Which New Zealand Companies are making money in Latin America ?
When it comes to Latin America there are few New Zealand companies who know it as well as Tait Communications.
The Christchurch-based business has been selling its products there for more than 25 years.
So when Tait’s vice-president of sales for Latin America, Hamish Wiig, went on the John Key-led trade delegation recently he kept a watch out for some of his products.
And it wasn’t long before he spotted some.
“It was great to see the police at the Sao Paulo football stadium all using Tait digitally encrypted radios,” Mr Wiig said
“Despite emotions running high in the second half between Sao Paulo and Palmerias supporters, the New Zealand delegates were safe in the knowledge that they were being protected by the best radios in the world, 100% made in New Zealand.”
While Mr Wiig is fairly blasé about the episode, it proved to be a seminal moment for other New Zealanders on the 10-day swing through Mexico, Chile, Colombia and Brazil.
Especially when they spotted other police equipped with Tait radios patrolling the streets of Sao Paulo.
“It was surprising and heartening to see that we have already got a footprint in Brazil,” Peter Cullen, a director of the Latin America New Zealand Business Council, says.
“It was really quite inspiring to see what we are already doing in Latin America.”
Mr Cullen’s pride was shared by many of the other delegates on the trip, all keen to take their lead from Latin American trailblazers such as Tait, Fonterra and Zespri.
Zespri now exports one million trays of kiwifruit a year to the region.
“In terms of future growth this area, particularly Brazil, is a very important part of Zespri’s future growth strategy,” chairman-designate Peter McBride said.
“The major challenge for Zespri in Latin America is that we will take on our major competitor, Chile, in their own backyard.
“Clearly, their cost to serve is lower than ours and we have to invest heavily in promotion to support the brand, and the price points we need to achieve have to be profitable.
“To grow the market we have to resource it and we have started that process by appointing a market manager for Latin America and putting increased focus on the market.”
Not easy to get established
Another member of the delegation, Gerry Williams, director of Pacific Basin Exports Ltd, says getting established in Latin America is not easy.
The agritech company, which describes itself as a “specialist Latin America trading company” has seen its business there grow by 20% to 30% annually.
“While the Latin American market is mixed, with some countries doing well while others are not so positive, we are relatively positive about the future of our sector,” Mr Williams told.
“However, it is a slow and difficult market in which to gain traction as a lot depends on personal relationships and price.
“Developing the relationships takes time and price issues are exasperated by changing New Zealand dollar values in relation to our competitors.”
Those views are shared by Tait’s Mr Wiig, who describes Latin America as a complicated environment in which to do business.
“In Latin America, developing strong political relationships is more critical to success than in many other developed countries such as Europe and North America.
“There are also numerous challenges such as bureaucracy, language and culture, complex legal environments and difficult access to information.
“For Tait, the main challenge it faces comes in the form of intense competition from American multinationals and these large incumbents are very difficult to displace.
“Despite these challenges, if companies adopt a long-term view, apply adequate focus and can overcome or mitigate the barriers, then the business potential that New Zealand companies can realise is huge.”
Clearly, Tait’s business strategy has paid off in Latin America, where it has won many multimillion dollar contracts over the last seven years.
Sales during this period have increased by well over $15 million and the company is now firmly established as the “No 2” provider of digital solutions in Brazil.
Asked whether New Zealand is doing enough to foster business relationships with the region, Mr Wiig said:
“Following the inertia from this once in a decade trade mission, New Zealand now needs to act with urgency to take advantage of the key areas of opportunity presented by the mission.
“Clearly, not a lot of attention has gone into developing business in Latin America to date, but there are several areas where we can make some serious traction.”
Those areas, he says, are:
- Education – more focus on teaching Portuguese and Spanish in New Zealand schools.
- People-to-people links – more working visas for Latinos wanting to travel to New Zealand as well as scholarships to study here.
- Negotiate a free trade agreement with Colombia and open an MFAT office there.
- Sign a double tax agreement with Brazil.
- Establish direct air links to Colombia and Brazil.
So what was the overall verdict on the Latin America trade mission?
To answer this question New Zealand Trade and Enterprise held a workshop with the delegates to find out what they had learnt from the trip.
This is what they said:
- There is a strong need for accurate market discovery.
- From this discovery, companies need to have a specific plan for each market and even regions or states within a country.
- Strategies for the market need to be specific to the market and well tailored to include customised supply chains, services and products.
- In-market capability and partnerships are a common area of dilemma and risk which needs good support from government and other companies in the industry.
- Patience and a long-term approach are the keys to success. You need to weather the ups and downs of these markets. Some of the bigger players use a portfolio approach to Latin America to help manage the risk of being exposed to only one or two markets.
Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.
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