The future of Australian and Latin American trade

Craig Dempsey
Oct 21, 2018 · 5 min read

At first thought, you may think that trading between Australia and Latin America is non-existent, as the territories are thousands of miles apart. However, as the world becomes more globalised, and businesses look for new opportunities to enter markets and expand their profits, Australia has, in fact, built trading relationships with countries in Latin America, and the two regions are forging ahead with new partnerships, importing and exporting each other’s goods and services.

What’s more, the Australian government is working hard to promote trade with Latin America, and has launched new bilateral agreements and made changes to its policies to allow relationships to be formed and strengthened. The New Free Trade Agreement, only passed in 2018, allows for trade between Peru and Australia, while Chile agreements and the Pacific Alliance has allowed Australia and Latin America to benefit from each other’s economies.

The challenges of Australian/Latin American trade

Whilst there has been a significant increase in trade deals and investment between Australia and Latin America, there are challenges that businesses and governments must overcome in order for those deals to be fruitful and long-term. One of the most common problems that some Australians face when trying to expand their businesses in Latin America, or offer their products or services to Latin American consumers, is the language barrier. Of course, you can pay for translation services and have your marketing materials translated into another language, but it can be hard to build and maintain meaningful relationships with clients and business executives that do not speak the same language as you, which is why hiring a local business development expert to live and work in a Latin American country is often the most sensible option for brands.

Aside from language barriers, there are also cultural differences, both in terms of consumers and their tastes and attitudes, but also in terms of business culture and best practices. Aussies are known for their relaxed and informal approach to business, whereas Latin Americans are more conservative and value regular business networking, forging and maintaining new deals and partnerships, and are perhaps stricter with their employees than Australian entrepreneurs.

Legal and financial differences must also be considered; indeed, laws and regulations can vary significantly from one Latin American country to another, so even if you expand successfully into Mexico, you may effectively need to start from scratch when working in a country such as Peru. And because of a lack of reliable knowledge into local markets, it’s also easy to make mistakes when trading or expanding; corruption is rife and individuals are often out for themselves.

Although countries like Mexico and Argentina are still recovering from protectionism policies and having a name for drugs trafficking, Latin America has seen some huge improvements over the past decade — there’s less corruption, less crime, a growing economy and changing attitudes.

The benefits of working with Latin America

Latin America has exploded in popularity over the past couple of years, with investors and brand directors seeing the benefits of the territory’s thriving economies, growing middle classes and changing attitudes to Western brands and products. LATAM is made up of 33 countries and dependencies and is home to more than 620 million people, all potential customers. Savvy Australians looking to expand their businesses into new territories will no doubt see that the market is not as saturated as Western markets like the United Kingdom, USA, Canada, or even growing markets such as China and that there are huge opportunities for growth and revenue.

Aside from the population, Latin America also benefits from the fact it has an abundance of rich natural resources, which can be utilised by Australian businesses to sell products back at home. Indeed, Colombia and Brazil are two of the leading coffee producers in the world, with brands such as Starbucks sourcing their supply from such countries. Cheap labour costs can also be considered a benefit to Australian businesses, with the average salary in El Salvador coming in at just $400 per month. Whether you’re looking to establish yourself as a new name in the country or you simply want to manufacture products to sell in other markets, the territory offers cheap labour and relatively affordable startup and running costs, which reduces the barrier to entry and allows businesses to invest in the country without too many risks or need for capital.

The benefits of working with Australia

Australia’s economy is on the up, with latest GDP growth coming in at a higher than expected 3.1 per cent. The country is also fast becoming a destination for international investment, with businesses around the world choosing to set up shop in the country and enter the market. For Latin American businesses, Australia’s high GDP per capita (one of the highest in the world at 55925.93 US dollars in 2017) means that demand for quality goods and services is high. More than $6,349 million Australian dollar’s worth of goods was imported from Latin America between 2016 and 2017, with $1,574 million in agriculture, and an incredible $2,732 million in ETM (Elaborately Transformed Manufactures, also known as high-tech electronic goods). Being able to capitalise on this market makes sense, and so competing with other businesses to offer products that are of the highest quality and at the lowest price is critical in order to compete.

Why Latin American and Australian trade is a good thing

As an Australian who has lived and worked within the country for decades, and now run my own company Biz Latin Hub that offers services including company formation to help entrepreneurs who want to expand into new markets, I know first-hand that improved relationships between Australia and Latin America can only be a good thing. Not only does it unlock potential between both territories, giving them both access to each other’s minerals, services, and other goods, but it helps to diversify the markets and reduce Latin America’s reliance on the United States, giving the territory increased purchasing and selling power, and helping Australian businesses unlock new revenue streams and compete in today’s global marketplace, where no business is safe.

Offering services in Latin America or Australia can be incredibly lucrative, but it’s important that you understand your competition and secure strong partnerships from day one. Whether you’re a startup business or you’re looking to expand, I wish you the very best of luck!

Data Driven Investor

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