Latin America on Target to set more records

We, at Dixie Cullen, have seen a large increase in the volumne of equipment and material coming through our warehouse facility for export packing bound for Latin America.

TRADE WITH LATIN AMERICA ON TARGET TO SET MORE RECORDS September 1, 2008 LETICIA LOZANO from Shipping Digest

Rapid economic growth spurs demands for U.S. importsSoaring energy and food prices, the worst housing slump since the Great Depression, a credit crisis, job cuts: It all may be enough to tip the U.S. into recession this year, if we aren’t already there. But the “flu” in the world’s biggest economy is causing little more than the sniffles in Latin America, where growth remains strong and a weak dollar is driving trade between the U.S. and South America.

With Latin American banks having little or no exposure to the U.S. credit crunch, and with the region’s strong domestic currencies, a China-driven commodities boom, high foreign investment levels and fiscal discipline, trade is robust — despite soaring oil prices, rising freight costs and Latin America’s congested ports.

“We haven’t seen impact from the U.S. slowdown,” said Alvaro Espinosa, general manager at the Port of San Antonio, Chile, which sends 16 percent of its exports to the U.S. and where U.S. imports represent 25 percent of all imports. “In the first five months of this year, we’ve seen a 15 percent increase in container shipments, so at least at the first reading, there is no talk of a U.S. recession here.”

Such optimism may be dampened in the coming months if the relentless increases in oil prices continue and as U.S. manufacturing activity falls. Consumer spending is weakening now that the fiscal stimulus checks have mostly been spent.

Overall U.S.-South American trade is nevertheless growing at historic levels, with Chile and Peru benefiting from free-trade deals. U.S. exports to Central and South America reached a record $107.5 billion in 2007, and imports hit a record $134.8 billion, according to the U.S. Census Bureau. Those records will probably be smashed this year. U.S. exports in the first six months of the year totaled $66.8 billion, while imports totaled $80 billion.

Despite the slowing U.S. economy and world oil prices, exports to Central and South America in June were a record $12.9 billion, compared with $8.7 billion in June 2007. Imports totaled $15.7 billion, compared with $10.7 billion in June of last year.

Brazil is enjoying a boom time as its middle class swells and the country enjoys an unprecedented stretch of economic growth coupled with low inflation and a strong currency. Foreign investment doubled to $35 billion last year, the economy grew 5.4 percent, and trade with the U.S. totaled $50 billion. The economy is set to grow 4.5 percent this year.

“The stronger buying power of Latin American currencies, particularly the Brazilian real, and the abundance of petro-dollars in Venezuela have generated a significant increase in export liftings compared to a year ago,” said Frank Larkin, senior vice president at Hamburg Sud North America, the U.S. subsidiary of the German shipping line Hamburg Sud.

Soaring economic growth in Argentina, Peru and Venezuela is also spurring demand for U.S. imports in those countries.

Despite the bitter anti-U.S. rhetoric of President Hugo Chavez, Venezuela is increasingly dependent on U.S. imports and, as the government nationalizes large chunks of the economy, its exports beyond oil are few.

“The downside of that shift is the need to continually reposition empty boxes,” Larkin said. “On the export side, the Venezuelan container market, for example, is virtually all inbound, and those boxes, once emptied, must then be repositioned to match up with export opportunities in other markets.”

Changes to customs laws in Brazil and Colombia this year also have made life difficult for shippers. Both countries now require cargo heading for their ports to be documented 48 hours prior to the vessel’s first Brazilian port call. Failure to do so can mean cargo confiscation or denial of berthing.

“These new mandates are very rigid and unfortunately conflict with the realities of modern just-in-time shipping,” Larkin said. “If manifest information is submitted to (Brazil’s) Siscomex Carga and then changes or additions need to be made, fines of $3,000 per incident can be imposed and cargo delivery can be further delayed.”

Such measures have increased costs for shippers having to rehandle and work export documents, Larkin said.