A surge in trade with Latin America - includes related articles

Nation's Business, Feb, 1993 by Rosemary Werrett

Fifteen years ago, Mexican government officials shut the door on imports from Leon Stern's U.S. company after four local specialty paper producers complained they were losing business to foreign exporters like Stern.

That ruling did not raze the energetic Stern, then owner of Photo Marker, a New York-based firm with about $10 million in domestic and international sales. He fought the Mexican government's ruling and succeeded in reversing it over a year later.

Now he uses that incident to illustrate the potential benefit of a U.S. free-trade agreement with Mexico and, by extension, with the rest of Latin America. "It would remove those idiosyncrasies of government behavior" that penalize the private sector, he says.

Removing arbitrary barriers to trade and investment is the purpose of the North American Free Trade Agreement, signed in December by the presidents of the United States, Canada, and Mexico and now awaiting the approval of the legislatures of those nations. Removing such roadblocks is the guiding principle as well of the 2-year-old Enterprise of the Americas Initiative (EAI), a plan to forge a series of agreements that ultimately will produce a free-trade area stretching from Alaska to Argentina.

And the EAI is on track. President Clinton recently announced he would soon begin free-trade negotiations with Chile. The United States has signed so-called framework trade and investment agreements with all the Latin American countries except Cuba, Haiti, and Surinam. This means that virtually the entire hemisphere is committed on paper to open economies and free-market principles.

Many governments have moved swiftly to implement these goals by slashing tariffs, paring away licensing procedures, reducing foreign-exchange restrictions, strengthening intellectual-property laws, and discarding foreign-investment restrictions.

Virtually all of Latin America now belongs to the global trade compact, the General Agreement on Tariffs and Trade (GATT).

The new openness is showing up dramatically in U.S. trade with Latin America. In 1991 there was a 17 percent surge in U.S. exports in the region, far outpacing U.S. sales gains in any other part of the world.

Moreover, while large U.S. corporations traditionally have fared relatively well in Latin America, it is small and medium-sized businesses that are now being buoyed by the rising tide of new business opportunities in the region.

Stephen Wolfe, president of Telular Inc., based in Wilmette, Ill., says his company is experiencing spectacular growth in sales of its cellular telephone interfaces in markets such as Guatemala, Costa Rica, Venezuela, Chile, and Argentina-not to mention Mexico.

Telular's device enables businesses and residences in even the smallest towns to connect their conventional telephones and fax machines to the cellular facilities now proliferating throughout Latin America.

Since inaugurating its Latin American push in 1989, Telular's sales there have jumped to more than one-fourth of the company's worldwide sales, which now exceed $10 million.

And Wolfe sees unlimited horizons. Reflecting his confidence, Telular now is looking beyond simple exporting to building in-country joint ventures, which Wolfe believes will enhance his ability to service his product. The first joint venture has already been forged in Mexico, and ventures in Chile and Venezuela are in preparation.

Symbol Technologies of Bohemia, N.Y., also is seizing the opportunity presented by Latin American trade liberalization. The company, which makes bar-code scanners and hand-held computers, has seen annual Latin American sales rocket upward at a rate "never less than 40 percent" since it began selling there six years ago, according to Victor Spencer, director of international sales.

Although Latin America still represents only a small share of the company's approximately $150 million in overseas business, Spencer also says the region offers large opportunities. Open borders and sweeping privatization have forced a revolution in the thinking of local companies, he says. They know they can survive only by becoming globally competitive through adoption of state-of-the-art technology. So, says Spencer, the time is right in the region for his and other high-tech companies' products.

San Diego-based Cal-State Lumber Sales Inc. also knows firsthand the rewards to be reaped when a market opens to U.S. products. It once faced a raft of government-imposed obstacles when seeking to export to Mexico. But Mexico now accounts for over half of the firm's processed-lumber sales, which zoomed from $14 million in 1989 to $104 million in 1990 and $147 million in 1992.

Mary Alice Acevedo, head of international relations for Cal-State, says business began picking up when Mexico joined the GATT in 1986, but sales really started accelerating when Mexico was put on the fast track to a trade deal with the U.S. "It used to be 20 permits to get our product to the destination in Mexico, and now it's down to five," she says, adding that she is counting on these disappearing with the formal implementation of the NAFTA, perhaps as early as this summer.