Australia’s Official Representation in Latin America — Should we do More?
By: Craig Dempsey
Tags: Trade, Australia, International Relations, Foreign Policy, Business

With Australia’s Asia centric international trade relations, where does Latin America fit into the fold? Two very different regions make for a complicated trading relationship, hence a lack of official Australian representation in the Latin American region. With basic things like language and proximity acting as a barrier to trade, Australia needs to take it’s focus away from Asia and Europe and focus on a market that’s growing at a rapid rate and that has huge potential.

Granted, Latin America has a chequered past with a historically volatile political landscape, often being overlooked by more established stable nations. But it’s an everchanging and evolving landscape that has been developing in leaps and bounds over the last century. Containing some of the fastest growing and largest economies globally like Mexico, Chile, Argentina, Colombia and Peru, Latin America is developing into a hugely attractive market for foreign investors.

From a Latin American point of view, countries within the region need to search for new opportunities. Whilst a lot of them are seeking to renew relations with one of the region’s biggest trading partners, the USA, its current administration is taking a more protectionist approach to trade and foreign investment. Latin America should look to Australia for trade opportunities. According to Austrade, Australia is one of the safest places in the world to invest and do business. Despite being a country that is home to only 0.32% of the world’s population, it’s the 13th largest economy in the world with a GDP of around AUD$1.9 trillion. With high productivity levels, a highly skilled and educated workforce and political and economic stability, it would make sense for Latin American countries to develop ties with Australia.

With drastically different economic and cultural landscapes comes challenges in doing business. The complexities of trading in Latin America can be seen as a barrier for international investment. Australian investors are guaranteed to face challenges like language barriers, differences in business culture and best practices, different legal and financial requirements, a lack of knowledge about the local markets and corruption. Countries like Colombia and Mexico are still trying to sever ties with their in-country problems of drug-trafficking and violence, and Argentina is only just recovering from former protectionism policies that have hindered foreign investment.

But it’s not all bad news, trade between the regions has been steadily increasing over the past few years, regardless of the lack of official Australian representation in the Latin American region. Governments all around the region have been changing policies and frameworks to make international investment easier, encouraging international trade through bi-lateral agreements. And the Australian government is working hard to promote trade with Latin America. Between 2015 and 2016, Australia’s total trade value with Latin America was a staggering AUS$11.2 billion. While the economies continue to expand, foreign investment opportunities for Australian investors keep growing in the region.

Improved diplomatic relations are encouraging trade between the two regions; Australia is increasingly identifying the need for greater official representation in the region. The recent upgrading of the Bogotá Consulate to an embassy is Australia’s sixth overseas post in the region, showing promise for stronger ties. The Australian Government has acknowledged that the establishment of the Australian Embassy in Bogotá, is part of the single largest expansion of its diplomatic network in nearly half a century. With 14,000 Australian visitors to Colombia annually, the embassy will significantly enhance Australia’s presence in the region. Not to forget that Colombia is the fourth largest economy in Latin America that has recently stabilised politically; Colombia’s total annual trade with Australia is worth AU$500 million, with Australia’s investment into the country totalling AU$3 billion. The new stability is creating opportunities in industries where Australia is a global leader, like mining, hydrocarbons, education, agribusiness and insurance.

Colombia is a member of the Pacific Alliance, along with Chile, Peru and Mexico, Latin America’s strongest supporter of trade liberalisation, economic amalgamation and engagement with the Indo-Pacific. A new Free Trade Agreement, that was only passed last year, allows for trade between Peru and Australia.

With staggering figures like 17,000 enrolments by Colombian students into Australian educational institutions in 2016, demonstrates the strengthening connection between the regions. Many Australian universities relying on foreign student fees to deliver effective education to Australian citizens, as well as pay for their services. Australian universities are gradually turning more and more towards Latin America, attracting students from all over the region. With huge revenue streams coming from this market, due to a rapidly growing middle-class and a greater ability for Latin American students to travel, it’s a no brainer that Australian universities are wanting to attract Latin American students.

The region as a whole has seen significant improvements over the years; economic growth has decreased poverty levels, the formation of economic alliances has encouraged trade relations and a shift away from the acceptance of corruption has improved investor confidence. Luckily for Australian investors, the presence of local companies that can assist with security checks, due diligence reports, risk mitigation etc. gives greater confidence to those wanting to invest.

Latin America is not without its problems; however, it makes total economic sense for Australia to continually build trade relations with Latin America and increase their official presence in the region. Governments all around the region have seen the benefits of international trade so they’re doing everything in their power to encourage international investment by making the process as easy as possible.

The continual growth of the region opens up opportunities for Australian investors in a variety of sectors, from mining to infrastructure and agriculture. A lot of these sectors are primary industries within Australia and Latin America, giving Australia a competitive edge. Australia has so much to offer to the region in terms of knowledge and skills, and vice versa.

If Australia continues to value the importance of this region, and continues to understand how important it is to have official representation, then there is a bright future for trade between Australia and Latin America; the current mutually beneficial relationship will only strengthen over time.