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ALABC's monthly newsletter, "Latam News," keeps members and supporters abreast of developments taking place in the Latin American markets. Locked articles can be read by paid ALABC members, including Individual, SME, Corporate and Patron.

Industry News

03

Pacific Alliance Free trade agreement

1July 2017

Minister for Trade, Tourism and Investment, The Hon Steven Ciobo MP, announced on July 1 the launch of Free Trade Agreement negotiations between Australia and the Pacific Alliance - the Latin American trading bloc made up of Mexico, Chile, Peru and Colombia.

Australia is one of the first countries to launch FTA negotiations with the Pacific Alliance.

Minister Ciobo said a successful free trade agreement would help lift high tariffs on Australian beef, dairy and service exports like mining. He went on to add that an FTA with the Pacific Alliance trade bloc "will create new export opportunities" for many Australian sectors.

The media release issued by the Minister can be found at: Pacific Alliance Free Trade Agreement negotiations 


30

ALABC Latin America Infrastructure Forum - Address by Alberto Calderon, CEO, Orica Limited

23 May 2017  


Good evening everyone, and I would like to acknowledge the many representatives from the governments of Australia, Victoria, Peru, Colombia, Argentina, Brazil, Ecuador, Chile, Mexico, and of course, the representatives of the Australia-Latin America Business Council. I thank you all for your company tonight.  

It is a pleasure to be here this evening.  

I’m particularly pleased to be among this gathering as a proud Latin American, born and raised in Colombia. But also as a Latin American who has had the privilege of working across a number of geographies, including Colombia, North America, the UK and Australia.  

Introduction: Orica in Latin America  
I’ve been CEO of Orica for just on two years now, and it’s the most geographically diverse organisation of any I’ve seen, serving customers across around 100 countries.  

We also have a substantial Latin American footprint. We employ around 2,500 people across Brazil, Chile, Cuba, Colombia, Venezuela, Panama, Peru, and Argentina, in manufacturing centres and on customer sites. We work with customers in the copper, thermal coal, gold, iron ore, and quarrying and construction industries.  

In the last financial year, our Latin American business accounted for around 17% of our global explosives volumes and 18% of Orica’s revenue, so it is a significant part of our global business.  

Latin America and Australia  
My career has introduced me to experiences across the globe and I have come to appreciate points of similarity and advantages of and across all the different economies and cultures in which Orica operates. In particular, given my personal heritage and my life here, I have come to appreciate the similarities and advantages shared by Latin America and Australia.  
   
I have also gained an ever increasing understanding of how the criticality of the resources industry is often both under- appreciated and misunderstood, despite resources being the lynchpin of economic and social development.  

For example, what do Chile, Colombia, Peru and Australia all have in common? Firstly, in each country, resources account for more than 50% of their exports1. Secondly, there is a general understanding that mining and related industries support the economy, whether by way of jobs, royalties and taxes, the flow on effect to local suppliers, as well as the introduction into the economy of increased skills, foreign investment, and expertise. In fact, you could argue that without the significant contribution of the resources sector in these countries, the respective current account balances would likely become unsustainable, host currencies would come under significant pressure, and government deficits would almost certainly grow. So across these nations, it is undeniable that the resources industry is a positive contributor to standards of living.  

Now we all know that China’s industrialisation led growth from the early 2000s until the end of 2011 created an unprecedented commodity price boom that we all benefited from, particularly in Australia where iron ore and coal are abundant and high in quality. Those record high prices are now over of course, as the demand and supply fundamentals for bulk resources like iron ore and coal moved toward equilibrium.  

While the pricing outlook for metals and mining globally remains subdued, as China moves from the industrialisation phase into one of consumption-led growth2, the next phase marks an opportunity for Latin America, given its substantial endowment of middle-income commodities, in particular copper.  

This optimism for the long term copper outlook sits on the back of China’s economic progress and the increasing movement of its populace into the middle class. In fact, you can reliably track the peaking demand from steel making commodities such as iron ore and coking coal, to more consumer product inputs such as copper and aluminium, by looking at GDP per capita. Demand for copper plateaus much later in the industrialisation cycle, compared with the bulk commodities.  

Steel intensity tapers off when GDP per capita reaches around the US$15,000 level (on a Purchasing Power Parity basis), while copper demand keeps growing until GDP per capita hits between US$30,000 and US$40,000.  

China accounts for around 45% of global refined copper demand, and by the end of 2015, its GDP per capita was around US$14,4503. Gold has similar market dynamics to copper.  

So while the last phase of the mining cycle was a boon for Australia, the future for mining in Latin America is probably the brightest in the mining industry globally.  

Like Australia, the Latin American mining nations are sophisticated, world class resources leaders.  Australian and Latin American mining companies have partnered and collaborated successfully for decades. Outside of mining, Latin America and Australia share similarities that make natural business partners. Of course I am speaking generally about Latin America, knowing that there are many differences across particular countries in the region.  

But – in general – like Australia, the nations of Latin America have been generally welcoming and understanding of the importance of foreign direct investment as an economic accelerator.  

