Emerging markets: doing business in Latin America.

Published: February 01, 1996, By Bomeisel, Pery

An industry expert from Brazil discusses the exciting opportunities - and challenges - that await as Latin American markets open up to the world.

Doing business in Latin America, and particularly in Brazil, has changed quite drastically in recent years. A few years ago military and nationalistic governments established high customs barriers in order to protect national industry and attempt to create a strong industrial infrastructure.

In some areas this method helped, but in others it had the opposite effect: Rather than helping industry improve through new technologies and by emulating the progress seen in highly developed countries, it proved to be a way to avoid competition and keep alive unproductive industries.

In recent times, Latin America has experienced a wave of democratization and open-mindedness in government, and many countries have started to see the world in a new way. Today, the direction of these governments is toward a free market, modernization, globalization, monetary stability, etc.

Moreover, the establishment of common market areas such as the North American Free Trade Agreement (US, Canada, Mexico) and Mercosul (a similar agreement among Brazil, Argentina, Uruguay, and Paraguay) are greatly affecting business activities in Americas.

The first attempt to establish a common market in South America was in March 1991, and, by the end of 1994, it was working quite well.

The success of Mercosul attracted other countries of Latin America that are showing a great interest in joining it. Recently, Chile took the first step toward entering, and Colombia, Venezuela, and others will likely soon join.

Good and Bad Consequences

The sudden opening of the markets in Latin America, and particularly in Brazil, where I live and face the daily problems, has produced both good and bad consequences.

For example, toy, textile, clothes industries, and more are facing fierce competition, mainly from Asiatic countries. The plus side of that situation is that the products of those industries are on the market with very low prices, so the consumer is benefiting. The price the Latin American countries are paying for that situation in terms of the shutdown of industries and unemployment is not well known yet.

I would like to emphasize the positive side of the new picture in Latin America. The best organized companies, ranging from very small to very large, began to modernize a few years ago in preparation for foreign competition. Those companies are now able to face today's situation and to compete abroad as equals.

What is happening now is a quick transformation of the business community in terms of foreign trade. Industries that until a few months ago were only producing and selling their own products are growing with the commercialization of imported products, in most cases in joint ventures with the exporter. The products are in the same line but are of a higher quality and are produced with more speed and versatility.

A Radical Revolution

Time magazine recently organized a panel with six experts from major Latin American countries to discuss and analyze the economic and business trends in the area.

The Brazilian panelist, Carlos Langoni, said, "The opening up of Brazil's economy is a radical revolution, a watershed, a break with the past."

With this in mind, we can say, without doubt, that the opening of the markets in Latin America and Brazil are irreversible, and the ways to do business in the area have changed for good as well.

To take advantage of the age of globilization, the best way to do business is through the establishment of multinational enterprises. That is true not only for big corporations but for small and mid-size companies as well.

Many new opportunities are opening up in almost all industries. The easiest way to begin is to find a good partner in the same specialty and work together. There are already several successful new small businesses all over Brazil and Latin America. Keep in mind one great advantage: Once you are established in one of the Mercosul countries, the markets of all four countries are open.

There is a difference between what happened in the past and what is happening now: In the past companies wanted to establish themselves in Latin America in order to enter a closed market and take advantage of the existing protection. Today, participating in the Latin American market gives you the advantage of a two-way flow of goods.

In summary, these are exciting and challenging times as Latin American markets open up. For the American businessman, in particular, things look promising, because he already understands the meaning of free trade, competition, a stable economy, and, of course, hard work.

Pery Bomeisel has many outstanding credentials in the converting/packaging industries. Among them, he serves as the Converting Machinery/Materials Exposition (CMM) general manager of Blenheim's Sao Paulo, Brazil, office.