With the new administration in action, have you become a bit nervous about the U.S. as an export destination? I’ve recently spoken with many companies from around the world. Most of them said that since President Trump’s inauguration, they are unsure of their future because the U.S. is their only or biggest export market, and they now consider themselves at risk.

The ironic thing is that, whether they realized it or not, they always were at risk.

It is essential to diversify your exports and not depend on one market, especially when that market is as big as the U.S.

Diversifying your export markets, and therefore spreading out the risks, should have been a priority right from the start; but now, the pressure is on.

The good news is, there are plenty of other interesting markets elsewhere, especially in Latin America, that offer the opportunity for growth. Like Canada and the U.S., Latin America is a continent of immigrants, and it offers the opportunity to create scale. This especially applies to Brazil, which has more than 200 million inhabitants. The continent has gone through some major changes in the past 15 years, politically, socially and economically.

For almost all of the LATAM countries, these changes have been for the better. This comes with the one exception of Venezuela, where things have gone from bad to worse to terrible. Unfortunately, that country should not be on your export destinations wish list.

Get involved in infrastructure in Brazil and Argentina

Let’s look at the two biggest economies in South America: Brazil and Argentina. Both countries have new administrations and offer more export opportunities than ever before.

The previous administrations were very protectionist, whereas the new ones recognize the importance of international trade (and not just their own exports) as important means to further develop their domestic industries and quality level. Both countries have experienced major crises, but are now on their way to recovery. It will be a bumpy ride, but definitely one with a positive outlook.

Don’t wait until these economies are fully back on track and growing fast – go there now.

Both Argentina and Brazil have indicated that developing their infrastructure is a top priority, and necessary to increase domestic economic activity and resume growth. This includes air and road transport, energy and cargo logistics. Agritech is another sector that offers plenty of opportunities for companies wanting to export there. In Brazil, luxury retail items and products related to health and cosmetics are also growing markets.

Both countries have a long way to go to improve food security, quality standards (especially for products meant for export), precision agriculture, and harvesting technologies with preference for sustainable techniques (i.e. Brazil’s poultry sector needs to reduce water consumption). In Argentina, there are opportunities to provide solutions for the underperforming dairy industry as well.

Brazil and Argentina are part of the Mercosur, South America’s biggest trade bloc. There is tariff-free trade between the member countries, but they currently do not have free trade agreements with any other nations. That can be considered a negative issue, and of course it poses a challenge, but the absence of a free trade agreement should not be a reason to overlook these two export markets. If anything, there may be more opportunities if you decide to seriously work in these markets. You will need to build strong export tactics and strategies, but will likely face less competition for your exports.

Time to say Hola to Mexico

Another country where your company can grow is Mexico, home to over 100 million people – the second largest economy in Latin America. Mexico is predicted to be the world’s seventh-largest economy in 2050. Typical of most countries in Latin America, and unlike many Western countries, Mexico has a growing middle class (now almost 50% of the population). This middle class likes to spend money on health and beauty products, food (especially convenience foods), home and kitchen appliances, clothing and footwear.

The current quarrels between Mexico and the U.S. may actually prove to be beneficial to Canadian exports. Mexico offers opportunities in (but not limited to) electrical engineering, infrastructure, healthcare (equipment, generic and over the counter drugs), energy, and agriculture.
Mexico is also looking to further develop its floriculture sector. They are seeking active collaboration with the Dutch, but there are opportunities for companies worldwide with activities related to greenhouse development.

Be prepared to make a commitment to LATAM

I would love to discuss each country in Latin America individually, since so many of them offer great potential. Unfortunately, there is no room for that here, but let me state that in general Latin America offers excellent export opportunities in healthcare, energy, infrastructure, retail, agriculture and construction. These countries need to diversify their own industries (beyond commodities) and are in need of technology, innovation, urban development and improved productivity. The growing middle class is prepared to pay premium prices for better products and services.

Exporting to Latin America is not for companies who like an easy ride.

It’s for the ones that are ready to take on the challenge and see the benefits of working with Latin American markets for a long period of time. The region offers many opportunities to companies willing to spend the time, effort and money. You may not find short-term ROI, but if you plan for ROI in two to three years and work the market as you are supposed to, you can profit from it immensely.

Preparation is essential if you want to have any chance of success. Market research and due diligence are your insurance against market entry failure, especially in Latin America.

But if you do it well, having a bit of salsa and samba in your exports can truly make a difference to your company. More diversification, more revenue, more global impact and more fun. Start now!

The post Here’s where you’ll find the biggest LATAM market entry opportunities in 2017 appeared first on Trade Ready.

Even Porsche had a tough time importing cars into the country. Starbucks ran out of imported plastic cups and had to source some locally, creating a major PR crisis for the company.

I personally remember a client’s nursery goods samples being stuck at customs for nine months (the average pregnancy length, how ironic) because of a host of inexplicable issues.

Protectionism hasn’t been the worst of all evils, though. The country now faces high inflation, problems with debt restructuring (you probably remember the holdout funds negotiations set to resume February 1, 2016) devaluation, fiscal mismanagement and more.

Misleading statistics (to say the least) haven’t helped, and neither has the reticence of Mrs. Fernández and her staff to cooperate with the incoming team.

On top of that, Argentina lost the World Cup final to Germany in 2014. Clearly, difficult issues to recover from.