Similarly, both Australia and our major Latin American trading partners are committed to free trade and open markets. In fact, Latin America has played a fundamentally important role in driving global free trade – an agenda that is critical to Australia’s economic health and wealth. This includes the development of a number of bilateral agreements Australia has with Latin American nations. Like Australia, most Latin American nations have open investment regimes, stable and pro-business governments and, of course, the abundance of natural resources that make the region an attractive investment destination for the extractive industries.  

Shared challenges  
With the good we also share industry challenges. Australia and resources capitals like Chile, Peru, Brazil and Argentina are grappling, to varying degrees, to compensate for the impact falling commodities prices have had on mining royalties and national balance sheets. Governments across the mining globe ignored warnings that resources will ever be a cyclical business and they allowed boom time revenues to become baked into forward budget estimates. 

In mining specifically, declining ore grades, resources that are increasingly more difficult to access, labour productivity, industrial relations issues and higher expectations from host communities and governments are increasingly challenging issues shared by Australia and Latin America, and indeed, by any country with a rich resources endowment.  

In a lower commodity price environment, productivity growth is essential. A recent McKinsey Global Institute discussion paper on Latin America’s growth opportunities found that while in developing countries overall, productivity grew at 3.9 per cent annually and per capital GDP at 4.2 per cent between 2000 and 2015, Latin America’s equivalent figures were 0.6 per cent and 1.6 per cent4. And Australia’s Multifactor Productivity Growth is only slightly better, at 0.9%.  

The figures are telling, and show a critical need for the region to focus on productivity initiatives. In my experience, while the burden of increasing productivity has to be borne by industry, governments have a role to play in ensuring the right industry-friendly structures are in place to ensure both the attraction of long term investment (based on having the confidence that business will be internationally competitive), and that businesses are free to take productivity actions. This particularly relates to labour laws that enable flexibility.  

There are other, emerging challenges in the Latin American region. The United States remains the region’s biggest trading partner and there is no doubt that U.S. international trade policies still require clarification under its new government. A border tax, if enacted, would certainly be difficult for the region, as would any moves towards more protectionist, domestic policies. These two issues alone would be significant for the region.  
Encouragingly however, both Australia and the Latin American nations have governments and industry who are highly experienced at managing through complex issues. And despite the challenges, I remain optimistic about Latin America’s resilience in the near term, and its growth opportunities over the medium to longer term.  

Rising above the challenges  
As I mentioned earlier, China’s transition to a consumption-based or middle income economy will drive demand for base metals, such as copper and aluminium, to the benefit of those countries that hold the resources, such as Chile and Peru.  

China has developed a voracious appetite for commodities. It has overtaken the US as the world’s biggest commodities importer, despite the fact that US imports grew threefold over the last 20 years. China now consumes almost half of the world’s refined copper, and is the world’s largest copper importer, with a 45% share5. China is also a major trading partner of Australia, Brazil, Peru and Chile6, so its fortunes and ours are strongly correlated.  

As China’s GDP per capita signals a move to the middle class, demand grows for middle class – or lifestyle – products, such as cars, air conditioners, mobile technology and household electronics, that require copper and other base metals as core components. This is now happening in China.  

In addition, the global rise in renewable energy and electric vehicles provides massive opportunities. To illustrate, the rapid uptake of electric vehicles has been boosted by faster than anticipated developments in lithium ion batteries. While there are around 1 million electric vehicles on the roads today, Wood Mackenzie estimates this to grow to around 100 million electric vehicles by 2035. Why is this good for copper? Copper intensity for electric vehicles is far greater than in standard vehicles, with transmission, charging and manufacture consuming 80 kilograms of copper per electric vehicles, compared to just 20 kilograms of copper for standard vehicles. This could rise even further if there is additional demand for renewable energy charging stations.  

In fact, we know that Renewable energy will be a growing component of our energy diets. And this is also good news for copper, because copper is a highly efficient conduit that is also a key input into renewable energy systems that generate power from solar, hydro, thermal and wind energy. In many renewable energy systems 12-times more copper is used than in traditional systems to ensure efficiency7. This provides an incredible opportunity for the Latin American nations that are exporters of copper ores and concentrates, including Chile, Peru, and Argentina8.  

The short term  
But all that is over a longer, 5 plus year’s horizon. What of the immediate future?  

Orica’s customers on either side of the Pacific are pursuing essentially the same strategies to rationally extend the productive life of their mature assets.  

The key point of focus is productivity improvements that serve to defend and enhance returns from legacy assets in these times of low commodities prices.  
                                                          
The Latin American extractive industries will continue to look for innovative and proven ways to strengthen the sector’s resilience, efficiency and profitability throughout the cycle. Counterintuitively perhaps, the lower commodity price environment presents opportunities for Australian businesses with the right skills and experience to work with Latin American companies in this effort.  

Orica, for example, is increasingly focused on working with our customers to develop better outcomes in productivity, costs and safety, and in minimising environmental impacts through advanced blasting.  

The real positive here for mining companies seeking to improve their productivity, is that the cost of explosives as a percentage of ore value is low, but an improvement in blasting outcomes can be leveraged into significant productivity benefits through improved mill throughput, maximising recovery, reduced energy usage, among other benefits. Blasting represents less than 4% of total mine costs, but it can positively impact 60% of costs, through improved fragmentation, vibration, increased throw, et cetera, which can be leveraged for significant productivity benefits9.  

