ALABC Perth breakfast report · 2013 Melbourne Dinner - Last days to register! The Australia-Latin America Business Council is pleased to invite you to join us for the highlight event

Chairman’s Message This month has seen the hosting of the second Latin America Down Under mining conference (‘LADU 2013’) in Sydney and it is fair to say that there were some notable differences to the inaugural event in 2012. That the event attracted a larger audience than in its first year augurs well for the future of both the event and the deepening of Australia’s mining engagement with Latin America. Both of these aspects were reinforced by the presence of more senior representation from the region - including the Mining Ministers of Chile, Guyana and Peru – and of more sizeable delegations, particularly in the case of Colombia and Mexico, two of the fast growing mining jurisdictions. The importance of the sector as one of the primary bridges between Australia and Latin America was also highlighted by the participation of Australia’s Minister for Foreign Affairs, Bob Carr, the recently appointed Australian Minister for Resources and Energy, Gary Gray, and the chief executive officer of Austrade, Bruce Gosper, amongst others. At a time when the news in Australia is increasingly about the end of the commodities super cycle, a growing slowdown in mining investment and the considerable difficulties being experienced by a large number of junior mining companies in sourcing funding, there were some very positive signs in evidence at LADU 2013. Although not immune to the global trends taking place in the mining sector, the Latin American mining sector appears to be faring better at maintaining its investment momentum and could actually strengthen its position as perhaps the world’s leading mining jurisdiction as a consequence of the consolidation that the sector is currently experiencing. The profile of the Australian presenters at LADU 2013 highlights another reason why we can be optimistic about the future of Australia’s involvement in Latin America’s mining sector, namely, the fact that we now have a growing core of executives who have extensive understanding of and experience in doing business in the region. This has not always been the case and this growing ‘team’ promises to make a very big contribution to enhancing Australia’s presence in the region. The growing maturity of the resources relationship was reflected in the fact that conference speakers did not shy away from highlighting the dominant and challenging issues that confront the mining sector in Latin America (as well as other mining jurisdictions), namely, an increasingly complex operating environment, in which the difficulties of accesing funding and the growing socio-political risk are the major concerns. In the case of Latin America, there is also an expectation that the costs of exploration will remain high during at least 2013.

This issue (Click on heading to open article)

Chairman’s message 1

2013 Melbourne Dinner – Bigger & better! 3

Qantas turns attention to Latam alliance 3

Westfield changes strategy in Brazil 4

LatinFinance prepares inaugural investor forum 5

Aspermont launches new Brazil news service 5

Arrium announces important changes 6

COALAR has new chairman and logo 7

ALABC Brisbane networking briefing report 7

ALABC Perth breakfast report 8

Charlie Sartain departs Xstrata 8

Latin America Down Under Report

-New opportunities after end of mining boom 9

-Juniors urged to look to Latin America 10

-Latin America tops mining deals chart 10

Bolivia aims to double oil and gas spend 11

Brazil to auction largest-ever oil find 11

FEATURE: Latin America’s technology sector 12

Peru – an emerging start-up hub? 15

Latin America cements Pacific Alliance 16

Opinion: Latam’s fastest-growing economies 17

Uruguay’s booming construction sector 18

Cartagena aims for megaport status by 2017 19

Ecuador seeks to expand mining activity 19

Brazilian wins WTO leadership role 19

Peruvian real estate sector to boom for years 20

For the diary 20

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Edition: May, 2013

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www.alabc.com.au Tel: 02 9357-4441

There is little doubt that the mining sector globally is entering a challenging period. As well as the stated difficulties affecting the junior miners, major mining companies have all recently changed their leadership teams and have adopted the new catch cry of ‘consolidation and cost containment’. The mining equipment, technology and services (‘METS’) companies have started to report more difficult operating conditions and to make forecasts of lower revenue and profit ahead. That said, there are some encouraging signs. Austmine this month held its most successful annual conference ever in Perth, showcasing the credentials and strength of Australia’s METS sector. On display was the world class innovation possessed by Australian companies, something that places our companies in a very strong competitive position as market conditions tighten and success will be the domain of those who are agile and able to offer the best in technology and services. Under the leadership of long-time president, Alan Broome, Austmine has gone from strength to strength and has helped its members to capture a growing share of the global market for mining equipment, technology and services. As a consequence, countries such as Colombia and Peru - like Chile previously - are looking to copy the Australian model for building mining clusters and adding value to their own METS capabilities. This widespread and growing interest represents an excellent opportunity for Australian companies. There is no doubt that every economic downturn produces pain, but they can also generate opportunity. Whilst those businesses that are bloated, unprepared and poorly-managed run the risk of failure, those that are agile, fast to adapt and well-led have the chance to grow at the expense of the former. This is the increasing scenario that prevails in the global mining sector, including in Latin America. Caution and prudence are essential, but adopting a purely defensive mode would be a mistake and would mean passing up what are likely to be some very appetising opportunities to invest and to grow. Now is the time for Australian companies to sharpen their strategies and to focus on cementing their positions in the Latin American mining sector. Fortune will indeed favour the well-prepared and the brave. Assets in Latin America are likely to come onto the market at lower and very appealing prices. Businesses in the region will be more receptive to creative business proposals and the scope for strategic alliances will therefore multiply significantly. The markets will take note of how companies perform when the blow torch is applied and those that stand their ground and maintain their commitment to existing relationships will be creating a platform for greatly enhanced success in the future. Company headcounts will undoubtedly contract, so the key will be to ensuring that the best talent is retained or brought on board. Possessing the right team for the ‘new normal’ operating environment will be as critical to success as having the right costs structure. More and more talent will become available at reduced cost and this can prove a valuable source of competitive advantage. However, although I have devoted so much of this commentary to the mining sector, it would be wrong to conclude that mining is the full extent of what Latin America has to offer to Australia. This is far from the case, even though we must acknowledge that the sector is one of the key pillars of the relationship at present. The more important story about Latin America is the emergence and continued growth of its sizeable middle class. More than anything else, it is this trend that is transforming the region and underwriting its future. As is reflected in the variety of news items contained in this newsletter, there is much more taking place in our engagement with Latin America than just mining. Slowly but surely, Latin America is capturing greater attention in Australia and a more diversified range of local companies are pushing into the region. We have entered what I believe will be a permanent cycle where it is ‘fashionable’ be focused on Latin America, where our growing business links will be complemented by increasing links in the fields of arts and culture, sports, tourism and many more. The pace of engagement is quickening. It may not yet be evident to all, but it is well-established and growing. Much remains to be done, including convincing many sceptics, but this century will not be Asia’s alone. Latin America will have an important role and it will be in Australia’s best interest for us to ensure that we buy a ticket for the journey. Jose Blanco Chairman


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2013 Melbourne Dinner - Last days to register! The Australia-Latin America Business Council is pleased to invite you to join us for the highlight event in our Victorian calendar, the 2013 Melbourne Annual Dinner, which this year will feature Dr. Megan Clark, Chief Executive of CSIRO, as our guest of honour and key note speaker. The 2013 Melbourne Annual Dinner will bring together ALABC members and guests, including senior business leaders from organisations throughout Australia and from a wide variety of industries, as well as Australian and Latin American Government officials who have interest in doing business in Latin America and in Australia’s overall relationship with the region. In addition to her position at CSIRO, Dr Clark is also currently Chair of the Mining for Development Advisory Board for AusAid and a principal in the Global Research Alliance, which brings together nine global applied research peers to support inclusive innovation for the world’s most disadvantaged. She is on the Prime Minister’s Science, Industry and Engineering Council and Minister Combet’s Manufacturing Leaders’ Group. Prior to the CSIRO, Dr Clark led BHP Billiton’s global efforts in Health, Safety and Environment and Community Engagement after heading BHP Billiton’s Global Technology unit. For more information on the CSIRO and its work in Latin America, including the CSIRO Chile Centre of Excellence, please visit www.csiro.au.

