globalEDGE Blog Archive January 2013

It is no secret that America tops the list of fattest nations. In fact, it is one of the largest stereotypes facing the people of the United States. Yet for the first time, competition has emerged from other nations like Mexico, New Zealand, and Chile and it may even be due to U.S. markets. Both fast food and drug markets are spreading globally, and consequently, so is obesity. With obesity, of course, come related health issues, especially diabetes, which is where the pharmaceutical companies swoop in to save the day while churning out incredible profits.

In an effort to quell the widespread problem of overproduction, China is encouraging mergers in nine key industries: steel, cement, shipbuilding, autos, aluminum, electronics, pharmaceuticals, industrialized agriculture, and rare earths.  Chinese officials are confident that these mergers will increase economies of scale and limit brutal price wars.  Government officials are also hopeful that consolidating companies in these main industries will result in larger companies that will emerge as titans of international trade.

While economists have many different ways of observing trade trends (think about looking at GDP changes), one of the best ways is to isolate a specific area and observe that to gain a good picture of it. One such area is the Port of Los Angeles and the clues that it provides about American international trade as a whole.

While the majority of European countries are experiencing the “nightmare” debt crisis, Germany is actually in an optimistic mood and is pleasant about its extraordinary trade surplus. Although Germany was hit hard initially by the global financial crisis, its exports helped the country's economy recover the by dropping unemployment to 3 million in 2012, the lowest level seen in 20 years. Its fast economy rebound left the rest of the European world in envy, and therefore triggered an argument on its role in the European Union (EU).

In recent years, the Chinese and Latin American business relationship has done very well, especially in the South American countries.  China is now the main market for most of the exports for Latin American countries, along with being a big source of imports as well. There has been much greater investment in Latin America by Chinese companies such as mining in Argentina, Brazil and Peru, manufacturing in Brazil and Uruguay, and tourism in the Bahamas. With all of these influences from China taking place, there have been some major imbalances of different kinds.

After reading the globalEDGE blog series on Latin America, you should now have a good understanding of the various trends in Latin America that are affecting the international business world. We looked at many topics this week including Latin America’s growing middle class and the regulatory environment of the region. To help further your knowledge of Latin America, globalEDGE offers several resources specifically regarding the growing market of Latin America. We will now take a look at some of these useful Latin American resources!

Latin America, a region once plagued with high inflation, has seen a drastic shift in spending and consumption trends in the past decade. This shift of consumption has been due to multiple factors, particularly the economic boom and declining poverty of the region. In the past decade, 50 million people in Latin America have joined the middle class according to a World Bank study.

Regulatory environments vary significantly from country to country and have a dramatic impact on business, both domestic and international. In the Doing Business 2013 report, senior managers reported that they spend 11% of their time dealing with government regulations and more than 50% of them feel that regulations are inconsistent. The Doing Business Report is a study that rates the attractiveness of a country based on its legal institutions and regulatory environment. Latin America is making progress according to the report, but no country from the region has been able to break into the list’s top 30. What does this mean for Latin America’s role in international business?

In the modern business world, domestic markets are simply not enough for businesses striving to reach new customers and serve a growing world. Emerging markets and regions across the globe have provided businesses, small and large, the opportunity to expand their operations beyond domestic markets. Latin America happens to be one of these emerging regions and its growth prospects have caught the attention of businesses worldwide. This week the globalEDGE blog team will give you an in-depth outlook on Latin America and how the region is affecting international business.

Despite already being a large investor in Southeast Asia, Japan is looking to increase its economic ties with countries in this region.  To address economic as well as security issues, Japan’s recently elected Prime Minister Shinzo Abe is currently visiting countries in this region.  China, as of late, has increased its presence in Southeast Asia both commercially and militarily and Japan is intent on remaining competitive in this region.

It is well known that areas in Asia, specifically Hong Kong and Beijing, are reputable for their dangerous air pollution and constant smog. In response, Hong Kong has begun to implement restrictions for the transportation industry regarding fuel and emissions, while even offering up to 50% savings on port fees for those vessels switching to fuel that doesn’t contain sulfur. However, these incentives aren’t enough to make the switch for some large container-shipping vessels, because it is simply too expensive to switch from the dirtier oil. When transportation companies refuse to use clean fuel, it gives them a competitive advantage that energy-conscious companies won’t tolerate any longer.

With an increasingly interconnected world and growing international marketplace, many companies are searching for opportunities at a global level. Businesses are looking to expand overseas for many reasons—stagnant economies at home, desired growth in their customer base, or even the pursuit for higher profit margins. Whatever the case may be, these businesses are becoming very important for the global economy. Surprisingly enough, not all of these businesses are large multinational firms. In fact, there is a recent trend where small businesses are beginning to follow larger companies in expanding their business operations into foreign markets.

