that if you believe de-coupling then you can’t subscribe to the theory of globalisation. He predicted that the US was headed for a crisis and that Asia – including China – would not escape.
Moving on 10 months later, the world has moved on at a rapid rate. The second road show was with another eminent US economist David Hale in October, 2008. A Chicago-based economist, David Hale was in Australia as part of the Australian Export Awards, in his capacity in October as an economic adviser to the Commonwealth Bank. By October, we all knew about sub-prime, we’d seen the collapse of Lehman brothers and very different bailouts on both sides of the Atlantic. Whilst Hale did not subscribe to Asian de-coupling he did believe that East Asia was going to survive the global economic slowdown in better shape than the US and Europe and some emerging economies such as Russia.
Accordingly, all the major private forecasters and the IMF has dramatically revised their forecasts for the global economy. The IMF described the world economy as now entering “a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s.” After four years plus 5 per cent growth rates – with the global economy in its best shape in 30 years – the IMF now expects the world economy to grow at 3 per cent in 2009, with the advanced economies at 0.5 per cent and the emerging and developing economies growing at 6.1 per cent. Of course, the forecasts are greatly varied across regions and subject to major local factors as well as the global head winds affecting the whole world community.
How will Australia fare?
Australia is better placed than most OECD economies to handle the crisis? Why?
Firstly, the Australian economy is in a strong position with positive economic growth prospects (2.5 per cent over the coming year according to latest International Monetary Fund forecasts), low unemployment (4.3 per cent, seasonally adjusted according to the latest Australian Bureau of Statistics data), a strong budget surplus and banks that have healthy balance sheets by global standards.
Secondly, Australia’s export diversity is also in our favour. Australia’s share of good exports to developing countries has risen from 53 per cent compared to 43 per cent 10 years ago. Australia’s trade action is now occurring outside the G7 and given that the developing world is increasing its influence in terms of contributions to global GDP. To date, the emerging markets have been less affected by the credit crisis relative to the USA and Europe.
Thirdly, Australia’s economic foundations have made us an attractive market for foreign direct investment (FDI) and our own financial services sector is also strengthening in its own right. Australia’s financial markets have combined assets of more than $4.2 trillion and the world’s fourth largest pool of funds under management globally (which now exceeds $A1.2 trillion).
Finally, Australia’s economic institutions from financial regulation to the labour market have placed us in a good position. We’ve dealt with our own financial weaknesses before with the state banks and our own external crises (like the Asian financial crisis of 1997) and learnt from experience. We’ve also seen the benefits of the floating exchange rate regime both in 1997 and now, where the Australian dollar takes on the burden of adjustment rather than the whole economy. One price adjusts instead of the whole range of prices and quantities in the domestic economy.
One institutional reform we should also be grateful for is the independence of our central bank, the Reserve Bank of Australia (RBA). And it is significant that the RBA was the first to act with a lowering of the cash rate by a full percentage point – a move that was followed by central banks around the world.
However, there is a reason to be concerned on the export front as credit is likely to be restricted in this uncertain environment. This may put exporters at a disadvantage as Austrade research shows that lack of finance is a major barrier to exporting and exporting small and medium enterprises (SMEs) are less likely to receive credit than other SMEs. However, mitigating this constraint is that evidence that exporters are, on average, more profitable than other businesses and they grow faster, are more productive and provide more job security than other businesses. In addition, the lower Australian dollar will assist the nominal competitiveness of exporters and the relative attractiveness of Australia as a target for FDI.
How will Latin America fare?
Latin America is no longer the place it was in the 1970s and 1980s. Economic reforms and political reforms have put it in a stronger position to absorb the credit crunch. However, many Latin America economies are commodity-driven economies, and like Australia, will feels the affects of lower prices for their exports, lower terms of trade and possible impact on their currencies. Financial institutions are stronger in Latin America than they have been historically, but with Argentina the exception with its financial institutional weakness.
The IMF has downgraded its forecast for Latin America, but it is still expected to regionally achieve an economic growth rate of 4.6 per cent this year and 3.1 next year. Peru leads the pack and is expected to grow by 9.2 per cent this year and 7 per cent next year, Argentina 6.5 and 3.6, Brazil 5.2 and 3.5, Chile 4.5 and 3.8, and Mexico (with its dependence on the USA market) 2.1 and 1.8. Colombia is an emerging economy but still expects to grow by 4 this year and 3.5 next year. Inflation is also a concern in the region with the IMF upgrading its forecasts from the early 5s to high to mid 7s in 2008 and 2009.
How will the crisis affect Australian-Latin American relations?
In some ways, we’re both in the same camp as commodity-based economies forging trade links with Asia, Europe and the USA. There was a time when Australia and Latin America were considered to be substitutes but now we are complements. In some ways, Australia has been a model economy for many Latin American economies – particularly Chile to emulate. In addition, many of the similar strengths in areas like mining, services to mining, agribusiness, and viticulture have provided opportunities for collaboration and joint ventures.
What opportunities will emerge in the Latin American landscape for Australian businesses?
Despite the global downturn, if we take a quick scan around the region, we can see some good opportunities for Australian exporters and investors.
First there’s the big ‘Latin 4’ to consider – Brazil, Mexico Argentina and Chile. Historically, the big 4 have produced more than 80 per cent of Latin American gross domestic product and 90 per cent of Australia’s trade with Latin America.
In Brazil, Australia companies are involved heavily in mining, and resources related-railway infrastructure, agribusiness, along with education and tourism. Climate change will bring its challenges to Brazil and its fledging ethanol industry and Australia – particularly the state of Queensland, led by its America’s Trade Commissioner and former Premier Peter Beattie – is playing an active role.
Secondly, in Mexico, mining technology and consumers goods and services to Mexico’s growing middle class. However, Mexico with its close trade links to the USA will be the most impacted by the sub-prime impact north of the border.
Thirdly, Chile is continuing to play its role as the unofficial ‘gateway’ to Latin America for Australian businesses – over 60 Aussie companies now are based in Santiago. In many ways Chile is the South American ‘Jaguar’ to Asia’s Tigers!
Fourthly, Argentina, the last of the big 4 is having its financial problems yet again. However, Australian businesses in niche areas are still making headway such as in agribusiness in the Pampas with animal genetics (Ar-gene-tina) and viticulture in the vineyards of Mendoza (sometimes known as the ‘Barossa of Argentina’).
In addition, some of the adjoining economies in the Andean states are also emerging. As we saw at the APEC Summit in Lima, Peru is becoming a ‘mini-Chile’ in terms of mining and investment. In addition, agribusiness (particularly dairy) education and tourism are growing areas too.
Finally, Austrade Americas Regional Director Grame Barty likes to extend the Latin 4 to the Latin 6 to include both Peru and Colombia. Barty sees Colombia becoming a rising start in mining, agricultural science and education as it aims to shed some poor nation perceptions of its past.
Conclusion
Australian exporters successfully dealt with the Asian financial crisis of 1997-99 and the dot.com crash of 2001 due to their own endurance, innovation and ability to forge lasting business relationships and the flexibility of the exchange rate to take on the burden of adjustment to insulate the Australian economy. The Latin American economies have withstood endless hardships and instability in the past but due to economic reforms of the 1990s, have fared better. Whilst with the credit crunch, we are heading into unchartered waters but the hard work of economic reform, our stronger trade links with the emerging economies and the benefit of experience with past crises, means Australian and Latin America can have some confidence we can both ride out the storm.