A new dawn, a new day

After an undoubtedly tough few years, are things looking slightly brighter now? Late last year, Argentinian voters chose Mauricio Macri as their new president, a much more pro-business character than its two predecessors.

So what has Macri done so far to encourage you to think about doing business with Argentina again? Just three examples will provide a more positive outlook.

First, Macri has scrapped Argentina’s farm exports, something that had caused havoc in the country during the Kirchner area. That’s had a positive worldwide repercussion, for what it means in itself and as a signal.

He has also opened up to a debt deal with the holdout creditors, another hugely positive sign.

Finally, the President has lifted currency controls, a big burden for any international trade and investment.

What also matters is that there is more openness in general, and a much more pro-business environment.

As The New Yorker wisely sums up:

“The new finance minister is a former executive at JPMorgan Chase; the minister of foreign relations is a former C.E.O. of Telecom Argentina; the minister of energy is a former president of Shell Argentina; the minister of production is the former C.E.O. of a pension fund; the head of Aerolíneas Argentinas, the national carrier, is a former regional director for General Motors; and the transportation minister used to run his family’s car dealership.”

Time to re-assess your Argentinian options

All looking good. So… is it finally time to export to Argentina (again)?

I’d say there’s no harm in undertaking some market research and gauging opportunities right now. It might also be the right time to start developing a network of contacts in the country.

Some major corporations are already doing so. Coca Cola, for example, just signed a deal to invest one billion dollars in its bottling and distribution operations in Argentina over the next four years.

After all, it’s South America’s second biggest economy, after Brazil (Colombians can argue they should come second, mind you) with some very strong sectors like agri-tech. If the country is going to go back to the growth part of its economic cycle, you want to be part of it from the start.

But the endemic problems of Argentina won’t be solved overnight. As encouraging as Macri’s administration’s first moves have been, things will take time. You will still find a country facing inflation, debt and a host of other problems.

However, it’s up to you to analyse whether the market itself is strategically viable for you or not.

What really matters, in my opinion, is that you’re no longer battling against a government that seemed to want to stop trade at all costs. You’re now facing a much more open, globally-minded Argentina. The right time to export to South America’s second largest country might be closer than you think.

Are you ready for it?

Are you considering Argentina as a potential export market? What are some of the challenges you would still have to overcome in this region?

The post Is it – finally – the right time to export to Argentina? appeared first on Trade Ready.

The number one lesson for all exporters is that South America is varied, and that understanding those variations is critical.

One of those variations is dividing the continent into two clear blocks: those economies that are open and keen to trade with the world, and those that aren’t as keen.

Trade protectionism in Atlantic South America

Let’s start with the latter. Brazil and Argentina, the two largest Mercosur partners, are spending a lot of energy making it rather hard for many imports to cross their borders. The idea behind this is to protect local industries from foreign competition to give them time to develop and grow.

I can see this working for some sectors if planned correctly, but South America has a strong record of failure with similar industrial policies. Also, I’ve heard Argentine industry leaders complaining that they can’t even import raw materials or spare parts to produce locally, and that they just can’t satisfy local and regional demand, even if other products are prevented from entering the market.

Whatever our opinions as economists on the effectiveness of these policies, as exporters you need to know that they exist and are unlikely to be reverted soon.

Argentina has become one of the most protectionist countries in the world, with tariffs that often shock the World Trade Organization (WTO) and that have resulted in many lawsuits. Tariffs aren’t the only barriers. The Argentine government is rather creative and constantly comes up with non-tariff barriers as well, such as slow and complex import licenses and quotas.

Brazil might not be as bad, but it’s on the same wavelength. Uruguay and Paraguay tend to follow suit as part of Mercosur agreements, even begrudgingly.  We’re close to national elections here in Uruguay, a country with people and businesses keen to trade with the world, and our allegiance to Mercosur is being questioned. There is also discussion about how to connect more closely with Chile and the Pacific Alliance. So that’s the Atlantic for you.

Pacific South America is open for trade

Now, let’s move over to the Pacific. The picture couldn’t be more different. Chile, for example, has free trade agreements with almost every country on Earth. Mexico (not in South but in North America), is the only other Latin American country that comes close. So they have understandably worked together in the Pacific Alliance, a trade block often compared to Mercosur, but one that has accomplished so much more over a very short period.

So, leaving Mexico and going back to South America, let’s remember that Peru and Colombia (also on the Pacific) are Pacific Alliance members with Mexico and Chile—two countries that have grown considerably in the last five years. Defying all expectations and becoming models for the region and the world, they have also favoured free trade policies.

Protectionism or open trade for long-term growth and development?

We could argue forever over which South American international trade policies are best for economic growth and long-term development.

What’s also important to know is that these divisions aren’t just economic, but also political, so things get tricky.

And remember that trade unions are very powerful across South America, particularly in Argentina and Brazil.

Whatever we think about each arrangement politically and economically, it’s clear that one of the strongest trade divides in South America is a protectionist East (Atlantic) versus an open West (Pacific). Make sure you understand these variations, since they can be critical to pricing and logistics, for example.

Also, make sure you understand the synergies within and across blocks when choosing and developing export markets in the region. And that’s without mentioning countries like Bolivia, Ecuador and Venezuela… Maybe next time.

The post Peeking into the South American international trade divide: protectionist Atlantic vs. open Pacific appeared first on Trade Ready.