Opportunities for Cross-Investments Between Australia and Colombia
Craig Dempsey is the CEO and Co-Founder of Biz Latin Hub, a company offers back office services that help both local and foreign companies establish and operate their businesses successfully in Latin America. He is a professional mechanical engineer, previously served as an Australian military officer, and worked mining executive with experience in various countries, including Colombia, Peru, Canada, and Australia.
Colombia is actively attracting international attention with its growing market and many opportunities for investment and trade. In particular, Australian-Colombian relations are on the rise. The Australian Department of Foreign Affairs and Trade (DFAT) cites at least 87 Australian businesses currently operating in Colombia.
Diplomatic relations between Colombia and Australia are nothing new. The first Australian ambassador to Colombia was appointed in 1976. Colombia then opened its first embassy in Canberra in 1987, and now has a total of five embassies throughout Australia. Both countries joined the United Nations in 1945 as part of the original charter and were part of the General Agreement on Tariffs and Trade (GATT), the precursor to the World Trade Organization (WTO), which they both joined in 1995.
In recent years, mutual interest in trade and investment has increased, and the countries are seeking opportunities to strengthen their relations. In 2016, trade between Colombia and Australia totaled US$682 million. Since then, they have sought new opportunities for collaboration. Australia entered into a Trade Alliance with Colombia and several other Latin American countries in 2017, and is currently working to further strengthen that alliance with ongoing negotiations for an Australia-Pacific Alliance Free Trade Association.
Australia established a diplomatic presence in Colombia for the first time in 2017, opening an embassy in Bogotá, with current ambassador, Sophie Davies. In 2018, Colombia was invited to join the Organization for Economic Cooperation and Development (OECD), of which Australia is already a member. Just last year, the two countries held an Inaugural Australia-Colombia dialogue in Bogotá, bringing together diplomats, scholars, and leading industry figures to discuss seven potential areas for expanding collaboration and trade.
Investment opportunities between Colombia and Australia are expanding in several industries. Here’s a more in-depth look at the primary areas of opportunity between the two countries, including mining, agriculture, education, and technology.
Mining is the primary export industry for both Australia and Colombia. Australia’s top four exports are iron ore, coal briquettes, gold, and petroleum gas, which also constitute four of Colombia’s top five mined products. In addition to hydrocarbons and gold, Colombia is the world’s largest producer of emeralds. This industry alignment led to several agreements between the two countries to encourage bilateral cooperation, including one in the mining industry in 2015 and another in the hydrocarbons industry in 2016.
There are several Australian mining companies already operating in the sector: South32, which mines ferronickel in northern Colombia; Orica provides mining services and operates an explosives factory in Bogotá; and Fortescue Metals Group, who acquired over 50 exploratory properties in Colombia in 2019.
Other Australian mining companies interested in expanding their businesses should look to Colombia. Not only do the countries share mining interests, but the Colombian government encourages foreign investment in the national mining industry. In addition to permitting foreign ownership of mining companies and titles, Colombia’s mining industry offers Australian companies a large market for mining machinery and other products, as well as related services, like design, management, security, and training assistance.
Both countries also face challenges in the mining industries. Innovative solutions to environmental concerns and land rights debates are much needed in both countries. By working together, the two countries could develop comprehensive policies, cutting-edge technology, and sustainable practices that benefit everyone: mining industry investors, natural environments, and local communities.
After mining activity, the main exports for both countries are agricultural products, with Colombia producing coffee and flowers and Australia producing wheat. However, Colombia’s land is underutilized, with two-thirds of the territory remaining unused. Colombia’s geographical terrain also makes connectivity and product transport difficult and expensive; however, technological developments and political shifts could help reach those areas.
There is a significant opportunity for new players and business opportunities in the agricultural technology, or agtech, market. Worldwide agtech investment reached US$17 billion last year, up 43% from 2018. Australia is home to several new agtech companies, including Farmapp, software that helps farmers with pest management, and Creso Pharma, a medicinal cannabis agtech company. Other companies are making strides in crop monitoring, aquaculture, field operations, and livestock monitoring. Partnerships between Australian and Colombian farmers and companies and could provide solutions that support family-owned land plots, sustainable practices, and help expand accessibility tools and systems throughout Colombia.
Another area for potential investment and collaboration is the tech industry. As a result of Colombia’s increasing connectivity and shifts toward online consumption, the country has become an attractive market for tech companies. Healthtech company, Cochlear, is one of a few Australian companies already operating in the Colombian market, and biotech company CSL Behring has an office in Bogotá.
The current Colombian administration is eager to promote economic integration on an international level, opening the door for Australian companies to expand in Colombia’s growing economy.
Education is the primary service export for Australia, with the value of education services exported to foreign students predicted to reach $35 billion AU by 2025. In 2018, Colombia sent the third highest number of foreign exchange students to Australia: 32 Colombians participated in an exchange at Australian educational institutions like the University of Queensland and the University of Newcastle Australia.
Part of the reason Australia is popular with Colombians for educational exchanges is because the student visa allows students to work part-time. Between the part-time professional experiences and educational exchange programs, students create many connections, increasing the opportunities for business collaboration. Organizations like Somos 21 also work with exchange students to strengthen business ties between Australian and Latin American young professionals through their events and digital platform.
Opportunities for mutual investment and collaboration
Despite much industry overlap, Australia still makes up only 0.1% of Colombian imports and exports, representing a significant market gap that businesses are beginning to address. In combination with organizations like the Australia Colombia Business Council, which promotes opportunities to connect companies, policymakers, and industry experts in the two countries, there is no question that the coming years will see mutual investment and collaboration between Australia and Colombia grow.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.