Chilean private equity player makes first move in Australia (This article was written by Misa Han and was published in the AFR on March 17, 2015)

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1 Latam News March, 2015 This issue (Click on each heading to open article) Chilean PE player makes first move in Australia 1 Air NZ launches Buenos Aires service in Sydney 2 Australia Latin America Young Professionals webpage launch 3 LAN enhances service with upgrade to Boeing Australian sheep genetics chosen for Falklands/Malvinas 4 Chairman s message 6 Company Profile: QBE Insurance Group 7 Colombian mining conference to feature Australian experts 8 JBS to focus on Australia post acquisition spree 8 Mexico seeks private sector investment for infrastructure 9 Ecuador looks to attract investment into mining sector 9 Company Profile: SEEK 10 Latam is home to innovative financial tech firms 11 Chile aims to boost mining industry productivity 12 Automotive Sector Overview - GM 13 - Toyota 13 - VW 13 - Kia Motors 13 - Brazil-Mexico accord 14 Vale s R&D conundrum 14 Juniors look to list on Santiago Stock Exchange 15 Industry Focus Digital sales channels in demand 16 In the News: - Brazil s challenges 16 - Latin America moves to the centre 17 Opinion: South America seeks new economic mode; 17 Mexico s beer market attracts Heineken 18 Feature: Teach for America program expands 19 Chilean miners rely on renewable energy 22 Uruguay s economic soft spots 23 For the Diary 24 Chilean private equity player makes first move in Australia (This article was written by Misa Han and was published in the AFR on March 17, 2015) One of Google's first investors and founder of $US1.8 billion (A$2.36 billion) Chile-based private equity firm Grupo Arcano, has kicked off an Australian investment drive, which he said will reach $US100 million over the next two years, targeting various technology and biotechnology start-ups. Alberto Chang-Rajii, who became one of Google's first backers at Stanford University in 1996, has made Grupo Arcano's first Aussie play with a University of New South Wales-based company called Future Solar Technologies, which is developing innovative technology to create "paint-on" solar cell technology. Speaking to the Australian media for the first time, he told The Australian Financial Review he intended to spend up to $US100 million over the next two years in Australia, targeting areas like e-learning, agricultural production, nanotechnology, smart drugs and energy. Smart solar tech While Future Solar Technologies is relatively small at $1.5 million, and the company itself was little more than a team of researchers led by UNSW researcher Ashraf Uddin, Mr Chang- Rajii said it represented the next generation of solar technology, and had the potential to transform lives around the world. It is creating a new form of non-silicon photovoltaic solar cells, which are claimed to have the potential to equal silicon efficiency at lower cost while being easier to manufacture. Essentially, the "paint-on" solar cell technology could be used as a coating on roofing or the windows of buildings or cars.

2 Newsletter of the Australia-Latin America Business Council Page 2 "I'm not investing in a tiny microscopic cell in a lab. I'm investing in future homes that will not require energy because there are solar tiles," Mr Chang-Rajii said. "That is today a microcell but then it's cars, then it's telephones it's what touches everyone's lives." Dr Uddin first began working with Grupo Arcano In November last year. He said the technology had the potential to make items as small as a smartphone solar-powered, by simply laminating them with the cells. "You can laminate a two-bedroom house so it becomes a zero-energy house, and it would only cost about $2000." Mr Chang-Rajii said he had previously attended presentations from teams at institutions including UCLA (University of California, Los Angeles) and Oxford University on solar energy, but nothing had been as impressive, due to the UNSW team's product being eco-friendly, thinner, flexible, easy to deploy, lighter and more affordable. It's the last quality that made Dr Uddin's project irresistible for Mr Chang-Rajii. "At the end, never mind how good the science is, it's not really good if it's not accessible to everyone," he said. "It's like the cure for cancer. If it costs a billion dollars, it's not a cure, it's a luxury." How to make billions from $US10,000 Mr Chang-Rajii has had both a good instinct for business opportunities and a fair bit of luck. Back in 1996, he forked out $US10,000 of his slim student budget to buy a 1 per cent stake in Google, an investment he still holds on to today, with a value of $US3.74 billion. Since then his private equity company Grupo Arcano has backed some of the world's biggest technology names, including electronic payment system Square, photo messaging app Snapchat and rideshare app Uber. "We invested in Square because it's a very smart, effective payment solution, and Snapchat was actually a new form of communication, which tapped into millennials, which is the most elusive market." Mr Chang-Rajii said. While his investments span many areas including energy, transport and biotechnology he said they were all disruptive, innovative, global and very easy to explain. Start-ups looking to woo him should be prepared to cut out the small talk and explain their idea quickly and clearly. "If someone can't explain a business in less than 60 seconds without a pen, paper and PowerPoint, I don't invest. If I don't get it in one minute I don't invest," Mr Chang-Rajii said. "Keep it simple and focus on one idea." Global appeal In addition to simplicity, Mr Chang-Rajii is looking for new businesses that can be spread globally and do something to improve the world. "I ask if the goal's beyond money, if it's global, if it can achieve greater good. If it's too local it's not very attractive." One of Mr Chang-Rajii's current focuses is on nanosatellites, a technology which he believes has the ability to replace traditional infrastructure such as electricity, telephone lines and broadband internet. "They will replace all infrastructure and provide very fast communication. And at the end, nanosatellites are easy to replace they can float around and they destruct themselves so there is no debris in the atmosphere," he said. Air New Zealand launches Buenos Aires service in Sydney Air New Zealand transformed their new Sydney office into the vibrancy of Buenos Aires on March 18 to celebrate the launch of their new long haul route and their first ever service to South America Auckland to Buenos Aires, Argentina. Honoured guests, the Deputy Head of Mission for Argentina, Mr Eduardo Acevedo-Diaz and the consul General for Argentina Mr Emiliano Gabriel Waiselfisz joined key travel trade and media guests for a Buenos Aires-themed night compete with tango dancers, musicians, Argentinian canapes, wine and beer. This new route provides significant additional strength to the Air New Zealand Pacific Rim network and delivers seamless connections for Australian travellers.

3 Newsletter of the Australia-Latin America Business Council Page 3 Tickets for this new service went on sale on March25, for flights commencing December this year. The flight time from Auckland to Buenos Aires is less than 12 hours with convenient connections from Air New Zealand s gateways throughout Australia. The aircraft operating this route is the ER, complete with the airlines latest Business Premiere, Premium Economy and Economy seating and award winning Economy Skycouch product. Air New Zealand General Manager, Australia, Leanne Geraghty says we believe Buenos Aires will be a popular destination for travellers looking for an action packed week long city getaway and obviously it is also well positioned as a gateway to the rest of South America. While there are strong opportunities for us to grow the outbound holiday market to South America and to influence more Australian travellers to go now, our new service also supports the broader business and reciprocal trade interests of both South American and Australian organisations. For 75 years Air New Zealand has placed the customer experience at the heart of everything they do. Their consistently high standards of customer service will only be enhanced further with the upgrades of the Sydney, Brisbane and Auckland lounges and their continued investment in the overall Air New Zealand travel experience. Australian Latin American Young Professionals move ahead After hosting a number of events and establishing the framework for a sustainable movement in 2014, the Australian Latin American Young Professionals grouping (ALAYP) has launched a web page aimed at raising its profile and enhancing its communication with members and supporters alike. ALAYP is a not-for-profit organisation aimed at fostering networking, business and career opportunities between Latin American and Australian professionals. Although the focus is on Latin American and Australian working professionals in the early and mid-stages of their careers, the group is open to all backgrounds and ages. ALAYP s objective is to become a leading association across Australia and Latin America in the provision of quality networking and professional initiatives. The establishment of ALAYP reflects the fact that the professional Latin American community in Australia has increased dramatically during the last 15 years. Australian companies are not only hiring more Latin Americans onshore but are also investing in foreign workers and bringing that talent to Australia. Currently the community is vast and diverse, making it a great network to create meaningful relationships, business opportunities, mentoring possibilities and life skills. The ALAYP leadership team comes from diverse cultural and educational backgrounds. Since July 2014 they have used their crosscultural experiences and expertise to grow ALAYP and create a hub for fostering relationships between the Latin American and Australian professional community.

