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Monthly Archives: February 2010

Peru: From Machu Picchu to Mining and Minerals


Australia’s ties with Peru are growing steadily. After all, it was less than a month ago that Peru made headline news in Australia. Out of 2,500 tourists stranded at the popular tourist destination of Machu Picchu after a crippling mudslide, 170 of them were Australians!  The figure was hardly surprising as 25,000 Australian’s visit Peru every year.

But Machu Picchu isn’t all Peru has to offer Australia. In fact, never before Latin America looked so inviting and Peru is no exception. In 2008-2009 trade between Australia and Peru reached $A 252 million, Australian exports amounting to A$134 million. Australian exports were concentrated in milk and cream, civil engineering and parts, goods vehicles and analysing and measuring instruments.

Economic Performance

Like many of its Latin American counterparts the Peruvian government undertook a lot of privatisation and other market-orientated economic reforms in the 1990s and the affects have now taken hold. Peru has outperformed the rest of Latin America and indeed the rest of the world with impressive annual growth rates that peaked at 9.8% of GDP in 2008 before the onset of the global financial crisis. In the last decade, Peru has promoted trade through investment reforms and a series of bilateral FTA’s.

Mining

With out a doubt the mining and construction sector has been the back bone of Peruvian growth. Peru is one of the world’s top mining countries with large deposits of copper, iron and zinc. 60% of Peru’s merchandise exports are minerals and like Australia, Peru has benefited enormously from the boom in commodity prices.

The down-side of this of course is that Peru is vulnerable to any fluctuations in commodity prices and could experience a recession in the event of a slump. At the moment the GFC has delayed a number of large U.S-backed projects worth billions of dollars and as a result the Peruvian economy has slowed significantly. 

But the strong demand for minerals from China and Asia, as well as the number of large government projects has stopped the mining sector from grinding to a halt. If we’re lucky, numerous future projects should fuel demand for Australian engineers and suppliers of future goods and services. Peru remains incredibly attractive for Australian businesses.

The Peruvian market is no stranger to Australian business. There are several big-name Australian businesses already set-up in Peru including ALS Chemex, Pasminco Explorations, Rio Tinto, BHP Billiton, Burns Philp, Amcor Packaging, Orica and Downing Teal. Australian suppliers have succeeded in the Peruvian market for mining locomotives, slurry pumps and mineral processing control systems.

There is a lot more money to be made. Peru is going to need more mining equipment, gear, machinery, shovels, software, compactors, safety equipment and much more that could potentially come from Australia. We have the know-how, let’s use it. The economic relationship between Peru and Australia has a bright future!

 Amy Doyle – International Market Analyst

For more information or assistance, please contact Australian Business International Trade Services under 1800 505 529 or email Sara at sara.cheng@australianbusiness.com.au.

 
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Posted by on February 26, 2010 in Latin America

 

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Business in China – Doing it Right!


When Coca Cola entered the Chinese market, they wanted to find Chinese characters for the phonetic equivalent of “Coca Cola”. So they chose Ke Kou Ke La, which translates literally into “bite the wax tadpole” or “female horse stuffed with wax”, depending on the dialect. Similarly, in Taiwan, the Pepsi slogan “Come alive with the Pepsi generation” was translated as “Pepsi will bring your ancestors back from the dead.”

These are just two of many anecdotes about intercultural communication gone horribly wrong. Especially when it comes to cultures (and languages) as different as Australia’s and China’s, there are significant challenges for those who wish to overcome the existing barriers. Lucky then that our Prime Minister is the only Mandarin-speaking premier outside of Beijing. Or not?

Human beings generally display a great desire to surround themselves with familiarity. That’s why people from the same background tend to stick together and rarely exit their particular comfort zone. It’s where we belong and where we feel understood. But the world has become a very small place and with international business links connecting the entire globe like a bowl of spaghetti it’s hard to escape the need to cross cultural boundaries.

