Dispatches from our Ambassadors in Latin America

Peru: water for thought

Nicholas McCaffrey, Ambassador to Peru

Peruvians are ‘glass half-full’ people: their country's economic boom over the last 10-15 years gives them reason to be. Yet when it comes to Peru’s water supply, optimism flows a little less freely.

Peru’s arid coast houses over 60 per cent of its people, but just two per cent of its water. Four million Peruvians lack access to regular water services and only three per cent of rural homes have secure supply. Commercial demand for water is also increasing in line with economic growth.

Barriers to better water access include poor infrastructure, rapid urbanisation and glacial melt. Extreme weather, like the flash floods in 2017, can also drastically disrupt water supply.

For the Government of Peru, water is a priority: by 2021, it aims to deliver potable water to all urban households and proper sewage treatment for everyone. This includes investing around $6.4 billion in water and sewage networks, mainly through public private partnerships.

This is good news for Australian businesses. They are well-placed to help, especially in irrigation, drought management, storage, storm water harvesting, urban and rural water supply, sewerage and water use in agriculture and mining.

The Australian Embassy in Lima is helping create opportunities. In 2017 we signed a Memorandum of Understanding on water cooperation with Peru’s National Water Authority (ANA). This will help Australian companies win business in Peru from the ANA and other entities, public and private. Our Austrade office also works with Australian businesses in Peru. In 2016, Austrade brokered a $500,000 deal between CSIRO, mining company Southern Copper and the ANA to develop a water management plan in southern Peru.

Australia’s commercial presence in Peru has grown quickly in recent years, with around 90 companies and $5 billion invested here. The Peru-Australia FTA signed in February 2018, will bring more opportunities for Australian businesses, including in the water sector.

Devices in the desert.
The Australian Embassy in Peru raises Australia’s water credentials through our Direct Aid Program. Last year, we supported an NGO led by an Australian-trained engineer to connect 70 families to a natural water spring in northern Peru. We also helped build “fog catchers” for a rural community in an area with persistent mist but no rain. These innovative devices harvest droplets from the air, channelling around 120 litres of water a day to each household.

Brazil: tourism to Australia is on the rise

John Richardson, Ambassador to Brazil

Australia is riding a wave of popularity in Brazil like never before. Brazilians are turning away from traditional destinations and looking for new destinations and experiences.

The total number of Brazilian visitors to Australia grew 19 per cent to September 2017, compared to the previous 12 months, to reach 53,055.

This included around 16,500 students travelling here for education, making Brazil Australia’s fifth largest source country of international students and Australia’s largest source country of international students outside of Asia.

Two thirds of Brazilian travellers continue to rely on the services of travel agents before purchasing international travel, so Tourism Australia’s Aussie Specialist Program training for travel agents continues to deliver remarkable outcomes. Training was held in 12 cities in Brazil last year, 110 travel agents attended an event in São Paulo in January this year alone.

Tourism Australia sends monthly newsletters to more than 3000 travel agents around the country informing them of new products and things to do in Australia for tourists, as well as upcoming training events.

High-end passengers continue to travel and spend but there is scope for much higher numbers of middle-class travellers from Brazil. Tourism spend is not the only benefit. Travellers gain an appreciation of Australian culture and our way of life.

Australia enjoys a high profile and positive image in Brazil. Networking functions, hosted by Australia’s Ambassador to Brazil, continue to grow strong interest in Australia. These include Australia Day celebrations in São Paulo and Belo Horizonte, the premier of the film ‘Lion’ in São Paulo and Brasilia, and gastronomic events, such as hosting the Semana Mesa in São Paulo featuring Australian celebrity chef Jock Zonfrillo.

We expect the number of Australians seeking adventure and cultural experiences in South America to grow as recent initiatives, such as the new Brazilian e-visa, make travel easier. The future is bright for tourism between Australia and Brazil and the people-to-people links it helps to create.

Caribbean: ‘Galleons’ of natural gas

John Pilbeam, High Commissioner to Trinidad and Tobago

Palm trees, sandy beaches and buccaneers pillaging Spanish galleons, might come to mind when you hear the word ‘Caribbean’ but you probably won’t think of oil and natural gas. Yet the south-east corner of the Caribbean tectonic plate, underlies one of the world’s largest oil and gas provinces.

The region’s petroleum wealth was known early because oil naturally bubbled up from the ground in places. As long ago as 1595, the English adventurer, Sir Walter Raleigh, caulked the timbers of his ships with tar from Trinidad’s Pitch Lake. What’s claimed to be the world’s first oilwell was drilled near the Pitch Lake in 1857.

Much of the oil-bearing territory belongs to Venezuela, but oil and gas have buttressed the economy of Trinidad and Tobago since the 1930’s and the oilfields of both countries provided fuel to the Allies during the Second World War.

BHP is a significant operator in Trinidad and Tobago. BHP currently accounts for around 10 per cent of Trinidad and Tobago’s production of oil and gas and has plans to increase its share in the medium to long term through exploration activities in the deepwater province off the east coast of Trinidad and Tobago and the possible development of the Ruby field which it discovered closer inshore in 2006.

