Sunday 03 Jul 2022 | 08:43 | SYDNEY
Sunday 03 Jul 2022 | 08:43 | SYDNEY

Australia Latin American opportunity

21 March 2012 09:16

Alexis Arthur is a Program Associate at the Inter-American Dialogue, a Washington-based think tank focused on Western Hemisphere affairs.

Kevin Rudd's resignation as Foreign Minister could be a greater loss than many realise for Australia's engagement beyond Asia.

Many Latin American observers credit Rudd's visits to the region as both Prime Minister (Peru in 2008) and Foreign Minister (Brazil and Chile in 2010) as critical to expanding Australia's aid program and renewed political and economic interest in our far-Pacific neighbours. The question now is whether Bob Carr, who has had little contact with the region, will continue what has become a positive trend in Australia-Latin American relations. 

Australia remains a small but growing presence in Latin America. In 2010, the Australian Government re-opened the Australian Embassy in Peru, and will open a consulate in Bogotá, Colombia mid-2012. A shift by the Australian Government to target emerging economies is a good sign for Latin America, home to some of the most vibrant emerging markets in the world. Brazil now leads the Latin American region in both economic and political clout, yet Australia has traditionally focused on other BRIC members, China and India. Brazil, meanwhile, has become more influential both within Latin America and globally, and is increasingly shaping the BRIC agenda.

Historically, Latin America has been treated more as an outpost than a partner. This is partly because Australia's trade with Latin America is so small. Comprising less than 2% of Australia's total trade in goods and services, it comes second only to Africa in volume.

It is also due to language barriers, geographical and cultural distance, and outdated assumptions about the region. While most Australians more readily associate Latin America with cocaine and caipirinhas, we have a lot more in common with Latin America – and a lot more reason to cooperate – than we might think. 

Latin America, and South America in particular, has enjoyed a long period of strong economic growth and has weathered the global financial crisis well. Sound macroeconomic policies developed in the wake of a series of financial crises during the 1980s and 1990s, bolstered by high commodities prices and strong Chinese demand, mean that this growth is likely to continue.

Importantly, economic performance has been accompanied by political stability, brought on by a steady transition to democracy over the last two decades. Latin America is now balancing economic growth with greater social inclusion, successfully targeting the high levels of poverty and inequality that have characterised the region.

Yet as more South American countries recognise the risks associated with a reliance on extractive industries as a driver of growth, they are looking to like-minded countries for assistance. Countries with large commodities sectors such as Peru, Chile, and Colombia are now looking to Australia as an example of successful resource management.

There are ample opportunities for Australian investment in Latin America, particularly in the mining sector, including technical training, equipment, and innovation. While mining investment in the region has been small, South America's political stability and established infrastructure offer numerous benefits over other new markets, such as Africa.

Latin America still faces a number of challenges. Democratic governance has been stymied by a culture of corruption across the region. Social tension and conflict, particularly over resource exploitation, has threatened growth and stability in Peru and Bolivia. Meanwhile, Colombia remains mired in a decades-long internal armed conflict.

But China and other emerging Asian economies will take advantage of the opportunities in Latin America, and Australia's lack of serious long-term strategy for the region means it risks being left behind. Domestic political battles and the loss of one of the region's few supporters in the ministry must not allow the early momentum go to waste.

Photo of Santiago, Chile, by Flickr user fahrenheit75.