Seminar, Norges Eksportråd, 03.02.97

"Investment opportunities in Latin America and the Caribbean."

State Secretary Nils A. Røhne

Chairman, Ladies and Gentlemen,

It is truly an honour and a pleasure for me to address this seminar on investment opportunities in Latin America and the Caribbean.

Norway has for a long time been an internationally oriented nation. Our economy is extremely open and dependent on trade with the outside world. However, our export markets and import sources have been, and still are, very much concentrated in the OECD area.

The increasing globalization of trade and investment flows, and the growing market potential i many developing countries, has, however, increased the interest for pursuing business opportunities in new markets, especially in Eastern Europe and Asia, and to some degree also in Latin America.

Three years ago, the Norwegian Government initiated, in collaboration with the business community, a strategic plan to increase exports to and investments in Asia. Although the plan has been operational only for a relatively short period, we have indeed been encouraged by the results so far. As a consequence, last year we set out to take a closer look at another region, namely Latin America and the Caribbean.

It is an understatement to conclude that the Norwegian presence in Latin America so far has been limited. Political contacts have been limited, with the notable exception of efforts to contribute to a peaceful development in Central America. Similarily, Norwegian development assistance to the region has for the most part been directed towards Central America.

Norwegian exports to Latin America as a whole constitutes only 2% of our total exports. With a few exceptions, Norwegian companies have not been very active in the region. It is estimated that we have only around 70 cases where a Norwegian company is physically present in the whole region.

Looking at Latin America today, we are encouraged by the political and economic changes that have swept across the region in recent years. The combination of governments which have come to power through democratic processes and the implementation of market oriented economic reforms, may change what a commentator in The Economist in 1989 described as the race in Latin-America in the 1990s between economic detoriation and political progress, to a situation where economic growth and political progress strengthen each other.

The political and economic transformation has created a new and more attractive basis for foreign investment, and capital is again flowing to the region. Prospects for sustained economic growth are looking relatively good, and Norwegian companies are eager to play a part.

At the same time, of course, it is clearly realized that the Latin American market presents certain challenges to newcomers. It is a difficult market. The business culture and business environment is unfamiliar, and the risk factors should not be underestimated. It is in this kind of environment where governmental support and assistance is of particular importance.

The existence of market opportunities and a low level of existing business relations should imply a clear potential for increased trade. The combination of an untapped potential on the one hand, and the very real difficulties and challenges facing newcomers in the market on the other hand, together constitutes the rationale behind the decision to develop a Strategic Plan for increased exports to and investments in Latin America.

The plan was formally launched last Thursday by the Minister of Trade and Industry at a seminar held here in Oslo. While we expected an attendance of may be 60 or 70 people, it turned out that we had trouble finding a seat for all of the 180 or so people present. Both the business community, as well as governmental institutions, research institutions, non-governmental organizations and media were well represented.

The Plan is firmly placed within the context of the Government's overall strategy to secure economic growth, employment and competitiveness. It is also stated that the implementation of the plan shall take place within the framework of Norway's overall foreign policy, including our concern for democratic values and human rights, as well as the need to secure a sustainable development process.

The Plan defines a set of objectives, of which the most important are:

• to secure competitive access to markets and financial mechanisms,
• to develop a positive profile of Norway,
• to stimulate and empower new companies to engage themselves in the region,
• and to establish long term relations through i.e. political contacts and the exchange of culture, information, technology and research, thus creating a basis for commercial cooperation.

Furthermore, four business sectors have been singled out for particular attention in the coming two year period:

• the maritime sector,
• the petroleum sector,
• hydro power,
• and finally: fish and fish products.

Working groups will be established under the leadership of the Norwegian Trade Council in order to develop concrete plans of action for each of these sectors. Company representatives will participate in these groups in order to secure that the plans reflect the real interests and needs of the business community. The establishment of this direct dialogue between the government agencies and the companie is may be the most important critical success factor involved in this Plan.

