Australia houses a powerful, mixed-market economy that boasts a GDP of nearly AU$1.7 trillion (USD$1.2 trillion). The Oceanic country holds an unprecedented record of uninterrupted GDP growth in the developed world, having avoided a technical recession for 26 years.
Australia’s economy is heavily dependent on international trade and foreign investment. While Australia’s export agenda has been heavily focussed on its rich Asian partners, businesses are becoming increasingly aware of the largely untapped export opportunities in Latin America. Australia’s growing trade ties with Latin American countries give export businesses the chance to flourish in brand new markets.
Overview: Australia’s export environment
Australia’s economic freedom score makes it the fifth freest economy in 2019. Its liberal approach to free trade has seen the country develop strong international trade ties. Presently, Australia’s export economy is the twentieth largest in the world.
In 2018, it exported US$253.8 billion worth of goods to its trading partners. Currently, the country’s top export partners are China, Japan, South Korea, India and Hong Kong. Australia’s imports mostly come from China, the US, South Korea, Japan and Thailand.
Unsurprisingly, Australia’s trading efforts are focussed on the developing Asian region due to its geographic proximity and exponential growth. This growth is fuelling demand for Australia’s minerals, agriculture, manufacturing, and education services.
This focus is reflected in Australia’s free trade agreements (FTAs), with trade deals signed with ASEAN (Association of South East Asian Nations), China, Korea, Japan, Malaysia, Singapore, and Thailand. It is also a signatory of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Other bilateral FTAs with the US, New Zealand and Chile round out Australia’s myriad trade connections.
Australia’s budding relationships with Latin America
Australia has only one FTA in force with a Latin American country: Chile. Australian exports to Chile in the 2017-18 financial year totalled AU$639 million, while imports from Chile reached AU$709 million. The countries’ agreement reduces barriers to trade of goods, services and investment. Since coming into force in 2006, over 200 Australian companies now operate in Chile.
Not yet in force is Australia’s FTA with Peru. This agreement promises Australian businesses greater transparency and consistency when operating in Peru. It also plans to eliminate tariffs on 99 per cent of Australian exports within the next five years, positioning Peru as a key export destination for Australia in the long term. Already, over 90 Australian companies are operating in Peru. This FTA sets the groundwork for a boost in Australian-owned companies in Peru.
Australia is also negotiating an FTA with the Pacific Alliance, a powerful Latin American trading bloc comprising Chile, Colombia, Mexico and Peru. Once achieved, Australian export businesses will gain access to some of Latin America’s largest and fastest growing economies.
Why the shift in attitude towards Latin American markets?
Like many other countries, Australia is realizing the extent to which Latin America’s markets have flown under the radar.
Latin America is starting to experience some stability across its array of historically turbulent political climates. Additionally, Latin American governments are opening their markets to varying degrees to entice to foreign investment.
Latin America’s top four largest economies – Brazil, Mexico, Colombia and Argentina – are making waves on a global scale. Brazil’s membership to BRICS puts the spotlight on the country as an emerging global power. Meanwhile, Colombia and Mexico (along with Uruguay, Paraguay and Peru) are capturing global attention with progressive reforms to legalize cannabis.
Progressive economic and political environments in Latin America are facilitating more favourable environments for foreign business. For Australia, the developing region offers a promising future in terms of export potential.
How to get ahead of the curve
Australia’s major exports in minerals, agriculture, and services have the opportunity to grow with closer trade ties to Latin American markets. As seen in Australia’s export trends with Chile and Peru, Australian expertise in agritech, water solutions, infrastructure and food products can also gain a stronger foothold in the region.
Latin American needs as a developing region offer Australian businesses high prospects for success in a diverse range of other sectors. This includes in financial technology and business consulting – both significantly successful domestic industries.
Large booms are expected in Latin America’s growing industries. Australian businesses looking to expand into Latin America will find many gaps worth exploring for long-term success.