Peter Beattie writes to ABCC: Feed Back on the Queensland Trade Mission to Latin America
The emerging business and investment opportunities in Brazil, Chile, Peru, Colombia and Mexico are too often underestimated in Australia despite the economic facts. As a result Queensland, Victoria and South Australia in partnership with Austrade are now looking beyond the crude, out-of-date characterisations of Latin America to the hard realities of the significant opportunities and in doing so are encouraging Australian companies to do business there. Queensland’s focus is on what I describe as the Latin super-five of Brazil, Chile, Peru, Colombia and Mexico. Austrade adds Argentina to form a six-pack of countries.
These five countries offer unprecedented opportunities for Australian companies and it doesn’t require a leap of faith. Rather it simply requires a hard-headed evaluation of these markets and our corporate boardrooms putting aside the out of date perceptions of Latin America which have been around almost as long as Columbus himself.
Australia needs to join the push into Latin America or we will be left behind the Canadians, Europeans and of course the Americans. Often misconceptions die hard but we cannot allow them to stand in the way of sound business opportunities.
The world is rapidly changing and we have to keep up with the new markets. This is not to understate the world’s economic woes or the US recession, rather to acknowledgement that recession is also a time to be strategic and plan for the future. It is a time to look forward, not backwards. It is a time for Australia to look to Latin America. The opportunities are powerful.
In Chile, the state-owned copper miner Codelco is talking expansion and growth. Earlier this year they announced they would be employing an additional 10,000 workers in new projects this year. Supported by a government approved US$2 billion capital expenditure budget under its belt for 2009, the world’s largest copper producer is also not anticipating any layoffs.
Growth. New projects. More jobs. These are rare concepts at a time of economic crisis but they are music to the ears of Australia’s/Queensland’s mining equipment technology and services industry.
Such are the opportunities in Latin America that I took a delegation of 16 export-focussed Queensland companies through Latin America from the 8th to the 20th of March, all keen to seek out new markets for their innovative and world-class products.
The delegation visited Mexico, Brazil, Colombia and Chile.
Many Australians would regard it bizarre that during the world’s worst economic conditions for decades, Trade Queensland and these 16 companies would contemplate undertaking such a mission. But they would also find it strange that a Chilean mining company would be gearing up for expansion.
It is not insanity, it is strategic. Queensland is moving into these emerging markets to get ahead of the pack, just as we did in China and India. Securing deals in these new markets equates to jobs for Queensland families. All of the companies participating in this mission should be congratulated for their vision. They are; Ausenco, Cardax, Connell Wager, GHD, Ground Breaking Innovations, GroundProbe, Industrea, Laser Services, Ludowici, Noja Power Switchgear, NQ Survey Supplies, Power Step, Sinclair Knight Merz, Wagners Global Services, Invest Brisbane and the Australian Institute of Management.
In Mexico Queensland signed a formal Statement of Intent with the United Mexican States. The agreement is designed to encourage cooperation in the mining sector, facilitate further business related links and enhance trade and investment between Queensland and Mexico. While it is good for Queensland it is also good for Australia.
The Colombian leg of the mission included an almost hour long meeting with the President of Colombia, Alvaro Uribe. He is a transformational leader - when he came to office in 2002 his country was dominated by drug lords and guerrillas and he's changed it to a safe, dynamic and globally focused country. And Australian/Queensland companies are realizing that there is a new and different Colombia with which to do business.
This was my fourth visit to Colombia in ten months and at no time have I felt unsafe or at risk as I traveled extensively in the country. During that time Queensland has developed very important links which have opened up this emerging market to our companies. The fact that so many forward-thinking companies joined me for the Colombian visit shows the level of interest. And the reasons are simple - Colombia has a population of 48 million people and there are enormous opportunities in mining equipment and services, in development of infrastructure like road, rail and ports and in energy. On top of that the Uribe government is very business friendly and has put in place a range of policies to encourage foreign investment.
Luis Guillermo Plata, the Colombian Minister of Trade, Industry and Tourism visited Queensland and Australian from 12-14 March as a direct result of an invitation Queensland and the Australian Ambassador issued to him last year in Cartagena. While Queensland had a delegation of businesses in Colombia, Minister Plata had a delegation of Colombian businesses in Australia.