Another critical success factor is the coordination between the various governmental agencies. Many agencies are involved in activities relevant for the promotion of export and internationalization. This some times results in a lot of horsemen on different horses riding in all directions. What we hope to achieve through this cooperative process that this Plan basically is all about, is to establish at least a minimum level of consensus concerning objectives and priorities, as well as a much better coordination of the specific activities undertaken by the various agencies.

The term that we like to use in order to describe this modus operandi is "Team Norway". We want to establish a national team for the promotion of exports and internationalization, or in other words, a partnership between the various governmental agencies and the business community.

It should be noted that the Plan do not envision any new financial mechanisms or any other changes in the established division of labor between the various governmental agencies involved. The focus is on how to obtain a more efficient use of existing resources, whether in terms of financial or institutional resources. This may of course disappoint a few people, and may mislead some to think that this is no more than hot air.

Our response to this question is first of all to refer to the positive experience from the Asia plan, which is based on the same approach and the same main principles. One of these basic principles, is the principle of "customer orientation" - the customer of course being the business community. As the Minister said on Thursday, the Plan represents an invitation to the business community to come forward and participate constructively in a process where the interests and needs of the companies and enterprises is the focus of attention.

I would also like to make a comment concerning the view that is often heard, and that is the complaint that what is needed is better financial instruments.

First of all, I am confident that available export credit and guarantee facilities are generally competitive. What this often heard complaint boils down to in most cases, is the question of available "soft" financing, or in other words, the use of more aid money to support business activities. That is of course a legitimate view, but it is important to not forget the particular political context of this question in Norway. The relatively restricted attitude towards such use of development assistance is a political fact that should be taken into account in order to inject a touch of realism into the discussion of this subject.

The second point I would like to make in this context, is that I feel that this "what-we-need-is-more-money-attitude" is way too defensive. One of the lecturers on Thursday gave a comprehensive overview of financing mechanisms available. His implicit message, which was very clearly demonstrated, was that funds are available. A vast number of various facilities exist, not the least through multilateral institutions, both on the Nordic level, the Washington based institutions, as well as institiutions in the region itself. What may be missing from the picture, is information about the various facilities available, and the skill needed to put together packages of finance from various sources. Clearly, there is a need for both competence building measures, as well as more financial engineering expertise. Anyway, just giving up because there's no more tax-payers money coming our way, will bring us nowhere.

This brings me naturally over to the reason why we are here today. As you know, Norway has always been a strong supporter of the multilateral system in general. In this system, multilateral development banks are important pillars in fostering social and economic development in their borrowing countries.

It is now widely acknowledged that the private sector has to be the engine of growth of developing, as well as developed, countries. We have followed with great interest how the multilateral development banks have shifted from being mainly sources of finances for public projects, to increasingly also include financing of private ventures.

I would like, however, to use this opportunity to promote a particular point of view. Again, I will refer to some of the remarks made in the seminar on Thursday. Several speakers made the point, that in spite of impressing economic reform programs in most Latin American countries, the quality of the institutional and legal framework relevant for commercial activity, is far from satisfactory. Indeed, it can be argued that this problem may be one of the main obstacles for achieving sustainable and satisfactory growth rates. This is why it has been argued from the Norwegian side from time to time, and I repeat it also in this context, that we hope that the mulitilateral financial institutions will focus more of their attention in the future on this particular issue.

Anyway, we are very pleased to have representatives of the private sector "windows" of the Washington based development banks with us today. We are looking forward to learning more about their operations. And not the least, we are eager to see how Norwegian companies can team up with the IDB, the IIC, the IFC and MIGA to promote joint projects in Latin America.

While it may be to stretch the truth a little bit to claim that this seminar is part of the follow-up of the Latin America Plan, as the initiative to this seminar was taken independently of the work related to the Plan itself, I do not hesitate to state for a fact that this seminar is definitely in accordance with the spirit of the Plan.

Thank you for your attention.