China is THE emerging market of the future. This is particularly true for Australia, considering China is our most important two-way trading partner, taking about a quarter of our exports. Demand from China was one of the key factors that rescued Australia from global recession. But we will need to find a balance between being open and being vulnerable and relations have been strained recently by the Chinese expression of interest in buying key stakes in Australian resources and commodities firms.

If anyone still has doubts about the intense interdependency between the two countries, think about monetary policies. Governor Glenn Stevens announced that the RBA’s decision to leave Australia’s target cash rate where it is can be explained mainly because of the Chinese authorities’ efforts to reduce the degree of stimulus to their economy. 

How does all this affect Australian businesses? Most of them engage with China on a trial-and-error base, wasting money and time on working out the basics. This is the outcome of a recent study by the Australian Business Foundation in co-operation with Australian Business International Trade Services, titled “Engaging China – The Realities for Australian Businesses”. The research was designed to explore the actual experiences of Australian enterprises which have had a substantive history of doing business in China, analysing the opportunities and problems addressed by them as they seek to enter, expand or maintain an competitive position in Chinese markets. Following a series of 25 business case studies based on interviews with senior executives of Australian businesses, the study points to three key issues in the business environment: culture, relationships, and government. All of them are at the heart of successful entry into the Chinese market and can decide over the yays and nays.

To read the full report at no cost, click here.

Stefanie Mueller – International Communications Strategist

For more information or assistance, please contact Australian Business International Trade Services under 1800 505 529 or email Sara at sara.cheng@australianbusiness.com.au.

 
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Posted by on February 18, 2010 in China

 

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Colombia – Investors Sold on Peace and Security


For many investors the mention of Colombia has for decades been accompanied by the frantic waving of red flags. It is no longer the case. The unparalleled success of President Álvaro Uribe Vélez in reducing the prevalence of violence and unrest has translated to new heights of investor confidence.

Political Stability

Violence has been a mainstay of the Colombian nation. Simply put, the fighting has been between left-wing guerrilla groups and right-wing paramilitaries. Drug cartels fund the violence so that the guerrillas defend their cocoa crops from any government interference. Civilians have been very involved. The fighting has occurred in their backyard, and on their front lawn.  Their family members have been murdered and kidnapped.

It was no surprise then when in 2002, Uribe was elected on a platform to restore security and target violence. His language was highly explosive and his policies hard line – and guess what – they worked. The rebel groups have been left weak and fragmented and the most of the paramilitaries have been demobilised. He was re-elected in 2006 by a grateful citizenry.

The Colombian Economy

Despite the turbulent political environment the Colombian economy is diverse and relatively advanced. Its key exports include petroleum, coffee, bananas, emeralds, flowers and coal. After a crippling recession in 1999 in which GDP contracted 4.3% the economy was resilient and bounced back with an annual economic growth rate of 5% from 2002 to 2007. The economy was not immune to the recent crisis. GDP fell 0.7% at the end of 2008, and unemployment rose slightly in 2009. 

The momentum behind the economy is in part due to Uribe’s economic reforms on tax, pensions and the budget. But it is mostly due to his security policies. It is amazing what difference it makes when people no longer fear their income, notoriety or business could lead to their murder or capture. A secure political, civil and business environment has unsurprisingly increased FDI and exports!

 Opportunities

There is an array of opportunities available to Australian businesses in Colombia including wheat, corn, soy and seeds, cotton and yarns, environmental services, renewable energy and medical equipment to name a few. But the most promising areas are agriculture and mining. Agriculture and mining are important sectors to Colombia but are not yet fully developed. As firms become more developed they will look to advanced economies like Australia to import sophisticated technologies so they can increase efficiency and yield. Australia has the opportunity to export mining machinery and training to the Colombian oil, gas and coal sector and both genetic materials and live animals to the Colombian agricultural sector.

Amy Doyle – International Market Analyst

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Robert at robert.trzebski@australianbusiness.com.au.