4 Newsletter of the Australia-Latin America Business Council Page 4 LAN upgrades to Boeing 787 Commencing April 2015, LAN Airlines, a member of LATAM Airlines Group and Patron member of the ALABC, will operate its daily flight schedule between Sydney and Santiago (via Auckland) using the airline s new Boeing 787 fleet. This announcement marks a milestone moment for LAN Airlines in the Asia Pacific region, as well as the next step in our continued effort and commitment to develop our offering and services in this market, said Patricio Aylwin, Managing Director Asia Pacific, LATAM Airlines Group. With the introduction of the Boeing 787 in early 2015, we will offer more passengers cutting-edge technology and a chance to experience the next generation of aircraft and the future of flying. LAN Airlines will be amongst the first to operate the Boeing 787 in the Australia and New Zealand region, further strengthening its position as a leading operator connecting travellers to South America. Since merging in 2012, together LAN and TAM Airlines have been providing unrivalled connectivity to, from and within South America, optimum efficiency and outstanding growth potential. Our fleet is now one of the most modern fleets in the industry, ensuring we continue to provide the most innovative solutions and experiences for our passengers, as well as the most environmentally friendly equipment continued Mr. Aylwin. We are excited about the development prospects in the Pacific region and believe this new addition to our fleet will help to spearhead further growth. LAN Airlines Boeing 787 will carry a total of 247 travellers, with a two-class layout featuring 30 Business Class seats, in a configuration, and 217 Economy seats in a configuration. The Boeing 787 features breakthrough technologies and an advanced aircraft design to increase efficiency, ease of operation and significantly improve the on board experience for passengers. Amongst the features are: Electronic auto-dimming windows and dynamic lighting to create a better atmosphere. The windows of this aircraft have up to 40 per cent more surface area than current windows, which will allow all passengers (in all rows) more visibility during the flight, giving them a better view. Overhead bins with 30 per cent more storage space for carry-on luggage. New air humidification techniques, significantly reducing fatigue and dryness associated with long trips Premium Business Class on board the LAN 787 between Auckland and Santiago will continue to offer superior services, entertainment and features, including spacious seats with six-way adjustments, including reclining and full-flat positions for optimum rest, as well as more room for personal belongings at ground level. LAN Airlines operates seven one-stop flights each week from Sydney to Santiago (via Auckland), the gateway to South America. Onward connections to over 115 destinations in South America are operated by both LAN Airlines and TAM Airlines. Falkland / Malvinas Islands look to Australia to improve sheep quality Australian Poll Merino genetics are being used to drive lamb survival in one of the world s harshest wool producing environments, the Falkland/Malvinas Islands. Australia s Mumblebone Merinos have been identified as one a small number of progressive Australian studs working on the traits needed by farmers on the Islands. Semen from Australian rams with positive Australian Sheep Breeding Values ( ASBV ) for fat and muscle, and superior wool traits, will be used on over 4,000 ewes making up Falklands Landholdings Corporation ram breeding nucleus later this year.

5 Newsletter of the Australia-Latin America Business Council Page 5 The 4,000 ewes on the Islands have been selected for an artificial insemination program due to be completed in May and conducted by Chilean veterinary specialist, Jose Nogueira. Mumblebone Merinos has supplied 1,500 doses of semen from stud sire , a double poll sire with ASBV figures of +1.2mm for yearling fat and +2.2mm for yearling eye muscle depth. Mumblebone principal Chad Taylor said the ram s staple length and worm resistance, growth, clean fleece weight and overall conformation made him a stand out. We have selected heavily for fat and muscle in the last eight years to improve the balance of traits offered in our Merino rams. As a result, in the last two years, there s been new interest from around Australia with the common focus being on selecting rams and semen which have high levels of fat and muscle in the mix of traits, he said. Superior rams from the program will eventually be used across the organization's ewe flock of 70,000 sheep on the Islands to the existing lamb survival average of 60%. Falklands Landholding Corporation general manager Neil Judd scoured Australian studs, unearthing a poll sire with high fat and muscle at Mumblebone Merinos, Wellington. Mr Judd said the Corporation had used sires over the last decade with high fleece weights and growth rates but little attention had been paid to hardiness and fertility. Lambing percentages of 60% are normal with young ewes generally not being mated until they are two and a half years of age. Lambs born struggle to gain the necessary body condition and live weights to satisfy tight meat industry specifications. Falklands Landholding Corporation manages around 300,000 hectares, typically shearing 150,000 sheep and supplying 25,000 prime lambs and mutton to the local European Union approved meat works. We are introducing genetics from a number of Australian Poll Merino studs specifically to improve hardiness and robustness through positive genetic fat and eye muscle on a plain bodied, mid micron polled Merino sheep, Mr Judd said. Our Patron Members Leadership I Support I Impact

6 Newsletter of the Australia-Latin America Business Council Page 6 Chairman s Message With business confidence across much of Australia being in a terrible state, all of the indicators suggest that we could be in for a prolonged period of sluggish economic growth. This is the scenario painted by a survey that the Australian Bureau of Statistics released in February that highlighted a decline of 20% in mining investment plans and 9% in non-mining investment intentions for the 2015/16 period. The situation is not dissimilar in Latin America, where the headwinds that the region faced in 2014 are expected to persist in Commodity prices are expected to be lower on average in 2015 than in 2014, due to sluggish global demand and a strengthening US dollar, and the collapse of oil prices is expected to take a toll on Latin America s largest oil producers Colombia, Ecuador, Mexico and Venezuela, although some will suffer more than others. Confronted by this new normal, companies need to ensure that they develop strategies that balance the need for short-term survival with long-term growth. In this regard, there are signs that the tougher economic environment could deliver an increased interest on the part of Australian companies in evaluating and hopefully seizing the opportunities that Latin America continues to offer. A focus on cutting costs is understandable in the face of falling revenue, but there comes a point at which continued cuts start to become counter-productive. Equal, if not greater, focus needs to be placed on increasing productivity and competitiveness, as well as on mitigating risk through diversification into new markets. For a growing number of Australian companies, the search for additional revenue streams and sustainable growth opportunities means taking a closer look at the better-performing markets in Latin America. These are markets that, despite facing their own economic challenges, hold considerable appeal because of their need for many of the services and products that Australia has to offer. Their status as developing nations means that they have greater scope for consolidation and for growth. Across a broad range of sectors, there are compelling reasons as to why Latin America warrants a closer scrutiny by Australian business. Despite the global nature of the mining industry, the project pipeline in Latin America is much stronger than in Australia. Likewise, the region s METS sector remains ripe for consolidation, with much still to be done in improving productivity, service levels, value chains and much more. A similar scenario exists in sectors such as oil and gas, water and sanitation, energy, infrastructure and others. In simple terms, Latin America has yet to undergo much of what Australia underwent 10 to 20 years ago. The need to enhance the quality of education in Latin America is paramount and success on this front will transform the growth prospects of the region. Likewise, improvements in infrastructure quality (ranging from roads to airports and ports; from energy integration to water efficiency, etc.) will produce significant growth and improve the living standards throughout the region. On so many levels, Australia is ideally positioned to contribute to and participate in Latin America s development. We have experience and capabilities in many of the areas that Latin America has yet to fully address and, just as importantly, many of the Latin American countries are openly reaching out to Australia to share that experience and to partner with them for mutual benefit. Hopefully, we will seize the opportunity with both hands, because it will not always be there for us. Success on this front will require input from many stakeholders, ranging from government to business, academia to individual citizens. In the face of increased dependence on China (both as a buyer of our commodities and as an investor in our country) and commitment to integrating with Asia, we need to ensure that the merits of Latin America are recognised and given proper attention. We need to understand that Asia is not looking solely to Australia for much of what it needs, but that it also has Latin America prominently on its radar and that the region is one of our competitors on several fronts. That said, it would be an error to ignore Latin America because of that competitor status. Instead, that is one reason why we need to monitor and be engaged with the region. It is the many complementary features that we share with Latin America that make it a potentially exciting and rewarding destination for our trade in services and investment. The challenge is not to choose between Asia and Latin America, but rather to engage with both regions and to extract the maximum benefits from doing so. We are making headway on this objective, but we need to increase our pace and redouble our efforts. We need to understand that Australia does not have exclusive claim to the opportunities identified and that other nations are knocking on the same door. Jose Blanco, Chairman

