By Kate Madley
Welsh exporters were introduced to the wealth of opportunities in Brazil and Mexico yesterday (May 16), as part of an event organised by the Welsh Government in support of UK Trade & Investment’s Export Week.
The growth in Latin American economies means that more and more businesses are now looking to the region for export opportunities, and these opportunities were presented by Gaynor Campbell, senior consultant at Kinetic Cubed.
Two very diverse markets, a recent report by HSBC suggests that Brazil and Mexico will be two of the world’s top markets by 2050; it estimates that by this time Brazil’s Gross Domestic Product (GDP) will be worth US$3 trillion and Mexico’s approximate GDP value at US$2.8 trillion.
Currently the sixth largest economy in the world, Brazil’s growth is attributed to its strong domestic market. Key drivers of this include the country’s hosting of the 2014 FIFA World Cup and the 2016 Olympics, as well as strong aviation and renewable energy sectors.
“It is the fifth largest country in the world, you can fit the whole of Europe into Brazil, and the UK would easily fit into Sao Paulo, Brazil’s largest city,” said Gaynor Campbell.
“Brazil is the world’s leading bio diverse country because of the Amazon basin, as a result the country has many of the world’s leading companies in the renewable sector growing out of it because of its resources.”
In 2012 nearly 90% of Brazil’s power came from renewable energy sources, and the government plans to develop large scale wind and solar projects and add 10,000 mega watts of renewable power to the grid from 2013-2015.
Another key driver for Brazil’s economic strength is the pre-salt oil and gas discoveries in 2006 and 2008, considered to be the Western Hemisphere’s largest oil discoveries in the last 30 years. Currently, the oil and gas sector in Brazil is worth 11% of GDP, and by 2020 it is estimated the sector will be worth US$320 million. Mrs Campbell highlighted that, despite the new discoveries, the cost excavation of oil is still very high, which provides opportunities for businesses.
Brazil is the third largest aerospace manufacturer in the world, and Welsh companies attending the event were told of the need for new materials and energy products in the sector.
Further opportunities lie in Brazil’s infrastructure projects. “There’s lots of investment and privatisation going on,” explained Campbell, noting significant government investment in rail, ports and airports.
In contrast to a flourishing domestic market, Welsh businesses were introduced to Mexico’s thriving export-orientated economy. Ranked as the world’s 13th largest economy, Mexico has the largest network of Free Trade Agreements (FTA) and is home to the world’s richest man, Carlos Slim.
Mexico is the world’s largest exporter of flat screen televisions, beer, refrigerators, smart phones and the largest producer and exporter of silverware.
“There are lots of opportunities in a variety of sectors in Mexico,” explained Campbell. “The automotive sector is key.”
The country has increased its world ranking in the automotive sector year-on-year since 2008. It was ranked as the eighth largest automobile producer in 2012 and by 2015 it expects to have created 3.6 million units in the sector.
The aerospace sector continues to grow in Mexico as well. It is the eighth largest supplier to the US and the fifth largest supplier to the EU. This industry continues to grow, with access to a talented workforce at low cost and with no language barrier.
Further opportunities in the electronics and IT sectors were outlined, with eight of the world’s top 10 largest manufacturing service suppliers operating in Mexico. Campbell suggested that Mexican SMEs needed to invest in IT for process automation, as well as English language training.
Brazil and Mexico have numerous opportunities for any ambitious business looking to trade in the Latin American region. Welsh businesses were advised to be conscious of language barriers, particularly in Brazil where a Portuguese introduction is vital for building business relationships.
“Language is a key issue in Brazil, if you don’t know Portuguese you need to make provisions,” advised Campbell.
“Other potential issues include a complex tax regime and local content laws. It is more relaxed in Mexico – an introduction in Spanish is not as crucial, but it is preferred.”
A good knowledge of the markets, their similarities and their differences is vital for the Latin American economies. Their solid growth has gathered additional interest from international markets as a place to do business, with the UKTI reporting a 500% increase from 2008-2011 in UK firms looking for assistance to enter the Brazilian market.