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Foreign Affairs, Defence and Trade References Committee
29/10/2015
Australia's relationship with Mexico

DEL RIO, Dr Victor Federico, President, Australia, New Zealand, Mexico Chamber of Commerce & Industry

[09:31]

Evidence was taken via teleconference—

CHAIR: Welcome. I advise you that, as you are providing evidence from a foreign jurisdiction, your evidence cannot be protected by parliamentary privilege. However, as you are giving evidence voluntarily, you may at any time make a request to be heard in camera if you have concerns your evidence may cause you harm. I invite you to make a brief opening statement before we go to questions.

Dr Del Rio : Firstly, I would like to thank members of the committee for the opportunity they have given to ANZMEX to present a number of initiatives that are going to move the relationship of Australia and Mexico forward. Secondly, I would like to recognise that these initiatives are the work of not one person but a number of people that are members of ANZMEX and all the people who are not members of ANZMEX.

I would like to highlight the contribution of Dr Elizabeth Katz from RMIT, Dr Barry Carr from La Trobe University and a number of experts in Mexico and in Australia that have helped us to produce these initiatives. Generally speaking, I think there are a number of opportunities we have been focusing on that we believe are catalytic, that can speed up the relationship that Mexico and Australia. Later in the conversation with you, Mr Chairman, I will provide more specific evidence in relation to that.

Senator BACK: Thank you very much for your submission and for appearing. Can I start with an issue you have raised in terms of research collaboration between Australia and Mexico. Can you identify for the committee those areas that you think are the highest priority for research collaboration, where Australian research institutions may be able to work and assist Mexican colleagues and where Mexican institutions could perhaps enhance Australian research activities.

Dr Del Rio : We can have a beautiful marriage between Australia and Mexico. Why? Because Australia, apart from having fantastic scientists, have an important scientific infrastructure. Mexico has many talented scientists, but they do not have the same level of infrastructure that Australia can offer. One example—it is one of the examples we produce in one of the initiatives—is the synchrotron. Mexico does not have a synchrotron. There are a number of different studies that can be undertaken in the synchrotron that would be of great benefit for Mexico: for example, NDI identification of the better and more nutritious varieties of corn. For Mexicans corn is a staple food.

Senator BACK: Yes, of course.

Dr Del Rio : Australia has done fantastic research in relation to wheat. Some techniques can be translated into corn.

Senator BACK: From wheat to corn?

Dr Del Rio : Correct. We have just been talking about Gruma and Mission Foods. The main product that Gruma produces is tortilla products that are made of corn. In relation to Gruma, I would like to add that we have been receiving fantastic support from the owner of Gruma, Juan Gonzalez, and all his team in Mexico and in Australia.

I think that there are a number of research types that would be conducive to a firmer and stronger relationship—for example, cancer, including breast cancer. The synchrotron at the moment can identify with 99.9 per cent accuracy whether a cancer is a malignant or benign type of cancer. That would reduce tremendously the number of false positives that we register at the moment with the current technology.

Professor Snow Barlow from Melbourne university, during the Australian Latin America Dialogue in 2010, stressed that there are incredible areas in the agricultural sector where we can complement each other. In the case of China, the demand of China is higher than all the production that exists at this moment in the world. In many, many areas, we can collaborate rather than compete. That was the topic of the conference in 2010—these types of projects. Then we can have other types of projects. For example, later on we hope that we are going to have the Minister of Innovation, Science and Technology from the state of Morelos, where they have around 30 research centres. It is a very rich state in terms of technological research, and many of those centres are doing very similar research to what Australia is doing at the moment, and the landscape for collaboration is enormous.

Senator BACK: I understand that there is a very active industry in Mexico associated with pharmaceutical development and production. Do you see a scope there for further collaboration between Mexican and Australian pharmaceutical and related businesses?

Dr Del Rio : Yes, in many, many areas—for example, in the clinical trials. Australia has a more efficient way of approving medicines and drugs. There is a possibility that we can collaborate not just in the research but also in the process that organisations in Mexico and Australia have in order to get the approval for those medications as soon as possible, a benefit for society and the world, not just Mexico and Australia.

Senator BACK: On a broader question, documents and submissions that have been presented to the committee indicate that Mexico has the capacity to move from being the 14th or 15th country in the world economically to being in the top 10 and, indeed, even to move further up that scale towards 5 or 6 by 2050, which is only 35 years away. Can you assist the committee by giving us some understanding as to where you think the Mexican economy can progress so tremendously in that short time frame.

Dr Del Rio : I was very lucky, because I have had fantastic advice in the last three or four days. I attended the business summit in Guadalajara, and the top people from industry and a variety of politicians discussed precisely the topic you would now like me to move further.

There are two main issues that Mexico has in order to be able to push the economy forward. One is corruption, and most of the interpreters at the meeting demanded that the government has to take stronger action to solve the corruption issue. For example, we were lucky that we had Ricardo Anaya, the president of PAN, one of the major parties; we had Carlos Navarrete, the president of PRD; and we had the deputy president of PRI—the three major parties in Mexico. All of them agreed that, within two weeks, they are going to approve major changes—for example, in order to be able to prosecute members of the parliament, in this case the Mexican congress, that have to respond to some accusations of corruption. Corruption is something that is in the mind of every single Mexican. We all agree that something has to be done about it.

