News Column

Helping Hands Overseas

November 2003, HISPANIC BUSINESS Magazine

Scott Williams

HISPANIC BUSINESS 2003 Top 50 Exporters

Ivan Motta, president of car-part exporter AZF Automotive Group, sums up why his company sells to the federal government in three words: "It's guaranteed money." AZF sold $9 million worth of product in foreign countries last year, to rank number 21 on the 2003 Hispanic Business Top 50 Exporters.

Financial predictability provided the main motivation for Mr. Motta to become a certified U.S. government supplier in 1999. That designation helped his company land contracts to export vehicles to Colombia. "It's something that everybody can do," he says about certification as a federal supplier. "It's just time-consuming and means lots of paperwork."

AZF represents just one example of how companies on the Hispanic Business Top 50 Exporter directory use federal programs to increase their sales abroad. Combined revenues for the Top 50 companies amounted to more than $1.5 billion in 2002, a record sum. Although all 50 companies have Internet access to government and corporate procurement officers through their participation in RedWire, the Hispanic Business online supplier diversity network, barely half (31 companies) have braved the red tape necessary to receive formal certification as a minority supplier.

Besides selling directly to the government for its foreign projects, as AZF does, companies can access government help through the Small Business Administration (SBA), the Export-Import Bank (Ex-Im Bank), or the Commerce Department's trade missions. Information about these programs is available online or at the SBA's 70 district offices and 1,200 Small Business Development Centers around the country.

Juan Gutierrez, CEO of Herko International, which ships auto parts to Central and South America, China, and Europe, used Ex-Im Bank insurance in a transaction last year. Herko ranks number 23 on the Top 50 Exporters, with a $1 million increase in export revenues between 2001 and 2002. Having insurance against non-payment helped the company qualify for a loan from a private lender for 95 percent of the sale, Mr. Gutierrez says.

"Ex-Im [Bank] is here to help finance exports that would not happen without our support, meaning the private market will not take the risk," explains Jeffrey Miller, senior vice-president of the bank's export finance group. "We have particularly focused on small business … even though we do large transactions."

The Ex-Im Bank primarily guarantees financing for a foreign company's purchase of U.S. goods. The bank's pre-export financing program, however, guarantees loans from private U.S. lenders to companies seeking working capital to manufacture or produce a product for export. The bank looks for "reasonable assurance of repayment" and takes as collateral a company's inventory and receivables. "We guarantee payment of that loan for that … company, and we provide that guarantee so they can get enough capital to export," Mr. Miller says. "The lack of working capital is one of the biggest barriers small businesses face, and … local banks may want more protection."

More than 92 percent of the loans under the program go to small businesses, according to Mr. Miller, and many of those companies are Hispanic-owned. Congress has asked Ex-Im Bank to devote at least 20 percent of its efforts to helping small businesses and to track its minority outreach efforts. "Our minority outreach has grown in the last few years, now that we keep tabs on it," Mr. Miller says, "and over 50 percent of minority outreach is to Hispanic-owned companies."

But Herko's experience points up the limitations of exporting within federal programs. According to Mr. Miller, the bank won't guarantee loans to countries with major political or economic problems. Mr. Gutierrez says Ex-Im Bank closed the program to finance exports to Venezuela when economic and political unrest rocked the country last year.

Ironically, Venezuela's instability proved a boon to Herko's exporting business. Because of strikes in the oil industry, Venezuela had to import lower-quality gasoline from Brazil, Mr. Gutierrez says, and people who ran out of gas added alcohol to their gas tanks. That put a strain on fuel pumps, fuel filters, and other parts.

While Herko previously sold around $100,000 annually to Venezuela, that figure jumped to the $600,000 to $700,000 range. At the same time, Herko managed to buy products at better prices than in the past. "We're able to make better deals right here in the states," Mr. Gutierrez says.

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