When: Wednesday 5 June 2013 (7.00pm—10.30pm) GOLD SPONSOR

Where: The Australian Club, 110 William St, Melbourne To register, visit: www.alabc.com.au/Events-Activities

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For more information or to discuss special seating or dietary requests contact: Kim Robinson, Marketing & Events Manager at: [email protected] or 02 9357 4441

Qantas turns its attention to closer ties with Latam

Qantas Airways is chasing a fourth international pillar to add to recent alliances with other airlines, pushing for talks to begin over a broader relationship with Latin American giant Latam Airlines.

Latam, the region’s largest airline that resulted from last year’s merger between Chile’s LAN and Brazil’s TAM, is now the target for talks over an alliance that could range from a broader code-share covering Australia and South America to a profit-sharing joint venture, similar to the deal that

Qantas initiated earlier this year with Emirates. Simon Hickey, chief executive of Qantas International and the man tasked with returning the ailing business unit to profit by the end of the financial year, 2014, said that, with its complicated merger out of the way, Latam was ready to extend talks about a deeper relationship. “We keep on talking to them about what is our next step with them,” Mr Hickey said. “It’s not some way off.” “Mergers are a distraction . . ., but we’ve got a very strong relationship there and we will talk over the next year or so, we will continue to talk and evolve that.”, said Mr Hickey.


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Bilateral alliances between airlines that allow them to co-operate on pricing, capacity management, scheduling and sales are an important form of consolidation in an industry in which restrictions on foreign ownership and government intervention have prevented true cross-border consolidation. With its international division incurring steeper losses in 2011 and 2012, Qantas chief Alan Joyce outlined a five-year plan to overhaul the unit that included a greater emphasis on partnerships with airlines in Qantas’s most important international markets, including South America.

Qantas puts its “QF” code on LAN’s six weekly flights from Sydney to its hub in Santiago via Auckland, but not on onward flights within Latin America. LAN also places its “LA” code on Qantas’s three flights per week between Sydney and Santiago. The fact that the merged airline chose the Oneworld alliance of airlines, in

which Qantas was a founding member and LAN already a member, over Star Alliance in which Tam was a member, has fuelled expectations in the industry that the Latin American giant will now look to forge a closer tie with the Australian flag carrier. After winning a conditional approval from the competition regulator in Australia for the Emirates joint venture, with conditions placed on the five-year deal to maintain capacity on trans-Tasman routes, Mr Hickey said he expected any similar alliance with Latam would face tough scrutiny here and in Chile. A joint-venture-style alliance between Australia and Santiago could prove difficult given there is no direct competition on the route. Argentina’s Aerolineas Argentinas flies between Sydney and Buenos Aires, where Qantas pulled out of, to connect into LAN’s hub in early 2012 “It would be great, but we have to work out what’s the art of the possible,” Mr Hickey said of managing the regulatory process around a potential tie-up. “We’re both working on what is the art of the possible.” “It’s not just the regulator here, it’s the regulator on both sides. Latam’s pretty big over there; it’s one of the strongest airlines across Latin America.” ↑Return to Index

Westfield changes strategy in Brazil

At the end of April, Westfield Group announced that it had sold its half-share of its Brazilian joint venture. However, when making the announcement, the company went out of its way to emphasise that it was exiting the joint venture but not the market of Brazil, where it still had long-term objectives. The deal with the Almeida Junior family was launched in August 2011, with co-chief executive Steven Lowy calling it a historic day for the group. Westfield initially invested 740 million Brazilian real ($440 million at the time) into the joint venture for a 50 per cent interest in five assets. Mr Lowy said at the time that it was a "measured investment". It was only the fifth new market the retail giant had entered since its founding in Blacktown, west Sydney, 53 years ago. But the group said it had sold its half share in Westfield Almeida Junior back to the original partner. Property analysts attributed the collapse of the deal to a difference of opinion between the partners as to the long-term outlook of the business, with Westfield seeing it as a stepping stone to a bigger asset base but Almeida Junior happy to redevelop the existing portfolio. "We have decided to dispose our interest in this joint venture as the partnership was not conducive to the achievement of the group's long-term objectives in Brazil," Mr Lowy said in the statement. "We will continue to independently review opportunities in the region in line with our global operating strategy.” Westfield plans to keep two of the three senior managers in the region. ↑Return to Index


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LatinFinance to launch inaugural Latin America Investors Forum in Australia One of Latin America’s most prestigious financial publications, LatinFinance (part of the Euromoney Group), has announced that it will host its inaugural Latin America Australia Investors Forum (LAAIF) at the Sheraton on the Park Hotel in Sydney on July 16-17.

LAAIF is explicitly designed to connect financiers, institutional investors, advisors, government officials and corporates from Australia with their counterparts in Latin America. The Forum will

address the full spectrum of investment, trade and business linkages that now connect LatAm and Australia, including: Debt & Equity Capital Markets, Oil & Gas, Agribusiness, Infrastructure, Project Finance, Renewable Energy, Retail, Trade Finance and much more. The event will cover two days of informative presentations, interactive panel discussions, and private 1-1 meetings. Confirmed participants Include: • Enrique Garcia, Chairman & CEO, The Development Bank of Latin America – CAF

• Jozef Henriquez, Head of Syndications, Structured & Corporate Finance, IDB

• Hugo Sarmiento, CFO, The Development Bank of Latin America – CAF

• Bernardo Guillamon, Chief of Outreach & Partnerships, Inter-American Development Bank

• Antonio Juan Sosa, Vice-President of Infrastructure, The Development Bank of Latin America – CAF

• Hans Schulz, General Manager, Structured & Corporate Finance Department, IDB

• Mark Johnson, Chairman, Australian Financial Services Task Force

• John Brogden, Chief Executive, Financial Services Council

LAAIF joins LatinFinances’ Global Capital Introduction Series which now includes successful annual Latin American focused

investor meetings in China, Hong Kong, Korea, India, the UAE, Qatar and the UK. For more information about LatinFinance please

visit www.latinfinance.com.

Don’t miss this timely initiative and your opportunity to meet with the key actors bringing Latin America and Australia c loser together. To register or for more information, contact: Kal Dias, LatinFinance Tel: +1.305.428.6280 [email protected] ↑Return to Index

Aspermont launches mining news service for Brazilian market

Australia-based international media group, Aspermont Limited, successfully launched its first foreign-language publication, Notícias de Mineração Brasil (translated Mining News Brazil), at the beginning of March 2013. The online news service is delivered entirely in Portuguese, written by a team of Brazilian journalists based in Brazil´s mining capital, Belo Horizonte, in the state of Minas Gerais.

http://www.latinfinance.com/

mailto:[email protected]


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Notícias de Mineração Brasil (NMB) is targeted primarily at the increasingly important and fast-growing Brazilian mining sector, which has expanded significantly over the past decade. Brazilian mineral production has risen from $US7.7 billion in 2001 to over

$US50 billion in 2012, while the Brazilian Mining Institute has predicted investments of $US75 billion for the 2012-2016 period. Beyond original content produced by the local editorial team, NMB also draws on the extensive stocks of English-language news delivered by Aspermont Limited´s range of existing mining news services, including MiningNews.net and Mining Journal, providing translated versions of relevant stories as part of its content mix. Annual subscriptions to the NMB service, as well as advertising opportunities, are being

commercialised through Aspermont´s new Brazilian subsidiary, Aspermont Brasil, based in Belo Horizonte. The local office is headed up by Simon Tarmo, a journalist and former Australian Trade Commission representative who has been living in Brazil since 2007. Aspermont group CEO Colm O’Brien commented: “The opening of our new Brazilian news service aligns to the group strategy of global online growth, particularly in regions where natural resources are a significant contributor to the economy. We will be looking to build further product offerings on this launch over the coming year.” ↑Return to Index

Arrium announces important changes to its management team

Mining and materials group, Arrium Limited announced on 30 May that Andrew Roberts will take up the position of Managing Director and Chief Executive Officer from 1 July 2013, succeeding Geoff Plummer, who is credited with transforming Arrium from a domestic focussed steel business to a growing international mining and materials group.

