Want to know the key to business success? Trade, trade and more trade. According to the National Center for the Middle Market’s 2016 report, “Winning in the Americas: Middle Market Trade and Investment in North, Central and South America,” 43 percent of middle-market exporters sell to one or two foreign markets, while 16 percent sell to more than five markets. The companies that serve the most are among the most productive, in part because they’re reducing their risk.
“You’re not solely dependent on revenue from one country and the economic swings that one country can be subject to,” said Susanne Keough, head of global trade solutions at SunTrust, in response to the NCMM report.
The most attractive countries are those with a growing middle class, expanding economy and relatively straightforward regulatory environment, according to Aldo Musacchio, an associate professor of business at the Brandeis International Business School.
“In a lot of markets, you have middle-class families who for the first time in their lives can buy electronics and clothing and go to stores and malls,” he said. “That consumption story that had been hyped in the past, especially in expanding emerging markets, continues.”
Here’s a look at three countries — Argentina, Canada and Mexico — that offer key benefits for U.S. companies aiming to expand.
Argentina: Burgeoning Middle Class
Argentina isn’t a major destination for U.S. businesses, with American exports to the country totaling about $8.6 billion in 2016. The country has also struggled economically, with GDP growth falling by an estimated 2.3 percent in 2016, according to the World Bank.
However, Argentina offers multiple positives: Its middle class has grown the most of any Latin American country over the past decade — 116 percent between 2001 and 2011, according to a Pew Research Center study. The country also boasts a booming oil and gas market that’s now benefiting from higher energy prices, and its home ownership rate is better than its South American peers, Musacchio said.
Argentina’s citizens also have more U.S.-style tastes. They’re familiar with American brands and want high-quality goods. There is one problem: “Not everyone wants to pay U.S. prices for these items,” Musacchio said.
The trick is knowing how to navigate the politics as well as local competitors. It’s critical to identify a partner to distribute your items or help you set up a location.
“You need people who can work with politicians and figure out the red tape,” Musacchio said.
Canada: Our More Mature Trading Partner
Canada has long been a friend to the United States. The U.S. exports $300 billion of goods there each year, and having similar customs and language makes it extremely easy to do business in the country, according to Katheryn Russ, an associate economics professor at the University of California, Davis. While it’s a far more mature market than other nations in the Americas, it’s still a large one with plenty of people who are willing to spend money.
Every sector looks attractive, according to Russ, although services are underrepresented compared to other export areas. That includes insurance and financial services, computer software operations, video game companies, and movie and entertainment businesses.
Canada also has a strong oil and gas sector that could provide some opportunities for U.S. companies, Musacchio said.
Because Canada is a saturated market, and its consumers are as savvy as they are in the U.S., companies need to make sure they’re providing Canadians something they can’t already get domestically.
One issue to watch is how a revamped NAFTA could affect Canada. “If the U.S. is trying to prevent goods from coming into the country from Mexico, then the chains might go back to Canada to make, say, auto parts,” Musacchio said. “So there may be opportunities coming soon from these trade deals.”
Mexico: Go For The Oil and Gas
America’s southern neighbor has long been a go-to trading partner, and should still offer plenty of opportunities, Musacchio said.
Of course, with NAFTA potentially being renegotiated, and a possible implementation of a border tax, the terms of trade could be altered. However, Mexico is such an important trading partner that there will likely still be opportunities for years to come.
For instance, the country’s flourishing oil and gas sector holds much promise, as Mexico has recently started allowing foreign companies to explore its oil-rich lands.
While big players like Chevron and Exxon Mobile will likely handle the drilling, middle-market companies could land lucrative work in related services, such as food, housing, equipment, consulting and construction.
“That’s where I see huge potential,” Musacchio said. “Maybe a firm is in Texas providing these things; they can now go over the border for even more opportunities.”
Mexico, which has more middle-class citizens than most emerging markets in the Americas, needs other services, too, according to Russ. Software, management consulting, public relations and architecture are all in high demand, she said.
It’s also easier to operate in Mexico than in the past. Over the past 20 years, the country has dramatically cut red tape, Musacchio said. And according to the NCMM report, 48 percent of companies said it was easy to do business there.
Local Savvy Will Drive Success
No matter the market, partnering with locals who understand their country’s laws and language is critical.
Many of these markets already have plenty of goods and services, so ensure that you have something new to offer. But follow the rules and tap into demand, and you are likely to succeed.
“There are ways for companies that are interested in selling abroad to do so very effectively,” Keough said. “The key is understanding who your partners are and how you can leverage the kind of information and tools you need to be successful in selling abroad.”
Bryan Borzykowski has written three books on personal finance. He also writes about businesses and technology. Bryan is on Twitter: @bborzyko.
© 2017 SunTrust Bank, Member FDIC. SunTrust Robinson Humphrey® and SunTrust are federally registered service marks of SunTrust Banks, Inc. SunTrust Robinson Humphrey is the trade name for the corporate and investment banking services of SunTrust Banks, Inc. and its subsidiaries. Securities underwriting and M&A advisory services are provided by SunTrust Robinson Humphrey, Inc., member FINRA and SIPC.