The actions being taken by our customers in Latin America mirror those across our Australian customer base, essentially because both are world class mining regions that are looking for innovative ways to increases mining productivity. This also means we are able to easily and effectively share experiences and lessons across the Pacific, for the benefit of Australian and Latin American customers.  

Orica has operated in Latin America for around 30 years, and my whole career in resources has bridged Australia and Latin America. Both my and Orica’s experiences have been the same. In short, while there are language and cultural differences between the Latin American nations and Australia, in business and in attitudes towards business, in welcoming foreign investment, and in the skills and expertise of its workforce and enterprise leadership, the similarities outweigh all else.  

Let me end this speech with some personal reflections about Australia. Since 2010 I’ve been very happy to call Melbourne home. Melbourne is a long way from Colombia and Latin America, but its tradition for welcoming foreigners is well known. It has actually welcomed South Americans since the beginning, Australia’s third Prime Minister, John Christian Watson, was born in the Chilean port city of Valparaiso, immigrating to Australia as a 21 year old in 188610.  
                                                          
When I arrived in Melbourne seven years ago my first major speech was here, with ALABC. So of course the opening lines had to do with footy, and what team had I chosen. I made then the joke that I would not make today. I said, I followed the advice of a good friend, “anyone but Collingwood”. And I say that I would not make it today because through the years I have come to understand the intricate and profound role that footy plays in society. Some of my best friends are Collingwood supporters and, yes, they have teeth… 

They didn’t have a choice, it comes with the blood, it is deeply engrained in the family. I live close to the MCG and I still marvel at the size of the crowds, the roars of the fans, but mostly I marvel at how the families exit with a smile, peacefully, win or lose. I probably have to add that I couldn’t make the joke today after the thrashing that my team, Geelong, suffered some weeks ago at the hands of Collingwood.  

Anyway… I also touched in my speech about my first impressions of this vast land of opportunity. How the mining boom was elevating the economy and touching so many lives for the better. This country, rich but still young in the industrial sense, vibrant, felt so pleasantly distant to the European continent I had left. Seven years have passed, and the easy charm of Melbourne and Australia has bewitched me and, if the government doesn’t keep changing the rules, I plan to apply for permanent residency next year.  

Unfortunately, something else has changed in the past decade. The two engines of growth in the past decade, mining and housing, are not what they used to be. China is still growing at relatively high rates, but they have moved on into the second stage of development, which means that the commodities that Australia has, iron ore, metallurgical coal etc, will still be important contributors but will not see again the boom of the first years of this century. Nor will investment in these sectors keep pulling the economy along. The same can be said about housing. The largest sector in the GDP accounts, Ownership and Dwellings, contributed 10% of the growth in 2015. Construction came a strong second.  

The most common theme of conversation in Melbourne, housing prices, leads to passionate debates. Maybe we will see some correction, maybe they will stagnate.  

What is clear is that with a world record household debt over income of more than 200%, with the highest housing stock valuation to GDP in the world (3.5), with banks with 30% to 50% of their loans using the financially intriguing “interest only loans” that can only be repaid if the market keeps going up, with all of these factors the growth in real estate prices will not be the source of wealth creation that it has been during the past twenty years, nor will it be a pillar of growth.  

There is another silent sign that things are not like they used to be. The underemployment rate, those who want to work full time but can’t find enough work, has reached almost 10%, the highest level since they began tracking this statistic – 1980. The highest hit cohorts, the under 24 and the over 45, are a particular worry. This is the main reason why real wages are not growing, nor will they grow at the 3% rates that for example the Government’s budget estimates.  

So what has to be done? The conditions need to be created for the private sector to invest, to innovate, to grow. Corporate taxes are the highest in the OECD, consumption taxes the lowest. This punishes investment and rewards consumption. We need to do the opposite. Make this boundless country as competitive as possible, and incentivise productivity to unleash its undoubtable potential. Unfortunately, we seem to be following the path of France and other developed low growth countries. Higher taxes on investment, higher government spending, crowding out of the private sector. One of the doyens of Australian journalism, Paul Kelly, wrote a column last week that I would like to quote: “The edifices of Australia’s aspirational politics and market based reforms are being torched in an end of generation bonfire. Occasionally in a nation’s history you can identify a point of transformation and it is likely that this week is such a marker…Politics is now a contest about the nature of tax increases, the scope of monumental social spending initiatives and the type of government intervention”.  

Daily life is enormously pleasant and easy in Melbourne. The economy is still growing and we have now the world record for the longest years without a recession. Maybe we will extend this for many years. But let’s not fool ourselves. The dynamic, vibrant economy that I saw when I first came is not present any longer. Our economy will look more and more like France, not like Singapore. But this is not inevitable; this can be changed. My words have the hope that we can all commit to not giving up, to keep dreaming and fighting for that country that we know we can be. Thank you very much.  

 


25

Australia–Peru aviation agreement signed

  • Bilateral agreement on air services signed in Canberra today, facilitating opportunities for new services between Australia and Peru
  • Agreement will support Australia's tourism industry, encourage investment and improve cultural and people-to-people links

Australia and Peru have signed an agreement to formally establish a treaty-level air services framework between the two countries for the first time.