The New Year began with the United States barely avoiding sequestration that many economists agree would have been a giant setback for the U.S. economy that would pile on to the global economic troubles. Not the way to start things off. With the major economies of the world still struggling to return to the growth needed to bring down unemployment there may be good news after all.

The flash of Dubai has captivated the world for the past decade.  But thoughts of skyscrapers built on sand with borrowed cash rather than a concrete future has been incepted into the minds of the world.  The opulent structures have created a city within a city – an oasis surrounded by relative poverty.  Consequences of such lifestyles and myopic philosophies are not latent in nature; they may be apparent tomorrow, next year, and even for the next generation.  While the world outlook for 2013 is positive in many ways, it would be arrogant to assume all liabilities will be paid by the end of this year.

Iceland’s application to join the European Union is being threatened by new quotas involving Iceland’s largest industry, the fishing industry. The new fish that is booming the industry in Iceland is the mackerel, and Ireland, Norway, and other European members are debating over how much mackerel Iceland should be able to fish. Scientists believe that mackerel are migrating to Icelandic waters in greater numbers, and since fishing accounts for forty percent of Iceland’s exports, the mackerel are now a vital part of Iceland’s economy. These fish led to the rebound from the crisis Iceland was going through, and if the stock allowed is increased, they will be able to lift the economy further.

Globalization has provided the world economy with an enormous amount of wealth and expansion since it first began in the 1970’s. It slowly progressed throughout the 1980’s up until the fall of the Berlin Wall, which led to a doubling of the global free-market labor force. Since then, the Dow Jones Industrial Average has climbed from 800 in 1979 to over 13,000 by 2007. The era of financial globalization went into effect in 2003, when financial services accounted for 30% of stock market earnings. For the past 3 to 5 years though, we have seen a different trend in globalization and the free flow of capital across borders.

The way in which shipping is conducted can have huge implications for consumers and businesses around the world.   As talks of sustainability and green energy continue to dominate the energy sector, businesses are looking for ways to make shipping less harmful to the environment.  Hence, some companies have begun to ship their goods via sailing ships that use the wind as the source of energy. The organic and eco-friendly sector has jumped on this idea because the maritime industry is said to currently produce 3-5% of global carbon dioxide emissions.

A recent report by the Consumer Electronics Association has projected that global gadget spending on electronics will surpass $1.1 trillion in 2013. This study comes days before the 2013 Consumer Electronics Show (CES), one of the world’s largest technology-related trade shows. What new innovations will the CES 2013 reveal and how will it impact the global economy?

Policy makers around the globe have all consistently attempted to solve the answer to one riddle: what makes a country wealthy? Every national policy maker in the world is attempting to advance the economic wellbeing of their country. Often, the question is posed as “what makes a country poor” in order to try to find some possible remedies. For instance, why haven’t Canada or Mexico reached the same level of GDP as the US? Why is Egypt much more developed than its neighbors of Libya and Sudan? The answers to these questions have varied from the degree of market freedom (Adam Smith) to overpopulation (Thomas Malthus) to a country’s natural resources (Jeffrey Sachs).

Southeast Asia set high expectation for 2013 despite the global crisis, but it was Thailand that caught my attention.  The country’s economy is expected to grow 5.7% in the coming year.  One cause is the substantial increase in public investment for higher quality infrastructure, education, energy and health.  Furthermore, there has been an flood of foreign ventures by not only large corporations, but also small business on Thailand’s resources, technology, and human capital.  This stream of assets has, in turn, created a new consumer base and multinational companies that are quietly looking outward.

In a move that always stirs controversy and can enflame international relations President Evo Morales, of Bolivia, has moved to nationalize the energy sector by overtaking the largely Spanish owned company, Electropaz. President Morales has accused the Iberdrola, the company based in Spain that owns the majority of Electropaz, of charging artificially high prices to residents in rural areas of the country. Morales argues that under the constitution this move is permissible by acting in the public’s interest.

With the 2014 deadline set for the withdrawal of U.S. troops from Afghanistan, franchising consultants are starting to turn their attention toward the prospective market. Besides fast-food chains, there are not many American franchises in Afghanistan, but that may soon change as RadioShack begins to establish ties in the region. Other franchises are following suit, despite depressing property values, capital flight, and other economic woes. The promise among tech-savvy Afghan businessmen may facilitate economic growth, stability, and employment in the suffering region.