BACK YARD TIES

The growth of the economies in Latin America seems to be consistently overlooked as people note the burgeoning markets in Asia. This is understandable to a point, because only Brazil can rival India and China as a market primed for major expansion. But there is an element of growth in Latin America that is of special significance to U.S. and Canadian manufacturers. This is our back yard and it is a region that we have special ties that should permit better business relationships.

There is often less of a language barrier than in China, as many more Spanish speakers exist in North America than those who speak Chinese, and the prevalence of English is high throughout Latin America. The supply chains are shorter and that will matter more as energy prices escalate.

Everything seems to point to this part of the world as a great place to do business if one is North American except for one thing ? many of the governments in the region dislike the U.S. and by extension the U.S. business community. To say that the U.S. has a complex relationship with the Latin states is an understatement. There have been many decades of tensions, U.S. intervention, left wing governments and insurgencies. Still, today some of the most overtly anti-American governments are in Latin America.

Thus, it will be a very long time before the U.S. gets engaged in Venezuela or Bolivia or Ecuador ? at least not until they dump the leaders they have now. But the opportunities in Brazil, Colombia, Peru, Chile and some of the smaller states of Central America and the Caribbean are becoming far more lucrative than they have been in past years. The election results of the past few weeks sent more signals that times have changed for the better. Colombia has been a staunch ally of the U.S. throughout the eight years of Alvaro Uribe. In that time, the nation has transformed from one gripped by civil war and drug cartels to one sporting economic growth numbers that rival those in Asia. The right-wing paramilitaries were largely disarmed and the back of the left wing narco-terrorists called the FARC was broken with the rescue of several American and Colombian hostages a few years back.

Even the all-powerful Medellin and Cali cartels were broken to a degree under Uribe. Now his former defense minister has won election with Uribe's support and his first order of business is to resurrect the free trade agreement with the U.S. The new government of Jose Manuel Santos is likely to carry on the same pro-U.S. policies that were developed under his predecessor. In Chile, the left-of-center party went down in defeat and the center right emerged victorious. The previous regime of Michele Bachelet was hardly anti-business nor anti-U.S., but the new regime of Sebastian Piñera is more attuned to the needs of business. Given that Chile is moving swiftly to repair the damage from the earthquake a few months ago, there is plenty of opportunity for business to become engaged in the process of recovery. Chile has long depended on the copper industry but in the past few decades it has diversified dramatically into everything from pulp processing to fish meal production to wine.

The biggest player in the region is Brazil and it now is a major player in the G-20 as well as having become the "B" in the BRIC nations. The growth rates in Brazil have been at or above 7 percent for most of the past decade, and the recession left only the slightest impact. It is the manufacturing center of the region and has diversified into everything from aerospace to food processing. Brazil continues to grow despite the downturn and the stress that has been imposed on some of its markets.

Brazil also is in the process of electing a new leader, but both candidates are trying to position themselves as the appropriate replacement for "Lula." The surprising presidency of Inazio "Lula" daSilva has put Brazil on the forefront of economic development and the nation wants to stay there. His party's candidate is Dilma Rousseff, his former chief of staff. She is running against Jose Serra, the former health minister under the previous regime and mayor of Sao Paulo as well as governor of Sao Paulo State ? the most populated parts of the nation. He also has asserted that he will continue the traditions of Lula. Either way, the progress made by Brazil is likely to continue which makes this a good locale for future investment and business.

All of these developments are critical, as it has been obvious that the path to economic growth for the average U.S. and Canadian manufacturer will be at least partly a foreign one. Exports have become integral to the growth of both economies and it appears the factors that led to the expansion of exports will remain in place for a while longer. The North American manufacturer has many opportunities, but trying to exploit them all can be expensive and time consuming. These all are different cultures and different challenges. It is increasingly apparent that the growth in Latin America is sustainable and the sophistication levels are getting higher. The region has never been better suited to an expansion of U.S. and Canadian interests.

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Dr. Chris Kuehl is an economic analyst for the Fabricators & Manufacturers Association (FMA; Rockford, IL), a professional organization founded in 1970 to improve the metal forming and fabricating industry. This was excerpted from Fabrinomics, an economic newsletter published by the FMA.