Latin America: Change and Opportunities for Australia

Speech

Australian Minister for Foreign Affairs, Alexander Downer

Canberra, 20 June 2000

Latin America: Change and Opportunities for Australia

Speech by The Minister for Foreign Affairs, The Hon Alexander Downer MP to the Australian National Centre for Latin American Studies.

Introduction

I'm delighted to be here today to deliver this inaugural lecture. My Department of Foreign Affairs and Trade has been an active contributor to planning activities for this conference, including a short-term secondment of an officer from our Latin America section and some financial assistance. We are confident that ANCLAS, through this conference and other activities, will contribute to a greater understanding and vision in Australia of a region which is very diverse, increasingly important but, until relatively recently, little known in our country.

While the government's highest foreign policy priority is engagement with our immediate region, we are also actively seeking to strengthen our relations with Latin America, an emerging dynamic region of the world. In Latin America we have not had a long tradition of cooperation, although there were some interesting connections in the 19th century - Rio was an important port of call for the early voyages to Australia (and an important source of rum!). Many of you will know that Australia's first Labour Prime Minister, John Watson, was born in Chile in 1867. Australia's knowledge of and relations with the region have been modest, but I believe are growing significantly now. Different colonial backgrounds and cultural heritage, including language, not to mention the geographical distance, which separates us, explain much of this historical divide. Until not so long ago both regions' economic interests revolved around Europe, North America and elsewhere - we saw each other as competitors, not trading partners. North America and the EU continue to dominate trade and investment in Latin America, but the opening up of the region's markets to the world and dismantling of protectionist trade policies have led to growing trade ties between the countries of the western seaboard of South America, particularly Chile and Peru, and the Asia-Pacific.

We now look increasingly to each other for trade and investment opportunities. As middle ranking powers and commodity-based economies, Australia and many Latin American countries share common trading interests. We also share similar perspectives on a range of global issues. And we share a fundamental belief in democracy and economic liberalisation.

In the 1990s Latin America experienced a remarkable transition which witnessed the wide embrace of the values of economic liberalism. In many ways the change has been revolutionary. During the late 1980s and into the 90's nearly all of Latin America's governments began to run their economies, albeit to varying degrees and at different paces, in accord with the so-called Washington consensus, the orthodox free market economic policies promoted by the IMF and the World Bank. The reforms include trade liberalisation, deregulation, privatisation and reducing the size and role of government. For the most part, the winning candidates in Latin America's presidential elections in the last half dozen or so years have been those committed to market reforms.

Over the past decade and a half, the Latin American political scene has also changed in dramatic ways. Between 1978 and 1990, fifteen Latin American countries which previously had been dictatorships held leadership elections. Prior to this, the region's political history was characterised by governments of virtually every conceivable shape and type: monarchies, populist regimes, oligarchic democracies, civilian and military dictatorships, revolutionary systems, Westminster-style parliamentary democracies and bureaucratic authoritarian states. Many governments are now carrying out what are widely called 'second generation' reforms - building solid democratic institutions (legislatures, political parties, labour unions, judicial systems, local governments and civic and community organisations for example) - to improve their capacity to pursue democratic policies and market economics. I firmly believe that economic liberalisation would not have occurred without democracy.

Despite these reforms, the region's macroeconomic performance has been uneven. The opening of political systems came precisely at the time national economies were experiencing difficulties as a result of the socio-economic crisis that hit during the 1980s - the so-called 'lost decade'. In the 1990s, the fallout of the debt crisis and its restructuring aftermath dominated Latin American politics. With the exception of Mexico and one or two other countries, nearly every major Latin American economy fell into recession in 1998-99, after a decade of mediocre growth - only 3 per cent on average, half the region's 6 per cent average in the 1970s.

There are economic success stories however - Brazil's economic rebound from the dire outlook in the first quarter of last year has been truly extraordinary and reinforces a key message for all economies - the importance of market reforms and sensible economic management. Continuing this process is the key to economic prosperity for Latin America, just as it remains a priority for my government.

Many Latin American countries have also reached a critical point in the process of political change: recent events in Peru, for example, have led some commentators to talk about the fragility of democracy in the region. Colombia is another example. It is experiencing its sharpest economic downturn in thirty years but it is also deeply mired in problems associated with narcotics trafficking and a seemingly intractable guerilla insurgency. One commentator has referred to the 'democratic deconsolidation' of Colombia. The scale of the crisis there was graphically illustrated recently. We were all horrified by media images of the 'necklace bombing' of an innocent Colombian woman by one of the guerilla groups last month. Also last month but closer to home, an Australian missionary was kidnapped in Colombia by one of the rebel groups, the second Australian national in two years. Thankfully both were released unharmed, but the incidents were uncomfortable reminders to us in Australia of the problems the Colombian government faces in dealing with the guerillas and drugs-linked corruption.