 
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Posted by on February 12, 2010 in Latin America

 

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Cup Half Full in Brazil?


Based on the article “Cup Half Full in Brazil?” by Simon Tarmo, from his Brazil 2014 blog, 18 May 2009

Simon Tarmo is a journalist from Sydney and co-founder of the industry journal Australian Sponsorship News. He now lives in Belo Horizonte, Brazil, and is currently focusing on business opportunities involving the 2014 FIFA World Cup in Brazil.

 

After the announcement of the 12 Brazilian cities to host the 64 World Cup matches in June and July 2014 the only question remaining is just how much work needs to be done before Brazil is ready to rumble. Most stadiums around the major host cities, even those in Sao Paulo or Rio de Janeiro, still don’t meet the minimum standards required by FIFA. The relatively short timeframe to tend to issues ranging over media, technology, infrastructure, hospitality facilities, and security, will pose a major challenge to the country.

Security is one of the most important aspects to be addressed before 2014. The Brazilian government has already started implementing its ‘Torcida Legal’ (literally ‘legal supporter’) project, which features the installation of complex crowd monitoring and security technology in all locations with a capacity of more than 10,000 spectators.

The project is aimed to set standards for the control of access to the stadia, the amount of video cameras required to monitor the area, and the setting up of fully functional security centres around the sites. The facilities are to be at least mainly efficient for the start of this year’s domestic soccer season and ideally up to scratch for the 2013 Confederations Cup, one year before the big event.

It will be an interesting to watch how it all turns out. Sinaenco, Brazil’s national association of architectural and consulting engineering companies, is certainly convinced that Brazil will live up to the expectations and is fully capable of developing and managing all projects regarding the event. Indian-based company Satyam, FIFA’s official technology sponsor for the 2010 and 2014 World Cups, has significantly increased its involvement in the Latin American market and most certainly hopes to get as big a piece of the cake as possible. Especially after its rather unpleasant ramble over the resignation and later arrest of founder and chairman, Ramalinga Raju, Satyam is eager to set the record straight and leave a good impression in Brazil. In South Africa, for instance, Satyam is responsible for the development of the core IT event management system for FIFA.

Enough of the prognosis! After all, it is the party centre of the world we are talking about, the country of Carnaval and Samba. No matter how big the obstacles, Brazil definitely has a strong desire to show what it’s worth and we will be following its progress with excitement. It would not be the first time that all the prior talk about possible failures turns out to be nothing but rambling.

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Robert at robert.trzebski@australianbusiness.com.au.

 
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Posted by on February 11, 2010 in Latin America

 

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Let’s Get Down to Business in Asia!


A new market of 600 million people with an estimated GDP of around US$ 2.7 trillion – an opportunity few businesses can afford to miss out on. Can you?

After coming into effect on January 10th 2010, the Australia-ASEAN-New Zealand Free Trade Agreement (AANZFTA) is the largest FTA Australia has ever concluded. With six out of ten ASEAN markets expected to grow at rates at least double the forecast OECD average in 2010, Asia is leading the global recovery after the economic downturn and there is great potential for Australian businesses to get a piece of the pie.

Why care? If your business is exporting or importing any product (or part of a product) from Brunei, Burma, Malaysia, the Philippines, Singapore or Vietnam, for instance, then you should care. The AANZFTA is the first such agreement covering all sectors, including intellectual property rights, investment, goods and services, ASEAN has ever negotiated.

Among tariff reductions, the AANZFTA includes new safeguard measures for investors, a decrease in restrictions to business travel within the region, as well as greater stability and certainty in the regulatory and legal environment of ASEAN.

Still not sure why this affects you? Let’s say you want to go on a business trip to Manila, maybe to explore future market entry opportunities, but you don’t have an established professional relationship with a local business yet. AANZFTA includes commitments on temporary business entry of natural persons such as service suppliers, goods sellers and investors that make it easier for you to get in and around the country without having to justify every step you are taking.

