News Column

Money Moving North

July/August 2005, HISPANIC BUSINESS Magazine

Keith Rosenblum

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From his office in La Jolla, California, Ignacio Hernandez frets over the taste buds of his countrymen in the United States. To date, says the CEO of MexGrocer.com, his company has shipped non-perishable Mexican food to 9,000 towns and cities in the United States.

But are 1,100 food items adequate for visitors to the Web site – some 3 million unique visitors to date? No way. "We have a fascinating dialogue in place with Mexicans and Anglos throughout the country," says Mr. Hernandez. "They are telling us daily what we need to add. At the same time, we're receiving notification from companies in Mexico about what they have to offer. We match them up."

Meanwhile, in Washington, D.C., Roy Thomasson, CEO of Young Americas Business Trust, a spin off of the Organization of American States, has engaged in another kind of matchmaking. In March, the organization sponsored a seminar titled "Creating Trade Opportunities Between Hispanic and Caribbean People in the United States and Their Home Countries." Thanks to video conference technology, the seminar had participants from the United States, Mexico, Argentina, Barbados, El Salvador, Ecuador, Peru, and the Dominican Republic.

"There is no tradition of enterprise for many people from the Caribbean and Latin America," says Mr. Thomasson. "They have been brought up in an 'us-them' world, where 'us' is the workers, the majority, and 'them' is the business class, or private sector. The poverty of 'us' at home is why they are in the U.S. in the first place. Our goal is to show them a path, get them excited about becoming entrepreneurs. Where better to start
than with products – and contacts – from the homeland?"

From different ends of the process, Mr. Hernandez and Mr. Thomasson seek to link Latin American companies with the U.S. Hispanic market. Mr. Hernandez, who spent three decades in Mexico promoting brands such Herdez, Doña Maria, Bufalo, and McCormick and whose team launched MexGrocer.com five years ago, says listening has been the key – first, to the company's survival (several ethnic Internet grocery sites have failed) and now, profitability.

"Many people think we are a manufacturer," he says. "We're not. We interact with the consumer – and we communicate with the producer. The truth is, we are a bridge."

Playing the role of "bridge" to foreign investors is easier today with an increasingly wired Latin America, less expensive long-distance phone costs, and air fares that are far cheaper than 10 years ago. Latin America as a region enjoyed also its best single-year growth in 25 years during 2004: U.S. imports from South and Central America were roughly 25 percent higher last year than in 2003. As a result, Latin American corporations have resources to invest in the healthy U.S. Hispanic market, especially with products which have a cultural connection, such as food and entertainment.

According to Jay Garcia, managing director of New York-based investment bank Samuel A. Ramirez & Co., Latin American corporations often find "that the purchasing power of their customers in the U.S. is far greater than their customer base at home." This has attracted some large-scale investments in the market. Mr. Garcia notes:

• Grupo Bimbo, whose Texas-based Bimbo Bakeries USA already accounts for 18 percent of its $3.3 billion in annual revenues, acquired Mrs. Baird's Bakeries in Texas and Four-S Bakeries in California

• Mexico's Gruma – with 5,000 employees in the United States – dominates the U.S. packaged-tortilla market through its Mission, Guerrero, and Buena Comida labels

• The newspaper El Universal de Venezuela has acquired a controlling interest in
Zoom Media Group, publisher of Poder and LOFT magazines.

Latin American companies tapping into the U.S. Hispanic market may have a linguistic or cultural advantage when dealing with expatriates when they first arrive, but that will not guarantee long-term success, says Bruce McKern, a senior lecturer in international business at Stanford University.

On the other hand, know-how employed by companies such as Mexico's cement producer Cemex and Brazil's AmBev soft drink company demonstrates how efficient technologies can propel a company to the forefront of its field without depending on its diaspora population. When Cemex acquires another cement producer, the company implements a process of "Cemex-ification," Mr. McKern says. "They have developed tremendous efficiencies at low cost and they unify everything right away with the systems they have in Mexico.

While large Latin American conglomerates have entered the global economy through the U.S. Hispanic market, obstacles remain to further trade and investment. The 2003 Index of Economic Freedom singled out Latin America as the least performing region and noted that for most Latin American countries, the 2005 version of the index found that the region has stagnated on economic reforms. The 2005 index also lists the United States as the 13th most free country in the world, the first time the nation hasn't ranked in the top 10.

Deputy Assistant Secretary of Commerce Walter Bastian tells Hispanic Business that the United States and Latin America are at a crossroads. "If you look at what free trade has done in Latin America, the results are incredibly positive," he says. "On the other hand, some governments talk about benefits of free trade and globalization, but the fact is they haven't 'sold' the concept to their countries and they haven't been willing to make the tough decisions to implement it."

Accurate information on the benefits of free trade needs to reach the grass roots level in Latin America, or trade will stagnate, says Mr. Bastian. He recalls a "Voice of America" radio show during which the first two callers, from Bolivia and Argentina respectively, asked about what globalization meant. The third caller, from Honduras, said, "I am standing here and looking over my orange groves. To me, globalization means that foreigners are going to come in and take them over."



Source: HISPANIC BUSINESS Magazine


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