Pathways to Commercial Success in Latin America

On Tuesday 14 December, the Australia–Latin America Business Forum was hosted by the Australian Disputes Centre as a hybrid event (in Sydney and online). Speakers from Australia and Latin America highlighted the growing trade and investment between Australia and Latin America and shared valuable insights into challenges confronting cross-border trade and tips on how to manage these business risks.

His Excellency Mr Eduardo Patricio Peña Haller, Ambassador of Mexico highlighted the importance of Latin America for Australian trade. The region has a population of around 654 million and produces 6.7% of global GDP. The region’s two biggest economies are Brazil and Mexico. Brazil is the 9th largest economy globally and will be the 5th largest by 2050.  Mexico is the 15th largest economy globally and will be the 7th largest by 2050. Mexico is Australia’s leading trade partner in Latin America, with trade totalling A$3.294 billion in 2020.

Both Mexico and Australia are part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which will provide further trade opportunities for Australian and Mexican businesses. Mr Haller reflected that Australia’s trade focus should extend beyond the Indo-Pacific to include the Pacific coast of Latin America, and the potential free trade agreement between Australia and the Pacific Alliance (comprising Chile, Colombia, Mexico, and Peru) would further strengthen trade with Latin America.

Kate Brown de Vejar, DLA Piper Global Co-chair of International Arbitration, Mexico City spoke to three key areas that she found frequently give rise to disputes in Latin America. First, in relation to legal and regulatory, disputes arise when there is a difference between black letter law and how the laws are applied in practice. This can be mitigated by having appropriate on-the-ground advice and establishing contact with the Australian embassy, Austrade representative, and business councils/chambers of commerce. The second area highlighted by Kate is cultural and social noting the importance of undertaking community outreach and understanding local powerbrokers. The last area Kate discussed is political issues, highlighting a general shift to the left in Latam politics, constant changes to government policies and the election of new politicians with different priorities regularly presenting challenges to businesses.

Gonzalo Vial, Dispute Resolution Practitioner and Arbitrator, Chile/UK shared his experience with energy disputes and put forward helpful tips for managing disputes relating to power purchase agreements. Electricity markets can be affected by unexpected events such as geopolitical events that affect power purchase agreements, with the affected parties likely to try to challenge or terminate the contract. Gonzalo highlighted the advisability of direct negotiations to avoid lengthy litigation. Agreements that include hardship or force majeure clauses need to be clear and well-drafted; ensuring ambiguous clauses are avoided as they may be challenged in litigation or arbitration.

Deborah Lockhart, CEO Australian Disputes Centre highlighted the need for gaining and maintaining a Social License to Operate and the need more effective negotiation. Deborah introduced the ADC Partnership Process for negotiation, which the ADC has developed as an actionable framework for cross-cultural and multiparty negotiation and decision-making. ‘ADC’ being Authority, Decision-making and Collaboration.

Mauricio Panizo (Peruvian Lawyer and NMAS Mediator) taking up Deborah Lockhart’s ADC framework, Mauricio shared a case study on the community engagement challenges for mining projects in Peru. Focussing on Las Bambas mine in Peru, Maurcio walked through the site’s history, including multiple community protests due to the perceived lack of benefit the mine provides to the community.

Richard Edwards (DLA Piper Partner, Perth) spoke about the challenges of conducting business in Latin America: the linguistic and cultural diversity of this large geographic region, the need to understand the local political systems, community engagement/ESG, and choosing appropriate dispute resolution processes.