‘Don’t view South America as a single entity’

If you’re intending to trade with South America, don’t put all the countries in that continent into the same basket in your market research. That’s according to two experts on South America interviewed by FTW – Nada Reyneke, head of international trade at the Johannesburg Chamber of Commerce and Industry (JCCI), and Theys Radmann, SA-based director (and former chairman) of the Chile-SA Chamber of Commerce, with a special responsibility for trade with this country. “It’s a fatal mistake to see all the South American states as being the same,” said Radmann. “All the countries are entirely different.” Radmann suggested that there was a group of countries that presented opportunities to SA traders – listing Brazil, Chile, Peru and Colombia – because they are growing and have relative political and economic stability. Chile, Radmann reckoned, was the most politically stable of them all, followed by Brazil, Colombia and Peru. Looking at these four countries individually, he classed Colombia as being a nation that had had serious problems in the past with the arrogant, brutal and socially powerful drugs regime. “But much of that problem has been overcome,” Radmann added. “Things are now definitely improving, and it is now politically and financially relatively stable.” Peru he classified as having been politically unstable, but he said things were now improving with a new president and government. “However,” he said, “traders would have to take care, because its bureaucracy was difficult to deal with. But there is a lot of foreign investment now going onto Peru, particularly in mining and agriculture.” Brazil is the big muscle in South America. Indeed, according to Radmann, this sheer financial strength has unbalanced the Mercosur trade agreement, and prevents it working as it should. But the Brazilian economy is developing to the point where it has global heft, and people have to take it seriously. That development has already brought a quadrupling of gross domestic product (GDP) since 1993 to US$2.09 trillion, and serious attempts are now being made to snuff out inflation and stabilise the economy. Brazil is a major producer of soybeans, wheat, rice, corn, sugar cane, citrus and beef. It also has bauxite, gold, iron ore, platinum, rare earth elements, uranium, timber and petroleum among its ample natural resources, and it is a major motor vehicle manufacturer. A problem here is that Brazil and SA are highly competitive in almost every way, and, although both are members of the Brics (Brazil, India, China, South Africa) grouping, it is difficult for the two to trade with each other. Chile, according to Radmann, is the easiest to do business with – apart from the logistical problem for SA of Chile being situated on the Pacific coast of the continent. “The only drawback is that it’s a very small (16-million population) market. But it should certainly be seen as a good guinea pig market for SA traders.” Although it has the world’s largest number of bi-lateral trade agreements, SA is not one of those. So exporters to the country face a 6% duty on all goods – except computer parts (like chips) where the duty is zero. For SA businesses looking at investing in Chile there is one big advantage. It has no taxation on foreign countries, according to Radmann, and therefore all profits can be repatriated to this country. He misses out Argentina (the continent’s second largest economy) in his listing. “Second largest it may be,” Radmann said, “but it’s a shambles. There is still too much political trouble in Argentina, and its rule of law is not well handled in the courts. “I wouldn’t recommend setting up trade there because the political situation is very much shaken up, and its GDP per capita is lower than its neighbour, Brazil. I’d wait.” Reyneke agreed with the concept of national diversity. “Basically, when you are looking at the SA trade outlook in South America, you can’t see that continent as a single entity,” she told FTW. “There are so many different countries, and different ideological groupings of countries, that you could never describe it as a unified entity.”