Peru's Minister of Foreign Trade and Tourism Eduardo Ferreyros Kuppers joined Federal Minister for Infrastructure and Transport Darren Chester in signing the agreement at Parliament House in Canberra today.

“This Agreement further strengthens bilateral relationships between our two countries, and will enable increased tourism and trade opportunities,” Mr Chester said.

“Both Australian and Peruvian airlines will be able to provide air services between countries either using their own aircraft or via code share arrangements with other airlines.

“Australia and Peru have enjoyed a strong tourism, trade and investment relationship which has continued to grow. In 2015, there were 3,500 short-term arrivals to Australia from Peru, an increase of 12.7 per cent on the previous year, while nearly 40,000 Australians visited Peru.

“It's great to see growing connections between our two countries. Inbound and outbound tourism benefits both countries, whether that be giving local business new opportunities right through to sharing each of our cultures.

“I am delighted to see this agreement signed and I look forward to welcoming the people of Peru to our great country in coming years.”


25

Australia and Peru sign Work and Holiday arrangement


Australia and Peru sign Work and Holiday arrangement

Peru has today become the latest country to sign a reciprocal arrangement with Australia, allowing young people from both countries to visit each other’s nations under the Australian Government’s work and holiday arrangements.

Assistant Minister for Immigration and Border Protection, the Hon Alex Hawke MP, today signed a Memorandum of Understanding (MoU) with the Peruvian Ambassador to Australia, His Excellency, Mr Miguel Palomino.

The arrangement allows young people from Peru, aged between 18 and 30, to apply to stay in Australia for one year and undertake short-term work and study. The same reciprocal conditions also allow young Australians to work and holiday in Peru.

Mr Hawke welcomed the new arrangement as it would enhance the already warm relations between the nations.

“The Work and Holiday programme gives young Australians and Peruvians the opportunity to apply for a unique cultural exchange experience,” Mr Hawke said.

“These arrangements strengthen the positive relationship between our countries and will further build economic and people-to-people links in South America.

“We will be working closely with our Peruvian counterparts to establish a mutually agreed start date for this arrangement as soon as possible.”

The arrangement will be capped at 100 places each year.

The signing ceremony formed part of the programme of a Peruvian delegation led by the Minister for Foreign Trade and Tourism, Mr Eduardo Ferreyros Küppers.

The commencement date will be announced on the Department’s website: http://www.minister.border.gov.au/alexhawke/2017/Pages/australia-and-peru-sign-work-and-holiday-arrangement.aspx


Assistant Minister for Immigration and Border Protection, the Hon Alex Hawke MP, today signed a Memorandum of Understanding (MoU) with the Peruvian Ambassador to Australia, His Excellency, Mr Miguel Palomino.

The arrangement allows young people from Peru, aged between 18 and 30, to apply to stay in Australia for one year and undertake short-term work and study. The same reciprocal conditions also allow young Australians to work and holiday in Peru.

Mr Hawke welcomed the new arrangement as it would enhance the already warm relations between the nations.

“The Work and Holiday programme gives young Australians and Peruvians the opportunity to apply for a unique cultural exchange experience,” Mr Hawke said.

“These arrangements strengthen the positive relationship between our countries and will further build economic and people-to-people links in South America.

“We will be working closely with our Peruvian counterparts to establish a mutually agreed start date for this arrangement as soon as possible.”

The arrangement will be capped at 100 places each year.

The signing ceremony formed part of the programme of a Peruvian delegation led by the Minister for Foreign Trade and Tourism, Mr Eduardo Ferreyros Küppers.

The commencement date will be announced on the Department’s website: http://www.border.gov.au/Trav/Visa-1/462-.  

Assistant Minister for Immigration and Border Protection, the Hon Alex Hawke MP, today signed a Memorandum of Understanding (MoU) with the Peruvian Ambassador to Australia, His Excellency, Mr Miguel Palomino.

The arrangement allows young people from Peru, aged between 18 and 30, to apply to stay in Australia for one year and undertake short-term work and study. The same reciprocal conditions also allow young Australians to work and holiday in Peru.

Mr Hawke welcomed the new arrangement as it would enhance the already warm relations between the nations.

“The Work and Holiday programme gives young Australians and Peruvians the opportunity to apply for a unique cultural exchange experience,” Mr Hawke said.

“These arrangements strengthen the positive relationship between our countries and will further build economic and people-to-people links in South America.

“We will be working closely with our Peruvian counterparts to establish a mutually agreed start date for this arrangement as soon as possible.”

The arrangement will be capped at 100 places each year.

The signing ceremony formed part of the programme of a Peruvian delegation led by the Minister for Foreign Trade and Tourism, Mr Eduardo Ferreyros Küppers.

The commencement date will be announced on the Department’s website: http://www.border.gov.au/Trav/Visa-1/462-.  


25

Major sporting events in Latin America offer opportunities for Australia

The Buenos Aires 2018 Youth Olympic Games and the Lima 2019 Pan American Games are providing a range of opportunities for Australian businesses.

The sporting events require architects, designers, construction companies, event planners and producers among other services.

Marie Hill, Austrade’s Trade Commissioner for Peru, said Australia is internationally known for its depth of experience in all aspects of staging major sporting events.

