Photo: Norma Lopez MolinaAfter seeing its business in Venezuela fall off, Certified Slings & Supply in Casselberry shifted its focus to other Latin American economies.
Tale of two Latin Americas
Difficulties in some of the region's largest economies mean Florida businesses must 'pick and choose.'
Economists describe the period between 2003 and 2011 as Latin America's golden decade. Florida, which accounts for 28% of U.S. trade with the region, was a main beneficiary: During those years, the state's merchandise trade with Latin America and the Caribbean more than doubled to nearly $90 billion.
Since then, however, Florida has seen its trade growth slow considerably amid weakness in several of the region's largest economies. Total imports and exports between Florida and Latin America leveled off in 2013 and declined 6% during the first nine months of 2014.
Prospects for a quick turnaround don't look good. Brazil, Florida's biggest trading partner, entered "technical recession" in early 2014 and was expected to experience a tepid recovery in the second half of the year, according to the International Monetary Fund. Argentina, facing an unresolved dispute with holdout creditors, likely will remain in Recession through 2015. Likewise, Venezuela's economy is projected to contract again this year amid inflation of more than 60%.
Against that backdrop, the IMF recently forecast economic growth for the region of only 1. 3% in 2014, the second-lowest increase in 12 years, followed by a modest 2.2% uptick this year.
In contrast to Argentina, Brazil and Venezuela, some parts of the region are "performing very well," says Manny Mencia, senior vice president of Enterprise Florida's international trade and development division. "Take those economies out of the equation, and all of a sudden you're at around 4% growth in the region," he says. "It's really a tale of two Latin Americas."
Colombia, for example, will experience "solid growth" thanks to strong domestic demand and a pickup in exports, the IMF says. Meanwhile, Mexico's economy is predicted to grow 3.5% this year, up from 2. 4% in 2014. Recent government reforms in Mexico's energy and telecommunications industries should spur investment and raise business confidence.
"Not a week goes by when I don't get an inquiry from a client who's interested" in capitalizing on Mexico's reforms, says Yosbel Ibarra, a Greenberg Traurig lawyer who co-chairs the firm's Latin American and Iberian practice. The firm opened an office in Mexico three years ago when "everyone was thinking Brazil, Brazil, Brazil" and now has 50 lawyers there practicing in the areas of corporate and securities law, litigation and real estate. "There are good things happening in the region."
Mencia tells Florida companies to "pick and choose" the best places in Latin America to do business, meaning countries that aggressively seek private investment and free-trade Agreements. "Focus on those economies that are more open and welcoming to international business, at least for the next couple of years."
Casselberry-based Certified Slings & Supply is doing just that. Founded in 1958, the privately owned company makes and distributes custom rigging, contractor supplies and safety equipment for commercial and military customers. In 2010, as the U.S. economy struggled, Certified Slings turned its attention to Latin America, making significant inroads in Venezuela.
By 2012, about 20% of its overseas business was in Venezuela, says Jay Sumners, director of international operations. Today, amid economic and political turmoil, Venezuela accounts for less than 2% of Certified Slings' international business.
"With the current political situation, it's been almost impossible to do any work in Venezuela," Sumners says. "A great deal of it has to do with the currency. Venezuela has a controlled currency, meaning the government sets the exchange rate and only allows so many dollars into the market. In mid- 2012, most people in Venezuela just stopped buying."
To adjust, Certified Slings focused on other countries showing promise. "That's mostly in the Caribbean and Central America," Sumners says. "We'd be further along in developing our international business if we hadn't lost Venezuela, but we've made up for it."
Meanwhile, a firmer U.S. recovery could create growth spillovers in Latin America. "When good things happen in the U.S., good things happen there," Mencia says. "And hope fully, Brazil's economy will slowly begin to turn around."