Australian energy industry consulting engineers WorleyParsons established a presence in Trinidad in 2002 and employs a workforce of approximately 120 engineers, constructors and project managers involved in delivering projects for Trinidad’s oil and gas industry.

Excitement in the region’s oil and gas industry currently focuses on significant oil discoveries being made in deep water 160kms due north of Georgetown, Guyana by a multi-party consortium. The group’s first find, in 2015, was of reserves of between 800 million to 1.4 billion barrels, and further drilling indicates the reserve may be double that or more.

The Guyana Government is expected to begin receiving revenue from the find once production commences in 2020. With oil and gas set to transform Guyana, the trust placed in WorleyParsons demonstrates Guyana’s confidence in Australia’s resource development industry to provide services critical to ensuring the best outcome for the country.

Argentina: aiming to become ‘the world’s supermarket’

Noel Campbell, Ambassador to Argentina

Signs of Argentina’s re-emergence as a regional and international player are growing. The Macri Government expects the agricultural sector to be a key driver for economic growth and prosperity and is working in partnership with farm groups to expand production. Argentina is undertaking a raft of reforms to make the sector more competitive, including trade liberalisation and infrastructure investment. The government’s vision is to make Argentina ‘the world’s supermarket’.

Initial results are impressive. Argentina is a leading exporter of grains and oilseeds (most notably soybean), lemons, pears, honey and beef. Other exports include wool, dairy and wine. Since the change of government over two years ago on-farm activity has increased, cereal production has expanded 38 per cent, and cattle stocks have risen by 2 million to 53.4 million head – although this is still far from historic levels. There has been growth in foreign and domestic investment in infrastructure, technology and equipment.

Argentina aspires to be a major supplier of the world´s food bowl. According to the United Nations Food and Agriculture Organisation, it is one of only a few countries with access to arable land and water to meet demand. Putting it into context, Argentina currently produces food for around 400 million people, almost 10 times its population. In the next 10 years, it plans to expand production to reach 600 million.

To realise this potential Argentina needs improved farm based research; farm management practices including for crop production, rotation, variety and yield; and infrastructure. Australia has the skills to assist Argentina in modernising its water and irrigation management systems and agtech strengths in biotechnology, traceability systems, gene technology, cattle and pasture management, precision agriculture and IT. We can offer best practice solutions in agricultural research and technology, services, machinery and equipment.

Vineyard and snow capped mountains.

Mexico: bridging the infrastructure gap

David Engel, Ambassador to Mexico

Mexico is set on a trajectory that will inevitably see it rise into the ranks of the world’s 10 largest economies by 2030, thanks to its emergence as one of the world’s greatest exporters of manufacturing and agricultural products.

This is no small undertaking. To achieve this Mexico needs to maintain efforts to enhance its infrastructure.

According to the McKinsey Global Institute, Mexico must invest $90 billion each year until 2025 to bridge its infrastructure gap, which lies mainly in transport and water infrastructure.

As part of a series of major reforms, in May 2014 the Government of Mexico released a four-year National Infrastructure Program outlining major programs and projects to be executed across the telecommunications, transportation, urban and rural development, energy, water, health, and tourism sectors.

In total, the government anticipated reaching approximately $640 billion in infrastructure investment from a mix of federal, local and private sources.

Budgetary pressures have meant government funds for implementing the infrastructure program have fallen short of planned public expenditure.

However, commercial banks, capital markets and other institutional investors have helped address the shortfall. The Government of Mexico is encouraging long-term financing for infrastructure by establishing an Investor Relations Office to link investment projects with domestic and foreign potential investors, encouraging long-term financing for infrastructure.

Macquarie Bank and IFM Investors are among the foreign businesses that have seized this opportunity. Macquarie has invested in solar and mini-hydroelectric projects.

IFM has acquired assets, the most glittering of which is a 110-kilometre toll road circling Mexico City. Over the coming decade Mexico will continue to need foreign funds to upgrade and expand its infrastructure and thereby deliver greater prosperity for its 130 million population.

With its vast stock of funds under management, Australia is well-placed to help Mexico continue its rise as one of the world’s economic powerhouses.

Highway interchange in a city.

Colombia: renewable energy opportunities

Sophie Davies, Ambassador to Colombia

Around 2.5 million Colombians living in remote and regional areas, including 400,000 in post conflict areas, are either not connected to a power grid or pay expensive levies for their connection.

Colombia is lagging behind other Latin American countries in its uptake of renewable energy, but the government is encouraging a transition to cleaner more renewable energy sources.

In 2014 President Juan Manuel Santos passed legislation to encourage the uptake of renewable energy in regions not connected to the national power grid, offering a 50 per cent tax cut for investments in non-conventional energy projects.

The first solar, wind and biomass offer was announced in November 2017, with 1GW of renewable power to be allocated before May 2018.