42 per cent of our total exporter base – around 18,500 Australian businesses – already trade with ASEAN. Make sure you don’t miss out.

Click here for a list of “ASEAN Made Easy” workshops throughout Sydney, the ACT and the Central Coast.

Stefanie Mueller – International Communications Strategist

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Ian at ian.bennett@australianbusiness.com.au.

 
 

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Don’t Wait For Asia to Pass you By


Now why do we need yet another Free Trade Agreement (FTA) if we already have bilateral arrangements with pretty much every country in the region? For those who haven’t heard about it yet: Australia has just signed the long-in-the-making Australia-ASEAN-New Zealand Free Trade Agreement (AANZFTA), which introduced comprehensive new tariff commitments and regulations on products, services, investment and intellectual property.

Most people are probably familiar with the problem of the “spaghetti bowl” effect of ever more free or preferential trade agreements between pretty much every country on the planet with every other country in one way or another. These numerous treaties organise trade relations between two or more parties beyond the general WTO rules. Not sure what I’m talking about? Imagine a map of the world with a link between every country in the world with two or more other countries. What you get is a “spaghetti bowl” of links that spread all over the globe and make it almost impossible to distinguish who is associated with whom. 

Why does this matter? The AANZFTA does not do away with the spaghetti issue. But it is complimentary and possibly a little more complete than bilateral agreements. It covers all areas in the one document, including services, goods, investment and intellectual property. Members can choose whether they wish to export a product under the existing FTA’s with specific countries or under the AANZFTA rules. Even though bilateralism often offers even greater tariff reductions and even less barriers, AANZFTA provides exciting new opportunities especially for manufacturing industries that are involved in rather complex supply chains.

An easy example of this is the automobile industry. An “Australian made car” is hardly Australian made. Its intestines and the technology to put it all together would come from a wide range of countries all over the globe. Through AANZFTA’s regional rules of origin Australia is able to profit from tariff reductions according to the origins of its imported inputs. This not only creates a greater market access for Australia, but it also provides incentives for regional members within ASEAN to use inputs from Australia.

If you’re still not convinced about AANZFTA, here is another argument: in the shadow of an economic downturn the greatest danger is for countries to engage in protectionist measures. The AANZFTA opens borders to counteract this trend. ASEAN as a whole is bigger than the EU and can gain some significant influence as a trading bloc in the region. It would be rather foolish for Australian businesses to be hesitant to jump on board this Asian giant. Others won’t be…

Stefanie Mueller – International Communications Strategist

Click here for a list of “ASEAN Made Easy” workshops throughout Sydney, the ACT and the Central Coast.

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Ian at ian.bennett.@australianbusiness.com.au

 
 

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Miss the Bus Now and Someone Else Will Have Boarded!


 

If there is an appropriate time to engage in business with India, it is now, according to SP Joshi, country manager for Australian Business International Trade Services.

Joshi cites India’s burgeoning growth (8% to 9% annually) and a strengthening middle class of 350 million people (11% to 12% annual growth) as motivation for Australian companies – but the proviso is that they need to act now.

According to Joshi, India’s growing middle class has taken on the trappings of Western society. While poverty has not vanished, it is still visible on the streets, and the country has an insatiable appetite for everything Western.

“They have the purchasing power to be able to afford a range of products and services that they can’t necessarily find in their own country.”

However, many Australian companies, Joshi believes, have been a little slow to respond to this growing consumption and expansion.

“It’s frustrating seeing businesses fail because they haven’t partnered with the right people who understand the Indian psyche and how business is conducted in the Sub Continent.

“I’ve seen some businesses collapse because they decide to go it alone, and considering India’s rapid growth, are wasting valuable opportunities.” 

To read the full article, click here.

SP Joshi – Country Manager, India

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email SP Joshi sp.joshi@australianbusiness.com.au.

 

 
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Posted by on February 10, 2010 in India

 

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