Miami as a nexus between China, Asia and Latin America offers opportunities, challenges
Miami faces major obstacles to become a hub for trading Asian goods with Latin America: Aging infrastructure. Inefficient ports. Strict U.S. regulations. And operating costs higher than many Latin American nations.
But the city has big advantages as a service center for Asian companies to set up offices and run their Latin American operations, thanks to its well-developed air links with the Latin region, its strong U.S. legal system and its solid know-how of Latin American business and culture.
Those were among the conclusions at WorldCity’s Global Connections forum held March 25 on the topic, “Miami’s Global Role: Connecting Latin America and Asia.”
Panelists said that Miami faces serious competition as an Asian-Latin American trade hub, with Panama, Colombia and Mexico developing world-class seaports for container ships and operating more cheaply.
“The largest obstacle we have is not to sit on our laurels of what we used to be” when Miami was one of the few modern transport hubs for the Americas, said Ed Fuller, senior vice president for Japan-based Sharp Electronics’ Latin America Group. “It’s important that Miami makes the investment that is next-generation.”
Miami already has lost much of its business importing Asian goods, storing them and shipping them out to South America as needed, participants said. China and other Asian nations now ship goods directly to Latin America, as the volume of that trade has soared and the costs of trans-shipment via Miami have jumped, partly from new rules Washington imposed after Sept. 11, 2011 terrorist attacks.
South Florida still has an edge to store and trans-ship Asian goods to some smaller markets in the Caribbean. But plans to dredge ports and host larger ships that will cross an expanded Panama Canal don’t aim to send more Asian goods south. Instead, they seek mainly to send more Asian imports by truck and rail to a wider range of U.S. cities, said Kevin Lynskey, assistant director at the Port of Miami, who attended the event.
“South America will be served directly from Asia. Dredging the Port of Miami…it’s really about serving Orlando and Atlanta after 2014,” when the Panama Canal expansion is complete, said Lynskey.
As an air cargo hub, Miami has a strong edge to trans-ship Asian goods flown in, thanks to its ample air links to Latin America – the most of any U.S. airport, said Nabil Malouli, director of trade lanes Latin America for delivery and logistics giant DHL Global Forwarding. Miami’s air cargo routes now include daily flights to Manaus, an industrial hub in Brazil’s Amazon region known for tax breaks.
But what about Miami developing as a hub for goods or services moving in the other direction – from Latin America into Asia?, asked Marcelo Castro, a principal with Miami’s MarketWise Group, which specializes in web site development, social media and marketing.
Latin America already ships directly most of its metals, grains and other commodities sold to Asia, without a U.S. stop. But there are opportunities for Miami to become a legal hub in case of Asian-Latin America business disputes, given Miami’s sophistication in international arbitration, said Javier Markowicz, an international attorney-at-law with Serber & Associates, who previously worked in Hong Kong.
Questions on Asian-Latin American business touched on a wide range of topics and nations.
On Japan’s earthquake, tsunami and the business impact: Fuller said Sharp suffered no direct loss of life or property, but Japanese consumers – who account for nearly half the company’s revenues – are not buying TVs or other electronics now. That’s partly out of moral solidarity with others suffering. The business impact for Sharp will be largely felt in lower sales, said Fuller.
On whether to set up a joint venture in China: Attorney Markowicz cautioned that most joint ventures in China fail. He suggested entrepreneurs from the United States try to keep as much control over China operations as possible. Two tips: Work from Hong Kong ,where you can more easily transfer Chinese currency and hire personnel in China to inspect production and check quality.
On free trade agreements: The pacts play a critical role in business, panelists said, responding to a query from Jim Fendell, chief executive of Aeropost International Services.
China’s free trade agreements with Chile, Costa Rica and Peru are stimulating that trade. And Argentina’s new import restrictions on such consumer goods as motorcycles are prompting Asian companies to consider putting factories in Argentina to sell there, said DHL’s Malouli.
On China’s future role: The Asian giant is quickly emerging as a world leader, participants agreed.
Yet the Chinese perceive the future differently than Americans do, thinking not five or 10 years out but 50 or 100 years out, said Javier Garcia, who works in international sales at logistics firm C.H. Robinson and lived in China.
For example, China is welcoming students from Latin America and grooming them in Chinese language and culture to nurture relationships in Latin America for generations to come. The United States in contrast often makes it difficult for Latin American students to come to U.S. schools and stay. “We are losing a lot of talent that is going to Asia,” said Garcia.
On India’s role in Latin America: India’s software and data-processing firms are investing more in Latin America, especially in high-tech parks in Uruguay, said Fuller.
On South Korea’s role in the Latin region: Samsung’s strong sales and Korean apparel factories in Central America and the Caribbean are part of a growing Korean presence, said international business consultant Tak Takasu, who specializes in strategic planning and competitive intelligence.
Yet Korean firms approached the Americas differently than the Japanese did, Fuller said. When the Koreans burst on the scene a generation ago, the Japanese dominated in the U.S. market. So, the Koreans went first to Latin America, selling plenty of entry-level goods with smaller profit margins. That made the Koreans cost-efficient by the time they moved north to the U.S. market. The Japanese instead started north and moved south, where they now face tough competition, said Fuller.
Global Connections is one of seven event series organized by WorldCity to bring together executives on international business topics. The Global series is sponsored by Florida International University’s business school and by real estate company Waterford at Blue Lagoon.
The next Global Connections forum is set for April 29 on the topic, “The Latin American Consumer and the Power of the Brand.”