On the same day, as Managing Director Elect, Andrew Roberts (pictured below) announced a number of organisational and management changes designed to align the company’s business portfolio to its strategic direction, and accelerate execution of its plans. The changes, effective 1 July, include the appointment of Steve Hamer as

Chief Executive Steel, combining the steel businesses of both OneSteel Manufacturing and Distribution. John Barbagallo has been appointed Chief Executive Mining Consumables, replacing Andrew Roberts. Mr Barbagallo is currently General Manager of Moly-Cop Australasia. Leo Selleck will be Chief Executive Operational Excellence, responsible for operational excellence, performance and capability across Arrium, and will lead a number of key strategic projects over the next 12 months. Naomi James, the company’s Chief Legal Officer will oversee the divestment of non-integrated steel businesses and property sales. In announcing the changes, Mr Roberts said: “While we expect the current difficult external environment for steel to improve, we are not waiting for this to happen. Today’s announcement reflects our focus on continuing to drive further action on cash generation. This will be through improved earnings from cost reductions and operational improvements, driving down working capital, and from divesting non-integrated steel businesses and properties”. Mr Roberts added that: “We have a very experienced and capable management team, and importantly, have been able to maintain this through the transition period. “Going forward, we will be focused on capturing the growth opportunities from our existing projects in the Mining and Mining Consumables businesses, improving earnings and cash generation in Steel, and strengthening the balance sheet through paying down debt. ↑Return to Index


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COALAR implements leadership change and launches new logo

On 29 May, Foreign Minister Bob Carr announced the appointment of Mr Chris Gale (pictured right) as the new Chairman of the Council on Australia Latin America Relations (COALAR). Mr Gale replaces Mr David Luboff who has served as Chairman since July 2010. Mr Gale has been a member of the Council's Board since August. He is the Managing Director of Latin Resources, a Perth-based iron and mineral sands focused exploration and development company. When making the announcement, Senator Carr said that Mr Gale has first-hand knowledge of the growing economic integration between Australia and Latin America, and its transition from a base of

mining and minerals into broader services sectors. Senator Carr acknowledged Mr Luboff's dedication and leadership to Australia's relations with Latin America, and wished him every success in his relocation to Singapore. At the same time, COALAR launched a new logo (pictured), based on each colour representing the land mass of the countries of Latin America and Australia based on land mass. The data forms a vibrant and energetic 'C', reminiscent of some traditional Latin American textile design. COALAR was established by the Australian Government in 2001 to contribute to the development of Australia's relations across Latin America. It supports initiatives across the areas of business,

education, tourism, sustainability and cultural promotion. ↑Return to Index

ALABC hosts networking briefing in Brisbane

May 16 saw the ALABC join forces with international law firm Norton Rose to host a networking briefing in Brisbane. Guest speakers were H.E. Mrs. Clemencia Forero-Ucros, Ambassador of Colombia (pictured left), Robert Whiddon, Managing Director,

Trade and Investment QLD and Maria Rampa, Marketing Manager Mining and Metals, SKM. Norton Rose partner, Robert Milbourne, moderated the panel discussion. The event drew an audience of some 40 participants and generated considerable discussion and engagement. Ambassador Forero-Ucros used her address to highlight why Colombia is one of the fastest growing markets in Latin America and as such provides a wealth of opportunity for Australian business from mining, education, agribusiness and financial services. As ALABC members well know, the Queensland government has been the most active state in developing commercial

relationships between Australia and the Latin America region. It was therefore very pleasing to have the opportunity to hear from Mr Whiddon about the latest news from his department. The perspective from someone on the ground in the market came from SKM’s Maria Rampa, whose firm is Australia’s leading engineering company and has a long and successful tradition of working in Latin America, having established offices throughout the region over the past decade. ↑Return to Index


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ALABC breakfast briefing in Perth

The ALABC held one of its regular Distinguished Speaker Series events in the form of a breakfast briefing at the Perth Convention Centre on the morning of Wednesday 22 May, coinciding with the Austmine 2013 conference. The event had a mining and resources theme, with the focus on Chile. Speakers included HE Mr Pedro Pablo Diaz, Ambassador of Chile to Australia; Matias Medel, Managing Director of Duratray and Stephen Prior, Managing Director of Admiralty resources.

The event provided an excellent networking opportunity for ALABC members and guests in the west, as reflected in the coverage given to the briefing by The West Australian newspaper. ↑Return to Index

Sartain moves on following completion of Glencore Xstrata merger

Following the completion of the merger of Glencore International Plc and Xstrata Plc, long-time chief executive officer of Xstrata Copper, Charlie Sartin, announced that he would be departing the merged entity to pursue new interests. It is expected that Mr Sartain will pursue a career as a company director after a enjoying a well-deserved sabbatical, Mr Sartain has been one of Australia’s leading advocates for engagement with Latin America and will continue to be so, as he has a number of other roles that will see him retain his links with the region. In addition to a distinguished career with Xstrata and previously MIM Holdings, Mr Sartin also served a six year term as a member of the Council on Australia Latin America relations. In 2012 the ALABC acknowledged Mr Sartain’s contribution to Australia-Latin America affairs with a special award during that year’s COALAR Business Excellence Award’s presentation. ↑Return to Index


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Latin America Down Under 2013 conference round up The second Latin America Down Under conference, took place at the Sheraton on the Park, Sydney on 29-30 May 2013. The conference attracted more than 350 delegates from business, government, academia and media, including key industry leaders from many of the Latin American countries. The following articles are some of the key messages delivered at the conference.

Opportunities follow the end of the mining boom – Foreign Affairs Minister Bob Carr

Speaking at the second Latin America Down Under conference in Sydney, Australia’s Foreign Affairs Minister, Bob Carr, said mining was a common tie between Latin America and Australia. “Mining is providing traction and substance in our relationship with Latin America countries,” he said.

“The growth has been phenomenal.” Merely four years ago there were an estimated 20 Australian mining companies operating in Latin America. The figure has jumped to 80, with activity placed on 200 projects.

