Macquarie pays US$153m for Mexican retail properties · retail giant Walmart and electronic chain RadioShack. ... The supply of energy is generally regarded as hile [s Achilles heel

Macquarie pays US$153m for Mexican retail properties

Macquarie Group’s real estate investment trust in Mexico has struck a deal to buy two retail properties for about $US153 million, in the latest sign the Australian financial conglomerate is committed to expanding around North America. The purchase of the properties in the Mexico City metropolitan area will build on Macquarie’s plan to expand its retail real estate portfolio in the country. The properties, Tecamac Power Center and Coacalco Power Center, are home to a range of stores, including retail giant Walmart and electronic chain RadioShack. They have a combined 134,246 square meters of leasable area with a tenant occupancy of 98.7 per cent. Macquarie estimates the portfolio, purchased from companies controlled by local fund Fondo, will generate about $US12.73 million of net operating income a year. “We are pleased to announce the agreement to acquire these two high quality retail properties located in the MCMA [Mexico City Metropolitan Area], with a strong base of high quality tenants,” Macquarie Mexican REIT chief executive Jaime Lara said in a statement. “We continue to execute on our strategy of building a national retail platform, adding two properties that are located in the strongest retail market in Mexico with excellent long term fundamentals.” Mexico is on the doorstep of emerging economies in Latin America and its economy has performed well relative to peers over the past few years. It established an office in Mexico City in 2009 and listed an infrastructure fund, which today has about US410 million in funds under management. Macquarie then raised about $US1.3 billion from investors last December when it listed its real estate investment trust, Macquarie Mexican REIT, on the Mexican Stock Exchange. It has investments in industrial, retail and office real estate across Mexico. After the transaction is finalised the trust will have 267 industrial, retail and office properties totalling 2.9 million square metres across Mexico. Macquarie intends to fund part of the acquisition with new debt, via a new debt facility which is currently being negotiated with lenders. The transaction announced this week is expected to close early in the fourth quarter of 2013. The deal will need to be approved by Mexico’s Federal Competition Commission. ↑Return to Index

This issue (Click on heading to open article)

Macquarie’s Mexican retail investment 1 Origin secures environmental approval in Chile 2 Glencore/SKM given environmental award 2 OZ Minerals making headway in Chile 2 Strong Australian presence at Extemin 3 Expo Minera in Acapulco awaits Australians 3 RungePincockMinarco expands product range 4 Chilean support for Monax Mining 4 Chairman’s message 5 2013 Brisbane Dinner 6 LAN Colombia to join Oneworld alliance 6 UQ’s 7

th Australia-Latin America Colloquium 7

StartUp Peru incubator to launch 8 Mexico’s proposed mining royalty plan 8 Peru to restart stalled mining projects 9 Changes to Bovespa’s benchmark index 9 Plan to inter-oceanic railroad 10 Latin American film industry booming 10

Feature: LatAm must figure in Asian strategy 11 Hockey adds to sporting links 12 Cuba’s bid to lure investment 13 Profile: BHP Billiton’s Vanessa Torres 13 Paraguay chases 8% annual growth 15 Feature: Towards an new energy paradigm 15 Bolivia targets idle mining concessions 16 Santander ready to lend for infrastructure 16 Tax alert for non-residents 17 Peru to boost transport and communications 18 Pacific Alliance appeal keeps growing 18 Uruguay’s economy expands 5.6% 19 Panama and Colombia sign free trade pact 19 Mexico proposes tax overhaul 20 Argentina’s incentives for software sector 21 Peru named ‘Destination of the Year’ 21 For the diary 21

PATRON MEMBERS

Edition: September, 2013

Newsletter of the Australia-Latin America Business Council Page 2

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

Origin Energy secures environmental approval for Chilean project

On September 10, Chilean authorities approved the environmental permit for a US$733 million hydroelectric dam owned by Australia's Origin Energy and global miner Glencore Xstrata PLC. The 640-megawatt Rio Cuervo project initially received the go ahead from environmental authorities last year, but was subsequently suspended after a local court demanded further studies.

The supply of energy is generally regarded as Chile’s Achilles heel. Steep power prices, an out-dated grid and delays to big, controversial energy projects have created a headache for Chile's government and for companies that make heavy use of electricity in the world's No.1 copper producing country. The Cuervo project presented two new studies and an updated monitoring plan, all of which were approved by authorities, said Christian Betancourt, acting head of the SEA environmental regulator in the southern Aysen region, where the dam will be built.

The Energia Austral joint venture between Origin Energy and Glencore Xstrata also has plans to build two other generating units, Condor and Blanco, for which it has yet to present environmental impact studies. All three generating units will cost an estimated US$3.6 billion to build and will provide 1,000 megawatts of installed capacity. ↑Return to Index

Glencore and SKM take out environmental award

Two strong supporters of the ALABC, engineering firm, Sinclair Knight Merz (SKM), and miner, Glencore Xstrata, have won an environmental excellence award from the NSW Minerals Council for their work on an integrated Air Quality Control System (AQCS) now in use on mines across NSW. Glencore and SKM’s system is now in place at Mangoola, Bulga Complex, Mt Owen Complex, Liddell, Ravensworth Surface Operations, and Ulan. It consists of an environmental forecast summary report, and an information website. The environmental forecast summary report is emailed to site personnel each morning and to garner a better understanding of the detailed information used to support the environmental forecast summary report, personnel can access the website. The website also features a tool to assist sites in predicting blast plume paths for any time of day within the next 48 hours. SKM project manager, Shane Lakmaker, said one of the key objectives of the AQCS initiative was to raise awareness of environmental issue at all levels of Glencore’s NSW open cut mine sites. “To achieve this objective, Glencore initiated the development of the AQCS so as to provide site personnel with information on daily environmental risks associated with air quality, noise and blasting, “ Lakmaker said. SKM advised on the modelling approaches and developed the system using inputs from Glencore and site representatives. ↑Return to Index

OZ Minerals moving ahead in Chile

Following the completion of due diligence on Herencia Resources’ iron oxide copper-gold Guamanga project in Chile, OZ Minerals will begin phase 1 work on the project under a A$13.8 million earn-in agreement signed in June of this year. This will involve OZ Minerals commencing detailed geophysical work in the next few weeks.

OZ Minerals has also advised Herencia that it believes that a significantly larger project opportunity exists at Guamanga and that it has therefore started acquiring leases around the project, which the joint venture will apply to.


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Herencia managing director Graeme Sloan said the company was pleased to partner with a company of OZ Mineral’s calibre. “We are also greatly encouraged that OZ Minerals, one of Australia’s leading copper producing companies, sees the potential to expand the footprint of our Guamanga project and to expand the agreement with Herencia to incorporate the extended project area,” he said. OZ Minerals will sole fund an initial A$3 million of exploration over 20 months to earn a 51% stake in the project. Phase 2 would see the copper-gold producer sole fund an additional A$5 million over 24 months to increase its stake to 80%. Once phase 2 is complete, Perth-based, AIM-listed Herencia can choose to contribute its 20% share of costs or let OZ take its interest to 90% by spending a further $5 million. ↑Return to Index

Extemin/Perumin showcases Peru’s growing mining appeal

The 2013 edition of Peru’s Extemin/Perumin mining conference and exhibition took place in Arequipa in September and attracted some 75,000 visitors from 28 countries, and featured some 2,213 stands including 13 international pavilions. Building on the momentum that Australian companies have been generating in Peru in recent years, Australia was the 5

th largest international

exhibitor. According to Daniel Havas, Austrade’s Trade Commissioner to Peru, the Australian presence in Peru has grown significantly in the past 10 years. In 2003, less than 10 METS companies were present in Peru. In 2013, there are approximately 45 METS companies operating in some form or another in Peru and approximately 20 Australian Junior Miners with projects in the exploration phase.

