Australia in Mexico

Australia in Mexico

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By Arturo Chretin

The economy of Australia is a highly developed market economy. The Australian economy is dominated by its service sector and has the eighth-highest total estimated value of natural resources. Despite the recent decline in the mining sector, the Australian economy has remained resilient
and stable and had not experienced a recession since July 1991, until 2020.

Australia is a member of the APEC, G20, OECD and the WTO. The signing of the Trans-Pacific Partnership Agreement (TPP) in 2016 has been a substantial trigger for increased interest and flourishing trade relations for Australia-Mexico.

The TPP is a proposed trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States signed on February 4, 2016. After the newly elected U.S. President Donald Trump withdrew the U.S. signature from TPP in January
2017, the agreement could not be ratified as required and did not enter into force. The remaining countries negotiated a new trade agreement called Comprehensive and Progressive Agreement for Trans-Pacific Partnership,
which incorporates most of the provisions of the TPP and which entered into force on December 30, 2018.

In recent decades, Mexico has become a strong and stable economy on a global scale, attracting national and foreign business opportunities. Economic similarities between other regional powers create valuable opportunities, such as those for Australian companies in Mexico.

Mining has contributed to Australia’s high level of economic growth, from the gold rush in the 1840s to date. Australia is the fifth largest mining country in the world. Many experts consider it the backbone of the Australian economy, which has kept the country stable during turbulent economic times. Currently, Mexico is home to two Australian mining operators and 15 mining equipment, technology and services (METS) companies.

Due to Australia’s long mining history, combined with its wealth of experience, Australian mining and mining services companies have the opportunity to play an essential role in the Mexican mining sector. The TPP
agreement removes tariffs on Australian mining equipment exports, further promoting Australian activity in this sector.

Australian engineering firm WorleyParsons once supported an expansion of Mexico’s largest mine, Cananea, in 1970. Australian explosives producer
Orica continues to be one of the largest suppliers for Grupo México, Peñoles, GoldCorp and Fresnillo.

Australian companies and research organizations are responsible for many of the innovations implemented in the mining process’ industries globally. In total, the mining equipment, technology and service (METS) industries contribute with more than US$70 million to the Australian economy annually, with exports exceeding US$21 million. More than 66% of METS companies are exporters. This includes companies such as Oniqua, JKTech, Austin Engineering (Westech), Pit to Ship, GroundProbe, Synergen
Met, Hawcroft, and Enviro Suite, with interest in Mexico.

Orica is known as the world’s largest provider of commercial explosives and innovative blas ting systems to the mining, quarrying, oil and gas and
construction markets, a leading supplier of sodium cyanide for gold extraction, and a specialist provider of ground support services in mining and tunneling. In Mexico, Orica is a supplier of mining companies, construction companies and Pemex, with operations in 10 locations where it employs about 450 people.

BHP Billiton is a world-leading resources company. The Australian company extracts and process minerals, oil and gas and its products are sold worldwide and are headquartered in Melbourne, Australia. BHP became the first formal partner of Petróleos Mexicanos (PEMEX) in the history
of the Mexican oil industry by winning the tender for the Trion field, and approved the past year (2019) an investment of US$256 million for the drilling of a boundary well and the conduct of additional studies in said field in deep waters of the Gulf of Mexico.

Macquarie Group arrived in Mexico in 2006 and has invested more than US$158 million in the operation of highways, renewable energies such as
wind and hydroelectric parks, telecommunications, and in the education sector.

FIBRA Macquarie México is a real estate investment trust targeting industrial, office and retail real estate opportunities in Mexico with a primary focus on stabilized income-producing properties. It has issued real estate trust certificates listed on the Mexican Stock Exchange. During 2019-4Q they signed 17 new leases and renovations, giving a total of 2.2 million square feet of industrial ABA. In addition, FibraMQ consolidated 15
rental renewals with a total of 1.9 million square feet.

FIBRA Macquarie México (FibraMQ) allocated US$45.2 million to the development of its operations during 2019, reported the Mexican Stock Exchange (BMV). Of the total amount, US$22 million were destined for the construction of properties, expansions and remodeling of its portfolio; while US$18 million were used to pay for debt and US$5.2 million to buy back cancellation certificates.

The trust, which has 235 industrial properties, 34.4 million square feet of gross leasable area, in addition to 17 commercial and office properties throughout Mexico, has a total asset value of US$2.3 billion.

Regarding direct investments of Australia in Mexico, the companies with Australian participation in Mexico have materialized, according to data
from the Ministry of Economy (SE) of Mexico, investments that amount to US$4.57 billion from January 2001 through the month of March of this year, as shown in Exhibit 1.

Exhibit 2 summarizes the Trade Balance between Mexico and Australia. It shows that commerce between the two countries reached its maximum level in 2018, registering US$1.57 billion.

Bilateral commerce had been historically negative for Mexico until 2012, when it started to have a positive trade balance that has been that way until today. Important factors in the trade balance between Mexico and Australia are interesting. For instance, there is the fact that during the 20-year time
span from January 1999 to December 2019, total exports from Mexico to Australia increased from US$122 mi llion to US$1.2 billion. At the same time, imports from Australia to Mexico showed a more moderated growth
from US$273 million (1999) to US$351 million (2019). It is worth mentioning that in 2019 commerce stats decreased 13% over the data of 2018 (US$1.57 billion).

Mexico and Australia have joined efforts in order to build a solid relationship of understanding and cooperation, which has resulted in
intense bilateral exchanges and an unequivocal commitment to generating solutions to the main issues on the multilateral agenda.

The economies of Mexico and Australia are complementary to each other and are open to the world. Their societies are modern and democratic and share common values and goals.