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MINISTER CREAN: Thank you very much, Neil. It is a pleasure to finally get here and this has been my first visit to Brazil and I came for more than half a day, that's true. I came for three days but all of them turned out to be a [public] holiday in one way or another, so I came here for the holidays but not on a holiday.

Yesterday we went to Brasilia. Funnily enough, I remarked to Celso Amorim yesterday as we happened to be there on the 50th anniversary of the city of Brasilia that my father came on a parliamentary delegation in 1958 to Brazil and they went to Brasilia as it was being constructed. So I said to Celso "I feel as though I have been part of your continuity in all that time." So, even though it has taken a long time to come here and reestablish the connection, it is very well worth it.

I thought that I won't go to all the discussions we had yesterday with Celso but I am happy to answer any questions about them. The main purpose of talking with him was how we get the Doha round and the world trade round going. He and ourselves have been working very closely to try and achieve that sort of an outcome.

We also interestingly talked about the possibility, the strong possibility now, of a regional trade agreement between Australia, New Zealand and Mercosur. In Uruguay we had a good meeting with senior officials to try and progress this and whilst we are not blindsided to the difficulties in terms of engaging with the four Mercosur countries, and if Venezuela comes in, it may become more difficult.

The fact is that each of the four countries has expressed their own strength of view about it, most importantly Argentina and yesterday Brazil. It was really Celso's suggestion to us when he came to Australia in 2008. At that stage New Zealand was not interested. Now New Zealand is and I just report that because I think the regional dimension of these agreements is going to be important and I'll come to the reason why in a minute.

The other thing that was very interesting is that they are keen to move more quickly now to finalise the Plan of Action for Enhanced Bilateral Relations between the two countries. We'd hoped that our Prime Minister could have come last year and this year with that disarmament conference but because of the health debate back home he wasn't able to come last week. They're still keen to do it and we are looking for opportunities to secure it perhaps in the margins of the G20 meeting, again a forum in which both leaders share a strong interest and commitment.

But why is the enhanced cooperation agreement so important? I think because the realisation by us for a long time that what's been important to us in terms of our economic performance is not just continuing to drive the argument for trade liberalisation but to do it across all sectors, not just agriculture but manufacturing and services. Services in particular because that is a strong field for us and there are a number of you sitting around this table that know that, whether it is banking, whether it is the technology, the software, those sort of things.

Yet there is no point opening markets unless your economy is competitive enough to take advantage of them. There is the push for structural reform and microeconomic reform and what drives competitiveness within the country and we've been strong advocates of that twin pillars approach for some time. Given the global financial crisis and given the prior perception there was in the Brazil-Australia relationship - could it work because we compete with each other, don't we? We're competitors in iron ore, we're competitors in agricultural produce.

The argument now, much more, is that coming out of the global financial crisis, what is it that are the major challenges to all countries in the world? It's food security, energy and resource security, the issue of water in the context of that food security debate and it's skills development because as we continue to move forward and develop... it's the skill shortage that could be an important constraint. I know in our country it is particularly because of the strength of the resource sector.

So rather than looking at the issues in which we compete, what can we do together to tackle the market opportunities that really have the deficits in those areas where we collectively have the surpluses? Take mining and resources for instance. We don't trade much in terms of these commodities. We compete. We sell a lot of the metallurgical coal because of the shortage here but Brazil has huge untapped resources in gas and oil. Australia's competitive advantage, not it's comparative advantage because we've got the stuff in the ground, but our competitive advantage is that we are the most efficient extractor, the most efficient distributor and the safest of the mining operations, the commitment to rehabilitation and the ability to deal with indigenous communities in the context of competing land claims. So it's the services we can export and it's the investment that we can make in a country like Brazil that is looking for the way in which it can unlock those opportunities.

I spoke yesterday with Celso about within this enhancement agreement seriously looking at whether we can do something more creative, more engaging, a MOU or whatever, in the field of resources and energy. The presence that we've got here of Pacific Hydro in the renewable energy space and given the strength of both economies in the concept of hydro power, the original renewable energy, the extension into the fields of wind and alternatives. The cooperation in the technology about sequestration, both economies are still as dependent as they are and will be on coal. We've got to come to grips with the question of the sequestration, the carbon capture storage.

So in the energy space it's the combination of the existing and the potential with the new frontier which is renewable energy. It’s why we've got the renewable energy mission here in Latin America. We've been to Argentina and now here and we've really been working with both countries to try on the same principle to overcome the common challenge whatever the difference may be with the BRICs and the BASICs on the climate change debate. It was interesting that Celso said yesterday he did not think Brazil and Australia were that far apart on that front and that was encouraging. We do share the common knowledge that we've got to go mitigation and adaption so that the technological and creative solutions is really a good space to be.