The Australian presence at the bi-annual Extemin event has also grown in the last 10 years. From having only 7 Australian companies registered in the Australian Pavilion in 2003, the number reached 25 in 2013. In addition, more than five other Australian companies participated separately to the Pavilion. The participating companies included providers of mining equipment, technology and services and this year Austrade also welcomed the first Junior Miner exhibiting in the Pavilion. Another initiative for 2013 also was the introduction of an “Education Lounge” within the pavilion, with two major Australian Universities joining to help promote transnational education in the mining sector.

Exhibitors in the Pavilion were able to attend several private briefing sessions on strategic sourcing by companies including Glencore Xstrata, Barrick and Antamina The official Perumin Program also included several Australian speakers, including Dr Mike Trefry from CSIRO and Professor Peter Dowd from Mining Education Australia. Austrade hosted the Australian Networking Event for 300 guests including exhibitors, key customers and government officials. ↑Return to Index

Expo Minera 2013 in Acapulco awaits Australian companies

Expo Minera 2013 will be held in Acapulco from the 16th to 19th of October and offers an excellent opportunity to learn more about the latest developments in the Mexican mining sector and to showcase Australia’s credentials in the sector. Austrade is coordinating the Australian presence at Expo Minera and will have some 8 or more specialist mining technology and services companies attending the event and participating in the Australian pavilion. In addition, a number of the Australian mining companies already active in Mexico are also expected to attend Expo Minera..

From left to right: Guillermo Shinno, Vice Minister for Mines, Peru; Gabriel Villalobos of Orica Mining; HE John Woods, Australian Ambassador to Peru; Jorge Merino,

Minister for Mines & Energy, Peru; and Daniel Havas, Trade Commissioner to Peru)


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Some of the key activities that Austrade will offer at Expo Minera include the following: Welcome Breakfast on Wednesday, 16th October at the Hotel Grand Mayan: the focus of the breakfast will be to welcome the visiting Australian companies and to give them a broad overview of the dynamics of Mexican mining sector. Official Opening of the Australian Pavilion on Thursday, 17th October: Ambassador Tim George and Mario Cantu, General Coordinator of Mines, will officially open the Australian Pavilion, followed by a networking cocktail VIP Dinner on Thursday, 17th October at Cebu restaurant: Ambassador Tim George will be hosting a private dinner to permit high level access and networking opportunities with key decision makers in the Mexican mining sector. This event is strictly invitation only and has limited numbers, however if you would like to attend, please contact [email protected]. For additional information about Expo Minera 2013, please refer to: http://www.expominmexico.com.mx ↑Return to Index

RungePincockMinarco expands its product offering

Australia’s RungePincockMinarco (RPM) used the Exposibram 2013 mining show held in September in Belo Horizonte, Brazil, to launch the openpit metals version of its XPAC scheduling offering. The release of the Open Pit Metals XPAC Solution (OPMS) follows the introduction earlier this year of mine planning software specifically developed for the opencut and underground coal market segments. RPM product manager-mine planning, Alun Philips said OPMS was a commercial-off-the-shelf product based on configuration not customisation. “OPMS delivers a streamlined process driven user interface that guides users through the scheduling process, from end to end. This approach of standardisation and simplification has been built on top of the underlying power of the industry leading XPAC scheduling engine. Users can now master the application quickly while at the same time having the scheduling confidence that comes with using XPAC.” “With OPMS … the entire process is managed by the one solution from start to finish. Data is entered into its relevant entry point once and only once, including automatically updating adjustment changes to the underlying geological model. All through the one, end to end standardised process.” RPM CEO Richard Mathews said a full schedule could be scoped and implemented in days rather than weeks with OPMS, meaning users could be generating, evaluating and delivering results up to 75% faster than previously. ↑Return to Index

Monax Mining buoyed by support from Chilean partner

Major Chilean copper producer Antofagasta plc (“Antofagasta”), through a wholly owned subsidiary, has agreed to provide an extra US$400,000 in funding and to extend its strategic partnership with Adelaide-based Monax Mining. The joint venture is one of the few in-bound focused investments from South America and targets to develop copper projects in South Australia.

In November 2011, Monax signed a two-year strategic alliance with Antofagasta, under which Antofagasta provided US$1 million to Monax over two years for target-generation and exploration within South Australia. During the initial two years, Monax reviewed numerous projects for the strategic alliance and currently has three sites under review - exploration leases near Olympic Dam, on

Kangaroo Island and at Tent Hill northwest of Port Augusta. The decision continues the strong relationship between the parties and will extend the joint work together into a third year. ↑Return to Index

mailto:[email protected]

http://www.expominmexico.com.mx/


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Chairman’s Message This month I attended the Melbourne launch of the "Great Southern Lands: Building ties between Australia and Brazil" publication and had the pleasure of hearing the introductory remarks made by Professor Ross Garnaut, one of Australia’s foremost economic commentators and an acknowledged expert on Australia’s engagement with the Asian region. In commenting on the publication, Professor Garnaut identified some of the opportunities on offer and also the challenges that we face in building Australia’s ties with Brazil. He also made reference to the competition that exists between the two countries in their quest to supply many of the commodities required by China and other emerging countries in the Asia region. His comments were very insightful and once again brought home to me how important it is for Australia to pursue a strategy that embraces both Asia and Latin America. There are significant differences between these two regions and, whilst it is hard to argue that Australia should not have engagement with Asia as its top priority, there are compelling reasons that justify Latin America figuring much more highly on Australia’s radar than it currently does. The reality is that the linkages between China/Asia and Latin America are growing by the day, and that Australia needs to engage with both regions if it wishes to maximise its position vis-à-vis the growth in and between these markets. The most important macro trend of the past decade on this front is that Chinese outbound investment into Latin America is increasing. It more than doubled from 2011 to 2012. In 2011, investments into Latin America constituted six per cent of China’s total outbound investment, but by 2012 the percentage had risen to 17%. As China outbound investment increases, there is a clear trend towards a larger diversity of players, targets and investment types. Although State-owned enterprises (SOEs) still dominate China’s outbound investment, non-SOE corporates, including private equity (PE) firms, are becoming increasingly active. Their investment focus will be on energy resources, innovative technology, and advanced manufacturing. There is also a new trend towards more Chinese financing of private infrastructure projects in Latin America. China’s list of targets is also expanding, moving beyond Brazil’s natural resources to other Latin American countries such as Mexico, Peru and Colombia. Further, there is a clear trend away from takeover deals towards more diverse forms of investment such as minority interests, partnership deals and co-investments. Chinese investors are increasingly investing via minority stakes to reduce risk, gain familiarity with a given market and minimise political resistance associated with certain transactions. Chinese companies and global firms are also seeking ways to cooperate in partnership to create more value for their companies and increase the chances for successful business integration by giving both partners an incentive to make the deal work. Australia has a unique opportunity to leverage this trend and to position itself as a link between China and Latin America in those industries where we have world-class credentials and a leading place at the negotiating table, e.g. commodities, education, and infrastructure to name a few. Focusing on one region to the exclusion of the other is not the way to proceed. This is the clear message that has to be shouted at all levels of government and to the Australian business community. The situation calls for leadership, for coordinated action and for fast and consistent action. If Australia does not embrace the challenge of profiting from the trade and investment flows between China/Asia and Latin America, other nations will not hesitate to do so. The race is on and we have much to do, so it is encouraging to see the message given by Pacific Hydro CEO, Rob Grant, at a recent University of Melbourne Business School event, as reported on page 10 of this newsletter. 2014 will see the Council celebrate the 25

th anniversary of its founding and we are going to strive to make the year as memorable

as possible. I encourage all companies dealing with Latin America to work with us to achieve this objective and to thus propel Latin America up Australia’s list of international priorities. Jose Blanco Chairman ↑Return to Index


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2013 Brisbane Annual Dinner – 31 October The Australia-Latin America Business Council’s 2013 Brisbane Annual Dinner promises to be one of the best ever. Sponsored by the University of Queensland, the dinner will have as guest of honour and keynote speaker the Governor of Queensland, HE Penelope Wensley, AC (pictured). Governor Wensley was born in Toowoomba and in 1968 joined the Australian Foreign service and pursued a highly distinguished career as a diplomat, representing Australia in a wide range of overseas posts and senior policy positions until 2008, when she became Queensland's twenty-fifth Governor. Among her prestigious diplomatic appointments, she served as Australia's Ambassador to the United Nations for seven years, in both Geneva and New York, as Ambassador for the Environment, High

Commissioner to India and Ambassador to France. She has been awarded honorary Doctorates by The University of Queensland, Griffith University, the

Queensland University of Technology and James Cook University. In 1994, The University of Queensland named her as the first woman Alumnus of the year. In 2001, Governor Wensley was made an Officer of the Order of

Australia (AO), for her distinguished contributions to Australia's international relations. On Australia Day 2011 she was appointed a Companion (AC) in the General Division of the Order of Australia "For eminent contribution to the people of Queensland, and to Australia's international relations through senior diplomatic representational roles and as a key contributor to initiatives of the United Nations".

