NZTE regional director Karlene Davis is advising Kiwi exporters to see beyond top-line economic signals when considering doing business in South America.
Karlene Davis was one of seven NZTE regional directors from around the globe who returned to New Zealand recently as the organisation rolls out its new strategic direction.
In an interview with Exporter magazine she said it is important to dig into economic messages from South America to find the areas of high-potential growth in each country.
The economic powerhouse of Brazil, for example, which single-handedly accounts for around 45 percent of the region’s GDP, barely budged its own GDP upwards last year.
But Davis says Brazil’s sluggish overall growth disguises fierce upticks in sectors well aligned to New Zealand’s expertise.
Agricultural firms, in particular, are looking for New Zealand solutions that will increase their efficiency and productivity, while opportunities abound for Kiwi companies providing food and beverages, ICT products and services, and specialised manufacturing.
“High domestic interest rates have limited local appetite to invest,” explains Davis. “So Brazil’s manufacturing sector hasn’t got the capacity to meet growing demand from middle class consumers, and that’s increasing demand for imports.”
An estimated 37 million households are tipped to move up into Brazil’s discretionary income bracket within the next seven years, with most of the growth centred on the northeast of the country.
Davis, based in Brazil’s largest city Sao Paulo for the past two and a half years, says there’s “huge” demand across the region for technologies and solutions that will increase productivity and for equipment that will increase capacity.
Kiwi /Latin American relationships also received a renewed impetus in March this year when Prime Minister John Key led a 22-person business delegation to Mexico, Colombia, Chile and Brazil.
Asked at a recent Auckland Go Global breakfast to highlight a Kiwi success story in the region, Davis praised NZ Natural Ice Cream for its “utter and thorough research”. While the Kiwi company had initially considered entering the Brazilian market, its research showed Chile would be a better place to start.
NZ Natural is now selling product through Censod – a major supermarket chain in Santiago.
“It went about it all in a very planned and constructive way,” says Davis. “We’re just beginning to see high-value food and beverages coming into South America. The NZ Natural example is a great milestone.”
Despite the many opportunities and achievements to date, challenges abound in South American markets. Davis warns exporters to thoroughly research the many complex import regimes and taxation structures in the region. She also cautions that, especially outside of Brazil, challenges can lie in getting to grips with culture and language.
Gateway issues can also prove cumbersome. While LAN Chile flies daily direct from Auckland to the Chilean capital Santiago, there are growing calls for more direct flights into other parts of the region.
Prime Minister John Key said at a recent Latin America NZ Business Council (LANZBC) lunch in Auckland that he hopes the endorsement of a new air services agreement between New Zealand and Brazil will encourage airlines to think seriously about expanding connections between our two countries.
LANZBC president Dr Matthew O’Meagher has described the lack of direct air links to South America as a “very significant issue” for developing trade.
He added that his group has been in discussion with airlines around increasing direct links. “It’s great to have [what we have] but it would be wonderful if Air New Zealand were involved and we speak with them on a regular basis.”
O’Meagher also said LANZBC increasingly hopes to make submissions to government on relevant policy matters.
He said no specific issues are on the agenda at present. “But, speaking hypothetically, if a Trans-Pacific Partnership (TPP) were signed that could raise issues for members as three Latin American countries [Chile, Mexico and Peru] are currently involved in TPP talks.”
LANZBC directors are currently working on a strategic plan which they will take to their 80-plus members early next year.
Ruth Le Pla is an Auckland-based freelance writer. Email [email protected]