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I would like to thank the DP Information Group for inviting me to participate in this event and permitting me to speak with you about APEC and some of the opportunities in Latin America.
Much has changed since APEC's inception and the world's political and economic atmosphere is much different than it was 20 years ago.
World Trade Organization negotiations are at a critical stage in the Doha Development Round. The world's financial system is precariously influenced by the fluctuation of a traditionally stable currency; the consequences of climate change can be seen throughout the world; food prices are escalating and the energy market has been impacted by the dramatic increase in the price of oil, with non-oil producing economies possibly experiencing the most adverse effects.
In fact, this particular period in time might be considered a catalyst. And it is in the face of challenge that we discover our greatest potential. Perhaps the most telling of all recent change has been the increased interdependence amongst world economies.
Arguably one of the most dynamic economic regions in the world, its members currently account for almost half of world trade, 41 per cent of world population and 56 per cent of world GDP.
Since APEC's inception in 1989, foreign direct investment inflows to the region are 50 per cent higher, exports 433 percent higher and average tariffs fell from 16.9 per cent in 1989 to 5.5 per cent in 2004. More than 200 million new jobs have been created in the region including 180 million in lower-income economies, and almost 200 million people have been lifted out of poverty - a reduction of one third. APEC's per capita GDP has almost tripled; cellular phone subscriptions have increased by over 55 percent; and internet users by over 30.
Established as a means to promote sustainable economic growth through trade and investment liberalization and facilitation throughout the Asia-Pacific region, APEC conducts over 70 percent of its world wide trade amongst its members. Globally, APEC accounts for 45 percent of the world total imports and 44 percent of exports.
These achievements have been remarkable and have been driven mostly by market forces. While governments want to promote economic growth and increased standards of living, it is private business that constitutes the engine of growth and leads the way in developing and adopting new technologies. It is the private sector that carries out the trade and investment activities that create economic growth.
But governments and intergovernmental forums like APEC play a significant role in building effective policies and shaping the environment in which business operates: by providing stable and open markets; a business-conducive environment; and addressing sudden shocks to our markets and communities.
The Asia Pacific region has before it both new opportunities and new challenges. Markets are now truly global. Paradigms are being created in accord with the rapid emergence of economic players, such as China. Relationships between some economies are waning while others - such as the relationship between Asia and Latin America - are being strengthened. And addressing the world's strained natural resources is paramount.
The APEC region has a major stake in global responses to the challenges of climate change, energy security and clean development. That is because APEC economies account for 60 percent of global energy demand and include the world's four largest energy consumers, as well as some major energy producers.
Energy security and climate change are mutually affective economic issues. Addressing the challenges they present is therefore fundamental to the macroeconomic stability and sustainable growth of the region. This is why initiating market-based responses is a priority to APEC Member Economies.
A range of policy instruments are being discussed with a view to protecting member economies from the effects of higher and more volatile energy prices. Our Finance Ministers have noted the importance of adequate investment in oil production, refining capacity, and technology transfer for energy conservation, and have advised economies to foster the reduction of demand-distorting subsidies on the energy market.
It is generally acknowledged that higher domestic fuel prices will drive inflation, and that this will be a threat to macroeconomic stability. This is particularly true as people throughout the region are already feeling the effects of rising food and fuel prices and governments find themselves facing a dilemma: stricter monetary policies may seem an effective response to inflation but threaten to exacerbate the situation and lead to political instability.
Our ability to find sound economic solutions to environmental challenges will be fundamental as the world becomes increasingly globalized.
The Senior Officials Committee on Trade and Investment is working to put forward an APEC list of environmental goods for potential tariff reduction and possible elimination to complement the WTO process. If this is achieved, barriers to trade in energy saving and energy efficient products will effectively be removed.
In addressing the challenges of our time, the importance of alliances cannot be overstated. As the host of APEC 2008, Peru has taken a leadership role in strengthening trade relations between Latin America both globally and, in particular, within the trans-Pacific region.
Latin America and Asia play an increasingly significant role in world trade. The economic groups and corporations of the main emerging economies, particularly those of the group called BRICs by Goldman Sachs: Brazil, Russia, India and China, are advancing not only towards external markets of other developing countries but also of industrialized markets of the OECD.
To illustrate, let me provide a few Latin American examples. The purchase that Mexico's "CEMEX" made of Australia's "Rinker" for a total of $ 15.3 billion made it one of the bigger businesses of the cement sector; ahead of the French company "Lafayette" and the Swiss company "Holcim". In 2006, Brazil received US$ 19 billion foreign investment and at the same time invested a total of US$ 24 billion abroad.