The 2013 Brisbane 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. It will also feature the presentation of the COALAR sponsored Latin America Business Excellence Awards, which were established in 2001 as a joint initiative by COALAR and the ALABC to acknowledge successes in doing business in Latin

America. When: Thursday 31 October 2013 (7.00pm—10.30pm) Where: Customs House, 399 Queen Street, Brisbane For more information or to discuss special seating or dietary requests contact Rosie Atherfold: [email protected] or call 02 9357 4441 ↑Return to Index

LAN Colombia to join Oneworld alliance from October 1

LATAM Airlines Group, parent of Brazil’s TAM and Chile’s LAN Airlines, announced back in March it had chosen membership in oneworld over Star Alliance for both carriers. It has now confirmed that LAN Colombia will join oneworld from October 1, the first

of the merged LATAM airlines to join the alliance. LAN Airlines, which has been a full member of oneworld since 2000, merged with TAM Airlines in 2011. TAM was a member of Star Alliance and the Chilean antitrust authorities required LATAM to leave one of the alliances when it approved the merger. All other passenger airline affiliates of LAN Airlines have subsequently joined oneworld as affiliate members —LAN Argentina, LAN Ecuador and LAN Peru—apart from TAM, which will transition to oneworld from Star Alliance in the second quarter of 2014. LAN

has said that dates for the switch will be announced “in due course” and that TAM's Paraguayan affiliate, TAM Mercosur, will also become part of oneworld.

Gold Sponsor

Silver Sponsor


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“With the other airlines lining up to join oneworld in the coming months, the alliance's network will expand to almost a thousand destinations in more than 150 countries served by a combined fleet of 3,300 aircraft operating 14,000 daily departures, carrying 480 million passengers a year and generating annual revenues of $140 billion,” LAN said in a statement. LAN Colombia, launched in 2011, serves 23 airports in three countries with a fleet of 24 aircraft—including Boeing 767s and 737s, Airbus A320s and Bombardier Dash 8-200s—operating 130 departures a day. It boarded 3.7 million passengers in 2012. ↑Return to Index

University of Queensland’s 7th Australia-Latin America Colloquium

The University of Queensland’s Latin America Strategy Group will next month host the 7th annual Latin American Colloquium, a pivotal forum on Australia–Latin America relations with business leaders, government, researchers and Latin America's

Ambassadors. This year’s theme is “Australia-Latin America relations: How do we shape the future?” and the event offers an open invitation to engage in lively debate on the future vision of Australia-Latin America relations.

What will the future of Australia-Latin America relations be like in 2020? What are the priorities of the region and Australia? Where are the emerging opportunities? How do we diversify the relationship? What barriers need to be overcome? How do we move to the next level of engagement? When: Thursday 31 October 2013

Time: 1:15pm for 1:45pm to 5:30pm

Where: Auditorium, Level 2

Sir Llew Edwards Building (#14)

Cnr University Drive & Campbell Road, UQ St Lucia

RSVP online by 23 October 2013

Please join UQ’s Vice-Chancellor (International), Dr Anna Ciccarelli, and other dignitaries in this opportunity to look forward, exchange reflections and build the future of Australia-Latin America relations. Distinguished Speakers who have already confirmed include:

Latin American Heads of Mission Mr Richard Neumann, Director, South America and COALAR Section, DFAT Mr Charlie Sartain, Senate member, The University of Queensland Mr Jose Blanco, Chairman, Australia-Latin

America Business Council (ALABC) Prof Jeff Jones, MD; CEO, Collaboration Hub

and Professor Interaction Design, Queensland University of Technology

Register for the 7th UQ- Latin American Colloquium 2013 and obtain information on associated events at www.uq.edu.au/international/latin-american-colloquium ↑Return to Index

http://www.vision6.com.au/ch/30320/1fmdb/1460521/7019217z25.html

http://www.vision6.com.au/ch/30320/1fmdb/2005008/70192g26h.html


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Government set to launch StartUp Peru incubator

The Peruvian government plans to launch StartUp Peru in December, an incubator aimed at boosting a culture of entrepreneurship which is modelled on the successful StartUp Chile program in the neighbouring Latin American nation.

Small and medium enterprises and industry vice minister Francisco Grippa said the program would have initial investment capital of 50mn soles (US$18mn) and was designed to create a new generation of companies and move the economy away from dependence on natural resources. "The Peruvian economy has grown constantly in the last couple of years and it is important to consolidate this progress with more emphasis on innovation, technology and measures to strengthen human capital," Grippa said. Similar to the Chilean model, entrepreneurs interested in the program will pitch their ideas and if selected could receive up to 130,000 soles (US$47,000) to develop their idea into a business.

Peruvian capital Lima is hosting the Start-up APEC Conference II 2013 from September 24-25, bringing together entrepreneurs from the US, South Korea and Chile. STARTUP CHILE StartUp Chile was created by the Chilean government in 2010 and seeks to attract early stage entrepreneurs, both national and foreign, to bootstrap their startups in Chile. The end goal of the accelerator program is to create an "innovation culture." Selected projects are given US$40,000 of equity-free seed capital, and a temporary 1-year visa to develop their projects for six months, along with access to social and capital networks in the country. The goal is to have 1,000 such companies participating in the program by 2014. Spinoffs of the idea have been seen in Brazil, Greece, the UK and Italy. ↑Return to Index

Mining companies balk at Mexico’s proposed royalty plan

Mining companies are reported to have threatened to cut investment in Mexico after the government proposed a 7.5 per cent mining royalty, arguing that lower metal prices, rising running costs and higher taxes reduce the country's investment allure. The royalty proposal was part of President Enrique Pena Nieto's plan to bolster Mexico's feeble tax haul, a reform which focuses on reaping more income tax from higher earners, closing corporate loopholes and widening the tax base. In April, Mexico's lower house of Congress approved a new royalty to redistribute miners' profits to the states and municipalities where they mine. The bill was originally due for a Senate vote in coming months. However, lawmakers later decided to fold it into Pena Nieto's fiscal reform, which has upped the stakes, proposing a royalty of 7.5 per cent of earnings before interest, taxes, depreciation and amortization (EBITDA). It would rise to as much as 8 per cent for gold, silver and platinum miners. Mining firms were already unhappy about the planned 5 per cent royalty payment, and grumbling has increased following the proposal of a higher levy by the centrist government. Camimex, Mexico's mining chamber, which argued against the first royalty scheme, said it was still analyzing the proposal. The government says Mexico, the world's biggest silver producer, has been too generous to mining firms for too long. "This mechanism will not affect investment decisions and is much more favourable than those adopted in other countries where they simply tax revenues," the government said in its proposal. Unlike regional peers Brazil and Peru, which have already imposed mining royalty schemes in addition to charging mining companies an aggregate tax levy on profits of more than 34 per cent, Mexico only charges miners income tax of 30 per cent. Mining is the fourth-largest industry behind car making, electronics and the oil sector, accounting for nearly 5 per cent of gross domestic product in Latin America's No. 2 economy.