‘Australian companies have played key roles at major sporting events including Summer and Winter Olympic Games, Commonwealth Games, FIFA and Rugby World Cup tournaments and the Asian Games,’ said Hill.

‘They have assisted with all aspects of major sporting events from initial construction and planning to Olympic torch design to opening and closing ceremonies.

‘With proven capabilities and a demonstrated record in helping host nations deliver successful events, Australian businesses are ideally suited to assist in Latin America, as event organisers call for tenders and secure suppliers,’ added Hill.

In Buenos Aires, Argentina, host of the 2018 Youth Olympic Games from 30 September-12 October 2018, infrastructure opportunities include the development of new facilities and upgrading existing venues.

Key projects include Argentina’s Olympic Park which encompasses an athletics venue, aquatic centre and playing fields for several sports like hockey, where Australia’s expertise in developing such facilities is internationally recognised. Suppliers of sports material and equipment are also in demand.

The 2019 Pan American Games and Para-Pan American Games held in Lima, Peru from 26 July-11 August 2019, offer a variety of opportunities for Australian suppliers to assist with infrastructure, equipment and services.

COPAL, the Organising Committee of the Lima 2019 Pan American Games, will use the Canadian Commercial Corporation (CCC) to manage all Games-related procurement and is expected to announce major infrastructure tenders in mid-March 2017. The details of service projects are also likely to be known once infrastructure projects commence.

‘To date, four local companies have told Austrade of their interest in partnering with Australian counterparts to bid for Games-related projects,’ said Hill.

‘Peru’s two largest infrastructure firms are interested in working with Australian firms who hold sports infrastructure expertise and international experience, as well as suppliers of relevant building products and sporting equipment.’

Hill said these partnerships would assist in bidding on key infrastructure projects which include the athlete’s village, athletics venue, aquatic centre, and indoor multi-purpose sports centres; as well as upgrading existing facilities like the soft roof to Lima’s cycling velodrome and resurfacing sports tracks.

‘Austrade has also generated interest in Australian companies forming partnerships to help establish an accredited anti-doping laboratory in Lima.’

Other potential opportunities include providing services in security, hospitality, transport, traffic management and volunteer training.

‘Further opportunities are likely and a trade mission to Lima and Buenos Aires is planned for March 2017. The mission which will include meetings with event organising committees and facilitate introductions with prospective local partners.

‘The 2019 Pan America Games will provide additional opportunities to build relationships between Australia and Peru on a number of levels through our common sporting interest,’ added Hill.

The Buenos Aires 2018 Youth Olympic Games is expected to attract 7,000 attendees from 206 countries and involve more than 3,800 athletes.

While the Lima 2019 Pan America Games is anticipated to involve 6,500 athletes and Para-Pan American Games 1,800 para-athletes in nearly 400 events, attracting over 75,000 visitors.

These events follow Latin America’s success in hosting international sporting events – the 2014 FIFA World Cup and 2016 Olympic Games in Brazil.

Visit Austrade’s website for more information about the Lima 2019 Pan American Games and doing business in Argentina.


Latin America Downunder Early Bird Registrations Open
16

Latin America Downunder Early Bird Registrations Open

Latin America Downunder
17-18 May 2017
Perth, WA


Early Bird discounts for registration are available now

For $990 (incl. GST) you will receive:

  • Full access to the exhibition area and presentation sessions over the two days
  • Morning tea, buffet lunch and afternoon tea
  • A delegate satchel
  • Admittance to the cocktail receptions held on 16 & 18 May 2017
  • A discount purchase rate for the CD of conference proceedings
  • 25% off a full priced subscription to Australia's Paydirt and Gold Mining Journal

To register, please click HERE

 


08

David Landers - Speech 2nd Australia-Chile Economic Leadership Forum Melbourne 6 December, 2016

David Landers 

Speech 2nd Australia-Chile Economic Leadership Forum 

Melbourne 6 December, 2016  

 

Download the presentation

Introduction (slide 1) 

Good morning everyone. It’s a great pleasure for me to be here today and to speak with you at this Australia-Chile Economic Leadership Forum. 

You’ve heard a lot about the Australia-Chile relationship so far, and so today I’d really like to speak to you about “The Big picture through the unique lense of the Australian Trade and Investment Commission” and what this picture could mean for the relationship moving forward.  

As you’re all well aware, the mining sector has been an important block in the foundation of the relationship between our two countries; one that has had significant flow on effects for other parts of the industry. Indeed, there are now over 90 Australian companies providing services and technologies to Chile’s mining industry and Austrade has worked to both support our established companies and also to provide opportunities for new entrants.  

But now, I’m going to focus on our plan to take the Australia-Chile bilateral trade and investment relationship to the next level. Following on from our success in mining, businesses in other industries have begun to enter Chile with greater regularity, whilst more sophisticated trading platforms are enhancing the way in which we do commerce globally.  As both Chile and Australia’s economies diversify, it is these emerging areas that will become the new engines of growth between our two countries, and therefor today I’ll be sharing with you:

  
1) the trends we have identified beyond the mining sector 

2) How we can boost these new areas by joining forces: Going from competition to competitive complementarity

3) How Australians are using Chile as a springboard for doing business regionally.   