7 Newsletter of the Australia-Latin America Business Council Page 7 Company Profile: QBE Insurance On February 24, QBE Insurance Group announced the sale of its Workers Compensation business in Argentina. What does this mean for the Australian insurer and its operations in Latin America? The global insurer and reinsurer QBE remains very committed to the Latin American market despite the recent sale of its Workers Compensation business in Argentina, says David Fried (pictured below), Chief Executive Officer of the QBE Group s Emerging Markets Division. We believe the Latin American region will be a growth engine for us going forward, said Fried. But given a rapidly changing competitive landscape and the ongoing impact of economic volatility, the workers compensation space had become very challenging for an international player like QBE. We decided to sell this portfolio to a well-known local operator so we can focus our attention on the remaining Property and Casualty business in Argentina and in the Latin American region more broadly. QBE launched its Latin American operations in 2001 and today has a strong presence across seven countries: Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, and Puerto Rico. QBE is one of the top 10 multinational non-life insurance groups and top 10 international Property and Casualty player in the region. Last year, QBE Latin America generated gross written premium of US$1.4 billion, representing an underlying growth of 25%. In 2012, the QBE Group underwent a fundamental review of its business strategy and identified both Latin America and Asia Pacific as core priorities in its value creation model. In 2014, the Group created the Emerging Markets Division to bring Latin America and Asia Pacific together to better capitalise on the organic and inorganic growth opportunities in both regions. In Asia Pacific, there is a US$27 billion addressable insurance market. Meanwhile, the Latin America, the insurance sector has been growing at an average annual rate of 7% over the past five years, while the general insurance penetration rate remains relatively low at 1.3%. As part of the strategic structural adjustments, QBE appointed David Fried as the Chief Executive Officer of the newly created Emerging Markets Division to oversee both the strategy and the business operations in the two regions. The Property and Casualty business in Argentina remains the largest component of the QBE s Latin America business, and includes a strong distribution partnership with HSBC. QBE is also a market leader in cargo insurance and strong expertise in the motor industry in the country. Brazil also remains a key market for QBE. Since 2001, the company has achieved more than 30% CAGR in Brazil, with a focus on affinity distribution and travel insurance. QBE Brazil currently provides insurance cover for about 2.5 million people, through more than 60 distribution agreements and is recognised as one of the most innovative and responsive companies in the Brazilian market. Last year, QBE was also the absolute leader in travel insurance sales in the country, covering overseas travel for more than one million Brazilians. QBE has also recorded solid results in other countries in the region. In Chile, QBE has managed to build a US$30 million business in just three years. In Colombia, the company is currently ranked as the 2 nd and the 9 th largest player in the compulsory motor personal accident and the property and casualty businesses respectively. In Ecuador, QBE is the 2 nd largest private general insurer. In Puerto Rico, QBE Optima is the only company that has increased its volume at an average rate of 22.7% consistently in the past five years. In Mexico, QBE is known as a commercial lines specialist especially in the SME sector and has consistently delivered a net combined operating ratio below 90% with a return on equity above 20% in the past five years. The implementation of the revised strategy will fully take advantage of the clear synergies with respect to key focus areas such as risk management and IT development, as well as leveraging the skills and best practices that have been established across the Asia Pacific region, notes Fried. Based on the strong foundation built over the years and the implementation of the revised business strategy, our Latin American operations are poised to be a growth engine for the QBE Group, Fried adds.

8 Newsletter of the Australia-Latin America Business Council Page 8 Australian experts to speak at Colombian mining conference Colombia s mining sector stands to benefit significantly if the nation is successful in concluding a successful peace accord with the FARC, something which could well come to fruition in the next 6-12 months. In the interim, the country continues to focus on ensuring that the mining sector is well prepared to exploit the opportunities on offer. One important step was taken last year, with the creation of the Asociación Colombiana de Minería - ACM (the Colombian Mining Association), which brought together the three leading private sector players in the industry, namely, Asomineros, the Cámara Colombiana de Minería and the Sector Minera a Gran Escala. To showcase the opportunities on offer in Colombia s mining sector and to facilitate debate about how best to expand Colombia s mining capabilities, the ACM will hold an important conference in Cartagena on April 23 and 24. The importance of the conference is reinforced by the fact that it will be opened by the Colombian president, Juan Manuel Santos, and will be attended by a number of senior government ministers. Thanks to the work undertaken by Austrade s Crispin Conroy and the desire that Colombia has to learn from Australia s experience in the mining sector, the conference will feature as keynote speakers a number of prominent Australian individuals, including Mitch Hooke (former CEO of the Minerals Council of Australia); Alan Broome (former chairman of Austmine); Paul Espie (Managing Director of the Pacific Road Group) and Mike Elliott (Global Mining Leader, Ernst & Young). Details concerning the conference are available (only in Spanish) at JBS to focus on Australia following Primo Smallgoods acquisition Brazilian meat giant JBS plans to focus on Australia, its US pork operations and its processed foods division under a 2015 strategy focused on organic expansion rather than acquisitions, CEO Wesley Batista (pictured) said on March 13. He went on to forecast that between 2.5 billion to 3 billion reais (US$806m/US$967m) in capital investment will be needed this year to support the strategy. We have many fruits to harvest, Batista said of the company's recent acquisitions. JBS plans to finalize its US$1.25bn purchase of Australian processed foods maker Primo Smallgoods this month. The deal, announced in November, is an opportunity to increase sales in Asian markets. The company also has more synergies to reap from the 2013 purchase of Brazilian poultry producer Seara, Batista said. After reporting 2014 revenue of 120 billion reais, the one-time family-run butcher surpassed miner Vale SA as Brazil's largest private sector non-bank company by revenue. Batista said JBS would continue to protect its business with hedge contracts in dollars, a strategy it adopted to avoid losses related to a weakening real. About 80% of JBS's debt is in dollars. Last year we made the decision to be 100 percent hedged. We paid a heavy price at the beginning of the year... but we had the right strategy, Batista said.

9 Newsletter of the Australia-Latin America Business Council Page 9 Mexico seeks private sector infrastructure investment as oil slump bites (This article was written by Luis Rojas and was published by Reuters on March 12, 2015) Mexico's government on March 11 urged the private sector to take a bigger role in billions of dollars worth of planned public works and the opening of the country's energy sector, weeks after scaling back its own planned spending due to slumping oil prices. Finance Minister Luis Videgaray said he expected low crude prices to continue into next year, a development which has already dealt a major blow to a country that has long relied on oil revenues to fund around a third of the federal budget. The government last year said it planned to raise 7.7 trillion pesos (US$ billion) in infrastructure investment through 2018, but in late January cut its 2015 budget by nearly 3 percent and shelved a tainted US$3.75 billion high-speed train tender as part of its austerity measures. Mexico, a major crude exporter, has suffered from a slowdown in growth in the past two years and the recent drop in crude prices has made a landmark opening of its oil and gas sector finalized last year less attractive to private investors. The oil slump has left Mexico more dependent on stoking growth through the infrastructure spending plan, and Videgaray said he is now analyzing how more private money could be drawn in via potentially lucrative concessions and other mechanisms. "We have a great opportunity, particularly in terms of the national infrastructure program, for greater private sector investment and to use mechanisms like public-private partnerships," Videgaray told a conference. "This is particularly evident in the energy sector," he added. Last month, the central bank revised down its Mexican growth outlook for 2015 and 2016 as the crude slide dampened hopes for the energy reform, which had formed the centrepiece of the government's plans to revive the economy. The reform ended a 75- year-old monopoly enjoyed by state-run oil company Pemex and aims to reverse a slide in crude output, which has plummeted by about one-third since Mexico's energy regulator said this month it would give oil companies a bigger share of profits and more flexibility in contracts in the historic opening after a host of companies said the initial terms would deter them. Executives at oil companies like Britain's BP and U.S.-based Occidental Petroleum Corp criticized the initial terms as too stingy and uncompetitive compared to investment opportunities elsewhere. Ecuador buffs up mining sector image to attract investment (This article was written by Nicole Mordant and Susan Taylor, and was published on Reuters on March 4, 2015) Rebranding itself as a mining-friendly jurisdiction, Ecuador has high hopes that incentives and tax benefits will polish its tarnished image and attract $5 billion worth of investment over the next five years. The small Andean nation believes that incentives passed in October will attract foreign miners to help develop its gold and copper riches. They include 30-year investment contracts that promise tax stability, and accelerated depreciation. "We have made the decision that mining constitutes a central axis of our development plans," said Rafael Poveda, Minister of Strategic Sectors, which includes Ecuador's mining ministry.