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Alongside the higher royalty, the Mexican government wants to charge a quarterly fee to mining companies sitting on mines that have not operated for more than two years. Half the money made by the tax would be pumped into a social fund for the villages and towns where mining take places. But it is not clear how much money the government hopes to reap. ↑Return to Index

Peru aims to restart US$6bn in stalled mining projects

Peru, the world's third largest copper and zinc producer, is working with communities to unblock at least US$6bn in mining investment projects by companies including Newmont Mining, Southern Copper and Bear Creek Mining, energy and mines minister Jorge Merino on September 17. Peru's government, which is focusing more on roundtables to bring development projects to Andean communities, expects over US$10bn in mining investment this year, up from US$8.5bn in 2012, Merino told reporters at the Perumin mining conference in the southern Andean city of Arequipa. "Here we respect contracts, the concept of property," Merino said. "Our aim is to make Peru a world leader in mining." Newmont, whose US$4.8bn Minas Conga gold-copper project in northern Cajamarca region was suspended by environmental protests in 2011, is bringing communities to visit a new reservoir built near the project to overcome opposition, he said. Government-brokered talks with the northern Andean community of Hualgayoq will help Minas Conga and the nearby Galeno and Michiquillay copper projects, Merino said. Other ventures suspended by protests in 2011 include Southern Copper's US$900mn Tía María copper project and Bear Creek's Santa Ana silver mine. Both companies are working closely with Andean communities to solve concerns about water use, Merino said. "Conga continues to be a challenge. We have to listen to the population and ensure investment is sustainable over time," he said. "We are sure that Tía María will be one of the new projects to come on stream." Peru has lined up US$54.7bn in mining investment projects over the next decade, including US$20bn in Cajamarca alone, according to the energy and mines ministry (MEM). Peru's mining royalties, which dropped 25% this year on slumping prices, will rebound in 2014 as Chinalco starts up its 300,000t/y Toromocho copper mine at the end of the year and metals prices recover, Merino said. ↑Return to Index

Brazil’s BOVESPA implements changes to its benchmark index

Brazil’s main stock exchange, Bovespa, is implementing changes to its benchmark Ibovespa stock index, the first since 1968, in an effort to correct recent distortions and better reflect the performance of local shares. Under the new plan, stocks will be weighted according a formula that takes into account the market capitalization of free-floating shares, as well as the liquidity of those shares.

Liquidity will be based on a so-called “negotiability index,” one-third of which is based on the total number of trades in the shares and two-thirds of which is based on the total value of shares traded. The Ibovespa, a gross total return index, has grouped the most-traded stocks in the São Paulo Stock Exchange with the same formula since its inception in 1968.

Changes to the index will be phased in over two portfolio re-balancing, beginning next year, the exchange operator said. For the portfolio lasting between January and late April, the index weightings will be calculated using the average of the old method and the new method. The new method will be fully implemented in the portfolio starting May, 2014.


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Many investors recently began calling for modifications to the index's formula, pointing to the comparatively heavy weighting of commodities exporters, which have underperformed stocks linked to domestic consumption over the past two years. The calls for change grew much louder in recent months on concerns over the weighting of oil producer OGX Petroleo e Gas Participacoes SA, controlled by tycoon Eike Batista. Other changes to the index include the following: Stocks that trade at an average price of less than one Real over the previous rebalancing period, such as OGX is likely to do at

the close of the current cycle, would be excluded from the index. Stocks forming part of the index would need to account for more than 85% of trades in the equities cash market, up from 80%

currently. Stocks would need to have been traded in 95% of trading sessions over the period of three index re-balancing. “With the changes, BM&F Bovespa aligns the methodology of its principal index with that which is practiced in other countries and adapts the Ibovespa to the current scenario in Brazilian capital markets,” the exchange operator said in an e-mailed statement. ↑Return to Index

Plan for Peru-Bolivia-Brazil inter-oceanic railroad Brazil, Peru, and Bolivia are teaming up to build an inter-oceanic railroad between Peru's Pacific coast and Brazil's Atlantic coast, Brazilian federal news agency Agência Brasil reported on September 16. As an extension of Bolivia's Montero-Bulo Bulo railway project currently being prepare, Peru and Brazil are coming into the picture to help build a multi-national railway aimed at stimulating import/export activity between the countries. The railway will start in the Peruvian port city of Ilo and run 1,200km to the inland port city of Puerto Suárez in Bolivia, first passing through the municipal regions of Bulo Bulo and Montero. From Puerto Suárez, it will cross Brazil's border into the mid-western state of Mato Grosso do Sul, and eventually reach Brazil's Atlantic coast, the report said without providing further details on the route. According to Bolivia's President Evo Morales, construction in Bolivia will start shortly. The country also has plans to connect to Argentina by way of Tarija department's Yacuiba city in southern Bolivia, and to Chile along its northern coast. ↑Return to Index

Latin American film industry surges

This month saw a posse of Latin American producers, state agency representatives, distributors and directors gather in San Sebastian, Spain, for the annual ‘San Sebastian Film Festival’ and the second Europe-Latin America Co-production Forum. This years’ Festival features a dozen or so Latin American films, including: Fernando Eimbcke’s competition contender “Club Sandwich”, Fernando Coimbra’s “A Wolf at the Door”, Marc Silver’s “Who Is Dayana Cristal?”, Mexico’s Oscar submission, “Heli,” from Amat Escalante; “Anina,” a Colombian-Uruguayan cartoon hit; Chilean Rojas Valencia’s “Root,” Caru Alves Souza’s “Underage” and Victoria Galardi’s “I Thought It Was a Party.” The success of the Festival depends not only on the quality of the movies unveiled – though that’s a big consideration – but what the companies behind them can bring to the table. When it comes to Latin American films there has been a big step-up on early last decade. In the past, Latin American cinema meant only Argentina, Brazil and Mexico. “These were the only countries where you could find interesting filmmakers with an international appeal” recalled Films Boutique’s Jean-Christophe Simon. “What’s really exciting is to now see that you have talented filmmakers and producers coming from Chile, Costa Rica, Uruguay, Colombia.”


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One of the changes has been that funding has ramped up across Latin America. Brazil now has available an annual $200 million in subsidy funding, plus a further $80 million in tax incentives through Cinema do Brasil. As a consequence, producers are plunging into international co-production, with the U.S. (Mexico, Colombia), Europe (almost elsewhere), and within Latin America itself.

In the period 2008-12, Brazilians partnered in 78 official co-productions. That is way up on the first half of the last decade when it was lucky to link with overseas on three-to-four films a year. Film authorities have multiplied co-production treaties and launched bilateral co-prod funds, Brazil

with Argentina, Portugal and Uruguay. Traveling to major festivals and markets, in trips facilitated by national film agencies, a new generation of more entrepreneurial producers has learnt the virtues of co-production, building co-production networks. “Latin America is beginning to re-consider the creation of a ‘region’ to exploit our films,” said producer Bruno Bettati at Jirafa Films. “Producers themselves are attempting to improve sales in Latin America. Latin American production partners, as well as sales agents attempting to build ‘Latin American slates,’ certainly help,” he added. A remarkable young generation of new directors has broken through throughout Latin America, broadening filmmaking options way beyond the predominantly social-issue base of past generation, at least as its films were known abroad. Thanks to digital, “Latin America has seen a huge technological change and, as a direct consequence of that, the proliferation of filmmakers who with digital formats have been able to make films from an early age,” Constanza Arena, head of the Chile promotional agency CinemaChile, commented in San Sebastian. The diversity of Latin American cinema is now dizzying, and far closer to the more-mature industries of other regions. ↑Return to Index

Feature: Don’t forget Latin America in your company’s Asia-Pacific Strategy (Editor’s Note: This article was published by the University of Melbourne Business School at www.mbs.edu.)