1. Chile 3.0: Beyond mining   
So where is our trade relationship now? 

Chile is Australia’s main trading partner in Latin America. We have an FTA and a double taxation agreement in place. This has facilitated trade between our countries with two way trade in goods and services amounting to just over $1 billion. Chile is home to over 180 Australian companies and other entities.  (Prompt: Move to slide 2)  

Whereas our presence in the region used to be defined by names such as BHP Billiton and Rio Tinto, we have entered a new period of engagement where companies such as SEEK, carsales.com.au, Amcor, Latam Autos, Cochlear, and Nufarm are seizing a different set of opportunities. The trend is not driven by mineral wealth but by the growing wealth of the middle class and increasing connectivity in the region. 
  
Austrade understands this trend, and through our office in Santiago is working to exploit opportunities across a range of industries to ensure the continued expansion of our relationship:  (Prompt: Move to slide 3)

a. Health:  We are very proud of our capabilities in the health sector. Australia’s medical technologies are making a global impact; solutions such as the cervical cancer vaccine, the cochlear implant (the bionic ear) and multi focal contact lenses are just a few Australian inventions that have transformed the lives of people around the world.    

These solutions are making their way to Chile, where Cochlear implants are helping the hearing impaired and where Truscreen’s portable cervical cancer screening device should soon be providing real time, 99% accurate detection of cervical cancer. 

  We are exploring cooperation in the aged care sector. Chile, much like the rest of Latin America, is trending towards the progressive ageing of its population. By 2050 Chile will have the second largest percentage of senior citizens in all of Latin America with 30.6% of the population. This increase in the ageing population requires a range of public policy responses to address a number of challenges and issues that this demographic trend presents. In the last 20 years, Australia has seen a similar pattern, implementing policies, skills and aged care infrastructure relevant to address the needs of our senior citizens. As such, there is an explicit experience that we can share. 

  
b. Infrastructure: Our engineering companies, which have established themselves in the mining sector are now successfully diversifying and pursuing opportunities in other sectors.   

With over 15 years in Chile, GHD is leading the charge on this front. Today, GHD is working on major projects across multiple sectors, including: 

  • the engineering study for the repair works of the recently collapsed Tolten bridge;
  • studies for the expansion of one of Chilean Patagonia’s most dangerous navigation channels (the Kirke Channel); 
  • redesigning the promenade of the beautiful southern city of Frutillar and 
  • power plant engineering, to name a few.     

Australian transport infrastructure expertise is also finding a receptive audience as the government looks to double rail cargo and more than triple passenger numbers by 2020 with a US$7.6bn reform. It has already identified Australia as a compatible partner given similarities in the two country’s rail systems and Austrade secured a keynote address slot for an Australian expert in rail communications systems at a major seminar for stakeholders this year and we are of course pleased to be hosting the Vice-Minister for Transport this week.    
  
c. Agribusiness and Food:  Both of our countries are agricultural power houses.  Our geo-climatic conditions are very similar and we share export destinations. Hence, it’s not surprising to observe increasing cooperation amongst our agencies and a growing number of agri-tech companies exploring opportunities in each other’s countries.  

  There is an increasing number of Chilean wine-tech companies (such as Cargobulk) and enologists in Australia’s wine industry. We see Australian automation equipment companies (GP Graders), seed (Valley Seeds) and water solution (Rubicon, Sentek) companies successfully establishing themselves in Chile. Over the past 24 months we have welcomed farmers from Chilean Patagonia who have visited our shores in search of sheep and cattle genetics and fruit producers seeking water management solutions.   

We are also very excited to share that CSIRO and Chile’s National Institute for Agricultural Innovation are exploring joint cooperation to investigate and find solutions to common challenges in the agricultural sector.  

d. Education:  Productivity is high on the Chilean government’s agenda and there is a renewed focus on skills and vocational education and training as part of the country’s ambitious education reforms. The Australian Qualifications Framework and training packages have become a model to be shared and adapted according to the local needs. The Chilean Skills Council for Mining is an example of this. The Chilean g overnment is set to create 15 new public tertiary level VET institutions, with potential opportunities for Australian institutions across curriculum development and teacher training.  The creation of a new Ministry of Science and Technology has been announced and a greater emphasis on strengthening local research capacity and capability is expected as a result of this.   

What we identify (beyond pure trade) is in fact the opportunity for our companies, educational institutions and science agencies to join forces with their Chilean counterparts to tackle even greater opportunities.   

2. Competitive Complementarity 

 (Prompt: Move to slide 4) 

Both Chileans and Australians are diggers, planters and service providers. To us, that means that whilst we could be viewed as natural competitors, the nature of that competition is highly complementary and makes us ideal partners in a number of fields.  

We both do well on the international business stage and have similar business cultures. Both of our countries are platforms for our respective regions: Australia for Asia and Chile for Latin America. Our universities and research agencies are working together and we offer each other’s companies fertile business environments. These are more than just observations; our companies and research institutions have already developed a number of strong and successful partnerships.   
  
As is to be expected, some of our strongest partnerships have been in the METS space, where we have seen cases like Seeing Machines team up with GTD and create Seeing Machines Chile. They are well established in the Chilean market and are now exploring opportunities in Brazil and Mexico. Conymet is a well-known Chilean Mining services Company that went to Australia, invested in Duratray, and is now selling Duratray’ s mining truck dump trays to Chile’s main mine operators. Romteck and Vantaz have also teamed up to form a distribution partnership. Thanks to Vantaz, Romteck’s technology is now monitoring mining employee fatigue in both Chile and Peru.  