10 Newsletter of the Australia-Latin America Business Council Page 10 "We want mining to constitute the axis which will allow us to improve living conditions for communities and 15 million Ecuadorians," he said at Toronto's Prospectors and Developers Association of Canada conference this month. The country sponsored "Ecuadorian Day" at this year's show, which included a speech by the minister of mining and project presentations. While a handful of foreign miners have ventured into Ecuador in the past decade, investment has been minimal. The country's reputation took a hit in 2013, when large Canadian-based producer Kinross Gold pulled out of the largest gold project, Fruta del Norte, saying the government refused to compromise on a 70 percent tax. When Kinross sold the high-grade venture last October, to a company belonging to the well-regarded Lundin family, the deal sparked some optimism even though the $240 million price tag was a fraction of the $1.2 billion Kinross paid in "I went down and met them (the government) before I did the deal. I got a very strong feeling that they are committed to getting the mining sector going finally," Lundin Gold Chairman Lukas Lundin said in an interview during PDAC. Odin Mining and Exploration, whose biggest investor is Canadian mining magnate Ross Beaty, is exploring for copper and gold in southern Ecuador. Still, the country faces hurdles. Ecuador's mining projects face tax rates that are among the highest of any in the region, with the government's take around 51 percent, according to a study by consulting group Wood Mackenzie. While the country has some "wonderful mineralizations," it remains to be seen if Ecuador has learned from past mistakes, said John Gravelle, global mining leader at consultancy PwC. "You have to make sure that the price is right to justify what the geopolitical risk is," Gravelle said. Company Focus: SEEK Australian company, SEEK, is one of the unsung heroes of Australia s engagement with Latin America. Through a number of investments made over the last seven years, SEEK now has over 1,200 staff in the region, operating the #1 employment marketplaces in Brazil (Catho Online) and Mexico (OCC Mundial). In the first half of the 2015 financial year, 32% of SEEK s international revenue (and 18% of total revenue) came from the region. Having grown profit (EBITDA) by 20% per annum over the last three years, SEEK is very pleased with the operating results that it has been able to achieve in Latin America. It is therefore understandable that, alongside Asia, the Latin America region is a high priority market for SEEK. According to SEEK s Managing Director of International Operations, Brazilian-born Isar Mazer (pictured below), The efficiency of labour and education markets is central to improving productivity and raising living standards in societies throughout the world. If the right people obtain the right skills and find the right jobs, the whole society benefits. This is particularly true in emerging economies. SEEK s purpose is to help people live more fulfilling working lives and to help organisations succeed. We do this by operating employment and education marketplaces, which aim to match more people to career opportunities than any other organisation in the markets where we operate. This commitment, and the associated value creation, has led to the SEEK Group today operating across 23 countries, mostly in emerging markets, helping 2.9 billion people across economies representing more than 20% of the world s GDP. The Group encompasses a strong portfolio of employment, education and volunteer businesses which span across Australia, New Zealand, China, Brazil, Mexico, Indonesia, Nigeria, Bangladesh, Philippines, Vietnam, Thailand, South Africa, Kenya, Malaysia, Hong Kong and Singapore.

11 Newsletter of the Australia-Latin America Business Council Page 11 We believe the good results achieved are in large part a function of our operating philosophy for emerging markets. Our model is based around carefully selecting, motivating, and backing high calibre local management. Company direction is set in partnership between global and local management in a process where analysis and logic wins out over hierarchy. Local management has full autonomy to carry out execution, with SEEK Group resources providing support by sharing the talent and knowledge afforded by our global footprint. We have found trusted, mutually beneficial relationships to be the cornerstone to leveraging local and global knowledge and achieving success. SEEK s future plans include strong continued investment in Latin America, regardless of the economic cycle. According to Mazer, Latin America will continue to emerge as a very important economic region globally, and the SEEK Group will be doing its part to help people live fulfilling working lives, and organisations succeed, in this exciting and dynamic part of the world. Latin America is home to innovative financial tech firms (This article was written by Tom Groenfeldt and was published in Forbes on March 18, 2015) Last autumn MasterCard asked the CVOX Group in Miami to put together a demo day in Brazil for start-up tech firms. They expected about 15 applicants. Instead they got 236, and all but 36 of those were strong. That was very surprising, said Ray Ruga, a co-founder of the firm. It just might have something to do with a population of 158 million millennials and the rapid growth of smartphones 60 percent penetration projected by In Brazil, Itaú is a technologically, digitally advanced bank, Ruga said. They are a truly omni-channel digital bank; there aren t many of those in the region. While there is some good technology being produced throughout Latin America, banks are still trying to cobble it together somewhat. They are culturally behind in promoting the adoption of the more innovative ideas. With 300 banks, compared to more than 7,000 in the US, Latin American finance hasn t faced the competition that North American banks confront. They have been slower in adopting innovation. Ruga and Maria Mancuso, the other co-founder of CVOX, had worked together for Citi in Latin America before leaving to start their own communications firm focused on financial services. Eighteen months after starting, we went into the financial crisis and lost almost all our business. In the process of retrenching we ended up working with a lot of technology firms. A venture capitalist client who was making portfolio investments in some tech companies asked us to provide communications and marketing for them. The technology community was being reborn in Latin America, and CVOX ran the first hackathon. Then a few years ago Citi approached them to help with an innovation strategy, suggesting something around SMS. But we said SMS is like horse and carriage, why not look at smartphones. We created Citi Mobile Challenge which was a huge success for them, and now they are doing it globally. Since then CVOX has focused on innovation and technology, especially in financial services, while continuing to work with other firms doing business in Latin America. Now Citi has seven innovation labs around the world, and the one in Miami is focused on Latin America. What became apparent is how far behind the innovation curve the financial services industry was, Ruga said. These banks have no idea what is going on. As we delved deeper and deeper, we saw many reasons. The banking culture is very conservative, risk averse, and very political. So you have structures that are not built for innovation, because innovation is inherently risky. Innovation in financial services tends to happen outside banks and then the banks may acquire the technology, he added. We decided to focus on educating financial services on the technology and innovation front.

12 Newsletter of the Australia-Latin America Business Council Page 12 They set up the first FinTech Latam conference last year and drew strong attendance from Latin America, but also three bankers from Flushing Bank in New York. They said our agenda had what they were looking for, which shows that technology is geographically agnostic. This year the conference will become Fintech Americas a 1.5 day program exploring the technologies, ideas and trends poised to disrupt both the US and Latin America s financial landscape. Finance is not always the first industry new tech firms think of, Ruga said. The highly regulated financial services has difficulty attracting attention from start-ups. When you tell some young kid that if he wants to develop something in fintech he has to get a lawyer and a compliance officer, they are out of here. The barrier to entry because of regulation and compliance makes it hard. It s not like social media or a gaming app, this takes investment and it s very capital-intensive and very distribution-intensive. But if a program can marry technology companies with big banks, the small tech firms can leverage the banking relationships to get volume. We tell tech companies that if they partner with a bank they could get millions of customers through the association. And we tell banks if you can t innovate internally, crowd-source your innovation. But banks are not very good at sharing because of privacy concerns. Chile launches national program to boost mining industry productivity (This article was written by Cecilia Jamasmie and was published on on March 9, 2015) Chile s Economic Development Agency (CORFO) has launched a special program involving mining companies, suppliers, academics and the state to address the sector s current productivity challenges, including power issues, lack of innovation and mounting costs. In an interview with MINING.com, Claudio Maggi (pictured), manager of the Competitive Development Department division at CORFO, explained that one of the plan's main objectives is to develop a nation-wide strategy to expand the local industry s technological capabilities. Currently Chile imports almost 76% of the products required by its mining industry, while it only produces 17% of them, he said. By 2035, we want the local industry to be exporting $10 billion in mining solutions and knowledge-intensive services and technology, Maggi said. Additionally, the program aims to form at least 250 worldclass suppliers. Next steps From now until 2018 the groups involved in the national strategy will work on identifying existing gaps and defining concrete measures to achieve agreed targets. Among the first steps taken, Maggi mentioned a number of initiatives that seek to promote the use of renewable energy among miners, especially solar and geothermal power. The industry has vowed to have at least 20% of its power needs covered by renewable energies. It is called the 20/20 goal, meaning that by 2020 Chile s most important sectors are supposed to have at least a fifth of their energy needs covered by renewables, Maggi said. The mining sector, however, has promised to get to that stage earlier, according to Maggi, and CORFO is working to help companies make it happen. In terms of mineral production, the strategic program has set the goal of increasing Chile s copper output to 130 to 150 million tonnes by 2035, significantly higher than the projected 6 million tonnes for this year, based on state copper commission's (Cochilco) latest estimate. Surprisingly, that is not the most sought-after outcome. concluded. By then, we want Chile to sell much more than just minerals; we want the country to become a top mining intelligence and solutions provider, Maggi