What’s your Asia Pacific strategy? It’s a question mulled over in C-suites and board rooms, but all too often, the focus is on Asia, at the expense of another continent in the region that has 600 million people and a growing middle class. “Ten years ago, I didn’t know that we needed South America, and they didn’t know they needed us,” says Rob Grant, Chief Executive Officer of Melbourne-based global clean energy solutions provider Pacific Hydro (pictured below). These days, Latin America accounts for half of Pacific Hydro’s business, people, revenues and profits. And for the past two years, Rob (MBA 1996) has been living in Sao Paulo, overseeing new wind, hydro, solar and geothermal projects across Australia, Brazil and Chile. “Our corporate strategy of investing in renewable energy exists because there’s a coherent macro-economic story,” says Rob, pointing to global trends: over the past 30 years the world’s middle class has grown by 700 million, and is set to grow by another three billion people over the next 20. ‘’All of them are going to want the same style of living that we have. Both Australia and South America sit on top of the mineral resources that are needed to fuel growth in India, China and South East Asia, and have the capacity to grow the food the rest of the world is going to want to eat.” Yet that growth intensifies global warming, which Rob says, jeopardises that prosperity. It’s not a story that always gains traction in Pacific Hydro’s home base, where the global warming debate is politicised and there is much uncertainty over future energy policy, scepticism about the ability of renewables to contribute to baseload power generation, and some local opposition to wind farms.


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But in Latin America, “We never have a conversation about whether it’s right to be putting wind farms in. They’re passionate about clean energy: they know clean energy is part of their competitive advantage, in a carbon-constrained world and future.”

In 2001, the safety, political stability, regulatory regimes and upward mobility of Brazil and Chile put them on the company’s radar in 2001, where Pacific Hydro had previously ruled out some Asian emerging economies. Brazil is now the world’s fifth-largest economy, and Chile is on track to attain developed nation status by 2018. It nevertheless took the company two years to commit to its first Chilean hydro plants. “Time and reconnaissance is never wasted,” Rob says. “It’s just as good not doing a bad deal as it is doing a good deal. Argentina was supplying a lot of gas to Chile at the time, so we were told hydro would never be competitive.” Patience paid off. In 2004, Argentina plunged into an energy crisis as it came out of recession. It cut gas exports to Chile to ensure its own domestic supply. Chile realised it needed to reduce its dependence on its eastern neighbour. Now, 60 per cent of the nation’s energy needs are sourced from renewables, including four Pacific Hydro run-of-river hydro power plants. And Pacific Hydro had

first-mover advantage. According to Rob, Latin American economies can learn a great deal from Australia’s rapid economic growth over the past 50 years. “Chile’s per capita GDP is where Australia’s was 20 years ago. Australia has a lot of lessons to contribute about shorter economic growth and what it means to have arrived as a developed economy. We can find opportunities in and share solutions to a lot of the issues that South American countries are going through at the moment as they go on a very similar journey to Australia’s over the past 50 years.” In turn, companies looking to invest in Latin America need to come to grips with the local environment. “You need to bring more than just dollars and capital to a country. It can’t just be a case of FDI in, dividends out.” In Chile, Pacific Hydro has contributed a football team – “los Santos” named after Rob’s beloved AFL Saints – but more importantly, a very successful sustainable communities fund in 2007 that finances health and education projects in rural Chile. “It was an industry first in Australia in 2005, never been done in our sector, and in 2007 we ‘exported’ the concept to Chile. The benefit has been very good for recruitment and retention, we get the local management team involved in the assessment of the fund recipients.” He reflects on the firm’s Latin American journey – uncertain at the outset, but in hindsight, “it all seems to make perfect sense.” ↑Return to Index

Hockey adds to the growing sporting links between Australia and Latin America

Hockey Australia will be hosting the International Super Series Hockey 9s in Perth from 17-20 October, 2013 (www.hockey9s.hockey.org.au/). The tournament will feature the Argentinian men’s and women’s national teams. The International Super Series Hockey 9s is a whole new hockey experience and a perfect day out with family, friends or business associates. With adaptations to the game of field hockey to make it more exciting and easier to understand, the International Super Series Hockey 9s has something for everyone. Hockey 9s is a new format, developed by Hockey Australia for a new hockey audience, and features the following key differences to the regular game:

teams consist of nine players instead of eleven, meaning more open space to run and hit;

matches last just 40 minutes (two periods of 20 minutes) as opposed to 70 minutes for urgent high-stakes action;

goals are one metre wider than normal … a nightmare for the goalkeepers but great for the strikers and fans of high scoring action; and

fewer rules will make the game easier to understand, particularly for those new to our sport. The event will be broadcast on Australian television on ABC-TV and likely throughout Asia and South America. The broadcast details will be announced by Hockey Australia over the coming weeks. ↑Return to Index

http://www.hockey9s.hockey.org.au/


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Cuba bids to lure foreign investment with new port and trade zone

Cuba published rules and regulations on September 23 governing its first special development zone, touting new port facilities in Mariel Bay in a bid to attract investors and take advantage of a renovated Panama Canal. The decree establishing the zone and related rules takes effect on November 1 and includes significant tax and customs breaks for foreign and Cuban companies while maintaining restrictive policies, including for labour. Cuba hopes the zone, and others it plans for the future, will "increase exports, the effective substitution of imports, (spur) high-technology and local development projects, as well as contribute to the creation of new jobs," according to reform plans issued by the ruling Communist Party in 2011. The plan spoke positively of foreign investment, promised a review of the cumbersome approval process and said special economic zones, joint venture golf courses, marinas and new manufacturing projects were planned. Most experts believe large flows of direct investment will be needed for development and to create jobs if the government follows through with plans to lay off up to a million workers in an attempt to lift the country out of its economic malaise. The Mariel special development zone covers 180 square miles (466 square km) west of Havana and is centred around a new container terminal under construction in Mariel Bay, 28 miles (45 km) from the Cuban capital. The zone will be administered by a new state entity under the Council of Ministers, and investors will be given up to 50-year contracts, compared with the current 25 years, with the possibility of renewal. They can have up to 100 per cent ownership during the contract, according to Cuba's foreign investment law.

Investors will be charged virtually no labour or local taxes and will be granted a 10-year reprieve from paying a 12 per cent tax on profits. They will, however, pay a 14 per cent social security tax, a 1 per cent sales or service tax for local transactions, and 0.5 per cent of income to a zone maintenance and development fund. Foreign managers and technicians will be subject to local income taxes. All equipment and materials brought in to set up shop will be duty free, with low import and export rates for material brought in to produce for export. However, one of the main complaints of foreign investors in Cuba has not changed: that they must hire and fire through a state-run labour company

which pays employees in near worthless pesos while investors pay the company in hard currency. Investors complain they have little control over their labour force and must find ways to stimulate their workers, who often receive the equivalent of around $20 a month for services that the labour company charges up to twenty times more for. And investors will still face a complicated approval policy, tough supervision, and conflict resolution through Cuban entities unless stipulated otherwise in their contracts. And they must be insured through Cuban state companies. ↑Return to Index

Profile: Vanessa Torress, BHP Billiton’s head of group investments and value management

(Editor’s Note: This article was written by Jessica Gardner and was published in the Australian Financial Review in September, 2013.)

As a curious five-year-old, Vanessa Torres would pepper her engineering professor grandfather with questions – “where things come from, how things were made” – and was always satisfied with the responses. “He was the only one who would answer all my questions and I deeply enjoyed the conversations that I had with him,” Brazilian-born Torres remembers. The youngster decided to be an engineer and travel the globe. As BHP Billiton’s head of group investments and value management, she has realised that dream. The trained chemical engineer takes joy in nurturing projects from concept to concrete, but it’s the community centre in Sao Jose de Lapa, a poor suburb on the outskirts of Belo Horizonte, set up by her parents and now funded by Torres that energises her.


