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The Latin America-New Zealand Business Council (LANZBC) plays a valuable role in fostering trade and economic relations between business communities here and in Latin America
Latin America has maintained strong growth rates. The five years to 2008 were Latin America’s best since the 1960s with economic growth averaging 5.5% per year and inflation generally kept down to single digits.
But this average doesn’t do the high-performers justice: The EIU estimates that Brazilian real GDP grew by 7.5% in the year to December 2010, Peru grew 8.8%, and Argentina 8.5%. Others are rebounding quickly from the global financial crisis, including Mexico at 5.5% and Chile at 5.2% growth. The Brazil economy alone is worth more than US$2 trillion.
Overall economic growth in the region is forecast to be 4% in 2011 – a lot healthier than a lot of other regions in the world. Itamaraty, the Brazilian Foreign Ministry, says that the Asia Pacific and Latin America will be the two main drivers of global economic recovery this year.
In recent years, these countries have lifted millions out of poverty and are increasingly building a middle class that is interested in purchasing the kind of high quality goods that New Zealand produces.
Our annual exports (mainly dairy to Mexico, Venezuela and Cuba) average around NZ$1b annually and NewZealand investments (in agri-technology, energy, fisheries and specialised manufacturing) are worth around NZ$1.3b.
Our trade in services with Latin America is also impressive. Last year almost 30,000 Latin Americans travelled to NZ. Annually there are around 4,000 students from Brazil, Colombia and Chile in New Zealand.
I am impressed by the number of New Zealand companies with world-quality capability in niche areas that are already focusing on Latin America.
A number of these companies were with me during my visit to Brazil last October and also in Mexico in early November. This includes companies involved in our traditional areas of dairy expertise and agri-technology, through to communications, aviation and airport systems, and specialised design and manufacturing. A number of these companies have significant business interests in the region.
In Brazil, for example, I participated in a NZ-Brazil business event – hosted by Sao Paulo’s Federation of Industry (FIESP). This was a fitting follow-on from the Latin America-New Zealand Business Council’s own series of “Doing Business in Brazil” fora in November 2009. These are important activities to build momentum in New Zealand’s economic relations with Brazil.
But I believe that there is still more that New Zealand businesses could be doing in Latin America. The potential is significant and I encourage New Zealand businesses to give this region serious attention.
I also encourage New Zealand businesses to do the necessary groundwork, in order to operate in Latin America effectively and successfully. It is essential that businesses first carry out thorough market research to understand the business and regulatory environment, trends and people. You will also need to engage Spanish or Portuguese speakers to help with market development. Finding the right local partner is critical.
We need to leverage off our innovation and efficiencies in the agriculture sector – especially dairy – to build long term agri-technology partnerships in South America that will yield an on-going return back to New Zealand. This region is a major player in helping to fulfil the growing global demand for food. We need to be part of that action.
There are some interesting opportunities in the energy – particularly, but not only, renewable energy - and clean technology area. Again, I know a number of New Zealand companies are already working in Chile and Mexico in this area. There are also good synergies with our education and research expertise – for example, in the geothermal area.
We need to promote ourselves better as an exporter of world class education, including technical education; and we need to encourage more Latin Americans to visit NewZealand, particularly as this can be a convenient stop off on their way to Asia.
The Rugby World Cup is providing a good opportunity to strengthen business links with Argentina.
Improving airlinks between New Zealand and South America would be a major boost to our economic relations. Rest assured, I am encouraging the key players to engage.
The Government’s Latin America Strategy is focused on maximising the economic opportunities for New Zealand. We are building our political engagement with the governments of the region in support of closer business links.
I have just returned from my third visit to Mexico within the last six months. All three visits were focused on climate change meetings, but I also took the opportunity to focus on the economic relationship.
For example, I raised our concerns about the tariff on kiwifruit when I met the Mexican Minister of Agriculture. And, once again, I reiterated NewZealand’s ambition to strengthen our economic relationship with Mexico through a bilateral FTA – or eventually through Mexico’s accession to the TPP. I accept, however, that this will be a long game.
The Trans-Pacific Partnership negotiation is a key focus, as we work to achieve the APEC vision of a closer economic integration across the region. Negotiations currently involve two Latin American countries: Peru and Chile, and with scope, I hope, to expand to Mexico in the future.
The TPP will establish a high quality platform linking the two regions and our hope is that it will go behind the traditional trade liberalisation and address some of the ‘behind the border’ issues that traders face when doing business across the Pacific.
We are also keen to explore whether an FTA between New Zealand, Australia and Mercosur (Argentina, Brazil, Paraguay and Uruguay) might be possible. This too, is likely to be a long game – but it reflects our commitment to ambitious and comprehensive liberalisation.
At the same time, a successful conclusion of the Doha Round remains an essential objective for New Zealand. This is the only sure means to enhance the stability and prospects of the global trading system, and boost global economic growth.
NewZealand is making every effort, including in the Geneva negotiations – involving some close engagement with key Latin American partners - to support conclusion of negotiations this year.
New Zealand is also working closely with our Latin America partners in the international climate change context. Mexico has shown real political leadership, managing to get the climate change negotiations back on track at Cancun in December. And a number of Latin America countries have come on board with the New Zealand-led initiative – the Global Research Alliance – focused on growing more food without growing greenhouse gas emissions.
We must challenge the traditional concept of international business being simply about finding new markets for consumer goods. In the case of economic engagement between New Zealand and Latin America, businesses need to get past the natural concentration on trade in goods and look to other types of business such as trade in services, investments and joint ventures.