13 Newsletter of the Australia-Latin America Business Council Page 13 Industry Focus: Automotive General Motors to expand plant in San Luis Potosi General Motors announced a new investment this month in the San Luis Potosí, Mexico manufacturing facility. The amount totals US$87 million and will expand the productive capacity of the facility through the addition of two new stamping presses to the current stamping line. We start this project looking to modernize and increase our working capacity in the stamping process in San Luis Potosi, which is key to producing vehicles like Chevrolet Aveo and Trax, which are very popular in the Mexican market, said the President and CEO of GM Mexico, Ernesto M. Hernandez. The Chevrolet Aveo is the best-selling car in Mexico for the last consecutive three years. The Chevrolet Trax is the top-selling small SUV in the Mexican market, and is also exported to South American countries and Canada. In total numbers, 39% of the vehicles sold in Mexico are assembled in the GM plant, Hernandez cited. Toyota to invest US$1bn in Mexico Toyota Motor is finalizing plans for its first passenger car assembly plant in Mexico that could be approved by its board as early as next month. The plant would make the popular Corolla compact sedan and begin production in Based on recent investments by rivals, including Volkswagen, a new assembly plant would represent an investment of over $1 billion for Toyota. Toyota is the last mass-market automaker without a major production hub in Mexico, which has lured car makers and suppliers through its low labour costs and tariff-free access to the United States, Toyota's largest single market. The Japanese firm has a plant in Mexico's Baja California that produces the Tacoma pickup truck, but it has no passenger car plant. The wave of new investment by automakers has brought hundreds of Japanese auto parts suppliers to Mexico over the past few years. Auto production in Mexico doubled to more than 3 million vehicles a year in the five years to With production capacity in Mexico, Japanese automakers avoid the risk of a stronger yen cutting into profits on exports and minimize the risk of a disruption to sales from events like the labour dispute that slowed trade through the US West Coast earlier this year. VW to announce US$1bn expansion Automotive News is reporting that the Volkswagen Group will announce a $1-billion investment in the company's Puebla factory. The company officially declined to comment, but AN is claiming the investment in the Puebla facility, which has been operating for over five decades, will add 1,900 jobs to the nearly 16,000-strong workforce. According to AN, a person familiar with the situation in Puebla claims the investment will support production of the next-generation Tiguan, slated to arrive in The Puebla factory currently produces Golf, while total output last year nearly hit half a million vehicles, or about 15 percent of Mexico's total automotive output. Kia Motors to start selling cars in Mexico South Korea's Kia Motors will begin selling cars in Mexico in July, tapping a growing market before it commences production at its first plant there next year. Kia Motors, an affiliate of Hyundai Motor, plans to bring the Forte compact from Korea to Mexico, while selling US-made Sorento sport utility vehicle (SUV) and Europe-manufactured Sportage SUV in Mexico, a spokesman said this month. Hyundai Motor last year launched car sales in Mexico, selling the Sonata, Elantra and Tucson and i10.

14 Newsletter of the Australia-Latin America Business Council Page 14 Mexico, the second-largest car market in Latin America, is expected to grow 3 percent to 1.16 million vehicles this year, from 2014, and to continue steady growth until 2020, according to forecast by IHS Automotive. Automakers making cars in Mexico are exempt from a 20 percent import tariff within 10 percent of their local output, according to Korean newspaper Maeil Business Newspaper. Kia's Mexico plant will start production in the first half of next year, helping cater to demand in the neighbouring U.S. market where its sole factory is running at full capacity. Kia plans initially to produce the Forte compact and Rio subcompact at the plant, people close to the talks told Reuters at that time. Brazil secures car quota extension with Mexico Brazil's foreign ministry announced this month that Brazil has negotiated the renewal of its car quota treaty with Mexico, a deal designed to protect its struggling automotive sector. The original 2012 treaty imposed tariffs of up to 35 percent on exports above an annual limit of about $1.5 billion, with free trade of vehicles allowed after its expiration on March 19 this year. The two countries have now agreed to renew the treaty for four years, a Brazilian foreign ministry spokesman said. Struggling with dwindling car sales, Brazil urged Mexico to extend the agreement to ease the pain for an industry that has fired hundreds of workers in recent months. Mexico, meanwhile, had wanted free trade to bolster its own flourishing car sector. Brazil sees unrestrained Mexican exports as a big threat to its domestic auto industry. A car sold in Mexico can cost as little as half the retail price in Brazil, where high taxes, transportation bottlenecks and powerful unions have hurt competitiveness. Hit by falling demand in the face of a weakening economy, Brazil was overtaken by Mexico last year as Latin America's biggest car producer. Brazil posted its first annual trade deficit in 14 years in Vale s R&D conundrum (This article was written by Pedro Ozores and was published in BNamericas.com on March 20, 2015) Amid an economic downturn, lower investment and falling iron ore price scenario, Brazilian mining giant Vale has been forced to rethink its R&D and innovation strategy to prioritize near-term results. "In such a landscape, you got to be more selective," the CTO and head of Vale's technology institute (ITV) Luiz Mello (pictured) told BNamericas. "In a moment of crisis, we balance and redefine our project portfolio, focusing more on the medium and short term, without losing total sight of the long-run. Productivity is key." It's not the first time Vale's R&D focus is 'redefined.' The company's R&D expenditures decreased 16.2% to US$734mn last year. In 2013, research and development was cut by 45%. The company's research focus "shifted from greenfield to brownfield exploration and productivity-focused research," Vale said in its Q4 earnings statement. The bulk of R&D allocation in 2014 went to iron ore and pellets (US$329mn) and base metals US$143mn). "We had already been refining and reviewing our R&D and innovation investments," Mello said, stressing that priority projects are spared. "[With key projects], we're not only maintaining the level of investment, but seeking solutions that may free up more resources." One solution is Brazil's tax relief program known as Lei do Bem, which allows Vale to benefit from its R&D capex in national technology. Enacted in 2005, the law is all but indispensable for most R&D-intensive local companies. Vale's other options to finance R&D include loans from development bank BNDES, federal innovation agency Finep and national science and technology development council CNPq.Vale has maintained a fluid relationship with the government during the transition at the science, tech and innovation ministry, headed since January by former sports minister Aldo Rebelo.

15 Newsletter of the Australia-Latin America Business Council Page 15 CARAJÁS Vale's top R&D and innovation priority is Carajás S11D, the largest iron ore project in the world. Vale CEO Murilo Ferreira often says the project expected to enter in operation in 2017 is "untouchable." Cross-industry technology concepts are being applied at Carajás, such as using the Internet of Things or machine-to-machine to remotely interconnect all the different equipment and operate them autonomously. "The future of mining is definitely heading toward 'autonomous mining,' in which human risks are reduced and productivity is increased," Mellos said, adding that the autonomy serves as another layer of defence against cyberattacks. "IT is side by side with us to back us up on that." Foreign mining juniors continue to list on Santiago Stock Exchange TSXV-listed Puma Exploration has obtained a secondary listing on the Santiago Stock Exchange, Venture Market (SSEVM) under the ticker PUMA to give it access to investors throughout South America. It joins Chilean Metals as the first Canadian juniors to list on the Santiago Venture Market. The SSEVM was established in February in collaboration with the TSX Venture Exchange to list and finance exploration stage companies that are compliant with TSXV and Canadian securities regulations, to provide Chilean investors with greater opportunities to invest in mining stocks. It was created to strengthen the link between mining an local capital markets, Santiago s Stock Exchange planning and development manager, Nicolás Almazán (pictured below) told Mining Journal, and had been received with a lot of enthusiasm by local investors that see in this new alternative a way to diversify their portfolios and access a sector, like mining, that until now had a low presence in the main bourse of the country. An SSEVM listing provides companies with access to MILA, Latin America s largest stock trading platform, that provides for seamless share trading by investors in Chile, Peru, Colombia and Mexico. The Bolsa de Valores de Lima (BVL) has successfully provided a secondary listing mechanism for juniors for almost 10 years. Although Puma currently has no projects in South America, let alone Chile, it thinks that the SSEVM secondary listing will expand its visibility in the continent and enable local investors to invest in its copper-molybdenum project at Nicholas-Denys property in New Brunswick, Canada, which it thinks will appeal to them given local knowledge of these base metals. Chile is a dynamic, mining oriented country with a sophisticated financial framework and a well-developed and effective capital market system. We stand to benefit from the attention of new investors and simultaneous exposure to Chilean exploration companies looking to participate in our advanced exploration projects, said Puma president Marcel Robillard. Key to the attractiveness of the SSEVM for Canadian-listed companies is that it does not place additional reporting requirements and they are exempt from having to make filings to the SVS, Chile s market regulator. As an added attraction, the process is relatively quick to complete. The process from the application to the availability of shares on the local market, takes three days, said Almazán. Despite its leading position as a copper producer, Chilean investors have historically had only a handful of investment opportunities listed on their local stock exchange, including small-scale copper producer Pucobre, nitrates and lithium producer SQM and steel company CAP.