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My life is very busy. I start my day working in the centre of the largest Australian company and I start my evening working for more than 100 kids on the other side of the world.

My job is about strategy. I’m accountable for corporate planning, valuation and investments at BHP Billiton. [I work] with the chief financial officer and chief executive to draft and prepare the messages that inform our annual planning cycle, which basically sets the drum beat of the organisation. I then work with our businesses around the globe as they prepare their plans. What we need is consistency of plans. There are 100,000 conversations happening at the base [of the company] and those things have to fit together. The strategy is what glues everything together.

In 2002 I got my first project manager role. I was the only woman project manager at the second largest company in Brazil [mining giant Vale]. I was proud but I was not happy about that. I took it upon myself to change that reality. I started on the things I could control which was giving real opportunity to female project engineers to pursue management roles. Today, one of the things I’m most proud of is I can give the names of women across the globe who are project managers or general managers that I either hired, mentored or sponsored. The best advice I ever got was from the man who gave me that role. I was very young to manage a team who were all men and at least 10 years older than me. His advice was: ‘Vanessa, don’t worry, just be a good leader. Care about the people and in less than one month it will not matter to them whether you are young or old, a woman or a man, black or white.’ It is now my first advice I give to other women. I love culture. I love going to the theatre or sometimes going to the movies after a very busy day. It’s nice to go and disconnect from reality and see a Woody Allen movie. I travel internationally at least eight times a year. Plus one or two times I go on my holidays to Brazil. I enjoy that. But it’s also important to have a sense of home, coming back. In Melbourne, I live very close to Albert Park. On Saturday mornings, I like going for a walk around the park to reflect on life. I have so many favourite places. One I have found most interesting is Giverny [France] where Monet’s garden is. That garden still looks as it was more than 100 years ago. The ability to preserve things – it’s a similar feeling to when I go to my community centre, in Brazil, on a Saturday when most kids are there. It’s almost like I feel the presence of my parents there. They have passed away, unfortunately, but they live through every kid that goes there. The community centre in Sao Jose de Lapa is my lifetime mission. It’s the thing I’m most proud of. We try to give the kids the same conviction that helped me embrace all different challenges, which is that feeling you can be whatever you choose. I ask the kids there “what do you want to be when you grow up?” Maybe ten years ago they would say I want to be a truck driver or I want to work in a house in the city, because that’s what their parents’ background is. Now we have all these volunteers that come who are lawyers and engineers. Now the kids say “I want to be a lawyer”. That is so fantastic. For me being a mentor is paying it forward. I formally mentor some women in BHP Billiton. It [gives me] the same kind of pleasure that I have every time I go to our community centre. The energy that you get from talking to and helping people is the best energy you can ever have. ↑Return to Index


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Paraguay chases 8% growth on investment surge

Paraguay President Horacio Cartes said this month that he will seek annual economic growth of as much as 8 per cent on a sustained basis by boosting infrastructure and agriculture investments in one of Latin America’s poorest countries.

Cartes, a former tobacco magnate who took office August 15, said he wants $2.5 billion annually in public and private investment to boost the land-locked nation’s $26 billion economy. The world’s fourth-largest soybean exporter, Paraguay is seeking private investment in irrigation, ports, airports and highways, while the government will target health, education and rural roads, he said in an interview. “We prefer to have a target of 7 to 8 per cent growth, on a permanent basis,” Cartes said. “It’s almost an obsession. We are confident we can have a good pace of expansion,” he added, while declining to offer a growth target for 2013 and 2014.

Paraguay’s economy will expand 11 per cent this year thanks to “excellent” agricultural yields, the International Monetary Fund said in June, after contracting more than 1 per cent in 2012. Growth is expected to slow to 4.6 per cent next year, the IMF said. ↑Return to Index

Feature: Toward a new energy paradigm in Peru

(Editor’s Note: This article was published on the website of the Institute of the Americas,www.iamericas.org)

Peru is striving to develop a “new paradigm” for its energy sector, one focused on planning against the backdrop of an economic boom, according to Vice Minister of Energy Edwin Quintanilla in his remarks at the Institute of the Americas’ Peru Energy Roundtable.

Just under 100 participants from across the government of Peru, private sector and civil society attended the August 27th Roundtable in Lima. The program, convened two years into the term of President Ollanta Humala, examined the government’s outlook for energy policy, as well as its efforts to balance energy demand and economic growth. During his keynote address, Vice Minister Quintanilla underscored the tremendous economic success the country has enjoyed, growth that will catapult the Andean nation’s GDP per capita past the global average by 2020. However, economic success presents several energy challenges, including the estimated 10% annual growth in electric demand between today and 2016 and expanding access to energy. Peru currently holds last place in South America in terms of providing access to energy for its citizens and without significant investment, the

country could face electricity shortages by 2017. Discussions and subsequent panels highlighted other challenges, particularly with regards to consummating the enormous success of the Camisea natural gas project as it nears its tenth anniversary. Since Camisea’s launch, the country has created from scratch an important domestic natural gas market. Indeed, Peru has seen over 117,000 residential natural gas users come on line and natural gas-fired generation accounts for over 20% of the nation’s electric portfolio. Government estimates point to over one million residential natural gas users by 2020 and over 400 natural gas vehicle filling stations by that same year. But some contend that a simmering undercurrent of social unrest in Peru threatens major investment and thus economic development if not properly managed. Rural, and in many cases indigenous, populations in the Amazon and Andean highlands have become increasingly vocal in their opposition to natural resource development projects. Rural residents claim that the windfalls from energy projects have not reached them and, worse, they are left to bear the environmental damage associated with what are largely extractive industries. The Humala administration has focused its efforts to redress these issues through a prior consultation law for indigenous or native peoples (Ley de Consulta Previa a los Pueblos Indígenas u Originarios). The government is confident that these measures, intended to improve project and local community


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interaction and consultation, will greatly alleviate the delays and the much-criticized permitting process for major energy and infrastructure projects today in Peru.

Several speakers at the roundtable pointed to the diversity of lessons from the development of the Camisea project as important tools to overcome the current challenges facing energy development in Peru, from the social to the environmental to the multiplier effect of exploiting domestic resources. Moreover, most agreed that as taxing as the energy investment climate is today, the possibility of a “new” Camisea project is within reason. There was much optimism surrounding the country’s energy potential and many participants felt that Peru’s significant traditional energy resources can be developed with the right policy framework and support of the government. But delays to projects such as the Gasoducto del Sur -- viewed almost unanimously as the lynchpin to meeting Peru’s energy demand growth and social inclusion efforts – as well as a downturn in exploratory drilling permitted by the government have made many key players in the sector

uneasy. Panelists from the mining sector also emphasized the link between energy, and sustainable economic growth in Peru. Mining contributes 10% of Peru’s GDP and 60% of exports yet inadequate transmission infrastructure threatens mining projects and, in turn, the country’s economic growth. The speakers agreed that expansion of natural gas supplies in the south, including the completion of the “Southern Energy Hub” will be critical. As Vice Minister Quintanilla underscored, the key challenge and thus the core of the “new paradigm” is for the government to develop a regulatory and investment framework that makes feasible universal access and energy security without distorting market signals. ↑Return to Index

Bolivia takes aim at idle mining concessions La Paz, Sep 19 (EFE).- Bolivia has enacted a law that allows the state to revoke mining concessions without paying compensation, a measure aimed at recovering control of idle, privately held land, President Evo Morales said. The "fatherland was being given away" under the previous legislation said the President. The Bolivian government said that with this latest measure, enacted on September 19, it expected to recover more than 1 million hectares (3,860 sq. miles) of land and 70 per cent of the country's 2,454 private mining concessions. The new law is aimed at recovering those concessions in which no investments were ever made, according to Morales, who said some of the properties were "idle or unproductive." The government is obligated, however, to "respect" those concession holders who have made investments, he added. ↑Return to Index

Santander ready to lend for infrastructure in Brazil

Following a meeting with President Dilma Rousseff, Banco Santander Chairman Emilio Botin said that the Spanish bank has 10 billion dollars available to finance infrastructure projects in Brazil. He also anticipated that loan book growth at Banco Santander Brasil SA would be up about 10% in 2013. “We’re making a great effort both advising and financing. We want to show that we can finance infrastructure projects to the tune of 10 billion dollars, which is an important sum in ports, highway, airports and railways”, said Botin.


