BY LIM HNG KIANG
Most people think of Latin America and Asia as two regions separated by culture, language and history. Yet, Asia and Latin America are more connected than we imagine.
In recent years, political and economic ties between Latin America and Asia have deepened. Not only have government–to-government links and interactions grown, but companies from both regions have increasingly come to realize the potential for doing business with each other. The growth in total trade flows between Latin America and Asia bear testament to this, having risen to reach US$267.3 billion in 2007, an increase of 24 percent over 2006.
The increased trade flows are a manifestation of the similarities in our approaches to intra and extra-regional economic integration. Both Latin America and Asia are committed to furthering trade and investment liberalization, even in these current uncertain times.
ASEAN AND UNASUR
In ASEAN, there has been good progress made towards achieving the ASEAN Economic Community. The recent conclusion of negotiations for the ASEAN-Australia-New Zealand FTA as well as the ASEAN-India FTA Trade in Goods during the ASEAN Economic Ministers Meeting in August will not only continue to deepen ASEAN’s internal integration, but also expand its external reach. In Latin America, 2008 bore witness to the establishment of the Union of South American Nations or UNASUR, which aims to create a single market and to integrate infrastructure.
These are similar efforts taking place more than 10,000 miles away from each other. These are significant developments which will support continued integration and diversification in both regions, as well as boost intra- and inter- regional trade flows. They bode well for increased cross-Pacific synergies. In fact, ASEAN and Mercosur [which is a customs union comprising Argentina, Brazil, Paraguay and Uruguay] have already started a process of consultations with the aim of increasing economic linkages between the two regions.
Of course, while healthy economic growth has been the hallmark of both regions’ economic trajectories in recent years, these are times of economic uncertainty. Both regions have nevertheless done well to improve their macroeconomic fundamentals. This will enable Latin America and Asia to better weather the challenges posed by the current environment. As each region continues to pursue long-term competitiveness and growth, we should not lose sight of, and continue, to build on the momentum generated thus far from increased engagement.
SINGAPORE'S GROWING LINKS
While trade links between Asia, as well as Singapore, and Latin America have grown, there is scope to do much more. For example, bilateral trade between Singapore and Latin America increased at a compounded annual growth rate (CAGR) of 17 percent over the last three years to reach US$8.89 billion (SS$ 13.4 billion) in 2007. But this only represents 0.07 percent of total world trade and 1.6 percent of Singapore’s total trade with the world last year. There are many areas where there are opportunities for collaboration, be it in agri-business, food and beverage, electronics, oil and gas, transport, logistics or infrastructure. In fact, an increasing number of our companies have made successful inroads into Latin America in these sectors. To date, there are about 56 Singapore-based companies with 191 points of presence throughout Latin America engaged in a variety of business and investment projects.
Latin America’s infrastructure sector in particular has attracted the interest of a number of Singapore companies. Latin American governments are placing increasing emphasis on investing in robust, well-integrated and efficiently managed infrastructure to sustain growth. This presents opportunities in transportation & logistics, urban planning, water and waste management, industrial park development, and oil & gas, amongst others, in both regions. Latin America’s need for expertise in infrastructure development dovetails well with Singapore companies’ infrastructure development capabilities and search for new markets.
SembCorp Marine and Keppel Offshore & Marine have been active in Brazil’s oil & gas sector for several years. Together they employ over 10,000 workers in Brazil. China and India’s growing energy needs which Latin America helps service coupled with the region’s resurgent oil and gas sector translate into opportunities for both companies to provide services in jack-up and offshore rigs, as well as conversion of tankers into floating, production, storage and offloading vessels. Keppel Seghers has already developed water treatment projects, at both municipal and industrial levels in Argentina, Brazil and Mexico. More recently, Jurong Consultants was appointed the master-planner for a Refinery & Petrochemical Park in Panama. In July of this year, Inter-Roller continued its foray into Latin America by clinching its second Baggage Handling Systems project in Quito, Ecuador. (...)
Beyond the infrastructure sector, our companies and industry associations continue to make headway in Latin America. For example, a consortium led by CrimsonLogic was recently awarded a US$10 million (S$14.5 million) contract to develop, operate and maintain an Integrated Customs Management System for the Panama Customs Authority. This is CrimsonLogic’s third success in Panama following its earlier contract to build and maintain a trade documentation system for the Colon Free Zone and its engagement by the Panama Canal Authority to build and maintain its automated pre-arrival declaration and mobile inspection system.
These private sector activities will be complemented by efforts to deepen relationship at the government-to-government level, as well as partnerships between the public and private sectors. For example, to complement our current FTAs with Panama and Chile, Singapore signed an FTA with Peru this year, at a ceremony in Lima witnessed by President Alan Garcia. Singapore is also looking to do more by building on our existing MOU with Mercosur and work towards the possibility of an FTA. In addition, (...) the range of IE Singapore’s initiatives geared towards enhancing business interactions [include] the appointment of Dr Alejandro Ferrer as Honorary Business Representative in Panama, further widening IE Singapore’s presence in Latin America. (...)
Latin America’s thriving private sector can also look to Singapore as their launching pad as they seek to expand their presence in Asia. In particular, Latin American companies’ strengths in the natural resources as well as food and beverage business segments dovetail well with Asia’s continued demand for such products. Blue chip companies from Latin America such as Embraer, Petrobras, Vale, Grupo Modelo from countries such as Brazil and Mexico amongst others, have established their presence in Singapore. We welcome companies to continue to leverage on our geographic location at the crossroads of Asia, excellent infrastructure, network of free trade/double taxation/investment guarantee agreements and strong capabilities in manufacturing, R&D, logistics and supply chain management.
OPPORTUNITIES FOR COLLABORATION
Latin America and Asia are two regions rich in its diversity of culture, language and opportunities. Our respective strengths present opportunities for collaboration. (...) Singapore is committed to deepening our links with Latin America.Lim Hng Kiang is the Minister of Trade and Industry of Singapore. This column is based on his remarks at the Latin Asian Business Forum in Singapore last week.