With the U.S. economy continuing to show weak results, Latin America is increasingly betting on Asia. Latin American exporters have found eager markets in countries like China, Japan and India, while Asian companies, in turn, are boosting their exports to Latin America.“The growth of Asia will drive the business with Latin America,” says R. Viswanathan, India’s ambassador to Argentina, Uruguay and Paraguay and widely considered India’s leading expert on Latin America. “Both governments and business have started looking at the potential for complementarities between the two regions.”
While international prices on commodities, the key Latin American export to Asia, are expected to fall or level out, two-way trade between the regions should keep growing thanks to a combination of factors, experts say. They include growing demand for other products in various Asian markets, more demand for Asian products in Latin America and an increasing number of bilateral free trade agreements across the Pacific.
“Trade will grow despite short-term commodity price fluctuations because demand in Asia remains high for Latin America’s resources,” says Michael Diaz, managing partner at U.S.-based law firm Diaz Reus, which serves many clients involved in Asian-Latin American business.
Asia-Latin Trade Boom
Financial News – Yahoo! Finance
In 1805, a 21-year-old South American nobleman, Simon Bolivar, traveled through Europe, drowning his sorrows over the death of his wife.
Arriving in Milan with his former tutor, Simon Rodriguez, to see the coronation of Napoleon as king of Italy, Bolivar was repelled by the power-hungry man he had once admired. He also saw that one man could bend history to his will.
On the Continent, Bolivar ingested the democratic ideas of the Enlightenment. He dreamed of bringing his country, which was to become Venezuela, independence.
Traveling on to Rome, Bolivar heard the story of Sicinius, who had led the people to Aventine Hill to protest the rule of abusive patricians. Going to the top of the hill with Rodriguez and another friend, [Bolivar], the young man dropped on his knees and said, “I swear before you, I swear by the God of my fathers, I swear by my fathers, I swear by my honor, I swear by my country that I will not rest body or soul until I have broken the chains with which Spanish power oppresses us.”
The pledge was preposterous. South America’s mines yielded vast amounts of gold and silver that financed Spain’s worldwide empire. To protect that, the Spaniards suppressed 300,000 Indians[indigenous Americans] who had revolted 50 years earlier.
Making his words crazier, Bolivar had never been in a battle. Two decades later, he more than realized his dream.
“[Bolivar] is seen as the George Washington of Venezuela, Colombia, Ecuador, Bolivia and Peru, an area the size of Western Europe,” Marshall Eakin, a history professor at Vanderbilt University and author of the Teaching Co. course “America in the Revolutionary Era,” told IBD. “Like other great figures in history, he had an unshakable belief in himself and the rightness of his cause.”
Unlike SE Asia’s export-led model of growth, India follows a domestic demand-driven growth strategy that is much more insulated from a prolonged U.S. or European economic downturn.
Business-The Times of India
Despite financial crisis in the US market, India would continue to grow at high rate of 8% to 9% in the next couple of years. Chief economic advisor Arvind Virmani told TOI financial crisis will have a minimal direct impact on Indian economy and it will grow at the projected rate of around 8% in 2008-09 and 9% in 2009-10.The main reason behind the optimism is correction in the commodity prices in the international market, because of the the slowdown in the global economy. The crude oil prices have already corrected to around $ 100 per barrel from over $ 140 per barrel few weeks back.
Goldman Sachs also felt in the same manner. In a report, it said, “We believe the credit crisis, which reversed the tidal wave of cheap foreign capital over the past few years, will have less of an impact on the economy’s fundamentals.”
If the inflation is brought down to single digit, the government and the RBI can take measures to ensure that liquidity crisis does not affect economy. Virmani said that India’s financial system remained intact even during the present crisis. This, he said would give confidence to the foreign investors, including the non-resident Indians to invest in India.
Goldman Sachs pointed out India’s external sector is holding well and various indicators suggest condition is undercontrol. The financial sector, the report said, remained sound, mortgage are a fraction of total credit and exposure to inflated real estate is small.