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He added that Santander Brazil participates actively in the PAC, Brazil’s long term Plan to Accelerate Growth which is focused on infrastructure projects. “I’m very satisfied with the meeting I had with the President; Brazil has consolidated as a regional and global power, with solid institutions and a consolidated financial system”, added chairman Botin who praised Brazil’s macro-economic management. “Brazil has sufficient margin to make all the necessary adjustments and has a government fully aware of what needs to be done and it will do it, as it has shown in repeated occasions”. Botin said that investment in Brazil has been one of the major strategic decisions of the bank: “we have full confidence in Brazil and this country is one of the main legs of our global business”. “We have to capture 10% of the banking business in Brazil, which has a very good blend of private and government banks. Our plans are to expand 10% annually in the next few years, which has helped consolidate us as the main foreign bank in Brazil”. “Our great mistake would be not to be in Brazil, this is a great country steaming ahead and our bets are on Brazil and that it wil l continue to grow”, said Botin. ↑Return to Index

Tax alert: Impact of non-residence on tax obligations

(Editor’s Note: This article was written by Asher Joseph, partner of Ernst & Young)

In May 2009, the Australian Government changed tax legislation which, as a result, brought the income earned from employment exercised outside of Australia back into the Australian tax system for many tax residents. The impact of an individual’s residency position from an income tax perspective took on greater significance and individuals and employers needed to have increased awareness of the implications of being an Australian tax resident and the employer obligations which are associated with this. Since that time, the Australian Taxation Office (ATO) has worked in an increasing capacity with the Australian Department of Immigration and Citizenship (DIAC) and AUSTRAC (Australia’s anti money-laundering body) to identify and audit more individuals who indicated that they are non-resident for Australian tax purposes as part of their self-assessment income tax returns. This has also resulted in a much larger number of cases being tested by the Administrative Appeals Tribunal (AAT).

On 28 June 2013 the AAT held that a citizen of Australia was considered to be an Australian tax resident for the 2009/10, 2010/11 and 2011/12 Australian tax years despite living and working outside of Australia since December 2006. The AAT upheld the ATO ruling on the matter finding that the taxpayer continued to ‘reside’ in Australia under the ‘ordinary concepts test’, meaning that his behaviour was consistent with someone living in Australia. The taxpayer had been physically present in East Timor for between nine and eleven months of each year since 2006 and had been employed on a renewable one year contract in East Timor since May 2008. Furthermore the taxpayer had only spent between six and eight weeks in

Australia in each year since 2006 visiting his non-dependent children and living in the property he owned in New South Wales which was available for his use. The case in question (Pillay and the Federal Commissioner of Taxation [2013] AATA 447) is consistent with a number of cases on Australian tax residency ruled upon by the AAT in the past 18 months. Many of these cases have found that Australian citizens are deemed to remain Australian tax resident despite physically spending large periods of time outside of Australia. The Pillay case refers specifically to a precedential case (Iyengar and the Commissioner of Taxation [December 2011] AATA 856) which established that the following 8 factors are relevant when assessing a taxpayer’s Australian tax residency situation: Physical presence in Australia Nationality History of residence and movements Habits and ‘mode of life’ Frequency, regularity and duration of visits to Australia Purpose of visits to or absences from Australia Family and business ties with Australia compared to the foreign country Maintenance of a place of abode


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In the Pillay case it was determined with reference to the factors above that the taxpayer was considered to be Australian tax resident upholding the Commissioner’s view that they “maintained a continuity of association with Australia in the relevant years despite being physically absent from Australia for significant periods...the taxpayer’s circumstances evince an intention to return to Australia and suggest that the applicant has continued to regard Australia as his home.” Residency assessments are now being determined with reference to many personal elements of an individual’s life which previously may have been considered to be relevant in a residency case, but not conclusive. There is evidence in recent years that the ATO are increasingly using data matching and information sharing processes with DIAC, Australian financial institutions and foreign revenue authorities to establish a more comprehensive picture of an individual’s personal and financial circumstances when assessing residency. There has also been increased scrutiny by the ATO on individual tax residency following the lodgement of personal income tax returns, evidenced by the increase in tax return audits and detailed residency questionnaires being issued by the ATO. Tax liabilities associated with an incorrect residency assessment can be significant and can also impact Australian employers where Pay As You Go (PAYG) income tax obligations or Fringe Benefits Tax (FBT) obligations have not been met. In light of the above, individuals and employers need to be vigilant when dealing with movements in and out of Australia as the factors listed above are becoming increasingly relevant in assessments of Australian tax residency. Documentary evidence and record keeping is also being examined in the case of residency audits and can play a key part in determinations if an audit i s initiated. ↑Return to Index

Peru transport and communications sector set for US$22bn boost

Peru's transport and communications sector is set for US$22bn in investment by 2016 as part of a government drive to "reduce the infrastructure divide" and make the country more competitive, said transport and communications (MTC) minister Carlos Paredes Rodríguez on September 23.

Road infrastructure will be one of the primary targets for investment. "By 2016 some 85% of the national road network will be paved, and 100% will be maintained to a level which ensures accessibility," said Paredes at mining convention Perumin, according to an MTC release. The entire Longitudinal de la Sierra highway will be paved in that time, some 1,000 bridges will be built or rehabilitated, and 13 highway tenders will be launched with a planned investment of US$4.86bn, said the minister.

Paredes also cited the deployment of Peru's 13,500km fiber optic network, the Red Dorsal, which will bring broadband to all the country's regional capitals. Additionally, 4Q13 will see concessions awarded for Chinchero international airport in Cusco and San Martín port in Pisco, said Paredes, who emphasized that the infrastructure works will improve the standard of living of all Peruvians. ↑Return to Index

Chile highlights global interest in Pacific Alliance

Chilean Foreign Minister Alfredo Moreno said September 9 that the participation of new observer countries to the Pacific Alliance reflects the interest that the Latin American trade bloc is generating around the world. That is also the reason why the presidents of member countries comprising Chile, Colombia, Peru and Mexico met at the end of September in New York, on the sidelines of the 68th United Nations General Assembly. "The alliance is not to separate us from the world, on the contrary, it is to bring us together so we can jointly face the possibilities the world offers us," he said. A total of 20 countries have been granted observer status to the alliance, including Panama, Costa Rica, Spain, China, the United States, Australia, New Zealand and Japan since it was founded in June 2012 in Chile.