16 Newsletter of the Australia-Latin America Business Council Page 16 Industry Focus: E-Commerce - digital sales channels a top priority (This article was written by Patrick Nixon and was published on March 13, 2015) Digital sales and marketing channels will be top priorities for Latin American and Spanish companies in 2015, according to a study by consultancy firm Multiplica. The study, which surveyed 120 companies from the banking, insurance, travel, retail and telecommunications markets in Spain, Chile, Mexico, Colombia and Peru, showed companies placing more attention on the consumer experience online, conscious that a bad experience can lead to abandoned sales. "The study confirms the level of maturity of Latin American companies by focusing on all areas that can maximize a return," said Germán Martínez, director of Multiplica Chile. According to the study some 68% of companies said that 2015 would be a critical year for going digital. In 2014, investment in digital marketing strategies rose 19.4% compared to the year before. Chilean companies are increasingly adopting cross-selling techniques, boosting their mobile presence and engaging in marketing to improve conversion rates of potential customers. Some 59% of interviewees said that their mobile strategy would be fundamental for developing different business lines, while 39% said that mobile traffic to their websites would surpass that of desktops. For that reason, 46% will seek to improve the user experience for mobile devices, 41% will design websites that adapt to smartphones and 40% will invest in native apps. SOCIAL MEDIA Despite the fact that 63% of interviewees said that social networks will play an important role in digital marketing in 2015, they do not yet see them as fundamental for growth of their businesses. Respondents said that user experience and web design were priorities over social media. Customer scoring, which enables companies to identify customer preferences and generate sales leads, as well as the use of big data and analytics are still not seen as top priorities and are not ready to take advantage of the technologies available. MULTICHANNEL While incorporating multichannel means of purchasing online was one of the lowest priorities seen during the 2014 version of the study, it is top of the list of company priorities for the next three years in the 2015 survey. This demonstrates a realization that many opportunities are lost at the last hurdle and that online channels should provide the option to start a purchase on one device and complete it on another. PayPal's general director of international trade in Latin America, José Fernández da Ponte recently said in a guest column for BNamericas that online retailers can recover 63% of the US$4bn in merchandise that is abandoned at the moment of purchase by deploying multichannel options to complete the sale. In the news: The Economist comments on the challenges facing Brazil On February 28, The Economist published an article under the heading Brazil: In a quagmire, that argues that Brazil s economy is in its worst mess since the early 1990s. It asserts that the country is in a mess, with far bigger problems than the government will admit or investors seem to register. The article concludes that all is not lost and highlights that amongst Brazil s strengths are the fact that it has a large and diversified private sector and robust democratic institutions. Nonetheless, it ends by asserting that its woes go deeper than many realise and that the time to put them right is now. Read more

17 Newsletter of the Australia-Latin America Business Council Page 17 Latin America moves to the centre Simon Whistler of Control Risks writes in Forbes online on 26 February that Latin America is lacking in revolutionary leaders these days, which is quite a change from a decade ago. Back then, the dominant geopolitical narrative in the region or at least the loudest was Hugo Chávez s nebulous ambitions of a Bolivarian Revolution that would give power to the people of Latin America. Today, as Control Risks notes in its recent RiskMap Report, Chávez s death laid bare just how out of step his revolutionary rhetoric was with the more stable reality that has taken root throughout much of Latin America in recent years. As Latin American nations have shifted to the centre, the challenges that foreign investors face have shifted as well. Expropriation and nationalism Chávez s preferred tools have become less of a threat. Instead, businesses in Latin America are now more focused on how to now navigate corruption and social risks. Read more Opinion: South American nations struggle to find new economic model (This article was written by John Paul Rathbone and Joe Leahy and was published in the Financial Times on January 11, 2015) Four years ago, when the China-driven commodity price boom was in full swing and south-south ties were all the rage, Dilma Rousseff began her first term as Brazil s president with a symbolic gesture jetting off to Beijing. Now, as commodity prices collapse alongside China s slowing economy, Ms Rousseff has begun her second presidential term by saying she wants to rebuild relations with Washington. She has barely mentioned Beijing. The shift reflects broader changes in South America s commodity-dependent economies, where the abrupt collapse in energy, food and metals prices has opened up dangerous trade and financing gaps that could force deep economic and political change. In Colombia and Peru, where commodities account for two-thirds of exports, current account deficits are forecast to reach 5 per cent of gross domestic product this year a level not seen since the 1990s when the region was associated with default. Soyarich Argentina and oil-producing Venezuela are suffering from dwindling foreign reserves. As for Brazil, where commodities account for 60 per cent of exports, its trade deficit last year widened to $4bn the same as in 1999, when Brazil was sucked into a global emerging-markets crisis. I am very worried. In fact I have been worried for years, said José Antonio Ocampo, a professor at Columbia University in New York and a former Colombian finance minister. Commodity prices... were bound to fall, sooner or later. Even in 2008, when commodity prices peaked, South America ran a combined current account deficit equivalent to 1 per cent of GDP. Now the situation is far worse. Should prices drop to 2003 levels, the region s current account deficit would be about 7 per cent of GDP, Mr Ocampo estimates. The challenge of financing this gap, equivalent to about $350bn, poses the region s greatest risk, he says. Although the whole region is affected, there is a spectrum of concern. At one extreme are spendthrifts such as Venezuela, where investors fear a bond default following the halving of the price of oil, which accounts for 96 per cent of its exports. Last week, Caracas turned to Beijing for a bailout. At the other are more prudent countries, such as Chile and Peru, which have ample fiscal and hard currency reserves. Brazil lies between. Investors are discriminating, so I don t expect contagion from any Venezuelan default, said Neil Shearing of Capital Economics consultancy. There are also several reasons why a 1980s-style debt bust is unlikely.

18 Newsletter of the Australia-Latin America Business Council Page 18 The first is improved economic policy making, especially the use of floating exchange rates, which act as a buffer. The Brazilian, Colombian and Chilean currencies have dropped more than a quarter in the past two years. In some ways, investors have already panicked, said Mr Shearing. However, Argentina and Venezuela have fixed exchange rates, while oil-exporting Ecuador is dollarised. Elsewhere, weaker currencies can close trade gaps by boosting exports. Rapid depreciation also feeds inflation, however, prompting central banks to raise interest rates, which slows the economy. This has been Brazil s experience. It is a marathon, said Alberto Ramos, an economist at Goldman Sachs. [Brazil s] adjustment could last more than a year. Another reason is that most of the region has low debt and enjoys access to abundant international liquidity to plug financing gaps. I am optimistic here, said Mr Ocampo. Yet, although South America attracted copious foreign investment in the past decade, reaching $188bn last year, more than a third has been into mining and energy. Such investments could now dry up. Furthermore, high foreign reserves do not always offer protection for indebted corporates when currencies plunge as Russia shows. South American companies have about $300bn of hard currency bonds, according to Bank of America, a figure dominated by Brazil s Petrobras, where a corruption scandal has locked the state oil company and some subcontractors out of capital markets. The broad implications for South America from this new state of affairs are threefold. First, belt-tightening will slow growth. Brazil is cutting public spending by 2 per cent of GDP, while Colombia has increased taxes to cover revenue shortfalls. Slower growth is the new normal, said Mr Shearing. Second, the region needs a new post-boom economic model, especially if local manufacturing were to be hollowed out by cheap Chinese imports. Greater economic orthodoxy may result. You have to understand that commodities are subject to deep cycles, said Mr Ramos. Don t get too carried away during the good years. Third, there may be a re-emphasis on north-south trade ties that languished during the commodity bonanza. Ms Rousseff s desire to improve US relations and even Washington s rapprochement with Cuba, as the latter s benefactor, Venezuela, bounces off the ropes may be two early signs of this. Mexico s beer market is high on the radar of Heineken Mexico s economic performance has rewarded foreign businesses prepared to do business within its boundaries. One example of this kind of success is Heineken, a company that, with six manufacturing plants in the country, knows the Mexican market well. Not only does Heineken produce and distribute its own product, but also several local beer brands, including Tecate, Sol and Dos Equis, among others. Seeking to increase its production in Mexico, the Dutch brewer is planning to invest in increased manufacturing capacity in Mexico, as its current production is being exceeded by the local demand for its product. Five years ago, Heineken, the third most important beer brand worldwide purchased the Mexican Cuauhtémoc-Moctezuma brewery, which resulted in the following benefits: sales volume increased 14%; income increased 11%; and profits increased 15%