Similarly with the biofuels debate and I remember there was a delegation that came to Australia 5 years ago when I was in opposition and your Agriculture Minister, Rodriguez came and I meet him in Canberra. I was struck by the fact that Brazil then was seeking our cooperation to interest the sugar industry in the ethanol debate. We produce ethanol though we don't do it from sugar, we do it from wheat starch. Nevertheless we could use sugar if we can get the industry focused on it.

What also struck me was they were saying their frustration was not that they didn't have a strategy here for expanding ethanol production and using it and all the mandating but if they were to penetrate third markets they needed to convince those markets there was a diversity of supply and they saw Australia as a natural ally. And this was a theme that I came back to yesterday with Celso in terms of the bilateral relationship.

Don't think of us as competing markets and don't think of us even in the areas of complementarity where we simply trade amongst ourselves. Look at the opportunity for us to get into third markets, to penetrate third markets. Whether we get a Mercosur deal or not, Brazil can provide important gateways for others of our product. Significantly, what we can provide for Brazil is important gateways into the Asian markets.

The year before last we concluded a FTA with ASEAN. They are the ten countries of south east Asia. Interestingly a 600 million people market and collectively already before the FTA came into effect, two-way trade between Australia and those ten countries is larger than our two-way trade with China and China is our single biggest trading partner.

So the collective is not just important in terms of its size. It shows what you can do, if you like, these multiple trade agreements that take account of different sensitivities within different markets and different stages of economic development. For us, it's possible to do an agreement with Mercosur that recognises those principles because we've done it with ASEAN. Also the ASEAN market opens up important opportunities in for countries like Brazil that decide to make the investment in Australia. Already Vale is and Petrobras is.

Interestingly, you look at this economy and investment flows between the two countries far exceed the trade flows. Investment between the two countries is $4 billion, roughly $2 billion a piece. Trade between the two countries is roughly about $1.5 billion so I think that also says something about where the trade relationships are headed to in the future. It's not just about goods. It is about the services side and it is significantly about the investment side. What we're trying to do in this modernised framework with Brazil is open up the opportunities for those new areas of trade, the bilateral, but also to encourage creative consideration of the third market opportunities.

Whether it translates into an agreement or not doesn't particularly fuss me. The more successful we are with the strategy it will drive its own dynamic in terms of translating to the framework. The point of raising it here and the reason why it's so important to have these engagements with the commercial sector, the people that actually do business here, is that it is one thing to engage at the government to government level, but you're the ones on the ground who have to try and find the business to business engagement and I'll be interested in your views as to what that is like. The truth is, what is going to drive the relationship strongest is the businesses and governments to interact and to have the government more reflective of what the businesses need.

That can only happen if we foster not just the strengthened engagement and the meetings and discussion at the ministerial level but if that gets better informed by what the commercial interests need. That's the purpose of the visit and we'll be going down to Embraer today to look at their operations and then we've got some important engagements with Brazilian interests here including the sugar industry tomorrow and the financial services sector as well.

I am very pleased to be here and I look forward to your input as to what we should be seeking to focus on and I hope I have given you something of a framework in which you at least understand the way we're approaching it and by the way, this is the fifth country in the final leg of a two week visit the Latin America which started in Mexico and then went to Chile, Argentina, Uruguay for the Cairns Group meeting and also for the Mercosur discussion here in Brazil.

TRADE COMMISSIONER GREG WALLIS: Thank you very much, Minister and thank you everyone for coming along this morning and listening to this presentation to provide your input. This event was actually oversubscribed which I am very pleased to say. It demonstrates a lot of the interest the Australian businesses that are here have in giving their views and talking to the Minister.

Please feel free to provide your input and let's make this as beneficial as possible. We want to take away as much as we can as to your views as to what you can do and what potentially the Government can do to make opportunities for business here. In terms of the format, I'd ask that you to briefly introduce yourself and address your question to the Minister.

MR ARGAR: Mark Argar from Pacific Hydro, Minister. I could start with a comment as always. I have been here for 5 years now in Brazil. I must say my view and from listening to people from New York and London and other parts of the world both directly at international fora and sitting on aeroplanes, which I think is one of the greatest places to talk to people, is that Brazil and its potential - the realisation of its potential is a very hot topic and I'm wondering if that message is getting back to Australia very loud and clear.

