Gordon Campbell on what John Key's trip to Latin America   4 Mar 2013

Gordon Campbell on what John Key could learn from his Latin American hosts

by Gordon Campbell

Let's hope Prime Minister John Key looks and listens during this week’s overseas trip to Mexico, Colombia, Chile and Brazil. There’s so much he could learn. In Brazil, Key could benefit from seeing the steps this economic powerhouse is taking to protect its local manufacturing sector – in everything from cellphones to steel tubing – from the impact of cheap imports from China. (In New Zealand, taking similarly sensible steps to save jobs and shield local manufacturing are deemed beyond the power of central government.) In another issue highly relevant to New Zealand, Brazil has urged active interventions to limit the damage caused by the influx of cheap money that is strengthening the Brazilian currency, the real, and rendering the country’s exports uncompetitive.

Brazil ruffled the feathers of some WTO members after it hiked duties on dozens of imported products from cars to glass and iron pipes to fend off competition from foreign producers in places like China….Brazilian President Dilma Rousseff blames the flood of cheap money coming from developed nations for devastating local industries in Brazil in what she calls a "currency tsunami." Record-low interest rates in the United States and Europe have brought droves of investors to Brazil, strengthening its currency, the real and making imports much cheaper.

Brazil circulated a proposal….explaining that WTO rules contained language dealing with currency-related trade distortions but no adequate instruments to act directly.

Brazil’s need – and determination - to do something about the currency wars that are threatening its exports is genuine. Last year, the Brazilian economy is estimated to have expanded by only 1 percent, compared with 2.7 percent a year earlier and 7.5 percent in 2010, in a slide attributed almost entirely to the impact of foreign exchange rates on Brazil’s prospects, Unfortunately, doing anything other than sitting passively on the sidelines tends to get frowned on by New Zealand, which has never let the needs of the real world get in the way of Treasury’s market theory. Thus, we find Brazil being absurdly judged in the NZ Herald this morning as the “least outward looking” of the four nations that Key will be visiting. This will come as news to the Brazilians, who are in the midst of opening up major trade initiatives to the Middle East, Nigeria and the Russian Federation (among others) while busily re-orienting their export drive towards the Pacific Rim, In this context, “least outward looking” means the Brazilians are not doctrinaire neo-liberals like us. Funny how this hasn’t stopped them from becoming a regional and global economic giant.

Key might also profit from seeing how the Chilean negotiators are taking a tough line against the medicines patenting proposals being promoted by the US pharmaceutical companies in the Trans Pacific Partnership (TPP) talks, as this editorial in the Santiago Times signalled only last month:

The U.S. proposal would require TPP partners to automatically grant strong patent protections for pharmaceuticals within a certain time period after they have been granted patents in another TPP country. This so-called “access window” goes beyond the requirements of the WTO and existing bilateral agreements, and would limit the availability of generic drugs and likely raise the price of medicines in TPP countries. On this issue in particular, Chile has proven hesitant. Lead negotiator Rodrigo Contreras indicated after the December 2012 round in New Zealand that the intellectual property issue was especially contentious and that he would consider introducing alternatives to the U.S. proposal.

Chile’s fierce determination to protect its IP position on pharmaceuticals is completely understandable. Chile’s medicines industry has been a significant part of its current economic success. Therefore, New Zealand should indeed be joining forces with Chile to resist the US moves, as we try to defend Pharmac inside the TPP talks. There is some leaked evidence that this is happening. On the wider front, Chile’s economy is booming. Its dairy output appears to be thriving, as our dairy industry continues its decline. Evidently, Chile’s manufacturing sector is also surviving the downturn in demand from China in ways that seem to have eluded New Zealand:

With Chile's economy running near full-employment, domestic demand booming and firm investments fueling economic growth, in stark contrast to looming global economic risks, the central bank has kept its key interest rate on hold since a surprise cut in January 2012. The South American nation has mostly fared better than expected despite slowing commodities demand from top trade partner China and fallout from the euro zone crisis.

Manufacturing output in the small, export-dependent economy grew 4.3 percent in January from a year ago, boosted by the food industry…"This expansion is chiefly due to strong dynamism of the food industry, especially the dairy industry, which has increased its productive capacity," the government's INE statistics agency said in a report. "Additionally, though to a lesser extent, an increase in medicine production… However…despite Chile's surprisingly low jobless rate, economists say underemployment and low wages remain significant issues for many Chileans.

In Colombia, things are less rosy for all concerned. Still, Key might at least find a sympathetic shoulder to cry on about the fate of Solid Energy. Colombia’s coal-mining industry has hit major turbulence as well:

Colombia said a three-pronged interruption of its coal industry, South America’s largest, is curbing tax revenue and dimming growth prospects.