But as metal prices decline and mining investment slows, Carr says the strong ties built up between the countries can stay in place and enable a reassessment of investment opportunities. “We’ve got a lot to learn from each other about managing times when prices are down and investment contracts,” he said. “That gives us a chance to gather our breaths, gather our energy, take pause and be prepared to see that when the next surge of investment comes we’ve learnt lessons and we go for quality. “We can refine policy, look at broader questions like managing surging investment in a way that provides sustenance during times of contracting investment.” Carr said tougher times could provide a good opportunity to address issues like challenges of budgets and sovereign wealth. Speaking about the re-emergence, as opposed to the emergence of Latin America as a mining hub, Carr said you need look no further than the facts. Brazil, already the second largest iron ore producer, is growing rapidly. In 2011, Brazil overtook the UK economy. PricewaterhouseCoopers expects it to be the sixth-biggest economy by 2030 and the fourth-biggest by 2050. Chile, the world’s largest copper producer, is a melting point for mining investment, with Australia the largest direct investor in Chilean mining. Peru is the second-largest copper producer and the sixth-largest gold producer. Mining investment in Latin America is still on the rise, with a predicted $A150 billion worth of potential investment opportunities over the next decade. “From Australia’s perspective, Latin America is a region of vast potential on the rise – our mining industry has shown it understands that as clearly as any industry,” Carr said. “Our job, in government, will be to make the most of the links we have, to set a stage in which new ties can be built and encourage the interaction that will be to our mutual benefit.” Highlighting the strategies the government is putting in place to strengthen ties between Latin America and Australia, Carr said sustainable mining workshops in Peru and Mexico were undertaken last year with participants from across the region. Just last week, Ausaid ran a mining for development conference. With Australia and Latin America having similar resource endowments and common environmental issues, Carr said it provided a good catalyst to foster strong relationships over numerous sectors. “This gives us an opportunity to work together to advance multilateral interests, including trade liberalisation, food security and climate change,” he said. ↑Return to Index


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Juniors urged to look to Latin America – Austrade CEO Bruce Gosper Austrade chief executive Bruce Gosper told delegates at Latin American Downunder that while Australia’s resource and energy exports were fuelling Asia’s industrialisation, an extraordinary and sustained economic performance by Latin American economies had inspired Australia to forge ties with the region’s economies. “It should be clear to this audience that Australia’s business

interests are global,” Gosper said. “Latin America is more and more an exciting place for business.” Brazil is now the world’s seventh-largest economy, while Mexico is expected to be the 10th biggest by 2019. Gosper said strong growth, stable fiscal policy and a young population was driving the investment. Australia’s trade with Latin America had grown strongly in recent years, with two-way trade jumping more than 60% in the past five years, to more than $A8 billion. Despite this, the presence of junior mining companies in Latin America was substandard, Gosper said. There were about 200 junior resources

companies involved in Africa’s mining sector, yet just 50 were involved in Latin America. “Yet the opportunities for these and other Australian companies to enter the growing Latin American mining market are significant as the sector there is keen to partner these Australian juniors in their mining, environmental, safety, technology and innovative mining techniques,” he said. Gosper said the application of mine water technologies was of particular opportunity. “Australia’s mining sector consumes about 4% annually of Australia’s national water consumption and has become very skilled in mine water management techniques,” Gosper said. “Water is a real issue for Latin American mines including in Peru and Chile and we will shortly be taking our water skillsets to Mexico so there is a strong opportunity there for Australian technologists in that space.” One division of Austrade involves putting mining companies and educational institutions in touch with customers through its network of offices in Latin America. “We work to promote Australia as a credible and responsible partner in mining,” Gospel said. “We’ve helped many executives and boards understand the operating environment and get access to governments in Latin America,” he said. In the past two years, Austrade has significantly expanded its presence in Latin America. “We currently have six offices with more than 40 staff and the company is looking for further opportunities to strengthen its presence,” he said. ↑Return to Index

Latin America tops mining deal charts – Liam Twigger, group managing director, PCF Capital Group

Speaking at the Latin America Down Under conference in Sydney, Perth-based PCF Capital Group managing director Liam Twigger said Latin America’s attraction was hard to ignore. “Nowhere was this more evident than in the predominantly gold-focused deals where the price paid per ounce of asset being acquired was significantly higher in Latin America than for elsewhere,” Twigger said.

Latin America commanded a solid $US125.18 per ounce of gold in its 2012 transactions, compared to $71.22/oz paid for Australian gold and base metals deals and $18.40/oz in Africa. “If there was to ever have been any example of the flight of capital to the more favoured Latin American jurisdictions then those price trends are telling,” Twigger said. “In actual dollar terms, the divide is wider again with the 2012 Latin American transactions, inclusive of the Glencore-Xstrata merger impacts, being worth upwards of $25 billion, compared to around $7.5 billion for Australian deals.”

Over 2012, Twigger said Latin America accounted for 72% of the world’s base metals by acquisition and 33% by volume. The market, according to Twigger, was very comfortable with Latin America’s jurisdiction and its prospectivity which had underpinned the surge in investment. “The market is certainly embracing Latin America,” Twigger said.


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“The investment flight to Latin America is not that surprising if you compare the level of political risk there compared to say the other favoured destination outside of Australia – Africa.” With the mining boom super cycle over, Twigger said the attention was being turned on cost control and margins to entice investors back to market. “It’s not as gloomy as a lot of analysts lead us to believe,” he said. “The companies with good management and projects with a pathway to production and relatively low capital cost will be successful.” ↑Return to Index

Bolivia to double oil and gas spending Natural gas-rich Bolivia - which sits on 11 trillion cubic feet of natural gas, according to government figures - plans to double its spending on oil and gas exploration to $500 million next year, and to woo private energy companies back to the South American country. Vice President Alvaro Linera said on 24 May that a new package of incentives will be issued in the next days, designed to give companies interested in Bolivia “a swift return on investment”. Natural-gas exports to Brazil and Argentina are Bolivia’s mains source of hard currency. Nearly half of Bolivia has potential for hydrocarbons, but only 35% of its territory has been explored, Linera added. Bolivia’s president, Evo Morales, nationalized the energy sector shortly after taking office in 2006. Earlier this month, Morales won a constitutional victory, with Bolivian lawmakers passing a law to allow him a third term. ↑Return to Index

Brazil to auction its largest-ever oil find in October Brazil plans to sell the right to explore and develop its largest-ever oil discovery in October, putting up for auction an offshore petroleum prospect that is expected to produce about 12 billion barrels of oil over 35 years. The sale of the Libra prospect, which Brazil said will be held a month earlier than expected, will be the first under new rules that tighten state control and raise government participation in a Bangladesh-sized offshore area near Rio de Janeiro. Known as the Subsalt Polygon, the area is home to several giant discoveries, including Libra, as well as more than 80 per cent of Brazil's current oil output. The name refers to Libra and other giant strikes where oil is trapped in rock under a salt layer. Much of the oil in the region, though, is trapped in reservoirs above the salt layer.

Brazil's oil agency, the ANP, discovered Libra in May 2010. With certification agency Veritas, the ANP estimates Libra holds 26 billion to 42 billion barrels of oil in place. Of that, production could recover 8 billion to 12 billion barrels, or an amount equivalent to three to five months of world oil demand. "In my 30 years in the oil business, I've never seen someone auction off something of this magnitude," Magda Chambriard, director-general, of the ANP told reporters. "This is a big, major prospect."

The auction was moved up from November to conform with Brazilian President Dilma Rousseff's schedule, Chambriard said. Unlike previous auctions, the sale will be held in Brasilia, the capital, rather than Rio de Janeiro, the centre of Brazil's oil industry. "Something of this size clearly requires the presence of the president," Chambriard said. "This is a very significant area." NEW AUCTION RULES Winners will be those companies that offer the government the largest share of future oil output to sell on its own account. This "profit oil" will only be paid to the government after the winning bidder or group has paid off the initial costs of exploration and development.


