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December 12, 2011 | last updated December 15, 2011 3:22 pm
Beyond Our Borders

Circumstances converge to make our neighbors to the south good export markets

Eleven Maine businesses recently returned from a highly successful state of Maine trade mission to Chile and Brazil. This was the first time Maine companies had requested a business mission to South America since the late '90s, and much has obviously changed since then. What was apparent to most of the trade mission participants was that in both countries there was a favorable impression of America, U.S. products are highly valued for their quality and the exchange rate is in our favor compared to their local currencies. What also was evident was that many of the Latin American countries are growing at very impressive rates compared to many European countries and there is definite demand for Maine manufactured goods.

Maine has traditionally been Canada- and Europe-centric in its exports. This is undoubtedly driven by its geographic location, sharing 611 miles of border with Canada and being the closest physical U.S. state to Europe. In the past 12 years, Asia has also been a preferred export location with Malaysia dominating due to our semiconductor exports, followed by China, South Korea and Japan. Latin America does not even appear on Maine's top 10 list of export destinations; however, Brazil and Mexico elevated to 11th and 12th places in 2010, with $32.8 million and $32.3 million, respectively, of goods exported annually.

Exploiting market opportunities

Brazil is naturally the powerhouse of South America, ranking as the fifth-largest country in population and land mass and the seventh-largest world economy in 2010 with a GDP of 3.675 trillion reais (U.S. $2.09 trillion), and per capita income that surpassed Mexico's. Although President Dilma Rousseff is trying to ease Brazilian growth to a manageable 4% to 5% rate by reducing the government spending and raising interest rates, Brazil still is predicted to grow faster than any of the European economies.

According to 2009 statistics, Brazil is a net importer of U.S. goods, purchasing $39 billion of U.S. products and exporting $25 billion of Brazilian products to the United States. Brazil's boom in the oil, mining and aircraft industries provide opportunities for Maine's manufactured goods that are a natural fit in the supply chain for these areas. In addition, business growth in major cities such as Sao Paolo (population 11.2 million), Rio (population 6.3 million) and even developing areas in the northeast such as Natal and Recife (population 1.5 million) offer great opportunities for Maine's engineering, infrastructure and construction supply firms.

Maine should also not ignore Brazil's developing neighbors. Chile experienced over 5% GDP growth in 2010 and is considered one of Latin America's most prosperous and stable nations. Although Chile is rich in many natural resources such as copper, minerals, seafood and forest products, it lacks a diverse manufacturing sector and is dependent on imports of advanced manufactured products.

Many of the Maine suppliers on the recent trade mission were pleasantly surprised by the demand for their products from this small, 15 million-person nation, and the low duty rates due to the U.S./Chilean Free Trade Agreement. Maine also stands to gain from the U.S. Free Trade Agreements recently voted in with Colombia and Peru. Maine exports to Colombia increased 175% this year and exports to Peru are up 43% through September 2011.

Requests for trade assistance for Colombia are up considerably at the Maine International Trade Center — there appears to be great potential for export growth in the veterinary and medical products, electronics and chemical products, as well as the agricultural products industry where U.S. is the largest food supplier.

Certainly, the U.S. has plenty of competition in terms of exports to Latin America. The Chinese have been aggressively going after many of these markets in terms of exporting their inexpensive consumer goods, investing in natural resources and real estate, and importing oil, copper and iron from the region. Europe has also had long-term trade and investment relationships with most Latin American countries. However, for the time being, the United States has the advantage of a low-valued dollar and is perceived as producing quality goods. Economists and investors have indicated that this could be the "Latin American Decade." What the trade figures show is that now is the time for our companies to reach out to the other Americas and establish our quality Maine brand and business integrity.

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