My commitment to the region is long standing. In 2004, as Premier of Queensland, I led a mission to Chile and Brazil, becoming the first Australian leader to meet Brazil’s President, Luis Inacio da Silva. By the end of my first year as Commissioner I will have visited each of these countries at least twice, some three times and Colombia 4 times.
It is worth noting that these particular countries have generally stable political and economic environments and are increasingly looking to open up to the world with effective pro-foreign investment policies.
All of these countries are strong in mining and so compatible with Australia and the expertise and skills of our companies. Opportunities extend beyond mining too. As ambitious and outward looking countries, they have a strong desire for improved and expanded infrastructure. This means companies with expertise in ports (land and sea), rail, road, tunnels; rapid transit systems and the latest ticketing technology can do deals in Latin America. The same goes for energy and research collaboration. And all of these countries support public private partnerships.
My Prediction:
Notwithstanding the fact that the region may face declining capital inflows as a result of the world economic crisis, if its enormous potential is combined with the fact that Latin America is not as intrinsically tied to the western capital markets as many other countries, in my view, Latin America will eventually become a new mini-China in ten years. Commentators will then be saying, where did Colombia’s economic growth come from and how did Brazil, Chile and Peru grow their economies so quickly? Companies that didn’t twig earlier will then be hoping it’s not too late to get into the market.
Of course, Latin America won’t escape the economic crisis but recent comments by the Executive Secretary of the UN Economic Commission for Latin America and the Caribbean Alicia Bárcena are reassuring. She says all the major countries have taken steps to offset the negative impact. Mexico, Chile and Colombia in particular have already approved budget laws for 2009 and economic packages which include increases in public spending - that will be financed without external debt - to moderate the expected fall in private economic activity.
Estimates using IMF figures show these initiatives will keep the major Latin America economies growing in 2009, albeit more modestly. Peru is looking at GDP growth of 5% and Brazil 2.1%. Latin America as a whole is expected to grow at 1.9%. Challenging but still growing.
Brazil:
Brazil is the largest of the Latin super–five.
The ‘B’ in BRIC (the others being Russia, India and China), Brazil has undergone a significant move towards modernisation driven by a more liberal trade regime, deregulation and privatisation and Australia/Queensland is generally well known in Brazil for the quality of its mining and mining services
Brazil is interested in diversifying its sourcing of equipment and services and Australia’s sound reputation in this area gives Queensland companies a good chance of winning business.
The need for new equipment and the development of new Brazilian mines and exploration is expected to increase significantly in the next few years. This means Australian opportunities from this increased mining activity, where there will be a tendency to outsource services and equipment
Through a special agreement with the State of Minas Gerais, which I signed as Premier, Queensland is uniquely placed to help our companies with access to this much prized market. Minas Gerais, like the name says, is a mining state. It’s home to Vale, the world’s second largest mining company. It’s also prosperous with the third largest economy in Brazil, accounting for nearly 9% of national GDP.
Opportunities exist in mining services and technology, but also infrastructure (air and sea ports, road, and rail) energy and research in partnership with the Federal University and the FDC Business School.
Education opportunities are also strong. During a visit in October 2008 an agreement was signed between the Federal University of Minas Gerais and the University of Queensland. Latin American students studying in Australia is growing strongly.
There are some predictions that by 2050 the largest economies in the world will be as follows: China, United States, India, Japan, Brazil and Mexico. Mexico is currently the 12th largest economy in the world as measured in gross domestic product in purchasing power parity.
This is very different to the perception, and as I said earlier Australia needs to deal with the reality.
If you look at the countries set to dominate the global economy by 2050, Australia already has deep links with China, India, Japan and the US. Queensland is working very hard to do the same with Brazil and Mexico, and the other key Latin American countries.
Latin America will eventually become a new mini-China. We can’t afford to miss out on the opportunities on offer right now. We can’t afford to be left behind.
Source: Peter Beattie - Queensland’s Trade and Investment Commissioner to the Americas