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Additionally, state-controlled oil company Petroleo Brasileiro SA, or Petrobras, will have to take a minimum 30 percent stake - as well as pay 30 percent of all investment - in any winning bid group. PETROBRAS TO DOMINATE Petrobras will be the only company licensed as operator of new Subsalt Polygon areas, meaning it will have control of most exploration and development decisions. Other partners will be primarily financial investors. If Petrobras wants a bigger stake it will have to bid for it like any other company, Chambriard said. When the rules were passed in 2010 analysts said the new system would primarily be attractive to large state-owned oil companies more interested in long-term supply than in developing the prospect. Because the government is more interested in maximizing its share of future oil output than winning a large up-front payment, the auction will have a fixed entry fee and bidding will focus on the amount of oil companies are willing to give Brazil's government, Chambriard said. The size of the potential new fields in the Subsalt Polygon make it unlikely that the government will sell areas in its borders more than once every two years, Chambriard said. The Subsalt Polygon may contain as much as 100 billion barrels of oil, according to the Brazilian Petroleum Institute of Rio de Janeiro-State University. A separate auction for natural gas prospects, both shale and conventional, was pushed back until November so the subsalt auction can be moved up, Energy Minister Edison Lobão said on 23 May. The government hopes to hold annual auctions for oil and gas prospects outside the Subsalt Polygon on an annual basis, returning to a schedule that was in effect from 1999 to 2008. Auctions were halted for five years as the government drafted new rules to boost its control of giant new offshore reserves in the Subsalt Polygon. ↑Return to Index

Feature Analysis: Is the Latin American technology sector ready for an entrepreneurial revolution? (Editor’s Note: This article was published by the Wharton School at the University of Pennsylvania and Universia on April 17, 2013) In 2011, four college friends decided to create a search website that would provide discounts, bargains and benefits for those users who had one or more credit cards or debit cards. They gave birth to Skonto, which became the first Argentine application to take part in Store, the Microsoft software shop for Windows 8. Thus far, the founders – including marketing students Diego Verzino and Federico Del Pup, and two students specializing in computer science -- have depended on support from UADE, the Argentine business school, but they are working to ensure that the business will eventually pay for itself. Skonto is one of several technology companies that have been emerging all across the region in recent times. According to some experts, the trend indicates that the sector is poised for a revolution. Last October, The Economist took note of that phenomenon when it published an article entitled, “The Lure of Chilecon Valley.” That piece highlighted the public policies of the country, exemplified by Start-Up Chile, an initiative established in 2010 with the goal of attracting technology talent and creating a Silicon Valley on a small scale. “Basically, the initiative involves the Chilean government co-investing with local investors in a non-recoverable fund,” notes Paris de l’Etraz, director of the IE Business School’s Venture Lab. The goal of the fund is to incubate the development and growth of start-up companies. The state-owned entity provides 90% of the funds for developing the group, up to the level of US$40,000 per company. “But it does not try to become an investor; it only wants to help local companies grow. If an entrepreneur arrives with references, and is qualified, [the fund] assumes part of the investment,” notes De l’Etraz. Thanks to this initiative, which requires entrepreneurs to stay in the country for at least seven months, Chile is taking the lead in the region when it comes to entrepreneurial initiatives. Nevertheless, comparisons with Silicon Valley can be exaggerated, adds De l’Etraz, who just attended several “Venture Days” in Latin America, during which start-ups presented themselves to audiences of local and international investors. “People believe that Silicon Valley is something that can easily be replicated, but its entrepreneurial ecosystem is quite special.”


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In his view, the most outstanding thing [about Silicon Valley] is that its angel investors have previous experience as entrepreneurs and, as a result, they “recognize the entrepreneurial mentality; they can identify an entrepreneurial project and team; and they know how to evaluate it and make it grow.” Nevertheless, in most areas of the world, including Latin America, angel investors and those who manage investment funds do not have an entrepreneurial character. “They come from investment banking, not from entrepreneurship.” So, “the mindset of this type of investor needs to be changed.” Beyond that, Silicon Valley has two of the most prestigious engineering schools in the world – Berkeley and Stanford - as well as a diversity in its population that is very hard to replicate. Many countries have tried to duplicate the model of Silicon Valley, and some of them have succeeded a great deal, such as Israel. “But [Israel] is a special case, because it takes in a lot of money from the United States, and there are lots of investors and funds that originate in the U.S. In addition, there is a very strong entrepreneurial culture there,” he points out. Now, however, the barriers to becoming more like Silicon Valley are starting to fall away, says De l’Etraz. He notes that countries such as Spain are transforming themselves into new destinations for establishing their own start-ups because in these countries “salary levels are lower [thus, more competitive]; there is a good educational system; there is a workforce with technical experience and the quality of life is high. Meanwhile, prices in Silicon Valley are prohibitively expensive.” As an example, he cites Tyba, a company founded by foreign students who live in Spain, which helps connect companies with young talent over the Internet.

The same conditions that exist in Spain are surfacing in numerous countries in Latin America. Javier Zúñiga, director of computer engineering at UADE in Argentina, notes that entrepreneurs in his country depend on “a very good quality of human resources in its educational system, and a high level of English training for international projects and activities, which is something fundamental in IT.” The Obstacles Nevertheless, there are some obstacles that still need to be overcome. Del Pup, the 29-year old Argentine who co-founded Skonto, complains about the lack of risk financing, not just in his homeland but in the rest of the region.

He adds that there are not enough governmental institutions that support entrepreneurs, “despite the fact that the [technology sector] is growing and needs to be pushed.” De l’Etraz adds that during a recent visit to Argentina, he noticed that entrepreneurs were nervous about the shortage of foreign confidence in the local market, which has compelled many start-ups to leave for other countries. “On Venture Day in Mexico, there were several Argentine projects. The same thing happened in Colombia. Argentines are very entrepreneurial, and they know how to sell. The country offers many opportunities, but so long as the political situation remains unstable, things are not going to grow the way they should.” According to Martin Vivas, the facilitator of Startup Weekend in Buenos Aires, an initiative that aims to set up new companies in just three days, the investment funds don’t always get to Argentina. “Investors try to create a relationship with entrepreneurs and, in that sense, [entrepreneurs here] are a bit far away,” notes Vivas, who is a member of Palermo Valley, a community of entrepreneurs that tries to promote the Internet sector while traveling to other markets. “We have seen projects of other countries that were not different from ours. We have high quality professionals,” he says. De l’Etraz notes that there is a crucial problem to solve in the region: How to create favourable fiscal policies for angel investors through tax deductions in case they suffer losses. “On July 10, we have a Venture Day in Colombia, and one of the requirements is that the companies are Colombian. But what does it mean to be Colombian when many companies are set up in Miami but do business in Colombia and in other places because of the tax situation [in Colombia]?”, asks De l’Etraz. “Governments must take this topic seriously and create policies, such as those in the United States, in order to attract investments and make it attractive, in terms of taxation, to take risks in the world of the start-up.” Given that situation, De l’Etraz does not believe that a technological revolution is taking place in the region at this time. However, he does believe that it will take place in the future. The number of entrepreneurial events has increased, he notes, and there is greater involvement on the part of governments. He points out, for example, that there is a “macro event” for entrepreneurs organized in November by the government of Peru. Nevertheless, he warns that the private sector has to get involved if the long awaited growth in this sector is to take place.


