by Fernando Otalvaro, Yusen Logistics (Americas) Inc.
History is not mistaking when it is time to evaluate the trajectory of the population to look for new horizons and search for opportunities, adventure, expansion and security to continue growing sustainability. From the Americas (North, Central and South), Latin America is the part that continues offering such options together with the advantages, challenges and turbulence this process involves in emerging markets.
The GDP projections from the IMF for Latin America and the Caribbean for 2015 are at 3%. This is slightly lower than expectations but higher than other stronger economics which growing processes will reflect a modest increase. The actual global contrast of different factors like weather conditions, consumers expending levels, lower world commodity prices and rising of global funding costs from traditional origins are affecting the LATAM region grow.
Companies will face the difficult job to ensure there is not significant increase to final consumer products due to the rise of transportation costs, wages, and complexities to meet transit times and planning projections; instead, the actual economic conditions are demanding a more competitive and affordable level price for consumers. The saturation of the traditional trades and its difficulties to meet companies' needs and expectations will be the reason for searching for other options and places where there is equilibrium between the time and price to place the product available for the consumer.
The Japanese word "KAISAN" is indeed a perfect way to define the actual adversities the Latin American region's growth will face in the short-term and long-term. Many countries in the region are adjusting their economics to be at the same or better levels of the traditional sourcing places by signing Free Trade Agreements, investing in infrastructure and security, and giving incentives to companies. This will increase the confidence and interest for companies that are not yet in Latin America to place offering multiple benefits such as same time zone for origin/destination communication; short transit times, not only for the commercial operations but also for the commercial interactions between companies and their providers; better quality in products; and labor and elimination of importing duties within those Free Trade Agreement countries like Mexico, CAM, Chile Peru and Colombia. Companies that are already sourcing in the region will have the opportunity to grow their presence and make strong partnership relations. Countries with options for trade by the Pacific and the Atlantic will allow more diversity and flexibility for better cost saving operations. Brazil, one of the bigger economies in the region, is providing options to improve sourcing and presence of other countries' business to satisfy its internal demands. Mexico and its proximity to the biggest consumer market in the world has a privileged position vs. the other Latin American countries; this is very well known by many companies of different sectors and the reason is the 3.5 GDP growth expectations for 2015 according to the IMF statistics.1
Gradually, we see the increase of the middle class in Latin America to 50 million more in the last 10 years, contributing to support the local and regional economic growth, not only from the labor point of view but also from the consumer aspect. This positive impact is also bringing additional challenges to countries and companies as to the demands and needs this important group will face. According to the World Bank, the increase of the media use and technology to levels between 40 to 50% is forcing the economic growth to be more dynamic and investing not only in the retail sector but also in other areas like consumer products, automobiles, pharmaceuticals, high technologies and natural resources.
Latin America will be a mandatory place for companies interested to stretch their supply chain process and productivity in a new global economic that it is every day more demanding with the sourcing results and options to the consumers in terms of pricing, quality and timing.
Fernando Otalvaro is the Latin America Origins Operation Manager (Business Development Manager) at Yusen Logistics (Americas) Inc., Origin Cargo Management (OCM) Division based in Secaucus, New Jersey. Fernando began his career at NYK Group 12 years ago in the NYK Logistics Accounting department and it is now part of the new Yusen Logistics OCM development plan in Latin America region. Yusen Logistics OCM is one of the best Global Logistics providers and is now investing in LATAM as one of the most prospective emerging economics.
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