Colombia has an estimated 42 GW solar energy potential and 21 GW of wind energy potential.

The northern and eastern regions of Colombia produce substantial quantities of forestry and agricultural waste and have the potential to be important sources of biomass energy.

Recent visits from Australian companies to Colombia and vice-versa have uncovered opportunities for Australia in this sector.

Australian experience in delivering smart grid solutions for regional and remote communities that integrate different energy sources could help renewable energy production in Colombia’s regional and remote areas to take off.

Block-chain technology, in particular, has the potential to give Colombians in regional and remote areas the opportunity to produce energy and trade it with other consumers on a peer-to-peer basis, reducing costs and the need for intermediaries.

The University of Sydney has recently tested the fastest transactional network in the world, positioning Australia as a key player in the block-chain industry.

Chile: Infrastructure sector set to take off

Robert Fergusson, Ambassador to Chile

Chile remains the top performing country in the Latin American region according to the Global Competitiveness Report 2016-17 and business confidence is high following the re-election of pro-business former President Sebastian Piñera.

President-elect Piñera, who took office on 11 March, has presented a plan involving corporate tax cuts and simplified regulation to promote economic growth, now forecast to increase to between 3 and 3.5 per cent in 2018.

His priorities include economy-wide infrastructure investment, including an eight-year $38 billon infrastructure plan, Chile Invierte, to address Chile’s $64 billion infrastructure deficit and improve its longterm strategic infrastructure planning.

Chile Invierte will improve inter-urban transport nationwide, pave more roads in rural areas and increase the rural penetration of fibre optic, wireless and internet.

Traditionally dominated by domestic and European companies, Indo-Pacific companies are increasingly eyeing Chile's infrastructure sector. Australian firms including ACONEX, GHD, SMEC and WorleyParsons were among those pursuing and securing new contracts in mining, energy and health infrastructure last year.

In particular, Chile offers opportunities for Australian infrastructure companies in sustainable construction and the steel industry. In recent months, the Chilean Chamber of Construction has held discussions with a number of Australian companies including Lend Lease, Studio505, Hayball, Prebuilt, Wood & Grieve Engineers, Hickory, Irwinconsult Pty Ltd and ARC CAMP.H (the Centre for Prefabricated Housing Research, the University of Melbourne). A delegation from the Chilean Steel Association visited Australia in September 2017 and met representatives from the Australian Steel Institute, Australian Steel Association, Commercial Metals Company, Maxispan, Rivergum Homes, Modular Building Systems, Bedrock, BayTimber and Newcastle Steel Frames.

Multiplex Engineering Innovations Group Director, James Murray-Parkes, visited Chile in November 2017 to highlight Australia’s experience in engineering innovation. Murray-Parkes delivered a seminar to members of the Chilean Chamber of Construction, providing an excellent opportunity to showcase Australian expertise.

Australia has an opportunity to become a strong partner for Chile on infrastructure, paving the way for Australian companies to expand their presence in this sector.

Australian investment in Brazil: it’s bigger than you think

Greg Wallis, Consul General, São Paulo and Senior Trade Commissioner, Austrade Brazil

Austrade São Paulo recently completed a comprehensive stocktake of the Australian business presence and investment position in Brazil.

According to the ABS, Australia has $4.4 billion of foreign direct investment (FDI) stock in Brazil. This makes Brazil a larger destination for Australian FDI stock abroad than India, Thailand, the Philippines, Korea, or Vietnam (noting that with the inclusion of portfolio investments, the total investments by Australia in those countries are in most cases significantly more than they are in Brazil).

Despite Australia’s extensive mining interests in the region, Australia's FDI stock in Brazil is greater than in the rest of LATAM combined. Unlike much of LATAM, Australian investments in Brazil are highly diversified beyond those in the mining sector. In addition to iron ore production and petroleum exploration, Australia has made big investments in Brazil that include renewable energy, logistics, online services, manufacturing, agribusiness, financial services, insurance and fashion retail. Macquarie, QBE, Goodman, BHP-Billiton, Brambles, Seek, carsales, Cotton On, NuFarm, Karoon, Ansell, Amcor and Pacific Hydro are some of these major investors.

Major Australian corporations invest in Brazil because it is an agricultural, resources and manufacturing power, and because it is the world’s ninth biggest economy with a consumer market of approximately 140 million. In spite of the deep and protracted recession that Brazil has endured since 2015 and from which it is has only recently emerged, the country has relatively high purchasing power levels that drive demand in the domestic services, retail and online sectors.

Brazil is not easy to sell to Australian corporations. Relatively few major Australian companies that are established in the US, Europe and Asia have taken the plunge into Brazil. They understandably prioritise the former markets because they are easier to enter. However, if Australian companies accept that to be ‘truly global’ means they also need to be in a market as big as Brazil, there is an upside from an investment perspective.

It will take a return to sustained growth and optimism about Brazil’s future for this to happen but this scenario appears to be unfolding — albeit gradually.

Last Updated: 4 April 2018