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The Accelerators Meanwhile, some entrepreneurial “accelerators” and initiatives that are looking for innovative projects have arrived “at the end of the world,” as the new Argentine-born Pope Francisco has dubbed Argentina. These initiatives have provided an economic boost to the country. One such initiative is Wayra, an accelerator that belongs to Telefónica, the telecom firm. Wayra provides seed capital of up to $50,000 to those start-ups that are “hungry” to grow and expand beyond their own frontiers. “Wayra was conceived for Latin America because we imagined that [the region] had the entrepreneurial ecosystem that we were searching for,” notes Andres Saborido, country manager at Wayra Argentina. “We knew that the projects in this region were good ones, so we expanded first in Argentina, Colombia, Mexico and Spain. The conditions were ideal in the sense that there was a lot of talent -- people who had various initiatives and ideas but who did not have the resources to move forward. “We offer these people a work space at Telefónica, and for four to 12 months we help them with coaching and mentors so that they will focus on understanding legal aspects of corporations, as well as product design. We try to provide them with quick methods for developing applications, testing them and giving them value, even within just a weekend,” says Saborido. Once all that has been completed, Wayra offers the possibility of working with Telefónica. “This gives the entrepreneur a scale [of operations] because we are in 12 countries. In return for these services, we retain 10% of the equity or capital of the start-up, but the decision about whether or not to provide services to Telefónica is left up to the entrepreneur,” he says. That happened in the case of Joincube, an Argentine business-to-business social network that involves both Telefónica as well as firms in other countries. In Chile, Joincube even received capital from an investment fund. Wayra’s Saborido notes that entrepreneurs are often waiting for the arrival of angel investors. However, since capital is not available for everyone, in his view “the interesting thing is that companies focus [instead] on a regional or global market, so that they can access foreign funds.” Wayra has already invested in 18 companies in Argentina, and 180 companies worldwide. Learning How to Fail During the initiative known as Startup Weekend, each participant pitches an idea for one minute. The best pitches are chosen in a vote, and the winners are equipped with teams for developing them. However, it rarely happens that the “start-ups become real companies,” notes Vivas. Nevertheless, in his view, these events help participants acquire the skills and experience that are going to help them forge their future as entrepreneurs. They learn how to make mistakes, which is very useful in the case of Argentine entrepreneurs, who are “very easily frustrated, unlike English-speaking entrepreneurs, who know how to wait until an idea [catches on] and matures over time.” Vivas stresses that although Argentines have other strong qualities – such as skill at resolving complicated problems – they have trouble planning ahead, “perhaps because we are constantly in a crisis mode.” As a result, it is hard for them to plan over the long term, with a view five years ahead. In Argentina, “Entrepreneurs expect great results in just a short time,” he says. On the other hand, entrepreneurs in the region face another handicap from a cultural viewpoint. “An entrepreneurial failure is considered a personal failure,” notes De l’Etraz. In his view, tax policies also have an influence on all this. “They are always telling you not to be afraid of failing, but they don’t help you to feel that way because if your project does fail, you can’t just wipe the slate clean, since you carry your debts with you [into the future]. In contrast, in the U.S., if I am an entrepreneur and I fail, and my company goes bankrupt, I can wipe the slate clean and start all over again.” In addition to learning how to make mistakes, experts note that Latin American entrepreneurs must overcome their fear of relying on an idea. As Vivas explains, “Often, entrepreneurs believe that they are going to be robbed, and this also has to do with their fear of failure. In Latin America, they start with the view that competition is the enemy -- that it is bad to make mistakes. But [in fact,] our enemies teach us. This is a transparent industry, and if you are doing well it is because you are doing things the right way.” In that respect, Skonto’s Del Pup offers this recommendation: “Although an idea may seem like a small one, you need to talk about it and act on it. You have to consider the project, and the more people who participate in it, the better. It can’t be just one person against the world.” In fact, his company brought in Ignacio Raffa and Nicolas Vilela, two computer science students, to add value to their technical department. “It was very important because it added a different perspective for the business. Everyone wins when your plans bear fruit; it is another way of cooperating in a cost-effective way.”


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On the other hand, UADE’s Zúñiga notes that some projects that begin within a computer science career path lack commercial vision. “We help [those sorts of students] link up with students who have other specialties. We try to work with them and add the part that they are missing in their professional training, such as how to create a business plan,” he notes. Overall, adds De l’Etraz, universities have a great deal to contribute when it comes to strengthening entrepreneurial activity in the region. “Students are the ones who have to begin to think like entrepreneurs. We have to start teaching them that learning how to fail is as much a part of the learning process as learning how to sell. This is the big challenge.” ↑Return to Index

Peru – an emerging Start-Up hub? With a lacklustre U.S. economic recovery, a limping Europe, (and a backsliding southern Europe), and Asia slowing down - Latin America is one the brightest spots in the global economy. In particular, one group of countries—the Pacific-facing ones (Panama, Colombia, Chile, and Peru) - are doing great, and one sector (technology with its entrepreneurial start-ups) is contributing to that growth. Chile has garnered most of the attention with Start-up Chile, a government program that invests $40,000 in entrepreneurs from all over the world that move to Chile to develop and launch their endeavours. But neighbouring Peru is also as an emerging hotbed of innovation that is often overlooked by observers. For most people, Peru is associated with natural resources, tourism, and gastronomy. Yet Peru is coming into its own in fostering an ecosystem of start-ups, joining those in Argentina, Brazil, Chile and Colombia.

In a recent interview in Lima, Juan Francisco Rosas, executive director of Wayra Peru, reports that: “Technology entrepreneurship is experiencing a highly favourable climate for access to venture capital. The past 18 months have seen the emergence of incubators like Wayra that provide $50,000 for each start-up we select, as well as government programs like Fidecom and Fyncit.” There is, indeed, an awakening among VCs that high risk investments can also yield very high returns. Universities are doing their part as well, with entrepreneurship centres, engineering and computing programs, and labs, and long-standing incubators like Lima Valley and organizations

like Start-up Academy are fostering many more. Central to Peru’s strategy to grow its tech start-up sector is adapting the winning practices of other countries, particularly neighbouring ones like Chile and Colombia. From the former, a key success factor is “co-investment” — private capital matched or often doubled from the public sector. This condition, while necessary, is insufficient by itself. As Wayra’s Juan Rosas notes: “Countries like Chile, Peru and Colombia are relatively small for attracting venture capital and private equity. These three nations should think about an integrated ‘regional’ zone for tapping investment, given the competition from large single markets such as Brazil and Mexico.” In doing so, a number of obstacles must be recognized. Peruvian higher education needs to improve quality, access, and physical infrastructure — especially labs — and faculty and the private sector need to develop a much closer relationship, one that meets the needs of local and multinational technology firms. The availability and ease of access to funding for start-ups are other areas that must be addressed. Finally, the lack of angel investors (there are only ten at present!) must increase by a factor of ten to make a real impact on the entrepreneurial ecosystem in technology. Nevertheless, Peru indeed possesses some very significant advantages. These include first-rate IT talent, high growth among industries that place a premium on technology and innovation, and a favourable geographic position with neighbours Chile and Colombia that are also faring very well economically and have cultivated excellent talent for their knowledge-based industries. Peruvian tech start-ups, valued at over $3 million, were unimaginable 5-10 years ago. Today, notable start-ups like Cinepapaya, Plaza Points, Arte Manifiesto, Face Me, and Ando Ayudando are garnering attention from investors and consumers and making their mark in the marketplace. Cinepapaya – a website that displays movie times and allows visitors to buy tickets online - has been a particular darling of investors.