19 Newsletter of the Australia-Latin America Business Council Page 19 According to Reuters, Heineken will invest 7.5 billion Mexican pesos (US$480 million) to build a new brewery to supply U.S. and Mexican markets. The brewery in the northern state of Chihuahua will produce five million hectolitres of beer per year, said Marc Busain, managing director of Heineken's Mexico unit Cuauhtemoc Moctezuma, but that could be expanded. Feature: Teach for America initiative expands in Latin America (This article was written by Whitney Eulich and Ruxandra Guidi and was published in the Christian Science Monitor on January 11, 2015) At the Sor Juana Inés de la Cruz high school in rural Puebla State, some classrooms are so cramped that students take their exams out on the front lawn. That was the case in November, when nine pupils, bundled in sweat shirts, crunched math equations at their outdoor desks, framed by Mexico s highest peak, Orizaba. But Fernando Hernández, keeping an eye on the test takers, was not discouraged. A young math and science whiz, he is looking past the power outages and weak leadership that regularly hobble these students to what he sees as a great opportunity: helping Mexico s dismal public schools produce more graduates who go on to college and become professionals. You have to ask, how can I contribute? says Mr. Hernández, who put his PhD on hold for two years to join Enseña por México (Teach for Mexico), a new program inspired by Teach for America in the United States that also operates in six other Latin American countries. I want to continue my studies one day, but that didn t have to happen right away. Public education, though? That needs attention immediately. Mexico recently passed sweeping education reforms that will inject more funding into the poorest schools and demand greater accountability from teachers. But equally eye-catching are the growing challenges to long-tolerated habits that many say prevent Mexico from firmly joining the community of developed economies. Teach for Mexico speaks to that new assertiveness, placing young college graduates in public schools across four states. But the program and Hernández represent only one part of a larger drive by nonprofits and public-private partnerships to change an institution burdened by patronage and bureaucracy across Latin America, the world s most unequal region, along with the Caribbean. Latin American nations have started to address the problem, directing more public funding to education over the past two decades. But investment hasn t been enough: The region scores at the bottom of international education rankings, and nearly 50 percent of students on average drop out before finishing high school. Quality schooling with proper funding, efforts to raise families low expectations, and less teacher absenteeism is a looming challenge for many countries in the region that, like Mexico, desperately need more skilled workers to work at home-grown multinationals, to tap resources such as oil and gas, and to create innovators and entrepreneurs. With Latin America s average growth predicted to fall to the lowest point in five years in 2014, the need is acute enough that the leader of the Organization for Economic Cooperation and Development singled out education in a recent warning to regional leaders. Results from the most recent OECD Program for International Student Assessment (PISA), the most widely watched international gauge for student performance, showed that all eight participating Latin American countries ranked in the bottom third for 15-year-olds in reading comprehension, math, and science. Talent is universal, but opportunity is not, says Angélica Ocampo, executive director of Worldfund, a non-profit that works with private companies and local governments to provide training for teachers and principals in Mexico s and Brazil s neediest schools. There is a huge elephant in the room: Public schools throughout Latin America are not delivering, she says. [Public education is] the great equalizer. For generations, education reform in the region has been the sole purview of governments and teachers unions, says Gabriel Sánchez Zinny, author of Educación 3.0: The Struggle for Talent in Latin America. Inviting in new players is vital, he says. We need people that innovate and try different solutions to help students learn... But whatever you do on the margins that brings about change, you need a government willing to adapt aspects or scale up.

20 Newsletter of the Australia-Latin America Business Council Page 20 As economies have grown over the past decade, entrepreneurs, nongovernmental organizations, and faith-based groups have stepped in with new training, teaching models, and even charter schools. With more room to experiment, they can set examples for education ministries. What has happened over the past several years is that many foundations and NGOs in the region have become more vocal about education, says Mariana Alfonso, a senior education specialist at the Inter-American Development Bank (IDB). She rattles off a list of advocacy groups, from Action for Education in the Dominican Republic to Mexicans First to Project Educate 2050 in Argentina. These and many others have created REDUCA, a regional network of social and business movements working for education reform. We have seen an increase in organizations trying to position education as a top political priority, Ms. Alfonso says. Public pressure succeeds The pressure appears to be working. Colombia made waves in August when it announced its plan to create the best public education system in the region by 2025, and to budget more for education in 2015 than for security and defence. That would be a first in the South American nation, plagued by more than 50 years of civil war. Peru, which ranks last among Latin American countries tested for PISA, recently decided to boost education spending from 3 percent to 6 percent of gross domestic product by 2020, resulting in a $7 billion gain. The plan pledges to add 10 academic hours to weekly school schedules, improve teacher training, revise texts, and upgrade infrastructure. But policymakers acknowledge they are facing a colossal task. To assume that the Ministry of Education alone could improve the situation of 9 million students spread over 80,000 schools would be pretentious, says Javier Eduardo Palacios Gallegos, the Peruvian Ministry of Education official in charge of reforms. We need continuity and support in order to achieve [change], Mr. Gallegos says. A host of projects is under way within or on the fringes of Peru s public school system, including low-cost private schools such as Innova, which integrates technology into the classroom. Eighty-six percent of Innova students passed national reading tests in 2013, nearly three times the number of public school students and nearly double the number of traditional private school students, according to the Ministry of Education. We believe most schools still give lessons in the way schools did 20 years ago, before our information boom, so we were interested in reinventing education, says Jorge Yzusqui Chessman, general manager of Innova Schools. Mr. Yzusqui Chessman says the Ministry of Education has taken note as it tries to bring more technology into its own schools. The ministry has also recognized the work of Fé y Alegría, Jesuit charter schools that have long served poor children in areas where public education is weak. These schools have more autonomy to raise funds and choose teachers, and multiple studies have proved that they generate higher test results than their public school counterparts. Teach for Mexico expands Erik Ramirez-Ruiz, Teach for Mexico s chief executive officer and cofounder, says his team designed the program with feedback from the secretary of education. The group has expanded in its second year from two to four states and operates in 65 rural and urban schools. We wanted to find a way to help teachers and principals already in schools, without being confrontational, Mr. Ramirez-Ruiz says. We try to complement the schools with things they didn t have before: Maybe they are understaffed or they don t have anyone properly trained to teach English. It s a collaboration. At first, many teachers were skeptical. They thought we were spies for the Education Ministry, says Mineko Matsumoto, who hails from northern Mexico and is in her second year with Teach for Mexico. But most participating schools now say the two-year placements are a gift. [The teachers] may be young, but they are motivated and well prepared, says Eloy Octavio Martínez, a social studies teacher at Sor Juana Inés de la Cruz high school. We ve learned a lot from them, and I think they ve learned something from us.