Like our relationship more broadly, these partnerships are extending beyond the mining industry. For instance, in Agribusiness we can see Rubicon Water teaming up with Agro Riego Tattersall to pursue opportunities in Chile and now Peru.   

We can see that cooperation is growing organically in mining and agriculture, let’s look at a few other potential areas of competitive complementarity:    
a. Services  (Prompt: Move to slide 5) 

Both countries’ services sectors are considerable. In Australia, services represent 80% of our GDP. In Chile, the services sector accounts for 61.5%1 GDP, putting it at the lower end of the developed economies range.  

As you can see from the graph, our service industries are at different stages of development. Australia’s larger and more mature services sector therefore has the opportunity to provide solutions to Chilean businesses in several critical sectors.  

Chile’s services sector is made up of business and financial services, transport and communication, hotels and restaurants and personal services such as education, healthcare and real estate. Australia’s sector correlates well, with financial and insurance services leading the way, closely followed by construction and healthcare. One area where the opportunity for cooperation is high is in:  

Agricultural services. Both Australia and Chile have had to resolve similar challenges in the Agri sector. These range from high labour costs, to water management, to pasture improvement. Our companies and research agencies are already engaged with Chilean counterparts and customers. We see considerable potential in following the steps of mining companies and joining forces to service this sector, where we have common customers in Asia.  
These services areas provide exciting opportunities for collaboration which we look forward to pursuing.      

b. GVC’s:  (Prompt: Move to slide 6) 

A 2013 OECD study reported that approximately 70% of world trade is structured within multinational corporation (MNC) global value chains. That is to say, 70% of world trade is in unfinished goods.  

The income from trade flows within GVCs has more than doubled between 1995 and 2010. For China it has increased six-fold, India five-fold and Brazil three-fold. GVCs are an integral part of the global economy now, and will only grow in importance over time.  

Increased engagement in GVCs by our respective countries is therefore essential to boost our relevance and competitiveness in the global economy.   

This is particularly the case as certain functions of MNC value chain decision making and production nodes move into countries and regions such as Mexico, South Asia and ASEAN to access a trifecta of innovation, cost efficiencies and proximity to significant emerging customer bases.   

Australia’s strong reputation for innovation, a highly educated workforce, urbanised and digitally connected means that Australia is well-placed to take advantage of global opportunities related to the evolving needs of multinationals.     
Austrade is pursuing this strategy through customer access programs, by working with major MNC customers to diagnose and prioritise particular needs in relation to their value chains and then employing a ‘Team Australia’ approach to identify and position best-in- class Australian solutions.   

Chile’s favourable trade and investment openness create an attractive environment for Global Value Chains. Low import tariffs, both at home and in export markets, and engagement in preferential trading agreements position Chile well in Central and South America.   
Chile has easy access to a number of GVC’s operating within its borders. Together we can access opportunities in: Mining, Fisheries (Biomar, Aqua-Chile Marina Harvest, Cermaq) and Agriculture (Ferrero Rocher, Nestle) Another option, which is closer to home and a much more immediate strategy for Austrade is the regional migration of our companies.   

3) Australia-Chile - regional springboards for migration  (Prompt: Move to slide 7)  

Chile is familiar to Australian businesses and provides a direct entry point to Latin America. It’s a great country for Australians to familiarize themselves with the business environment and then grow.  Likewise, Australia is familiar to Chilean businesses and provides an excellent gateway to Asian markets.   
  
This slide is a good illustration of how Australian companies, universities and science agencies are using Chile as a springboard for regional migration. It shows companies that have set up their operations in Chile (either by establishing a subsidiary or engaging a representative) and have then gone on to either establish offices or pursue opportunities in Argentina, Peru and Colombia.   

Helping Australian companies, universities and science agencies grow and pursue opportunities in neighbouring countries is a key component of Austrade’s strategy. We have agile and closely connected teams posted across the region. We share intelligence about business opportunities and local country conditions, develop valuable networks and have the capability to guide our companies though the unique business culture of each country. We would be very pleased to support Australian-Chilean partnerships in their search for greater opportunities abroad.   (Prompt: Move to slide 8)  

But it’s not all one way, Chilean companies are taking advantage of direct air-services to Asia from Australia and established partnerships and linkages between Australia and Asia to export their goods and services.  And Chinese companies in particular are making investments in Chile through Australian acquisitions, Pacific Hydro is an example.  

Conclusion:  

There’s no denying the importance of the Mining sector to the Australia-Chile bilateral trade and investment relationship, but I hope I’ve made a case that the complementarity between our two economies extends through a much broader range of sectors. Health, Infrastructure, Agribusiness and food, and Education.  

Moreover, the depth and breadth of Australia’s services sector offering, Australia’s capacity to feed into the global value chains of multinationals corporations that are operating out of Chile in increasing numbers, and finally the access both our countries offer to larger regional economies suggests that the future of our economic engagement will be significantly more weighted toward a variety of more globally integrated sectors.  
It is therefore critical that we work collaboratively to leverage each other’s strongest capabilities and work to open ourselves up to new industries and markets.  