Recently I flew back from Australia and I sat next to different people. The plane was full of people from around the world coming to Brazil because of Petrobras and the mining sector, coming to Brazil to share in the abundance and potential value of the resource and agriculture sector. I wondered to myself whether that same sense of enthusiasm was infusing Australia, and if it was, how well we can direct that into real action to get Australia and Brazil engaging more?

MINISTER CREAN: There is that interest, but interestingly enough I think the problem that you describe - that perception about Brazil - can very much be said about Australia. That we know the diversity of Australian capacity, the rest of the world that deals with us knows it, but the more general world doesn't. The interesting stuff that comes from the studies that are undertaken to test the feasibility of FTAs, for example, really come to the conclusion that there is little awareness by each side of the agreement party about the full potential of the other.

So, I think both countries have a task ahead of them in terms of promoting that diversity. In part, what we're doing and will be launching in the next month or so is a Brand Australia notion that seeks to present Australia not just as a nice destination to come and have a holiday but a good place to do business and the strength of its skill and research base. All of those soft infrastructure dimensions, whatever we do, we excel in and people are surprised to see us doing it because of our size. I think in many sorts of ways what this highlights as much as the problem between the two countries, is that we are so similar in many ways. You look at the size of the land mass and we cover everything. Brazil is the fifth largest country in the world and we're the sixth largest but you go from the tropics to the sub-temperates. You've got a diversity of industry but Brazil has a much bigger population. The more you look at the layout of Brasilia, it is very much like Canberra but it's got its own uniqueness to it and if that argument is right then the ability to accommodate urban design, livability, all those sorts of things, it's a huge opportunity.

I know Ronaldo has been looking at this to get engaged in the Olympics and World Cup, the design of the structures because Australia's been very successful not just on the sporting field but also building sporting fields or designing sporting stadia. For example the cube in the Beijing Olympics, the construction of the London stadium, the security and the ticketing so it's the services that go with sport again. It comes back to the point it is not just the services sector that is strong, it's agriculture, whether it's water and food productivity, it is in so many of the services.

In so far as the financial services sector is concerned, the other great brand that Australia has is it’s a developed country that has a banking system that didn't collapse, who did not get exposed in terms of the sub-primes, who find that right mix of regulation and openness and this is something that the G20 is grappling with, so in many senses it is exporting the platform not just the service.

I really think in an economy like Brazil, that also weathered the economic storm and is back into a trajectory, our ability to interest them in how we have got that model right not just to get a presence of the retail banking but innovation in the infrastructure development, the public-private partnerships, the infrastructure bonds in wealth management, the funds under management. Australia is the largest funds under management in the Asia-Pacific region but it is the fourth largest in the world. And how did we develop it? We developed it because we introduced a system of compulsory superannuation. That's how we did it and why did we introduce a compulsory superannuation scheme? Because we did it as a wage trade off with the trade union movement in the 80s to get inflation under control and lock in low interest rates.

For the last 25 years we've had 1 year of recession but inflation has been under control. Before I came into parliament I was the head of the trade union movement. I was part of the negotiations that did that trade off to make us a more competitive country and to link wages to productivity movements not to inflation movements.

We got other spin offs in being creative about the way we did it so in the whole gamete of financial services Australia is in a good position in a way I think Brazil also is looking to develop and needs to develop, going forward on its trajectory in terms of size, in not just land, in terms of size in the global economy and GDP.

I think we have a reasonable awareness about Brazil but I think it could be better. How do we improve it? We do delegations like this both ways and try and get the mix of interests. It really is for organisations through your chambers etc that tries to not just bring down the obvious teams but to link it creatively to where the synergies and the connects are.

Just to give an example, in the context of China, China in the next 20 years will have to house 300 million people. It is incredible and the biggest urban development in the world in the next 20 years. That is a huge opportunity for urban design and construction. But you can't build things like that unless you've got the logistics and retailing that actually deliver the services that make it happen.

It seems to me that these are spaces that countries that have synergies in it and have good reputation in it ought to be looking to jointly penetrate those markets or else the developments. Brazil is going to have to seriously look at making sure the investments it puts into its World Cup and its Olympic structures have usage and functionality post the events. You can't spend billions of dollars constructing these things if they don't have lasting events. Can you use them not just as sporting facilities but as living communities and use it to sensibly grow this service?

These are the challenges and I think we should focus to branch out in specific ways. Now that has taken a long time to say the answer to your question but I think it is a good question because it sums up lack of understanding, but once you start to focus on it you realise how much we have in common.

ENDS

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