There are also political success stories. Since returning to civilian rule at the end of 1989, Chile, for example, has quickly established a stable liberal-democratic tradition with a well-developed civil society. The maturity reflected in the handling of the Pinochet issue is a clear illustration of how far Chile has progressed since its reversion to democracy.

I would now like to look briefly at the future for Australia-Latin America relationships and how we can continue to build on them.

Let me say firstly that Australia and Latin America have a proven track record of cooperation on a range of trade and other issues, in the WTO, the UN and elsewhere.

A quintessential example of this cooperation is the cairns group, which has a distinctly latin flavour, with Argentina, Brazil, Chile, Colombia, Paraguay and Uruguay as members. Another example is of course APEC, of which Chile, Peru and Mexico are members and there is growing interest from others to join. There are other examples, of which the new World Wine Group, the Valdivia Group and the Miami group are just a few I could mention. The outlook is for continued cooperation in all these areas in the future.

The expansion of our trade and investment links will also be a priority for us in the near future. Although South America is a modest market for Australian companies in comparison with East Asia, the European union and the United States, it has an important role to play in the diversification of Australian trade. Unfortunately however, Latin America has for too long been a region which seemed to reflect unfulfilled expectations for the Australian business community. Overall, our trade relations with the region remain well below their potential. Latin America accounts for only 1.5 per cent of our merchandise exports and around the same percentage of Australian investments abroad. Apart from traditional areas such as banking, finance and mining, new opportunities in areas such as education, superannuation, health, tourism and telecommunications are increasing, particularly as the region presses ahead with deregulation and privatisation.

Investment has been the cornerstone of Australia's involvement in the region. Officially estimated at just over a$3 billion, investment in South America's strong resource and agricultural base has been attractive to Australian companies. Despite our modest overall stake, we are already prominent in the exploration and mining of Latin America's vast mineral and energy resources and our interests are growing. One notable example is MIM and north's share in the massive Alumbrera copper and gold mine in Argentina.

As the countries of Latin America place increasing emphasis on their political and economic links with the Asia-Pacific, there will be opportunities for significant spin-offs for both regions through greater contact and linkages. Both regions have potential as gateways to much wider commercial opportunities. Many Australian companies with operations in particular Latin American countries see their operations there as crucial to a successful leap into other regional markets. We hope an increasing number of Latin American corporations will choose Australia as their regional headquarters for the Asia-Pacific.

Opportunities for Latin American firms in Australia also abound. The recent announcement that an Argentine company, Invap S.E. in alliance with the Australian companies John Holland and Evans Deakin are to develop the replacement nuclear research reactor (a $a280m contract) at Lucas Heights was significant.

To ensure we have the right policy framework in place to make the most of the opportunities in Latin America, the trade sub-committee of the joint standing committee on foreign affairs, defence and trade will shortly release a major report on Australia's trade and investment relationship with south America. The study will provide a valuable review of our links with the region and identify new and innovative ways to take the relationship forward.

I believe that people-to-people links will be crucial to building on our relationships with Latin America, by increasing Australia's profile there and raising awareness of Latin America here.

At the government level we have had and will continue to have more Ministerial visits to and from Latin America. My colleagues the Minister for Trade, Mr Vaile, and the Minister for Immigration, Mr Ruddock, both visited Latin America last year. The Minister for Communications, Information Technology and the Arts, Senator Alston, recently returned from a visit. I also hope to be able to visit Latin America later this year.

Cooperation in education, science and technology also provides fertile ground for people-to-people exchanges. We are honoured to have with us at this conference the Argentine Minister for Education, Dr Llach, who I understand is here to look at, among other things, Australian expertise in the delivery of education services, particularly distance primary education.

We currently have two Australian defence personnel in Peru providing expert advice to officials there on the destruction of Peru's landmine stockpile. Another example is the establishment by the Australian Federal Police of a narcotics liaison office in Bogotá, which will assist Colombian law-enforcement authorities in their efforts to combat transnational crime and narco-trafficking.

Let's not forget sporting, cultural and academic links.

Australia and Latin American countries are friendly rivals in many sports, notably soccer - the Paraguay national team recently visited - and rugby union: I note here that the Socceroos recently defeated Paraguay and the Wallabies defeated Argentina. We look forward to welcoming many fine Latin American athletes to the Olympic Games in September: I understand Canberra will be host to the Brazilian Olympics team for six weeks pre-games training.

There is a fascination in Australia for Latin American music, art and literature. I understand tomorrow's program here will be devoted to the culture of the region.

On that note, let me conclude today by congratulating the ANU and the Latin American Heads of Mission on the establishment of this centre. I am sure that by promoting research on Latin America and acting as a focus for Latin American studies in Australia, the centre will be playing its part in fostering the two-way communication that is vital to strong and healthy relationships.