Interview: Andrew Robb
How much does trade with Mexico stand to increase under the Trans-Pacific Partnership (TPP)?
ANDREW ROBB: TPP members account for nearly 40% of the global economy and 25% of global trade, making the TPP the world’s largest regional free trade agreement (FTA). Mexico is already Australia’s largest merchandise trading partner in Latin America, with almost $2bn in goods and $154m in services in 2013-14. Given the complementary nature of our two economies, there is potential for significant growth in sectors such as advanced manufacturing, agribusiness, education and training, energy, telecommunications, food and beverages, mining and infrastructure, tourism and financial services.
The TPP will also provide a platform for Australian firms to take advantage of Mexico’s energy and telecoms reforms. Several Australian companies are already exploring opportunities for collaboration with Pemex and Mexican companies. Oilfield goods and services suppliers, engineers, lawyers and other professional service suppliers will be well placed to participate as foreign investment in these sectors increases and Mexican companies expand into international markets.
What Australian investment is there in Mexico?
ROBB: As the earliest Australian fund managers to enter the market in 2007, Macquarie has been Australia’s largest investor in Mexico in recent years, with more than $2bn under management. Macquarie’s presence has been the spearhead in total Australian investment of $4.13bn in Mexico. The Australian funds manager IFM made its first major investment in Mexico in December 2014, injecting $600m into a toll road.
Which sectors have the greatest potential?
ROBB: Mining is a key sector of interest for Australia. While deeply embedded in other parts of Latin America and elsewhere, Australian firms are under-represented in Mexico, despite the country being the fifth most popular destination for mining investment in the world. One key focus going forward will be increasing Australian participation in providing mining equipment, technology and services. The automotive sector also offers an opportunity for Australian companies to penetrate some of the global value chains in Mexico, and a further strategic opportunity is in agriculture.
Mexico and Australia share very similar challenges and ambitions. We are focused on improving land productivity, we produce many of the same commodities and we face similar environmental challenges, including water management. Yet, it is unlikely we will ever be great competitors in each other’s markets.
What competitive advantages does Mexico offer?
ROBB: For the past decade, Chile has been an entry point to Latin America for many Australian firms. But the logic for Mexico to serve as a gateway is compelling. Mexico has geographical proximity and deep integration with the world's largest economy and North American Free Trade Agreement partner, the US. Through the Pacific Alliance, Mexico also has growing links to markets in South America, a region that will be one of the most reliable growth centres for the foreseeable future. On the back of structural reforms in 2013 and 2014, Mexico’s longer-term outlook is very positive. All this, coupled with one of the broadest free trade networks and domestic market potential makes Mexico an attractive destination for investment.
I would like to see Mexico view Australia in the same light – as a gateway to Asia. Australia has worked systematically over past decades to deepen economic integration with Asia. As Mexico’s foreign investment footprint grows and Mexican companies turn their focus towards opportunities in Asia, they should think of investing with Australian companies to access these markets. Australia is the fourth easiest place in the world to set up a business, according to the World Bank’s “Doing Business” report, and our workforce is one of the most educated. Australia’s economy is in its 23rd year of uninterrupted growth – an achievement that is unequalled by any other developed economy.
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