The other one is the rule of law. We have to strengthen all institutions in Mexico. Australia can help Mexico to do that because Australia has a very strong judicial system. There are a variety of things that we can see are problems in Mexico but also opportunities to move the relationship forward between Australia and Mexico.

Senator BACK: We have had discussions of the possibility of the Trans-Pacific Partnership. We know that there are benefits in commodities. I was in another Senate hearing, only the other day, to do with the wine industry in Australia. One example at the moment is that our wine producers suffer a tariff of some 15 to 18 per cent against others in the Mexican market. I think even in mining services—from my own state—there are some imposts. Further to what you are explaining to us, can you see where there can be a greater emphasis on provision of services? For example, with the last witness we were talking about the possibility of further collaboration in the VET sector—vocational education and training. Can you give us some idea of where you think there can be a greater collaboration between Australia and Mexico in the services sector?

Dr Del Rio : I think that you have just touched a very important sector—the VET system. I work as a consultant to the World Bank in the Middle East. I am going to mention some examples. I have to be very careful about the information I am going to mention. Australian TAFE colleges were bidding to get a part in the construction of 110 colleges of excellence. What I am going to tell you is private knowledge. I feel comfortable about that because I work on the other side of the fence. What I can tell you is that the Australian VET system is considered one of if not the best in the world. The TAFE colleges that were part of this bidding were at the top of all the colleges that applied from all over the world to get the contract in Saudi Arabia. But they did not get it. I think that there are intrinsically major problems with the VET system in Australia to be able to be exported. I do not think we are entrepreneurs. We do not have the entrepreneurship in our organisations in order to move the agenda forward. For example, we are very happy about receiving students from Latin America in Australia, but that is a very small market. We are talking about people who have got a lot of money and who speak English, when the real market is the market who do not speak English and who have that financial capacity. In order to do that, we need to be in Latin America. But we are not doing it.

I cannot explain it. I have worked with many TAFE colleges in Australia and many universities, and we have not moved forward. There are things in the system that have to be arranged. For example, I taught at a technological institute in Chile, and we taught a double degree in training and assessment, but in order to get the double certification—in this case it was from Victoria University—the process was a little bit burdensome, because they did not believe that we applied the same standards in Latin America as the standards that apply here. Even though I have got the certificate and the diploma and blah blah blah, because we were delivering the course in Spanish, for some reason the authorities in Australia thought that the quality was inferior. There are many issues related to that.

CHAIR: What are the priority areas in which Australia and Mexico should cooperate, or collaborate, in terms of science, manufacturing, agriculture or services? Which is the priority that we should be looking at?

Dr Del Rio : From my point of view, given that the infrastructure in Australia is better than the infrastructure we have in Mexico, there are a variety of disciplines that we can target, but obviously agriculture, water, energy, sustainable fields—

CHAIR: Renewables?

Dr Del Rio : Renewables, yes. Sorry. I think we should be targeting that because we share the same concerns. Everyone is working independently, when we can do more if we work in collaboration. But, in order to do that, we need to do what Mexico is doing with the United States. The United States and Mexico have a science and technology foundation called FUMEC that has been working for many years very successfully. Actually the director of FUMEC, Guillermo Fernandez, came to Australia and he was trying to explore to see whether they could extend the scientific operation using some funds from FUMEC. But, at the time, he did not find a strong level of interest.

CHAIR: You have a close relationship with the United States and you have the North American Free Trade Agreement. How do we fit in? Basically you can get all the science, manufacturing, logistics, agriculture and science that you need from America. Why is Australia important?

Dr Del Rio : I think that Mexico has got the same issue that Australia has. We have all the eggs in the same basket. Eighty per cent of all the exports of Mexico go to the United States. In the case of Australia, it is China and Japan. It is a little bit more complex in Australia because China and Japan are now looking each other in the eyes, and, if there is—and let us hope that there is not—an issue between those two countries, then I will say what Gough Whitlam said: 'God save the Queen, because no-one is going to—'

CHAIR: That is a very good point.

Dr Del Rio : Most countries are trying to diversify their exports, and Australia and the Pacific are one of the main targets to do that.

CHAIR: Much of the comment around the recent free trade agreements that Australia has made with Korea, Japan and, more recently, China, and the forthcoming developments in the TPP, has been about services. But I have not really seen an effective services export. A lot is made about insurance, banking, superannuation and these types of exports. Given that our economy is such a service oriented economy, is the export of services a viable area of interest in Mexico?

Dr Del Rio : Yes, but there are two things. Australian knowledge of China is a lot better than Mexican knowledge of China. Regarding all the required services identified, Mexico can learn from Australia's relationship with China and generate a relationship. In the case of Mexico, knowledge about the United States is probably better in Mexico, because Mexico knows the market better than Australia does. Also, there are 30 million Mexicans living in the United States. Mexico has that connection that Australia, although it is a strong ally of the United States, does not have. Remember that Obama said he won the election thanks to the Hispanic vote, particularly the Mexican vote.

