Doing Business in Latin America

An overview of the economies and top products in demand in Colombia, Costa Rica, Panama,

and Peru.March 24, 2010

Eduardo Torres, DirectorUnited States Commercial Service, South Florida

US Department of Commerce

Take Home Messages

• International markets can provide an important source of revenue diversification.

• Opportunities exist for firms that can define and communicate their market value-added and can afford a time horizon beyond a quarter.

• The US Department of Commerce is your ally

Our Aim

• To maintain and create jobs here in the US by helping firms to identify, penetrate and build presence in promising markets worldwide– Our team is located in US Embassies and Consulates in

over 80 nations and across the US

(Not like this…)

It can be a long road from here to market success…

Market Development Challenges

• Project finance• Building an appropriate/trustworthy network

– Appropriate partners and projects– Communication

• Competitive pricing and getting paid– Culturally-colored perception of the value of “services” – Value of a contract

• Different approaches to doing business– Corruption– Building standards– International competition and advocacy

• Competition and existing vested relationships

Market drivers

• Global urbanization• Energy and water security• Climate and environmental change• Materials demand

Market Identification

• First question: what value do we bring to the market? – Niche specialty?– Ability to bring in finance and other solution providers? – Outstanding expertise and track record?– Price advantage?

• Second question: is the market ready for us? – New project types coming on-line that mirror your expertise?

• Third question: what are the costs of doing business in the market?– Explicit costs: transportation, degree of operational difficulty, financial

obstacles – Hidden costs: communication (cultural) barriers, corruption, lax project

execution, etc.

Getting paid and avoiding unforeseen challenges

• Don’t do anything that you wouldn’t do in the US• Communicate your value consistently and effectively• Exercise careful due diligence on partners and clients• Make wise use of USG resources overseas• Consider ways to minimize your transaction risk, e.g., terms

of payment, letters of credit, currency management• Identify conflict resolution procedures in contract• Be present• Don’t do anything that you wouldn’t do in the US

Is Latin America ready for me?

• Gross statistics on market size are irrelevant for an individual firm– They tell you nothing about the costs and benefits of market

engagement for your firm• If you go:

– Don’t rely on “guanxi”• (you probably don’t have it)

– Prospect in second-tier cities– Exercise thorough due diligence– Find a way to be present over time– Be patient, but have an exit strategy

Colombia

• Fifth largest market for U.S. exports in the region, after Mexico, Brazil, Venezuela, and Chile, and is ranked 29th as a market for U.S. exports globally.

• Best prospects for U.S. companies are (in order of market size/potential growth):• Oil and gas machinery and services; Plastic materials and resins;

Automotive parts and accessories; Computers and components; Telecommunications equipment and services; Travel and tourism; Construction and mining equipment; Air cargo services (AVS); Electrical power systems; Pollution control equipment; Safety and security; Building materials; and Beverage processing and packaging equipment.

Costa Rica

• Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR) opened opportunities in the wireless telecommunications, internet, and insurance markets that previously had not existed.

• Major prospects include:– auto parts, audiovisual equipment, hand/power tools,

hardware, medical and dental equipment, and security equipment

• Other prospects include:– travel and tourism services, hotel and restaurant equipment, and

construction equipment sectors

Panama

• Best prospects by sector include:– Wholesaling, Warehousing: clothing, consumer electronics, and

shoes.– Building products: gypsum board, lighting, and roofing/flooring

products.– Travel and Tourism: increase in travel for medical care in the U.S.,

religious reasons, and cruise vacations.– Telecommunications Equipment: PABX systems, radio trunking

systems, and satellite-based telecommunications facilities.– Computers and peripherals: personal computers, LAN equipment,

and laptops.– Construction Equipment: earth moving machinery, hydraulic

excavators, and off road trucks.

Peru

• The Best Prospects for U.S. exports of non-agricultural products to Peru include the following sectors:

• The Best Prospects for U.S. agricultural products include:– hard wheat; cotton; yellow corn; soybean meal; dairy products

(whey and cheese); and beef and offal.

Mining Industry Equipment Pumps, Valves, and Compressors

Plastic Materials and Resins Pollution Control Equipment

Construction Equipment Air Conditioning and Refrigeration Equipment

Industrial Chemicals Computers and Peripherals

Oil and Gas Field Machinery Security and Safety Equipment

Strategies for smaller firms

• Court larger US clients for overseas work– Initial track record that can help you to expand your client base

• Be strategic, not opportunistic– Apply your limited resources where they will yield the greatest return– Generally, don’t respond to “trade leads”

• Build a reliable network for project identification and execution– USDOC should be part of that network

• Follow the money• Who is investing what where?

– Multilateral development banks» Private arms (IFC, etc)

What NOT to do #1

• DO NOT wait to develop international strategy until all domestic opportunities are exhausted – or until there is a domestic downturn!

– Developing the domestic market takes time

– Developing international markets will also take time

What NOT to do #2

• DO NOT dismiss going international altogether (bad architecture)

– There may be strategic reasons to not go international, but remember…

– Your foreign competitors are in their home markets, the U.S. market, and probably other markets, as well

– Competitors bring their international strength and know-how to the U.S. market and use it to compete against you

• Our Customized Services– Targeted matchmaking

• Strategic partner identification and introductions

– Customized market intelligence– On the ground due diligence– Official Advocacy– Market Launch Promotional Activity– Targeted trade promotion events

Additional Resources

• US Trade and Development Agency (TDA)– Feasibility studies, orientation visits

• Overseas Private Investment Corporation (OPIC)– Project finance– Political risk insurance

Upcoming Events

• April 22, 2010: Export University 301 “Understanding the ITAR”• June 8-10, 2010: Energy Ocean• June 14-18, 2010: Trade Mission to the Dominican Republic and Jamaica• September 3, 2010: Export University 201 “Standards in Exporting to Latin

America”• October 4, 2010: Doing Business in Russia Seminar

U.S. Commercial Service

Make an appointment today!

United States Department of CommerceUS Commercial Service, South Florida

Tel: 954-356-6640Eduardo.Torres@trade.gov

Web: www.buyusa.gov/