"We never leave the country unless we have a letter of credit to pay us in U.S. dollars," says CEO Jaime Jurado. "We export our materials to use on our own jobs." Last year, about $15 million of its $78 million in revenue came from foreign projects, he adds.
While Top 50 Exporters have found ways to shelter themselves from currency whipsaws, some economists feel that currency plays a relatively minor role in trade stimulation or international balance of payments. In fact, a strong dollar provides an incentive for foreign investors to park their money in the United States, thereby benefiting U.S. exporters through cheaper credit services and low inflation. "Since the 1930s, it's never been a good idea to cheapen U.S. currency, although we momentarily gain the upper hand in exports," says Boris Kozolchyk, president of the National Law Center for Inter-American Free Trade, a group that works to harmonize trade laws and regulations in the Western hemisphere. "We get a lot more total value in exports by facilitating credits and service than by artificially lowering the value of the dollar."
"I cannot recall a customer that has found himself pushed out of a market because of a strong U.S. dollar," says Eric Nielsen, manager of the Tucson, Arizona, export assistance center of the Commerce Department.
"For the small exporter, small variations in the dollar should not be the focus of attention," says John Mathis, professor of international finance at the American Graduate School of International Management. "Much more important is greater economic activity. What is the income of the people in that country? And is that income growing? What is inflation and real income?"
Until recently, those questions provided optimism for many Top 50 Exporters, who sell heavily in Latin America. But evidence now indicates that the economic slowdown has become global. Last year, the Commerce Department reported that U.S. exports jumped 10.2 percent, a figure that has trailed off this year, down to 1.3 percent through the first six months of the year.
A more telling statistic for Hispanic exporters is the fate of Latin American countries. Trade with Mexico, which had grown at a 22 percent clip for the four years since NAFTA began, is expected to flatten this year. Argentina faces a financial crisis after a near-default on $128 billion in debt. If it does default eventually, neighboring Mercosur countries, including Brazil, the continent's largest economy, will feel the effects.
Currency plays a role in Argentina's problems. In 1991, the country linked its peso to the dollar with a one-to-one ratio in a bid to curb hyperinflation. The strategy worked for a while, but when economic turmoil hit East Asia and Latin America in 1997, the country kept the rigid dollar-peso exchange. Then Brazilian devaluation took place in 1999, and many Argentine factories moved there to take advantage of lower labor costs.
"For them to maintain parity with the dollar, they have to bring in enough dollars to back up the value of the peso," says Mr. Kozolchyk. "The only way to do that is through exports. But they have no way of exporting because productivity is low and they have no export credit."
Operating in this environment requires some counterintuitive business skills. Tire Group's Mr. Gonzalez estimates his gross revenues at $25 million this year, down from a high of $34 million in 1996. "The last three or four years we've focused on the bottom line and cut out low-margin business," he said. "Revenues have decreased, but the bottom line has increased." During the 1996–2001 time period, he has trimmed his work force from 49 to 21 people.
Still, Mr. Gonzalez admits he lost some big money in Argentina and won't do business there again until there are major changes. "We hope the Latin American economies will rebound, but I doubt it will happen in the next six to 12 months," he says.
As a long-term strategy, Mr. Mathis suggests, exporters should begin to consider their method of payment – including currency – as part of the product they're selling. "International competition is increasingly combining cost and technique of financing with marketing strategy," he reports. "The more effective the financial strategies a company uses, the better able it is to compete."
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