CHAIR: I notice on the sheet we have here that sets out Mexico's principal export destinations that in 2014 you had 80.2 per cent going to the United States.

Dr Del Rio : Yes, correct.

CHAIR: So, is Mexico looking to diversify strategically?

Dr Del Rio : Yes. We know that at some point Mexico has to move also to services, because we have some very strong links with some countries but eventually we are going to lose part of that competitive advantage. In the case of Australia, Mexico received $37,000 million of investment last year. And I think investment from superannuation funds or infrastructure funds from Australia to Mexico will offer an incredible market for a number of different products.

CHAIR: How important is agriculture? We have the Australian Centre for International Agricultural Research, or ACIAR. Are you aware of whether they do any work in Mexico at the moment?

Dr Del Rio : I understand that there are some people who are doing work in Chapingo. The Chapingo university does very important research in agriculture. But I would also like to mention that Mexico is importing coal, and that is an incredible thing for Mexico, because Mexico used to be a coal exporter. I think the opportunities are not just in relation to research in relation to agriculture but also research in relation to basic products.

CHAIR: In the couple of minutes we have left, can you sort of prioritise the two or three greatest areas of potential in Australia's and Mexico's relationship, and the opportunities?

Dr Del Rio : Education is No. 1, but Australia has to be far, far more aggressive. It has to lose the fear of driving the Mercedes Benz they have in the garage and taking it around. And that Mercedes Benz is the educational system and the VET system. Mexico has 60,000 new scholarships, as Victor Perton mentioned earlier. There is no capacity anywhere to supply that level of services. Australia can be one of the many providers. But in order to do that Australia also has to create an infrastructure, and that is why we need some of the initiatives. The Spanish language has to be taught as a priority language in Australia. At the business summit in Guadalajara they had one of the top educational experts from Korea, and he said the success of Korea was due to only one thing: English is compulsory because they see English as a trade language. If people want to do business in China, then Mandarin is compulsory. If Australia wants to do business in Latin America, then Spanish has to be compulsory.

The body of evidence from research says that when people speak the same language the trade follows. And when there are direct flights, as Victor Perton was saying before, within five years the trade between those two cultures trebles. There are other things. We need an evidence base, an institution that can produce policies. We cannot continue to have ad hoc policies. We have to have an independent session that analyses all these things you have mentioned, to say that we can expand our trade in this area, or services in this area, and we can buy products from Mexico in this area. There are no resources, and if we really want to see this expansion of bilateral trade, we need to put more resources into this question.

CHAIR: Is the lack of a direct air service between Mexico and Australia a significant impediment?

Dr Del Rio : I have been almost 40 times to Mexico. This time when I went to Mexico I flew from Sydney to Dallas, and then from Dallas to Mexico, and I had to wait six hours at the airport. It took me around 32 hours to get to where I wanted to go, because I departed from Melbourne. So I think it would help. And it is not just direct flights for passengers; we are talking about cargo, too. This is a possibility. I have talked to experts, and they said that the basic ingredients are there. We understand that it is a commercial decision that has to be taken by the airlines, but the airlines have to be persuaded to do the studies that have to be conducted to be able to see that it is effectively a good commercial decision. We would like to see flights starting in 2018, which is three years from now, from Cancun, because Cancun has the capacity to receive big aeroplanes, and they have the capacity for infrastructure to receive big aeroplanes. And we are trying to get a target of 2022 for having direct flights to Mexico City, because we hope that by then the new Mexican airport will be built and fully operational.

Senator BACK: It is interesting: some years ago I spent a long time trying to convince Emirates that they should start three flights a week between Perth and Dubai, and there are now 14 flights a week between Perth and Dubai, and they are looking to increase that to 21. I congratulate you for the quality of the information you gave us in relation to the possibility and the background work your group did. I can concur: the United States now does not have transit lounges in its airports, so you have to apply for a visa to fly through the United States to go anywhere, including Mexico and in my case Panama, where I go quite often, and I certainly find that to be a difficulty. Has your organisation engaged with either of the major Australian airlines, Virgin or Qantas, with a view to exploring this, and even presenting your data to those airlines?

Dr Del Rio : In time. Actually, there is a person who represents Qantas and we have been trying to talk about this issue. But at the end of the day it is what I call a whole-of-government strategy—something that brings to the table all the airlines, because it is in their own interests to do that. If we do the educational push then we need direct flights. If we do the scientific and technological collaboration, then we need more flights. If we do the Spanish language, we need more flights. If we allow Mexicans to have access to the e-visa and the ETA visa, that is going to accelerate the number of people from Mexico coming to Australia. We will then need more flights. If we have an overall strategy that we could negotiate in the right way, we can have a bright future.

CHAIR: Thank you for your evidence and for your appearance here today. We are having difficulty with the videoconference link for the next witness.

Dr Del Rio : Would it be possible to have Dr Eduardo Ramirez give evidence first, as he is in the same room here with me. You could then connect with Dr Brenda Valderrama Blanco.

CHAIR: Okay.