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Asked about China's participation as an observer, Moreno said, "China has been one of the latest countries to join the Pacific Alliance as an observer, along with the United States, and now we have the applications of Germany and England." China was granted the observer status at the end of June. Moreno said China is Chile's main trade partner and is also one of the most important trade partners for Latin America and the Caribbean, where China has active trade and investment. The alliance, with a market of 209 million people, represents 35 per cent of Latin America's gross domestic product, or about 2 trillion U.S. dollars. Its 5-per cent annual growth in 2012 is 3.2 per cent higher than the world's average. The four members represent 50 per cent of the region's trade, with exports of 556 billion U.S. dollars and imports of 551 billion dollars in 2012. Their main exports include fuel, minerals, and agricultural and manufacturing products. ↑Return to Index

Uruguay’s economy expands 5.6% in second quarter

Uruguay's economy expanded 5.6% in the second quarter compared with the same period a year earlier and 2.1% compared with the first three months of this year, the central bank said in its quarterly report. Most economic sectors grew in the second quarter, but what contributed most was “supply of energy, gas and water” due to a high hydroelectric production, as a consequence of abundant rainfall following a long period of drought the bank said. This sector grew 225.4% in the second quarter, compared with the same period in 2012. Transport and communications registered the second biggest growth at 9.2%, due to the expansion of internet services and cellular phone sales, and positive foreign trade. Agriculture and livestock also rose 3.3%, due mainly to good crop performance. The only sector which registered a fall was construction, down 4.3% mainly because of “a contraction in the private sector’. This is attributed to the end of construction work in the Montes del Plata pulp mill, one of the largest investments in Uruguay’s history which is forecasted to begin production in the next six months. Exports also had a good performance having expanded 11.1% in the second quarter (in value) compared to the same period a year ago, while imports were up 2.5%, which had “a lesser negative impact on the physical volume of goods and services trade balance’. The central bank expects the Uruguayan economy to grow 4% for the full-year 2013, but private analysts forecast an expansion of 3.45%. The IMF and World Bank are also forecasting between 3.5 and 4%. ↑Return to Index

Panama and Colombia sign free trade pact

Panama signed a free trade agreement with Colombia on September16, making a step forward to join the Pacific Alliance. The agreement was signed by Panama's Minister of Trade and Industry Ricardo Quijano (on left in photo) and Colombia's Minister of

Trade, Industry and Tourism Sergio Diaz Granados (pictured on right). Diaz Granados said the free trade agreement, the negotiation process of which was launched in 2009, represented an important achievement as the two nations have an annual trade of 2.8 billion U.S. dollars. The agreement will provide clear rules for their trade exchanges and help improve the business environment, Diaz Granados said. The minister added that the agreement paves the way for Panama to become a full member of the Pacific Alliance, a Latin American mechanism for economic and free trade integration grouping Chile, Colombia, Mexico and Peru.


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In the coming weeks, Colombia will present the agreement to the Congress for ratification, said the minister. The signing of the free trade pact between the two neighbour countries was also hailed by the Panamanian side as an important achievement. Quijano said the agreement will allow a deeper economic integration between the two countries, and it represented a major step for Panama to become a full member of the Pacific Alliance. Panama is now in negotiations with Mexico in a bid to reach another free trade agreement, according to Quijano. ↑Return to Index

Analysis: Mexico proposes tax overhaul, pension plan (Editor’s Note: This article was written by Elizabeth Malkin and was published in The New York Times on 10 September 2013.)

Pressing ahead with plans to reshape Mexico’s economy, President Enrique Peña Nieto has proposed a sweeping overhaul of his country’s tax system, intended to collect billions of dollars to finance new social programs.

In a speech from his residence, Mr Peña Nieto described the broad outlines of his plan, which would eliminate many loopholes and exemptions that favour the richest Mexicans. He proposed new taxes on capital gains, carbon emissions and soft drinks. Still, he said, his proposal was “good news for Mexican families”, because the revenue it would generate would pay for a new universal pension for all Mexicans over 65, and for introducing unemployment insurance. The Mexican government collects just 10.6 per cent of the country’s annual economic output in taxes, less than almost any other country at its level of development. With so little tax revenue, the government has financed itself instead by squeezing money from Pemex, the state-owned oil monopoly, to pay for 30 to 40 per cent of all public spending. Mr Peña Nieto is pushing to open up the energy industry and reduce dependence on revenue from Pemex. “We collect few taxes because we have oil,” said Juan Pardinas, the general director of the Mexican Institute for Competitiveness. “That allows us to pay less in taxes and allows the state to make little effort to collect them.”

Mr Peña Nieto is in a hurry. Since taking office in December, he has been able to work with the two main opposition parties to rewrite Mexico’s public education laws and promote competition in the telecommunications industry. Under an agreement known as the Pact for Mexico between his party and the opposition he is trying to inject some dynamism into an economy that has failed to expand any faster than 2 per cent a year, on average, since 2001. The Pact for Mexico has worked smoothly on issues where there was broad agreement, but the political divisions over energy policy and taxes are deep. Opposition parties say the next priority should be passing new electoral laws to combat the vote-buying practices they accuse Mr Peña Nieto’s party of using. And when it comes to taxes, nobody seems to want to take the lead. “The government is 100 per cent in charge of this,” Gustavo Madero, the president of the conservative National Action Party, said in an interview before Mr Peña Nieto unveiled his tax proposal. “Let the government defend it.” Even so, Mr Madero was present, along with other opposition leaders, when Mr Peña Nieto presented his tax proposals on Monday. To open up the energy sector, Mr Peña Nieto proposes streamlining Pemex and allowing it to reinvest more of its profits. But the government will have to make up the foregone revenue – thus the new taxes, along with improved efforts to collect existing levies. Even if the country’s political elite agrees to lighten Pemex’s burden and step up tax collection, popular opinion may not follow. Andrés Manuel López Obrador, the left-wing candidate who ran second to Mr Peña Nieto in last year’s election, drew an estimated 30,000 people to a rally on Sunday and promised to organise further protests against the president’s energy and tax policies. ↑Return to Index


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Argentina launches new fiscal incentives for software firms

The government of Argentina has launched new fiscal incentives for software and IT service firms. The government this month issued a resolution which modified the country's software promotion scheme, which was defined in 2008. The new fiscal incentives will be offered until 2019, according to the published report. "The local software sector consists of over 4,000 firms, of which 98% are SMEs and microenterprises," industry minister Débora Giorgi was quoted as saying. A total of 324 software firms have already registered with the software promotion scheme. The government expects to attract nearly 500 more companies with the new fiscal benefits. With the new incentives, software firms will be able to pay national taxes with a fiscal bond they receive for the equivalent of 70% of paid employer contributions. ↑Return to Index

Peru named ‘Destination of the Year’

Once again, Peruvian food is making a splash among international lovers of great food. On September 4, British cuisine magazine Food and Travel hosted its annual “Food and Travel Magazine Reader Awards” at the Savoy Hotel in London and, among awards such as “Restaurant of the Year” and “Chef of the Year,” Peru appeared as the winner of “Destination of the Year.” The awards were decided by an online vote organized by Food and Travel Magazine, where foodie fans of the publication could voice their opinions about their favourite restaurants, hotels, and destinations over a three month voting period. Winning travel and food awards is nothing new to Peru, of course. In 2012 Peru was named the “World’s Leading Culinary Destination” at the World Travel Awards. More recently, Peruvian restaurant Lima27 was listed among National Geographic’s top ten restaurants in the world. ↑Return to Index

For the diary Date: October 16-19, 2013 Event: Expo Minera 2013 Venue: Acapulco, Mexico Organiser: Austrade

Contact: Radek Divis, [email protected] Date: October 31, 2013 Event: 7

th Australia-Latin America Colloquium

Venue: Sir Llew Edwards Building (#14), Cnr University Drive & Campbell Road, UQ St Lucia

Organiser: University of Queensland

Contact: www.uq.edu.au/international/latin-american-colloquium Date: October 31, 2013 Event: Brisbane Annual Dinner Venue: Customs House Organiser: ALABC

Contact: Rosie Atherfold, [email protected] or Tel: 02 9357 4441 Date: November 25-26, 2013 Event: Canberra: Latin America Roundtable and Strategy Forum Venue: To be confirmed Organiser: DFAT and ALABC

Contact: By Invitation Only - Rosie Atherfold, [email protected] or Tel: 02 9357 4441 Please visit our website www.alabc.com.au for regular updates. ↑Return to Index


http://www.vision6.com.au/ch/30320/1fmdb/1460521/7019217z25.html

http://www.vision6.com.au/ch/30320/1fmdb/2005008/70192g26h.html



http://www.alabc.com.au/

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