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As is common with other nations, government plays an important role in Peru, as well. Late last year the Ministry for Industry announced plans to allocate $20 million for a fund to assist technology start-ups get off the ground. Peru hopes that spreading the word on campuses (targeting science, math and engineering students) and promoting Peru’s technology ecosystem regionally and globally will achieve the intended results. For technology start-ups in Peru, the future is bright – as it is for the economy overall. One can only hope there will be many more Cinepapayas on the horizon. Start-ups and later-stage firms will emerge and thrive in South America’s nascent but fast-growing technological environment. Peru will surely be a major player. ↑Return to Index

Latin America cements ‘Pacific Alliance’

(Editor’s Note: This article was written by Andres Schipani and was published in The Financial Times on 24 may, 2013)

On 23 May, Latin America’s largest free-trading Pacific countries cemented their “Pacific Alliance” in a quest to boost productivity amid concerns of a slowdown in the commodities boom. Formed last June, the free-trade bloc links Chile, Colombia, Mexico, and Peru, which at a combined GDP of $1.7tn have over a third of Latin America’s output, placing it as the world’s eighth largest economy Despite the four nations being seen as competitors in some aspects – such as the attraction of foreign investment and the Asian market for commodities, both factors that fuelled the region’s growth in the past decade – the photo opportunity that followed the meeting held at a polo club in the Colombian city of Cali depicted a comradeship among presidents that was reflected in the summit’s results. Juan Manuel Santos of Colombia, Ollanta Humala of Peru, Sebastián Piñera of Chile, and Enrique Peña Nieto of Mexico agreed to eliminate 90 per cent of tariffs on their merchandise trade, paving the way for a gradual full elimination, as well as mechanisms for the harmonisation of trade of goods and services and ways to accelerate and protect investments. The meeting also touched on the entrance of Mexico’s stock exchange into the Mila, or the Mercado Integrado Latinoamericano – the tie-up between the Chilean, Colombian, and Peruvian bourses – that has been constrained by regulatory obstacles. “This goes well beyond free trade,” Mr Santos, told the Financial Times during the gathering. “Every country wants to grow at high rates, but sustaining that is a big challenge.”

The four countries are among Latin America’s best performers. Peru currently tops the group with forecast GDP growth of 6.3 per cent in 2013; Chile trails behind with 5.5 per cent; then Colombia with expected 4.8 per cent; and Mexico with 4 per cent growth. “Our growth has to be increasingly dependent on improving productivity,” added Mr Santos, a former foreign trade minister. Indeed, for Barbara Kotschwar, an expert on Latin American free trade at Georgetown University, the bloc is not a traditional trade agreement, as what these countries want is to increase productivity levels by bolstering “regional supply chains in order to be able to include them in the global supply chain; the Pacific Alliance signals that these four countries are open

for business”. This puts the four countries not only more focused on Asia but also further away from some of its neighbours, such as Argentina, Brazil and Venezuela, which are more protectionist when it comes to trade and capital flows, and are part of another bloc, Mercosur.


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The excitement over the consolidation of the union was echoed by the corporate world. “I am sure the Pacific Alliance will generate benefits for companies, consumers, and the countries in general when it comes to commerce, investment,” said Carlos Piedrahíta, chief executive of Nutresa, Colombia’s premier food manufacturer that already has operations in Mexico and Peru, sells its products in Chile and is expanding into Asia. The ambitious plans even aspire to a common market somehow akin to the European Union. The member countries have already removed visa requirements for each other’s citizens and are promoting student and professional exchanges, and agreed on issuing joint tourist visas for third countries. They are also opening shared embassies and trade delegations in Asia and Africa and envision energy integration. Other countries appear eager to join. Stephen Harper, Canada’s prime minister also attended the meeting in Cali. So did Costa Rica’s president, Laura Chinchilla, who inked a free-trade agreement with the host country in order to be next in line to join the alliance. Other observer nations include Guatemala, Panama, Japan, Australia, New Zealand and, despite not being on the Pacific, Uruguay and even Spain – a country with heavy investments in the region. During the summit, France, Portugal, and Ecuador, among others, joined as observers. However, some believe it is fair to issue a cautionary word before the bloc turns into a behemoth. “The Pacific Alliance has started out as a pragmatic economic initiative,” said Ms Kotschwar. “The challenge to negotiators it to not incorporate too many issues and to keep the Alliance from becoming a victim of its own success.” ↑Return to Index

Opinion: Latin America’s fastest-growing economies in 2013

(Editor’s Note: This article was written by Andrés Oppenheimer and was published in the Miami Herald newspaper on 24 April. Andrés Oppenheimer is an Argentine journalist who resides in the United States. He is the Latin American editor and syndicated foreign affairs columnist with The Miami Herald. is a regular political analyst with CNN en Español, and anchors his own Spanish-language television show, “Oppenheimer Presenta”)

New economic projections from the World Bank and the United Nations show that Latin America countries will keep growing at moderate rates this year, except for the booming economies of three countries that start with the letter P — Paraguay, Panama and Peru. Before we get into what the P countries have in common, and why the World Bank and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) are backtracking from their sometimes overly-optimistic projections in recent years, let’s take a look at their latest figures. According to a new World Bank report on Latin America, As Tailwinds Recede: In Search of Higher Growth, Latin America will grow 3.5 per cent this year, a slight improvement from last year’s 3 per cent growth, but significantly below the 5 per cent annual growth rates of the past decade. The region’s economic stars in 2013 will be Paraguay, which will grow about 11 per cent, and Panama and Peru, which are projected to grow 9 per cent and 6 per cent respectively, the World Bank study says. Chile, Colombia and Bolivia will grow by respectable rates of between 4 and 5 per cent, while Brazil and Argentina will grow by nearly 3 per cent, it says. Latin America’s worst performing economy will be Venezuela, which will grow by 0.1 per cent, or virtually nothing, the study says. The World Bank report notes that the tailwinds that helped much of Latin America grow rapidly in the past decade, such as high commodity prices and steadily-growing Chinese imports, are no longer there. Today, Latin America finds itself in a “windless” global environment, in which future growth will depend on each country’s own economic policies. “The tailwind is gone, and we can no longer sail effortlessly,” the report concludes. “It is time to row.” Likewise, a new report from ECLAC revised regional economic projections downward to 3.1 per cent from the 3.8 per cent it had projected in December.


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Latin America’s fastest growing economies in 2013 will be Paraguay (10 per cent,) Panama (8 per cent) and Peru (6 per cent,) ECLAC says. Mexico will grow by 3.5 per cent, while Brazil and Argentina will show “a less dynamic than expected recovery” from last year’s downturn, it said. Most economists say that Paraguay, Panama and Peru are benefitting from different factors. Paraguay’s economy is rebounding from a sharp recession following the country’s political crisis last year, and benefiting from record crops. Panama is reaping benefits from huge investments linked to the ongoing expansion of the Panama Canal, and Peru is being helped by a flurry of investments stemming from its pro-business policies over the past 15 years. It may be too early to get excited about Paraguay (a one-year spurt may be a statistical blip of little relevance,) but Peru and Panama are a different story. Peru and Panama have been growing steadily at rates that almost double the region’s average in recent years. “In Peru and Panama, we see an investment dynamism, and a significant optimism among investors,” Augusto de la Torre, World Bank chief economist for Latin America, told me in an interview. “They are also making significant advances in their efforts to improve the quality of their public education systems.” My opinion: While the reasons behind their rapid growth differ, Latin America’s P countries have some things in common. Unlike Venezuela, Argentina, Bolivia, Ecuador and other countries whose populist leaders scare away investments by creating a climate of confrontation to blame others for their economic shortcomings, the P countries roll out a red carpet for domestic and foreign investors. And while Venezuela, Argentina, Bolivia, and Ecuador have grown over the past decade largely thanks to external factors — such as booming world prices for oil, gas and soybeans — Perú and Panama are growing to a large extent thanks to their economic policies. They offer economic stability and no changes in the rules of the game with every new government. And the end result is clear: Peru has reduced its poverty rate by half, from 55 per cent of the population to 28 per cent, since the beginning of the millennium. ↑Return to Index