The shutdown of three of Colombia’s four largest mine complexes is affecting 79 percent of the country’s output and costing 192,000 metric tons of exports a day, Javier Garcia, head of corporate mining at the Mining and Energy Ministry, said in an interview from Bogota last night. Coal is Colombia’s second-biggest source of foreign revenue. “The gravity of this crisis is unprecedented,” he said. “The consequences will certainly be felt in our gross domestic product.”

Overall, from New Zealand’s viewpoint, the most promising sector for growth on the PM’s Latin America jaunt will be export education. Chilean and Brazilian students are already a significant presence in New Zealand, and the 3,500 Brazilian students based here contribute an estimated $55 million to the New Zealand economy. There are hopes that such education links will be formalised and extended during the course of the PM’s trip. Such formal arrangements would be in line with the government’s target of creating a $5 billion export trade in education by 2025.

ENDS

Add a comment

Bookmark and Share

News

Body found in London park believed to be missing Kiwi

30 Sep 2014 News
London police believe a body found in a southwest London park is that of missing New Zealand man Malcolm McKinlay. Mr McKinlay, who... more

Uncovering the secrets of NZ's discovery

30 Sep 2014 News
Two scientific papers have shed new light on how Polynesian explorers may have arrived in New Zealand, but the authors have... more

Business

NZ dollar drops after weak Australian retail sales

1 Oct 2014 Business News By Suze Metherell
  NZ dollar drops as weak Australian retail sales sap demand for trans-Tasman currencies Oct. 1 (BusinessDesk) - The New Zealand... more

NZ dollar heads for 11% slump in Sept quarter

30 Sep 2014 Business News
By Paul McBeth Sept. 30 (BusinessDesk) - The New Zealand dollar is heading for an 11 percent slump in the September quarter as... more

Living

Hip Hop-eration chosen for world's leading documentary fest

2 Oct 2014 Entertainment
New Zealand Documentary Feature Hip Hop-eration In Competition at the World's Leading International Documentary Festival Director... more

Three first places at the national Young Designer Awards

1 Oct 2014 Arts
ACG Strathallan   By Kennedy Anderson from ACG Strathallan, winner of Photography section, Young... more

Property

UPDATE: Asking prices for NZ properties plateau nationwide

2 Oct 2014 Property By Fiona Rotherham
UPDATE: Asking prices for NZ properties plateau nationwide, Trade Me survey says (Recasts with added Jeffries comment from 3rd... more

NZ building consents flatline in August

30 Sep 2014 Property
By Suze Metherell Sept. 30 (BusinessDesk) - New Zealand building consents held steady in August from a month earlier, underpinned... more

Migration

UK Government: Indefinite Leave to Remain made simple

30 Sep 2014 Migration
There are thousands of expats living in the UK who are aiming for permanent residency status and, eventually, a British passport. But... more

Migration boom rolls on as fewer kiwis depart

30 Sep 2014 Migration
New Zealand's annual net migration rose to a record in August, exceeding Treasury's forecasts, and spurred by more migrant arrivals... more

Travel

Travel tidbits and deals of the week

30 Sep 2014 Travel & Tourism
Some of the best travel deals going - both in New Zealand and abroad. Bookmark this page and check back each week for all the latest ... more

Air NZ's Luxon defends domestic regional air fares

30 Sep 2014 Travel & Tourism
By Paul McBeth Sept. 30 (BusinessDesk) - Air New Zealand chief executive Christopher Luxon has defended its pricing on domestic... more

Sport

New opportunities for elite athletes

2 Oct 2014 Sport
With the Waikato region fast becoming a major centre for high performance sport, the University of Waikato has signed Memorandums... more

Emirates Team New Zealand Update - Practice Day at Nice

2 Oct 2014 Sailing
It’s back to work for Peter Burling and Blair Tuke. The holiday’s over. They took a week off after their win at the 49er... more

Columns

Gordon Campbell on the last rites for the TPP

1 Oct 2014 Opinion By Gordon Campbell
The Trans Pacific Partnership trade deal is one of those litmus issues that has always had more to do with one’s place on the... more

Time to debate proportional representation

30 Sep 2014 Opinion
Article - Sridhar Ekambaram   Time to debate proportional representation By Sridhar Ekambaram30 September 2014 With the... more

Kiwi Success

Auckland Uni Press Book Wins Prestigious History Award

2 Oct 2014 People
Congratulations to Professor Peter Holland who has won the 2014 Archives and Records Association of New Zealand (ARANZ) Ian Wards... more

UCOL Chief Executive Appointment

1 Oct 2014 Appointments
UCOL Chief Executive Appointment Leeza Boyce has been appointed as UCOL’s new Chief Executive to succeed Paul McElroy upon ... more

Recruitment

NZ's top pay packet revealed: $4.1m

30 Sep 2014 Recruitment
With a total pay package worth $4.1 million, ANZ New Zealand's David Hisco is the top-paid boss in the Business Herald's executive pay... more

NZ job market expected to strengthen - survey

30 Sep 2014 Recruitment
The job market is expected to strengthen and potential employees are increasingly looking at staying in New Zealand for work instead... more