Technorati Tags: economic growth, india
Booz, Parthenon set up consultancies in India
While Booz will initially start operations with a dozen consultants, the plan is to expand to 100 people in a couple of years. Booz, as part of its global restructuring exercise, had moved out of India in 2000.Things are a lot different today. “Global companies are using the Indian model in various businesses. This is in countries like Africa and other developing economies,” says Suvojoy Sengupta, head of India operations, Booz and Co.
Globally, Booz has 3,300 people in its 57 office in 30 countries. “With India expected to grow at 7% per annum, companies are serious about India,” he adds. Apart from sectors such as telecom, energy and healthcare, Booz sees opportunities in other areas like supply-chain management. It is expected that the top team at Booz, comprising mainly people of Indian origin, is relocating to India from the offices in the US and UK. Globally, Booz clocks revenue of $1 bn.
Another strategic consultancy firm Parthenon has set up shop in India early this year. It relocated Chip Greene, an expat, to head the Asian operations in India. Today, the size of the team has increased to 15. The firm’s Mumbai office has already started servicing clients in China, Japan and Thailand. Parthenon has a different model of accepting fees.
For India, the time has come when its success in various industries can be replicated in other countries. That’s exactly what is happening as consultants are looking to make a name here.
Technorati Tags: management consulting
Indian mills should be allowed to import raw sugar duty-free against a commitment to export the refined commodity as domestic output is expected to fall sharply, a leading industry body said on Monday.India, the world’s biggest producer of the sweetener after Brazil, allowed mills to import raw sugar free of duty in 2005 on the condition that the same amount of refined sugar would be exported within 36 months.
“It is important that the scheme introduced in 2004/05 to improve capacity utilisation of the industry be put in place once again,” Jayantilal Patel, president of the National Federation of Cooperative Sugar Factories, said at the annual general meeting of the industry body.
Analysts say imports of raws by India would cheer major producers such as Brazil, Thailand and Australia and push up benchmark prices in New York and London. Patel said India’s sugar output, estimated to be about 20 million tonnes in the year from October, would fall short of likely domestic consumption of 22.5 million tonnes.
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Has economic slowdown taken a toll on the cash churned out by India’s leading companies? Are more companies reporting negative cash flows as a result of longer working capital cycles?An analysis of the latest annual reports for the BSE 200 companies (representing 84 per cent of overall market capitalisation) reveals no cause for worry on this front.
First, the number of companies reporting negative cash from operations hasn’t significantly increased in 2007-08. Only one in every six companies in the BSE 200 (excluding banks) reported negative operating cash flows, much the same number as in 2007 and 2006.
Two, overall cash flows for the universe, at Rs.1.6 lakh crore for 2007-08, haven’t varied much over a three-year period. Some believe cash flows to be a better metric than net profits for gauging a company’s financial performance as they capture the results of operations shorn of attempts at window dressing arising from higher receivables (sales not converted into cash) or inventory held.
Growth in cash flowsONGC, Bharti Airtel, Reliance Industries and NTPC top the list of companies which generated the highest cash flows from operations in 2007-08.
IT majors such as Infosys and TCS and FMCG players such as ITC also figured, not surprising given the high margins and low leverage characterising these businesses. However, not all of the top cash generators have seen significant growths in their operating cash flows in 2007-08.
‘Power’ showCompanies from sectors such as commodities, power generation and power equipment are the ones to show a sharp improvement in operating cash flows this year.
Why cash flows matter
One, healthy cash flows can help a company meet its funding requirements internally in a high borrowing cost environment. Two, a company’s ability to manage its debtor and inventory levels indicates the strength of the business, in a slowdown. In this regard, the top 200 companies in India might not have too much to worry about.
Technorati Tags: BSE 200
Over long distances, hauling freight by rail is the most economical option. Private companies in LatAm need to put building and upgrading rail lines to ports on the governmental agenda. Or do it themselves in conjunction with overseas investment partners where possible.
