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International Trade
"We've already purchased the land. The only decision is whether to start building early 1997 or late 1997," says Hellmann's president of North American operations, Gregg E. Borgeson, who serves a roster of clients that includes The Limited family of retail chains, Sensormatic Electronics and Wilson Sporting Goods.
"There is no question that South Florida's economy is driven by the Latin American market," Borgeson says. "Our largest single international office is in Hong Kong, and we see Miami being in a parallel position to Hong Kong as a place where trade deals get done."
As Hellmann's experience illustrates, many Florida companies are profiting from renewed economic growth in South America, where inflation rates have been lowered, currency exchange rates stabilized, state-owned enterprises privatized and trade barriers removed. Brazil was Florida's top export destination, followed by Colombia, then Venezuela, in 1995.
Florida's trade outlook for 1997 isn't uniformly optimistic, however. Economic and political problems in parts of South America could constrain Florida exports this year.
Manuel Mencia, vice president of international trade for Enterprise Florida, the state's primary economic development agency, remains optimistic about the number one export market. "I see tremendous potential in Brazil," he says, especially for such technically sophisticated products as computers, telephone equipment and aircraft components.
But in Colombia, the government's refusal to permit extradition of criminal suspects to the U.S. is fanning fears that the Clinton administration will retaliate with economic sanctions. "It's kind of a scary situation," Mencia says. "Colombia is our (Florida's) second-largest market in the world."
Political developments
The flow of goods into Venezuela, meanwhile, has been disappointing. From 1991 to 1995, Florida's exports to all of South America grew 76%, but were flat in Venezuela. A rash of bank failures has added to the misery; the collapse of Venezuela's Banco Latino in 1994 triggered a run on deposits at the bank's subsidiary in Miami, a bankruptcy filing and a one-year freeze on withdrawals. Mencia sees signs of recovery in Venezuela but says it has been "the sick man of Latin America for most of the decade."
To be sure, these hiccups haven't cut the world's appetite for Florida exports. The dollar volume of the state's exports jumped from $18.6 billion in 1991 to $29.4 billion in 1995, an average annual growth rate of 14.5%.
But whether that growth rate improves or declines depends heavily on economic and political developments in South America, Central America and the Caribbean - which together represent about two-thirds of the worldwide market for Florida exports.
One fortunate Floridian who expects to keep riding the Latin trade boom is businessman James P. Clinch. He lives in Venice and runs a Sarasota-based business service that manages export sales on behalf of U.S. companies in the medical products and electronics businesses. Clinch has associates stationed in Guatemala and Bolivia.
"We pretty much concentrate on Latin America," Clinch says. "I personally believe that it's the future of the U.S. economy. I don't see us, long term, going to Asia or Russia; and I see European protectionism beginning to appear." Clinch won't reveal financial figures for his privately held business but cheerfully predicts that it is "going to take off" in 1997. "Frankly, I expect I'll be turning down business."
Still, amid optimistic talk about emerging markets such as Chile and El Salvador, serious concerns loom over the Latin trade boom. Some observers worry Florida's export gains from trade liberalization may be headed for a plateau.
Charles Jainarain, executive director of the state-supported Summit of the Americas Center at Florida International University in Miami, says growth in Florida exports to Caribbean nations is likely to stagnate unless these nations get some assistance in developing their own export markets. "You can't always go to these developing countries and sell, sell, sell," Jainarain says. "Our exports to the Caribbean are probably maturing right now."
Structural reforms
"With varying depth and speed in the last five to ten years, all countries of Latin America and the Caribbean have implemented important structural reforms aimed at improving efficiency, spurring economic growth and increasing the incomes and well-being of the population," says Alexander Watson, who served as assistant U.S. secretary of state for inter-American affairs from 1993 to 1996.
But Watson warns that "this recovery is hardly sustainable." True, he says, widespread tariff reductions in Latin America and the Caribbean have fueled trade growth since the late 1980s and early 1990s. But "exports have not been growing fast enough to keep up with imports," he says. "Only Mexico and Argentina reduced their purchases of goods and services from the rest of the world in 1995 - but in these cases, severe recessions were needed to achieve it. With the current export performance, only a handful of countries in the region can maintain their recent import increases over the medium term without facing similar situations. This is a major challenge that remains to be confronted."
Geographic proximity and cultural ties are the most obvious reasons behind Florida's lopsided reliance on Latin and Caribbean trade partners. But another reason may be the state's failure to fully capitalize on trade flowing east-west as well as north-south.
A sobering report issued last year by the Wall Street research firm Sanford C. Bernstein & Co. found that, "Florida's trade activity is surprisingly low when compared to the nation's." Moreover, Florida relies on Latin and Caribbean markets with a history of volatility.
In 1995, Florida was a net exporter to Latin America and the Caribbean and a net importer from Europe and Asia. Florida's commanding share of U.S. exports to its southern neighbors ranged, in 1995, from 42% in South America to 54% in the Caribbean and 51% in Central America.
Despite its size and proximity, Mexico is having relatively little positive impact on Florida's economy. Just a small fraction of U.S. exports to Mexico are going through Florida. Meanwhile, one of the principal effects of the North American Free Trade Agreement (NAFTA) has been Mexico's encroachment into agricultural markets served by Florida farmers. "At this point," Mencia says, "Florida has been a loser in NAFTA rather than a winner."
However, there are some signs that a growing number of international companies in Florida are reaching beyond the state's mainstay markets overseas. In 1995, for example, sales of Florida products abroad increased between 10% and 20% in South America, Central America and the Caribbean, but jumped by 43% in Europe.
Other hemispheres
In South Florida, the World Trade Center Miami recently honored as "Emerging Company of the Year" a firm called Inter City Tire Export, a Miami-based company that buys and sells tires and tire tubes worldwide, not only in Latin American and Caribbean nations but also in Europe and the Middle East.
Another example of a Florida firm doing business beyond the Western Hemisphere is Octa Marketing Inc., a small construction company in Panama City that works on tourism developments in its hometown but also manages projects overseas. Last year, Octa oversaw construction of a new hotel in mountainous southern Russia, not far from Mongolia. "It reminded me of Colorado. It's just beautiful," says Octa's owner, Joey W. Blair, who has built a gas station in Moscow, too. "A lot of people have gone into Russia and lost money. So far, we've been lucky."
Lately, Blair has been looking at new business opportunities along the Red Sea and Mediterranean Sea. But he is steering clear of the huge South American market - the destination of nearly half of Florida's exports. Why? "If so much of Florida is doing it, why would I want to get in there and compete with them?"