21 Newsletter of the Australia-Latin America Business Council Page 21 Teach for Mexico hasn t been in classrooms long enough to have robust data. But in Chile, the first Teach for America spinoff in Latin America is now in its sixth year. It was evaluated in 2012 by the IDB, which found a strong correlation between Teach for Chile classrooms and better outcomes in math, Spanish, and skills such as motivation or self-control. Farther north, EnseñaPerú (Teach for Peru) which targets rural schools that struggle to attract state-hired teachers has started documenting its success after five years in public classrooms, gaining financial backing from large mining companies, the banking sector, and private foundations. At the start of 2014, nearly 50 percent of students in first-time Teach for Peru classrooms were behind by one or even two school years, as measured by national standardized test scores. That fell to 10 percent after one year in a Teach for Peru classroom, according to the group s data. The Education Ministry has acknowledged the group s success, though it hasn t confirmed those results. Franco Mosso, cofounder of Teach for Peru, says alumni have gone on to join Peru s Ministry of Education, while others have created education non-profits. That is an enormous shift in countries where many in power have never set foot in a public primary or secondary school. Their size... is small, says the IDB s Alfonso. Just 56 Teach for Argentina members work in public schools, for example, out of some 600,000 teachers nationwide. But they are doing very notable things, and in some cases the public sector has tried to incorporate their innovations or work. The need for high energy Back in Mexico, in San Pedro Cholula, about two hours from the school where Hernández works, Ms. Matsumoto is gesticulating left and right and even overhead as she mimes English words and phrases. Her energy points to a key skill: the ability to command the classroom. In Mexico, about 70 percent of public school instructors failed their teaching exam in 2012, according to the Ministry of Education, and it shows. You know how they tell you that there is a gap between private schools and public schools? asks Matsumoto, who worked as a private school teacher. Numbers can t tell you what these kids are going through. Many of her high-schoolers can t read numbers with more than three digits, and struggle to distinguish between a city, country, and a continent, she says. But in Chile, Ecuador, Mexico, and Peru, as well as the cities of Buenos Aires and Rio de Janeiro, officials have stepped up evaluations. In Colombia and El Salvador teacher-college graduates must now pass exams to work in a public school. Much like Teach for America in the US, however, programs like Teach for Mexico face criticism for putting individuals with little professional training into classrooms. We need obligatory professional trainings for everyone in the public school system, says Luisa Figueroa Morales, a principal at a technical high school in Veracruz who previously taught public school English for more than 30 years. Ms. Figueroa understands the value of professional development: She s wrapping up her third year of a principal training program called Listo, or Ready, run by Worldfund. The program has given her confidence, she says, and the communication skills she needed to get the 70 teachers she manages to show up at least 10 minutes before class, a huge feat. I ve learned that I have to help my school forward, and that I have to create the habits and the values to do that, she says. That is what drives Matsumoto: being part of a positive movement. As I walk [to work], I think about all the others walking with me to make this change, she says teachers, government employees, and Teach for Mexico members. We all want better public education, Matsumoto says. I m not alone in this.

22 Newsletter of the Australia-Latin America Business Council Page 22 Chilean miners turn to renewable energy (This article was written by John Mathews and was published in The Conversation on December 17, 2014) Mining is the fourth-largest energy consumer in Australia, using roughly 10% of Australia s total. Some of this comes from the electricity grid but much is supplied offgrid in the form of diesel and other fossil fuels. Could some of this be replaced by renewable sources? Recently I participated in the Australia Chile: Asia Pacific Economic Forum in Santiago, Chile. I was surprised to learn that Chile is now emerging as the southern hemisphere s renewable energy giant, particularly in the mining sector. Falling costs, driven by increasing renewable investment in China, are driving the trend. The Australian mining sector has been slow to take advantage. So, what could we learn from our Pacific neighbours? Chile: the renewable energy giant In the Pacific Century Chile and Australia are natural partners across the ocean. A free trade agreement signed five years ago has strengthened trade and investment between the two countries. Both are major exporters of mineral commodities to China as well as India. One important difference is in the field of energy. As the Chilean Energy Minister Maximo Pacheco pointed out at the economic forum, Australia exports 70% of its energy (oil, natural gas and coal), while Chile imports 70% of its energy needs. The country has abundant minerals (including the world s largest copper producer, the Escondida mine, operated by BHP-Billiton) but not abundant oil or gas. electric power. But now this could work to the advantage of the Chilean minerals producers, who are meeting the challenge of soaring energy costs by developing their own renewable power supplies. Miners in Chile are building independent solar, solar thermal, wind and geothermal power plants that produce power at costs competitive with or lower than conventional fuel supplies or grid-connected Consider these facts: The Cerro Dominador concentrated solar power (CSP) plant, rated at 110 megawatts, will supply regular uninterrupted power to the Antofagasta Minerals complex in the dry north of Chile, in the Atacama desert. Construction began in This is one of the largest CSP plants in the world, utilising an array of mirrors and lenses to concentrate the sun s rays onto a power tower, and utilising thermal storage in the form of molten salts, perfected by Spanish company Abengoa. It will supply steady, dispatchable power, day and night. The El Arrayán wind power project, rated at 115 megawatts, now supplies power to the Los Pelambres mine of Antofagasta Minerals, using Pattern Energy (US) as technology partner. Antofagasta Minerals has also contracted with US solar company SunEdison to build solar panel arrays at the Los Pelambres mine, with a power plant rated at 70 megawatts; while the related plant operated by Amenecer Solar CAP is rated at 100 megawatts, the largest such array in Latin America when it came online in There are many more such projects under review or in the pipeline. The Chilean Renewable Energy Center reported in 2014 that the pipeline of renewable power projects in Chile added up to 18,000 megawatts (or 18 gigawatts), which is more than the country s entire current electric power grid. Australia falling behind The one Australian company involved in this proliferation of renewables projects is Origin Energy, with its joint venture Energía Andina, in partnership with AMSA, to develop geothermal projects for the Chilean minerals sector. Origin can offer technology based on its extensive geothermal operations in New Zealand; it reported plans to upscale these activities in Chile at the recent economic forum. You can t say the same about the wider minerals sector in Australia. Big miners like BHP-Billiton, or Rio Tinto continue to operate mines using expensive diesel supplies and in some cases grid-connected electric power ignoring their capacity to generate their own energy in abundant and reliable manner by turning towards renewables.

23 Newsletter of the Australia-Latin America Business Council Page 23 Contractors such as Leighton Holdings and Ausenco have some modest renewables operations like stand-alone wind farms, not yet integrated into their primary service activities. By embracing renewables there would be the added bonus of exporting the technology involved, to free trade partners such as Chile. China leading the charge Why are the costs of generating renewable power in remote mining sites coming down, to becoming competitive with conventional fossil fuelled generation? The answer, in a word, is China. Alongside its well-recognised black power system based on coal and gas (supplied to a large extent from Australia) China has been building by far the world s largest renewable power sector, based on hydro, wind and solar. In 2014 this complementary green system was rated at 378 gigawatts by far the largest in the world and it is set to grow to a staggering 1000 gigawatts of zero-carbon power by 2030, under the terms of the recent US- China climate deal. As the scale of China s renewable power expands, so the unit costs decline. This is the iron law of the learning curve. It is advantageous for China, of course, but it also means that the same lower costs can be enjoyed by other countries in this case, Chilean power producers supplying renewable power to the minerals sector. The underlying technology is diffused around the world, and competition ensures that the lower costs are shared by all. Chile has been astute in taking advantage of these cost trends to build its renewables sector. It is ensuring that costs come down through competition by staging a series of auctions for renewable power licenses the latest just this past week, coinciding with the Chile-Australia Business Forum. No fewer than 17 projects were solicited, with costs coming down to $US80 per megawatthour (a bid by Santiago Solar). In contrast new coal-fired power plants are estimated by the US Energy Information Administration to cost on average $US95. So Chile might have fewer deposits of oil, coal and gas than Australia but it is now mining its substantial supplies of renewable energy to produce cost-effective power for its minerals industry, in a way that would have been unthinkable just 10 years ago, before the arrival of China and its marked influence in driving down renewables costs. Australian heavyweights such as BHP-Billiton are late to note and take advantage of these trends. Perhaps they are afraid of offending the Abbott government with its ideological opposition to renewables. But economic rationality cannot be resisted forever; in the end the sheer cost competitiveness of renewables as sources of power both for grid applications and for remote mining operations can be expected to assert itself. John Mathews is professor of strategic management, Macquarie Graduate School of Management at Macquarie University This article was originally published on The Conversation. Read the original article here. Uruguay s economy susceptible to inflation and budget deficit The Uruguayan economy is decelerating gradually after a decade of strong and inclusive growth. Export receipts are growing at a markedly lower clip than a few years ago and domestic demand growth is slowing towards a more sustainable pace. At the same time, inflation remains above the target range and the primary fiscal balance has weakened further in According to the latest IMF report on the Uruguayan economy, the external environment presents risks as well as opportunities. As a small open economy that exports mostly agricultural products and has non-residents holding a relatively high share of its public debt, Uruguay is exposed to the risk of lower global growth and tighter global financial conditions. At the same time, the recent drop in global crude oil prices will provide a welcome opportunity to improve the overall fiscal and balance of payments positions and reduce inflation. Uruguay s strong liquidity buffers would allow an orderly adjustment in the event of adverse external shocks. Public debt maturity is high, reserves comfortably exceed prudential benchmarks, and banks and the