Going Global-South America
May 14, 2018
In the first of a new Chambers Ireland series looking at various overseas markets and the opportunities they pose for Irish business, Emma Kerins, EU and International Affairs Manager, assesses the potential of the Mercosur region.
With Brexit on the horizon, Chambers Ireland has been focused on encouraging Irish companies to diversify the markets they trade in as a way of mitigating against some of the potential risks of an UK exit from the single market. However, even if Brexit was not a threat to Irish exporters, the argument for market diversification remains strong. By 2020, 90 per cent of world GDP growth is expected to come from outside the EU, so if Irish exporters are to remain competitive, finding a foothold in these markets must be a priority.
Promoting awareness of the benefits of trade and sharing information on how Irish business can prosper from new opportunities will be a big part of how Chambers can help Irish businesses prepare for Brexit and increase their global competitiveness.
One such region of interest to Irish business in future years will be South America, specifically the Mercosur region which comprises Argentina, Brazil, Paraguay and Uruguay. This region has a population of 260 million consumers and is the world’s 7th largest economy with an annual GDP of €2.2 trillion. According to EU statistics, a significant trade relationship between the two regions already exists – in 2016 businesses in the EU exported €42 billion in goods to Mercosur countries while in 2015 they exported €22bn in services.
Mercosur countries are also major investors in the EU, with stocks of €115bn in 2014. The EU is currently negotiating a free trade deal with these four countries, with the objective of removing barriers – especially those that impact SMEs – making it easier to export more, strengthening people’s rights at work, improving environmental protection, encouraging companies to act responsibly, and upholding high food safety standards.
Negotiations for a trade deal, which were re-launched in 2016, are progressing with hope that a deal between the two regions might be reached later this year. With potential for an even closer trading relationship between the EU and South America, what opportunities can Irish businesses hope to benefit from as part of the trade deal?
Speaking to Chambers Ireland, the Brazilian Ambassador to Ireland Eliana Zugaib says the Mercosur-EU agreement would provide a renewed dynamism to bilateral trade and allow for a qualitative jump in the integration of the production chains of both partners, which would strengthen the overall competitiveness of both regions in the global economy and increase their appeal as investment destinations. It is the first wide range comprehensive deal ever negotiated by the Mercosur bloc with developed countries. Therefore, European companies would benefit from a first-mover advantage in areas such as industrial goods, services, public procurement and intellectual property, in an emerging and vibrant market of sizeable dimensions and with growing purchasing power. In terms of GDP, Mercosur is second only to Japan when compared to other EU negotiating partners.
Ambassador Zugaib adds that as far as Brazil is concerned economic indicators confirm that the country has recovered from the recession and has entered a new cycle of opportunities for foreign investment and trade. With the agreement in place, the services sector would also present further opportunities for European countries, considering that services correspond to more than 70 per cent of Brazil’s GDP.
“Since I arrived in Ireland last September, I have met with CEOs of some of the top Irish companies with a presence in Brazil and they all expressed satisfaction with their Brazilian operations and some intend to invest further in the country,” says Zugaib. “Trade between Brazil and Ireland has grown by 20 per cent in 2017 compared to the previous year, and there is great potential for further growth. We, at the Embassy of Brazil in Ireland, aim to establish a closer relationship with the Irish business community willing to do business in our country, including through building partnerships in innovation and technology fields. Brazil offers various opportunities to be explored by Irish companies that wish to expand to larger markets.”
Elsewhere in Mercosur, Argentina is a market with huge potential and is seeking, in its government’s words, to be “intelligently reinserted” to worldwide trade and commerce. President Mauricio Macri came into power in December 2015 and immediately introduced measures designed to improve its economic and investment climate and facilitate a comeback to international markets. The Irish embassy in Argentina has been working to promote the region as a place in which Ireland can invest. Irish companies are strongly encouraged to look at the many opportunities that Argentina presents and to contact the embassy to learn about how to get started.
In 2017, Argentina was Ireland’s third largest merchandise trading partner in Latin American and the Caribbean, after Mexico and Brazil, with total bilateral goods trade valued at 2309 million. Speaking to Chambers Ireland, the Chargé d’Affairs of the Irish Embassy in Argentina, Dermot Fitzpatrick, notes that 500,000 Argentines claim Irish heritage, by far the largest Diaspora community outside the English speaking world.
“This immigration largely ceased prior to the First World War, meaning these are now mostly fourth or fifth generation, but the connection with Ireland still exists strongly, and it can be utilised to make contacts in the commercial arena,” he says.
“There is unquestionably room for this trade to expand. The top exported commodities from Ireland were medical and pharmaceutical products, and office machines and automatic data processing machines, while top imports from Argentina were animal feed and essential oils. In the event of an EU-Mercosur trade agreement, trade would become progressively easier and frictionless, making trade relations more dynamic.
“In this scenario, Irish companies might consider being one step ahead, and begin the groundwork of positioning themselves in the mind of new potential buyers and trade partners. Irish companies are encouraged to contact the embassy for more information, market intelligence reports, and for access to our network of contacts.”
Getting Down to Business
Want to learn more about how to break into markets in South America? Why not start with some of the embassy contacts listed below.
Irish Embassy in Argentina
Nebraska Villapol, Commercial Attaché
T: +54 11 4808 5700
Embassy of Brazil in Ireland
T: 01 416 1216