Emerging opportunities | Maine goods find strong demand in the BRICS markets
In mid-April, leaders of the emerging markets of Brazil, Russia, India, China and the recently added South Africa met at the third annual BRICS summit in Sanya, China. As internationally active companies in Maine mature, they are increasingly reaching out to the world’s emerging economies, including the BRICS countries. These markets offer tremendous growth opportunities, as well as difficult challenges. Goldman Sachs has indicated that the original BRIC markets could become the four most dominant economies by 2050. Currently, these countries represent 40% of the world population, over 25% of world land coverage and have a combined gross domestic product of $18.49 trillion. They have also surpassed Europe in the number of billionaires in residence.
The International Monetary Fund estimates BRICS markets will expand 6.5% in 2011 — more than double the 2.5% estimate for developed countries. Not only are they expanding their manufacturing and service industries, but they’re also increasing their percentage of imported products. As they get richer, they invest more in overseas markets such as the United States. Brazilian companies now own such classically American businesses as Budweiser and Burger King. China is investing in U.S. real estate, car manufacturing and soybeans in the Midwest, among other areas. This foreign investment growth translates directly to opportunities in the Pine Tree State.
BRICS breakdown
In terms of Maine trade, the BRICS markets represented $410 million of exports in 2010. China held the lion’s share at $332.7 million of Maine products imported in 2010, mostly in the pulp/paper, semiconductor, aircraft and parts, and advanced textile industries. Many Maine companies sense the great potential in this fast-growing market, including Hancock Lumber, whose president, Kevin Hancock, recently returned from a China sales trip.
China will continue to grow in importance as its people’s median incomes increase and internal consumption develops. But common sense tells us that growth has risk, and at least several Maine companies’ experiences with the Chinese markets during the past decade mirror those of other U.S.-Sino ventures. There continue to be challenges with quality assurance in the early business stages. Lack of knowledge of cultural differences can translate into difficulties on pricing and contract negotiations. In addition, China was once considered one of the cheapest labor markets globally, but it’s losing that position to other countries like Vietnam and Indonesia. Some Maine companies that were contract-packing and manufacturing in China have brought their manufacturing back to Maine due to quality issues, transportation costs and cultural challenges. For Maine companies to successfully venture into the Chinese and all other BRICS markets, they must do their homework, be well informed of cultural differences in business practices and do due diligence on their business partners.
To our south, the emerging market of Brazil has tripled its purchase of Maine goods over the past four years, with Maine exporting over $33 million of products including pulp and paper, aircraft and engines, and biotech products. Brazil’s phenomenal growth clocked in at a 7.5% increase in GDP in 2010 over 2009, and Brazil’s imports increased by 27.2% last year — good news for Maine exporters. According to seasoned traders, opportunities abound but Brazil has its peculiarities as well, with some extremely high import tariffs and unusual requests for export/import documentation. Maine has developed a few consultants who hand-hold companies through their Brazilian transactions and help them navigate the obstacles in customs clearance, market development and the government’s import systems.
Reviewing Maine’s growing business in South Africa is particularly surprising. Four years ago, it was a small, $2.5 million market, but has in a short time increased 12-fold as an export destination. There is a broad diversity of product interest ranging from Maine’s renowned precision manufactured goods to medical/biotech products, and South Africa has experienced solid growth in demand for Maine’s food export industries.
Of all the BRICS countries, India and Russia trail behind. Although they, too, have had positive growth, their developments have been less remarkable than those of China and Brazil. The U.S./India Business Council in Washington, D.C., is a valuable resource for Maine companies and institutions looking to develop in the Indian market. There have been some successes in the broadcast/RF technologies areas, where SPX Communication Technology and others have obtained entry. The burgeoning education market has helped Maine schools enhance their recognition with the Indian student population studying in the United States.
“Emerging Markets for Growth” is the topic at this year’s Maine International Trade Day on May 20 at the Marriott-Sable Oaks in South Portland.
Janine Bisaillon-Cary, president of the Maine International Trade Center, can be reached at info@mitc.com. Read more Beyond our Borders here.
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