(Prompt: – move to slide 9) 

Thank you.


28

His Excellency General the Honourable Sir Peter Cosgrove AK MC (Retd) - Sydney Annual Dinner speech

ALABC 2016 SYDNEY ANNUAL DINNER 

22 NOVEMBER 2016

HIS EXCELLENCY GENERAL THE HONOURABLE SIR PETER COSGROVE AK MC (RETD)

SPEECH


 

Good evening.

It is a pleasure to be with you.

At the outset I want to express my sincere appreciation to Jose Blanco and all those at the Australian-Latin America Business Council.

For 27 years the Council has dedicated itself to forging closer ties between Australia and Latin America.

You have made immense progress and the relationships we enjoy today—economic yes, but also the people to people relationships and our strong cultural ties—owe much to Jose and his team.

My visit earlier this year to Latin America was the first by a serving Australian Governor-General.

And a cracking pace was set.

In 17 days I made State Visits to Mexico, Uruguay, Argentina and Chile; as well as an official visit to Brazil—even finding time to meet the Australian Olympians in Rio.

There were many highlights:

Mexico:

  • Meeting President Peña Nieto to celebrate 50 years of diplomatic relations between Australia and Mexico.
  • Visiting the Australian-funded International Centre for Research and Improvement of Wheat and Corn in recognition of
    its 50th anniversary.
  • Visiting the Teotihuacan Archaeological Zone—Pyramid of the Sun, Jaguar Mural, Butterfly temple.
  • Laying a wreath at Niños Heroés monument.
  • Being made a Distinguished Guest of Mexico City and awarded the keys to the city.
Brazil:
  • Attending a reception with the then interim President of Brazil Michel Temer and seeing the magnificent Olympic
    opening ceremony.
  • It was a wonderful Olympics and Paralymics, the facilities were great and the logistics ran smoothly.
  • Visiting the Australian-funded Pipa social project.
  • Meeting Australians working and living in Brazil.

Uruguay:

  • Meeting President Vazquez.
  • Receiving the Key to the city of Montevideo.

Argentina:

  • Laying a wreath at the General San Martin Monument.
  • Being invested with the insignia of the Collar of the Order of the Liberator General San Martin.
  • Visit to the Australian-funded Fundación Botines Solidarios rugby academy.

Chile:

  • Marking the 70th anniversary of Australia's diplomatic presence in Chile marking with President Bachelet—a woman with
    a long and close connection to Australia—.
  • Laying a wreath at the General Bernardo O’Higgins Monument and then visiting his Crypt.
  • Visiting the Australian-funded San Nectario Foundation School for children with autism and dysphasia.

These are just some of meetings and people who provided unique insights into countries and a continent you all know very well.

And now I’ve had time to reflect—I can see that there were a couple of key messages kept coming through.

From presidents, diplomats and business people—everyone I met wanted our countries to stay close, to stay open and to keep working together for all our benefit.

They understood that our futures are joined.

They understood Australia was a genuine friend.

And they knew that prosperity comes from people and nations embracing each other, recognising all we have in common and working together for our mutual benefit.

Universally, there was enthusiasm for closer bonds between our nations and people:

  • For greater friendship.
  • For more trade and investment.
  • For closer business ties of course but also education and tourism.
  • To capture the benefits of economic growth.
  • And to work as one, for a better planet, for better lives and to tackle the really big issues facing our planet.

We need to have mutually beneficial relations between nations.

There is no place for isolationism, xenophobia, and protectionism; they are not the Australian way.

And they are not the Latin American way:

  • We have recently seen the elections of reform minded governments in Argentina and in Peru with the election of
    President Macri and President Kuczynski.
  • Brazil is moving toward greater trade liberalisation and free markets under President Temer.
  • Peru has just successfully hosted APEC which is all about fostering greater trade in the Asia-Pacific.
  • Peru, Mexico and Chile are also part of the Trans Pacific Partnership.
  • Mexico is here this week for MIKTA.
  • And Argentina is set to play an important leadership role in the world economy as chair of G20 in 2018.

So all my experience, all the evidence, is that multilateralism and global trade continue to be alive and well and very much front and centre of our relationship.

And why wouldn’t it be:

  • Out trade has exceeded the $10 billion mark.
  • Over 280 Australian companies are doing business in Latin America—many of them in mining sector.
  • Nearly 50,000 students come to Australia from Latin America to study, a figure that is growing each year
  • And visitor numbers between Australia and Latin America continue to rise.

There is so much potential still to be taken advantage of.

And this is where I am happily and earnestly doing my bit to promote the relationship and the opportunities that exist.

Whenever I get a chance, I spruik all that we are, and that we can become together.

Admittedly I do it with the zeal of a recently returned traveller.

But I also do it with the opportunities and contacts that come with being Governor-General and armed with a knowledge and appreciation of our countries, the linkages we have and the untapped potential that remains.

I think of Australia and Latin America as trusted friends and trusted partners committed to working together for our people and our nations.

I am honoured to be part of that process.

And of course the Australian Australian-Latin America Business Council is integral to that process.

Together we are, and we will continue to be, firm friends and partners.

Thank you.

 


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