FTA´s Lead to Trade Opportunities for Mining Equipment and Technology Services in Latin America
Written by Luke Musto, Lawyer, Harris Gomez Group
2018 was a big year for Australia and its Free Trade Agreements (FTAs). Throughout the course of last year, Australia signed an FTA with Peru, along with the signing of the Trans-Pacific Partnership Agreement (TPP) in Chile, and finally an FTA between Australia and the Pacific Alliance (the Latin American bloc made up of Mexico, Chile, Colombia and Peru) continued to move closer towards reality, with negotiations having continued throughout the year and much progress being made. Australia’s FTAs in the Latam region should be viewed as significant given their comprehensive nature and the structure they provide in support of open trade and investment between Australia and Latin America. In particular, the TPP will be one of the most advanced trade agreements in the world.
What makes FTAs important for business? Australia’s FTAs do more than simply reducing or eliminating tariffs. Instead, they are a key part of Australia’s international business strategy and policy. Australia’s recent FTAs present significantly more opportunities for a wider-range of companies and industries, given that besides reducing the tariffs placed on goods, they also include commitments from the signatories to reduce barriers to investment, and the liberalisation of some services by way of provisions addressing issues of temporary movement of labour, e-commerce, and intellectual property.
This means that business and investors that provide service will access and benefit from FTAs in different ways than traditional solely tariff-based agreements.
FTAs with the Latam Region
- Australia – Chile FTA – 6 March 2009
- Peru – Australia FTA – signed on 12 February 2018
- Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP-11) – signed on 8 March 2018
- Pacific Alliance Free Trade Agreement – currently under negotiation
Why Do FTAs Matter for METS companies?
The Latin American region is a major market for the Australian Mining Equipment and Technology Services (METS) industry, with a number of the world’s biggest mines found throughout the continent, with increased foreign investment and strong mining credentials found throughout the region. It should be kept in mind that mining, in fact, encompasses a broad range of economic activity, delivering both goods and services. METS companies support the mining industry by providing many services that are key to the industry, such as engineering, construction, research, blasting, or drilling. With the dimensions of the METS sector constantly changing and expanding, it represents an important export industry in its own right.
The provision of services is key to Australia’s economic performance, both at a national and international level. Conversely, high levels of barriers still exist to service and investment in many parts of the Latin American region. This has a significant impact on the costs of trade between Australia and Latin America, and will often act as an impediment for companies seeking to trade in Latin America. This is where FTAs play a key role, as they work to both reduce these barriers and increase opportunities.
Opportunities for METS Businesses – FTAs
Primarily, METS companies will enjoy a direct benefit from the greater market access and commercial opportunities that arise as a result of FTAs. The FTAs in place with the Latam region and those that are currently being implemented deliver a wealth of new opportunities for METs companies by granting new legal rights.
In addition to direct benefits, the expanded level and volume of trade that comes with these FTAs provide a number of indirect benefits. With the increased trade in the mining industry, METS companies are presented with a wealth of additional opportunities as further demand is created for support services. In this way, METS companies can strategically use FTAs to create new opportunities for expansion and growth.
FTAs also have a positive impact on the commercial visibility of Australian service providers. This is particularly the case in new and emerging markets such as Latin America, who may not have previously been aware of services or the quality thereof that are provided by Australian METS companies.
Making Business Easier
FTAs regularly have positive effects on their signatory countries’ regulatory landscape, including provisions and declarations in favour of transparency in services regulation and decision-making. In markets with a lot of red-tape (such as some Latin American countries), this can have a huge impact on ease of business for companies.
Furthermore, FTAs provide greater protection of intellectual property rights, by including provisions guaranteeing international treaty protections.
FTAs also make it easier for companies to move staff between countries, will all agreements providing for the temporary entry of business and qualified personnel to other FTA markets.
Setting the Agenda and Economic Reform
The political climate throughout Latin America over the past few years suggest that many countries understand that their economies may be in need of reform. The policy agendas that FTAs provide (both bilateral and the TPP) provide a justification on a domestic basis for countries to reform their markets.
FTAs set ‘standards’ for more open-service markets. In the long term, by countries creating binding legal commitments for liberalisation as part of making FTAs law, the business standards that are formed will support more competitive services in the wider Latam region. This is more important than ever given the wider global trend towards protectionism and nationalism, from which Latin America has not been immune. As Latin American economies continue to grow, demand for Australian technology and the services provided by METS companies will increase as these countries look to invest in infrastructure and further develop their own mining industries.
While FTAs are negotiated and formed between governments, ultimately, it is businesses that will trade and invest under these agreements. FTAs can provide a number of potential benefits and commercial opportunities, however, it is up to businesses to make the decision to take these opportunities. The FTAs in place and being negotiated between Latin America and Australia can provide a number of new opportunities for METS companies. To discuss the potential benefits for your company, get in touch with our experienced team today.
Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Mexico, Boliva, Ecuardor, Peru, Brazil, and Argentina. Over the last 16 years we have been supporting foreign companies with their growth in Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets.
To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at firstname.lastname@example.org