In fact, if Mexico and South Africa were added to the BRICS group, they would add more than US$ 70 billion to total investment abroad. Of that US$ 70 billion US$ 55 billion has been invested in industrialized countries.
All this is to say that the rapidly increasing economic importance of Latin America and Asia to the world market and for business-to-business relationships can not be overstated. Statistics indicate that trade between Asia and Latin America had reached almost 185 billion by 2006. The contribution of Latin America to this figure is an approximate 81 billion in exports. For Asia, the supplier of 20 percent of Latin American imports, it represents almost 77 billion in export dollars, as of 2005. One can see then that business opportunities certainly exist in the two regions.
Trade between Latin America and Asia might be increased further through the development of strategic alliances among businesses in both regions. These alliances would allow a better use of the industrial fragmentation that promotes industrialization and the benefits of intra-regional commerce. APEC, as a trans-Pacific forum can assist America's business sectors as they continue to seek new avenues for growth.
In this context, I would like to highlight that the APEC Peru Business Summit 2008 will bring together both shores of the Pacific Rim, providing a unique opportunity to increase trade and investment.
As Chair of APEC 2008, Peru has asserted priority areas that incorporate issues relevant to the international agenda and which promote comprehensive, systematic trade. Let me share some of them with you now.
While the WTO provides an international trading system, the recent proliferation of Free Trade Agreements must also be taken in to account. Fifty percent of world trade occurs through free trade agreements and of the approximate 385 free trade agreements that exist throughout the world, no less than 119 are within the Asia Pacific region. Completed FTA/RTAs amongst APEC members total 27 and an additional 16 are currently under negotiation. Peru has signed free trade agreements with Canada the United States, Singapore, and Thailand; and is in negotiations with China and the European Union, among others.
Failure to secure markets through free trade agreements will leave non-participating economies at a visible disadvantage. While it is a long-term vision, APEC is currently exploring the possibility of a Free Trade Area of the Asia Pacific. Stakeholders should have the freedom to explore all opportunities so as to ensure a stable and secure trading environment for the region.
The ability to compete in the international arena is especially important to Small and Medium Enterprises, for whom reaping the benefits of globalization can produce the most notable results. SMEs account for over 98 percent of all enterprises and employ as much as 60 percent of the work force in the APEC region. Yet, at present, they only account for about 30 to 35 percent of exports.
By definition, globalization is a two-way street. While countries gain opportunities to expand trade through exports, they also face pressure to increase their imports. For small and medium-sized businesses, this can present an insurmountable challenge and those who are not prepared in terms of skills, systems or infrastructure will fail to thrive and fall behind.
In this context, I would like to highlight that ABAC will host an SME Summit in August. The first part will take place in China in early August and will engage high profile businesspeople - from Jack Ma to Jet Li - to share their experiences in IT, training and financing. The second part will take place in Lima in late August; the objectives are to assist SMEs to have access to relevant information, market opportunities and financial channels for their development.
The APEC Peru CEO Summit 2008, being held in Lima in November will be the most important business event to be held in the Asia Pacific in this year. Participants are not only able to meet with business leaders from the region, but can do so with Ministers and Government Leaders. Invitations have also been extended to the most important South American business associations, including those outside of APEC. The APEC Peru CEO Summit 2008 will be the bridge for the future development of Asian and Latin American business contacts.
A very important aspect of the Chairmanship of Peru is to provide opportunities for public/private partnerships, and thus unite governments and businesses in trade, investment and sustainable development. In the same way that the summit can bring together various sectors, it can also open doors for trade and investment between regions.
It is an ideal opportunity for Asian corporations to secure markets in both Latin America and Asia, to diversify business scope or to reinforce existing interests
Latin America is a logical complement to Asia. Asia requires food products and energy to increase its growth while Latin America requires infrastructure and investment. A similar model might be found in the investment of Singapore's PSA International in Panama's port infrastructure or the investment of Hong Kong's Hutchinson Corporation in Manta Ecuador.
The APEC Peru CEO Summit will complement the Latin Asia Business Forum of Singapore in October 2008 and will serve as a foundation for the CEO Summit of the following year so that by the end of 2009, Asian Pacific business interests will be in closer alignment than ever before.
It is our hope and expectation that the opportunity should be of collective benefit. Both the principles and undertakings of APEC serve to promote open trade, facilitation of investments and business mobility. These factors have had a positive impact on the regional economy. We have seen that borders are not boundaries and that, by working across them, we expand the scope of possibilities for ourselves and for others.