Uruguay’s booming construction industry facing slowdown

The investment in the construction industry in Uruguay soared 26.45% last year over 2011 and reached seven billion dollars, of which 40% correspond to the Brazilian-Chilean pulp mill, Montes del Plata, the country’s largest investment in years equivalent to 2 billion dollars. However there are storm clouds ahead. “Private investment was responsible for over 75% of the total investment in the construction industry in Uruguay, in 2012”, said Julio Villamide, an expert in real estate issues. He added that the investment in the industry in 2012 was 62% above the average of the last fifteen years. However Villamide admits that this year’s scenario can be complicated particularly for the building of housing since “several factors will make it more difficult to retain the strong average growth”. Villamide identified low productivity, soaring labour costs and legal responsibilities, the depressed value of the US dollar in Uruguay, the Argentine situation which is also reflecting in a lower sales rhythm and a tendency to sliding prices, although there is a market resistance to accept the new values. “The situation is complicated and causes concern; we’re not speaking of specific cases but rather the overall situation. Since our organization of private construction promoters was launched 22 years ago, this is the first time we face this scenario, and this should also concern government since as the private sector we are always willing to invest and risk” said Anibal Duran, secretary of the Asociación de Promotores Privados de la Construcción del Uruguay. “The slowing down, almost a freeze is significant and extends widely to the more traditional area of the business which is housing both residences and apartment buildings. We have a registry of purchased lots but given the circumstances, promoters have shelved all plans to begin building”, added Duran. ↑Return to Index


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Cartagena aims to be a global megaport by 2017 The Colombian Caribbean port of Cartagena is undertaking extensive infrastructure and technology upgrades in an effort to be one of the world's 30 best megaports by 2017, when it will have the capacity to handle up to 5 million cargo containers.

The nearly $1 billion "Mega 2017" project calls for overhauling the port's facilities in two phases, with officials setting a goal of doubling the number of containers handled by the end of this year. Achieving the goal would put Cartagena in the same league as the U.S. ports of Los Angeles, Long Beach and New York. The Colombian port has grown from handling 96,000 shipping containers in 1993, when the Port Authority received its franchise to manage the facility, to nearly 2.3 million containers today. The port already handles Post Panamax ships, vessels that can carry up to 14,000 containers, and is looking to process cargo faster and more efficiently to boost exports.

The Port Authority plans to build the infrastructure necessary to meet the demands created by the free trade agreements signed by Colombia with several countries, including the United States. ↑Return to Index

Ecuador seeks to increase mining activity Ecuador, the smallest of the OPEC members, is working hard to diversify away from a dependence on oil exports, with the country’s president, Rafael Correa, pushing for a new law to fast track mining contracts and investments in the Andean country. “We have sent a bill labelled as urgent… it contains the reforms to the mining law,” Correa said this month. “Investors asked for some reasonable things and that is why we are changing the law.” Correa added that the current law “was too strong in some aspects and there were not as many investments as we expected.” The bill – which is expected to sail through the government-dominated Congress – includes reforms that would postpone windfall taxes until a company’s investments are recovered and put a ceiling on royalties. Mining companies pay a minimum of 5 per cent but there is no maximum. This will very likely expedite a pending deal with Canada’s Kinross, which has been holding fire on a $1.3bn gold project. Ecuador does not yet have a big mining industry but some observers believe the country sits along the same mineral-rich vein that has made mining central to other Andean economies. Ecuador’s mining chamber of commerce values the country’s mineral wealth at $220bn. Last year Correa gave the go-ahead to Ecuador’s first large-scale mining project: a $1.4bn deal with China-backed Ecuacorriente at the Mirador copper deposit. The company is now negotiating with the government to ink a deal for the Panantza-San Carlos copper deposit. Chile’s Codelco – the world’s largest copper producer – has joined forces with Ecuador’s state-run mining company, Enami, to develop the Junín deposit in the north of the country. Talks have also been reported between Canada’s INV Metals for the Quimsacocha gold-copper-silver mine, and over a dozen junior miners have some exploration projects in place. ↑Return to Index

Brazilian wins WTO leadership role Brazil’s Roberto Azevêdo has been appointed the new director-general of the World Trade Organisation after seeing off Herminio Blanco of Mexico, the favoured candidate of the US and EU. Both Latin American rivals coveted the WTO position as a means to elevate their countries’ influence and cement their status as rising powers. The competition to succeed Pascal Lamy, the Frenchman who has presided over the WTO since 2005, had also been seen by some as a proxy for wider trade battles between the developed and developing worlds.


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Mr Azevêdo faces a major challenge to restore the credibility of an organisation that has failed to conclude the Doha round of global trade negotiations. He will take the helm of the grouping in September at a time of huge challenges for the global trade body. He will be the first WTO chief from Latin America. Mr Azevêdo is a career diplomat and Brazil’s current WTO ambassador. Supporters say his knowledge of the institution and broad backing across many emerging markets could help bridge the north-south split within the WTO and reinvigorate talks ahead of a December ministerial conference in Bali. ↑Return to Index

Peru’s real estate sector to keep growing for 15-20 years The real estate sector in Peru will maintain its strong growth for another 15 to 20 years, mainly driven by the ongoing construction boom in the Andean country. This estimate was made by the Unión Iberoamericana de Trabajadores de Edificios y Condominios or UITEC (Latin American Union of Workers of Buildings and Condominiums). "Our country for several years has been experiencing an impressive real estate development and this growth is expected to continue for about 15 or 20 years," said UITEC.

In a press release, the union said that this growth is driven by Peru's booming economy and mainly by the unmet demand for housing in the country, especially in Lima. Citing data from the Peruvian Chamber of Construction (Capeco), UITEC estimated that 50,000 new homes need to be built every year. According to the union, at present between 20,000 and 25,000 homes are being

built, and more than 90 per cent of them are apartments. ↑Return to Index

For the diary Date: June 5, 2013 Event: ALABC Melbourne Annual Dinner - Keynote Speaker, Ms Megan Clarke, CEO of CSIRO Venue: The Australian Club, Melbourne Organiser: ALABC

Contact: Patricia Villaroel ([email protected]) or Tel: 02 9357 4441 Date: July 16 - 17, 2013 Event: LatinFinance Inaugural Latin American Forum Venue: Sheraton on the Park Hotel, Sydney Organiser: LatinFinance

Contact: [email protected] Date: August 22, 2013 Event: Sydney Annual Dinner - Keynote Speaker, Mr Mike Smith, CEO of ANZ Bank Venue: To be confirmed Organiser: ALABC

Contact: [email protected] or Tel: 02 9357 4441 Date: October 31, 2013 Event: Brisbane Annual Dinner Venue: Customs House Organiser: ALABC

Contact: [email protected] or Tel: 02 9357 4441 Please visit our website www.alabc.com.au for regular updates. ↑Return to Index





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