Key takeaways from the Australia-Latin America Business Networking Event 2020
“Latin America: Diversify your Growth”
Co-hosted by ALABC and COALAR.
Wednesday 14th October 2020
Richard Andrews: Chairman ALABC
Initial comments about Latin America:
Latin America has been growing in economic importance for Australia in recent years. Chile, for example, in 2009 became just the fifth country in the world with which Australia entered a free trade agreement, and this basis for exchange has only been bolstered through both countries’ membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – an accord that also includes Mexico and Peru. More recently, Australia signed an FTA with Peru.
ln addition to such agreements, the increased trade between Australia and Latin America has been stimulated by a gradual move by both sides away from their traditional reliance on exporting primary products and towards services and manufactured goods. As global commerce and trade become more and more digitised, particularly amid the potential long-term transformations brought about by Covid-19, exchange between these increasingly service-based economies could no doubt be accelerated.
Mr. Alberto Calderon: MD and CEO of Orica, takes over as the new Chairperson of the Council on Latin America Relations (COALAR):
Mr. Alberto Calderon made his first official speech as COALAR’s Chair at the Australia-Latin America Business Networking Day, on the 14th October 2020.
The new Chair of COALAR mentioned the close relationship and dependency, that exists between Australia and Latin American countries, especially in the resources industry, where collaboration in areas such as the environment, productivity and many other fronts have been mutually advantageous and worth continual exploration.
In that sense, he expressed his willingness to continue partnering with ALABC in bringing together, government and businesses to discuss the important issues of diversifying markets during these extraordinary times.
Mr. Calderon also announced a special grant round targeting COVID-19, with a specific focus in digital technologies to assist in the recovery of business between Australia and Latin America. The official call will be published on the DFAT website.
Eduardo Suarez: Vice – President Latin American Economics at Scotiabank:
Latin America is the region where Scotiabank has chosen to expand very aggressively prior to operations in Toronto, Canada and Australia. Currently, the Bank has more than 60,000 employees based in the Latam region.
What do we like so much about Latin America?
In spite of going through challenging times, Eduardo believes that there are some very attractive long-term dynamics in the region that make it very attractive as a long-term investment opportunity. It's a region that can be characterised as being part of the global middle class, a very large market that is attractive for multinationals.
For many consumer brands, when you break the US $5,000 in terms of income, a market becomes an attractive opportunity for non-durables. In the Latin American region, most of these countries have an income between $5,000 to $20,000. Most of the region is over the $10,000 mark, thus becoming very attractive for durables as well.
Just looking at five of the largest markets in the region, the growth in population will add 65 million new consumers over the next 30 years. With today's income level, that would be equivalent to creating a new economy the size of Colombia, Singapore or South Africa.
The increase in the size of the Latin American market will be largely noticeable.
Women in the labour Force:
Women have an extremely strong influence in Latin America and the increased participation of females in the formal labour market has been overwhelming, especially for countries such as Peru and Chile. Due to this, this means that the capacity of households to consume has drastically increased. The same situation applies to countries such as the Dominican Republic, Costa Rica, Panama and numerous other countries that manage to convert from a country of $3,000 of income per capita to over $10,000, in just a couple of decades.
Well-funded social security systems:
The pension reforms developed in Chile in the 1980’s and exported to majority of the region where each individual makes mandatory contributions to his/her own saving account, has created a diverse pool of domestic savings, which in turn has allowed interest rates in the region to fall, affecting consumption dynamics in the region. Now these countries have the capacity to take out debt in their own currency at fixed interest rates for much longer, which increases the demand and supply of durables such as housing and cars.
Chile, Colombia and Peru entered the crisis with very strong growth dynamics and prospects; therefore, the expectation is that growth will start strong for the recovery next year.
As the region entered the COVID crisis, countries such as Colombia, Peru, Chile, Costa Rica and the Dominican Republic have had very prominent growth dynamics and growth prospects, while other countries have experienced growth challenges, burdened by the government’s debt to GDP ratio.
Countries including Brazil, Mexico and Argentina have been negatively impacted by COVID-19, but they have strong fundamentals and large markets, making these countries desirable for Australian companies to consider doing business with.
Many countries in the region have agreements with other countries such as Australia, Canada, Europe, United States, Japan and China which protect investors and also display an attractive investment destination at a time when, when global politics is making us question assumptions that have not been questioned in the past.
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