Latin American exports’ growth depends more on lower transport costs than on reduction of tariffs. This warning is in research “Unclogging the Arteries: A Report on the Impact of Transport Costs on Latin American and Caribbean Trade.”Produced by the Inter-American Development Bank (IDB), the study includes figures for nine countries: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Peru, Paraguay and Uruguay.
The study should be presented on Wednesday, October 1st, in Brazilian capital Brasília, during seminar “Transport for Trade and Regional Integration”, promoted by the National Confederation of Industries (CNI) in partnership with the IDB. The participants should discuss relations between transport costs and foreign trade in Latin America and propose solutions to the logistics bottlenecks that affect Brazilian exports.
According to the study, a 10% reduction in the value of tariffs would increase exports by these countries by less than 2%. On the other hand, if the same reduction were made in transport costs, foreign sales to the United States would grow 39%. This calculation considers stability of other factors, like exchange rates and economic growth.
To IDB economist Mauricio Mesquita Moreira, one of the authors of the research, the governments of the countries in Latin America are more concerned with tariff and non-tariff barriers and forget other greater obstacles, like transport. “The trade policy in the region is out of focus,” criticizes Moreira.
The report also shows that if the countries in Latin America reduced freight costs by 10%, there would be trade growth of over 20% in the region. In case the reduction was in tariffs, the growth would be just 10%. The reduction of transport costs would benefit products made in Brazil, Chile, Ecuador, Peru and Uruguay and ore and metal exports by Argentina, Colombia and Paraguay.
Latin America spends 7% of export value on freight, almost double the 3.7% spent by the United States. In the case of Brazil, this cost is equivalent to 5.5% of the product price.
“Despite being lower than the Latin American average, the country has been spending much more with transport than the United States,” stated Moreira. “Customs costs are not the main obstacles to foreign trade, with a few exceptions, as is the case with alcohol, cotton and orange. In most products, transport cost may be as much as 50% higher than tariffs.”
The researcher points out that there is space for reduction in transport costs. However, he recognizes that the products exported by the countries in Latin America require greater freight allocation, which ends up increasing costs.
“The comparison between exports of one dollar of chips and one dollar of soy is very different, as the latter is significantly larger. If we divide the weight of the product by its value, transport cost is much higher for primary products than for electronic products,” he explained.
Transport costs in Latin American are almost double that of the United States. According to the study, Argentina spends 22% more than the North Americans, Chile twice, and Paraguay, over four times. Latin American and Caribbean exports to the United States pay ocean freight almost 70% higher than those paid by Dutch products.
The report also shows that around 30% of the transport costs in Latin America are due to port inefficiency. To Moreira, this is the most important figure for the establishment of sector public policies.
“One of the main causes for inefficiency is port competition, which is smaller in Latin America than in the United States and the Netherlands,” he pointed out. “In this area, it is possible to reduce government interference, like the agreements that restrict coastwise navigation.”
Another obstacle is in air imports. According to the research, airfreight costs have grown faster in Latin America than in China and the rest of the world. Freight costs in the Caribbean in 2006, for example, were 36% higher than in 1995. In the same period, China kept the cost below the 1995 figure, despite higher oil prices.
Moreira adds that, in Brazil, airfreight is almost three times more expensive than in the United States. Another problem is that consumers and producers are not informed of these costs.
