With the threat of recession in Europe and a recent cooling of Asian economies, countries in the Americas are coming increasingly into focus as hot-spots for global expansion and investment.
The 2011 AT Kearney Global Retail Development Index states: “Growth in South America benefits from a lack of investment fatigue, especially in Brazil, where a large and mostly urban population, surging retail sales and significant investments planned for the upcoming Olympics and World Cup are having an impact.”
Attention from the top
US politicians are emphasising this point by putting South and Central America higher on their agendas. When US president Barack Obama took his trade mission to Brazil, Chile and El Salvador in 2011, his visit was not only to symbolise the strengthening economic partnerships between the US and these countries; the intent was to encourage the expansion of business at home as well.
Governors from states including California, Delaware, Maine, Virginia, Ohio, Minnesota, Wisconsin, New York and Florida have also been embarking on trade missions to South America to anchor trade policy and foreign direct investment. In October 2011, a Florida delegation of influential public and private sector leaders led by the state’s governor, Rick Scott, travelled to São Paulo to help bolster commerce with Latin America’s most populous country. “The Brazilian economy is expected to be one of the fastest growing in the world in the coming decade,” says Mr Scott.
Brazil is the largest trade partner with South Florida's customs district, and some 300,000 Brazilians reside in Florida. According to the Miami Association of Realtors, Brazilian investors are bullish in South Florida, and are descending on the location with business and real estate purchases to take advantage of the amount of distressed property available.
Apex Brasil, in line with this trend, recently expanded its US operations in Miami. The agency promotes the exports of Brazilian products and services, supports the internationalisation of Brazilian companies and helps to attract foreign investments into the country.
Elsewhere in South America, Delaware governor Jack Markell led a trade delegation to Santiago, Chile, in August 2011, to sign an agreement to extend a relationship with a key partner of the Port of Wilmington. “Our main goal was to finalise the agreement and thank our customers for their business and the jobs that business creates,” says Mr Markell.
On the visit, Mr Markell also sought to extend an agreement related to the Chilean fruit business in Delaware whereby the Port of Wilmington would store and distribute Chilean fruit until June 2014. Sources say that the concern within his office is that Asia is now vying for much of the business, which could take away opportunities from North American firms. Chilean fruit is big business to the Port of Wilmington and has been responsible for growth of a cold storage and distribution network in the area.
Another push for increased trade and investment between South and Central American countries and the US comes from the free-trade agreements that the US has signed with Panama and Colombia. Their impact, however, is yet to be realised.
Springboard to trade
Other countries are using the US to help boost their position in South America, as the country shares many time zones with South America, and gateway cities offer relatively short flights. The US also offers a stable market from which to operate.
The Hong Kong government, for one, has increased its focus on South America because, as officials from the Hong Kong Economic Trade Office (HKETO) say: “It is an increasingly important market for Hong Kong merchandise exports and source of inward investment into Hong Kong.”
To help bridge relations, the Washington, DC, office of HKETO was tasked to plan and organise a visit by Hong Kong’s financial secretary to Brazil and Chile in December 2010. In addition, HKETO representatives across the US receive pitches from US cities claiming to have excellent connections with various Latin America economies, with a view to assisting the Hong Kong government with its strategy in the region.
Like Hong Kong, the Netherlands is also looking to foster investment opportunities with South America via US connections. The Netherlands-American Business Chamber commenced operations in Miami on February 14, 2012, to establish and promote the development of local, regional and international opportunities between Dutch business organisations and those in the Americas. The chamber works closely with the Netherlands Foreign Investment Agency.
“This initiative takes place in the right location,” says Simone Filippini, consul general for the Netherlands in Miami. “Miami is the ‘linking pin’ between the US and the Caribbean and South America, and we have now pulled the Netherlands into this powerful connection.”
International air carriers are also interested in feeding into the business by increasing their services to South America. United Arab Emirates-based Etihad Airways, for example, does not yet service South America directly, but can access the market via its codeshare relations with American Airlines. “We have strong relations with American Airlines, which has a hub in Chicago,” says James Hogan, Etihad Airways president and CEO.
American Airlines operates extensive connections between US cities and cities throughout Central and South America. Non-US airlines cannot connect services between South and North America due to rules and regulations that govern international flight routes. Consequently, Etihad plans to enter the South American market direct from Abu Dhabi in 2014.
Firms related to financial services also find that the US offers a good entry point for accessing South American opportunities. For example, Compass Plus, an international provider of electronic funds transfer and payments technology to financial institutions recently expanded its Miami office. The company originally opened its Miami office in 2011 to increase new business efforts in Spanish-speaking Latin America and the Caribbean.
“Compass Plus has experienced a significant increase in interest in the region since opening in 2011,” says Juan Bustios, regional director of Latin America and the Caribbean for the company.
In yet another industry segment, US-based biopharmaceutical services provider Parexel International has further expanded its global clinical logistics infrastructure with a new ancillary warehouse in the greater Boston area of the US and a “significantly enlarged” depot in Santiago, Chile. The additional facilities bolster a clinical logistics network that extends across North America, Latin America, Europe, Africa and the Asia-Pacific region.
Networking is the key to maximising international commerce and foreign direct investment. While a US office used to access South American opportunities can be a helpful strategy, ultimately, it is those with an in-country presence that benefit most from the opportunities emerging in the growing economies in the region.