[M]ore than 490 million people (about 70 percent of the Indian population) live in rural and semi-urban areas. They are difficult to reach, especially in a country where doctors are scarce (the ratio of physicians to total population is less than one per 100,000 people, compared with about one per 160 in the United States). World-class facilities are even scarcer. Rural patients must often travel to cities for treatment, a journey of excessive cost since their family members travel with them. These constraints affect the nature of health care in unexpected ways. For example, in the United States, a customized lower-limb prosthetic may require several fittings spread over weeks. In India, it must be finished in one eight-hour sitting, so the patient and his or her family can return home before their money runs out.And yet amid all these constraints, a few health-care providers in India are establishing new global standards for cost, quality, and delivery. They do it by bypassing the conventional approaches to medical practice. For example, the Narayana Hrudayalaya cardiac care center, located in Bangalore, is one of the world’s largest providers of heart surgery and other forms of cardiac care, including care for children. A private corporation, it was founded in 2001. Only three years later, in 2004, the company performed 7,500 cardiac surgeries and treated 60,000 outpatients, including almost 2,000 telemedicine patients who received consultation and treatment at remote sites, accessing specialists through satellite- and Internet-based telecommunications links. NH makes no distinction among the quality of service delivered to different patients. Everyone is charged a fixed rate per surgery of $1,500 — one-thirtieth the $45,000 that a typical U.S. hospital might charge, and one-third of the $4,500 that a top-line hospital in India would charge.
It’s important to note that the facility and its parent company, Narayana Hrudayalaya (NH), are profitable. And NH’s cardiac care is far from the only profitable health-care innovation emerging from India. The most famous example (documented at length in my book The Fortune at the Bottom of the Pyramid) is the “Jaipur Foot,” a prosthetic foot made from rubber, intended for below-the-knee amputees, such as people injured by accidents and land mines. The JF (as it is universally called) costs about $30, a fraction of the $8,000 to $10,000 cost of a similar Western prosthesis; if a patient damages, loses, or outgrows it, he or she can simply get a new one. Since 1975, the JF has been distributed by a nonprofit, nondenominational organization called the Bhagwan Mahaveer Viklang Sahayata Samiti (BMVSS), which fits about 16,000 patients per year, with trained paramedics as the primary patient contact. BMVSS also ships artificial feet, calipers, and other aids to thousands of patients worldwide — more than 50,000 in 2004. BMVSS does not charge for its prosthetics and service; it survives on donations from satisfied patients and from philanthropists.
Another example is the Aravind Eye Care system, the world’s largest provider of cataract surgery. This company, founded in 1976, performed 240,000 surgeries in 2004 and treated 1.6 million outpatients. The founder, Dr. G. Venkataswamy, has said that his goal is to “wipe out needless blindness.” Thus, Aravind treats more than 60 percent of its patients free — and continues to operate profitably.
All three health-care innovators, NH, BMVSS, and Aravind, have been around long enough to give us confidence that these innovative health-care efforts represent sustainable businesses.
Technorati Tags: innovation, health care, india
In a pointer to the growing stature of the Indian car market globally, Japan’s Honda Motor Co has decided to set up a research and development (R&D) centre for cars in the country to understand the requirements of the market better. Globally, this would be the one of the seven R&D centres for the company.
“India is an important market for Honda worldwide. As the market matures, bringing the R&D function into the market becomes very important,” Takeo Fukui, Honda’s global president and CEO, told TOI.
Technorati Tags: automotive, R&D
Healthcare software provider iSoft on Thursday said that its Indian R&D team is developing a solution what it described as the world’s largest civilian IT healthcare project.The Lorenzo software application, which will link nearly two-thirds of the hospitals in the United Kingdom, will also be launched in Europe, Australia and Germany in November, iSoft executive chairman & CEO Gary Cohen said at the opening of the company’s global product development centre here.
iSoft was acquired by Australia’s IBA Health Group in 2007. Hospitals will also be connected to general practitioners, allowing patients in the UK to get themselves treated at any clinic in the country without the need for re-entering data. The solution can be extended to any part of the world, managing director S Govind said.
“The entire solution, which is for linking up all the hospitals as well operations with the hospitals is being developed and rolled out from the India development centre,” he observed.
The company is also installing solutions for the Medicity group in Gurgaon and is targetting adding 100 hospitals to its list of clients next year.
iSoft, which has 1,800 employees at its Bangalore and Chennai facilities, will hire 200 more by next year. It has grown by 50% in the last 12 months. About four-fifths of iSoft’s $500-million revenue in 2007-08 came from Europe, while Asia, Australia and New Zealand accounted for the rest.
Technorati Tags: health care, technology
