Archive for October, 2009

October 22nd, 2009

A rosy future for Panama

At a time when all the traditional export markets have slowed, you can still find good opportunities in smaller, lesser known places. Panama is one such place, and here is why I think Laval entrepreneurs should check it out.

I’ve had a chance to discover this Latin American country through my work. The first time I travelled to this bustling, resource-rich country, I felt right at home. Panama has been likened to Miami because of its sophisticated business community, high-speed Internet connections and similar architectural style. I’ve been going there every year for the past four years and am amazed at the pace with which buildings are popping up.

Thanks to its economic growth, Panama has been making headlines in recent months. You can find out more by reading the following articles:

  • Weekly commentary of September 23
  • Article on negotiations of a Canada-Panama free trade agreement
  • Article in the LTIBC summer 2009 newsletter

I firmly believe Panama is on the cusp of an economic boom thanks to, among others, the canal expansion project and the country’s new president, Mr. Ricardo Martinelli, who has promised to build a metro. Also note that Panama has become a retirement destination for many Canadians and Americans.

Panama may be small but it’s succeeded in carving itself a place of choice in Latin America due to a business culture that makes international negotiations easy. For instance:

  • The country’s official currency is the U.S. dollar;
  • Panama is one of the most open economies in the world (multiple free-trade agreements, including one recently signed with Canada);
  • The Panama Canal facilitates access to this market and to all Latin American markets.

If you’d like to learn more about opportunities in Panama, join us on November 12 for a meeting with representatives from Panama, Costa Rica and Edificar S.A. , one of Costa Rica’s three largest construction firms. The company is doing extremely well in Central America and is looking for business partners in Canada.

October 14th, 2009

The management of currency risk: a critical but often neglected and generally misunderstood element in international business

Without claiming myself an expert in hedging strategies or attempting to make a full statement on the subject, I’d like to share with you an article published in EDC’s ExportWise summer 2009 edition. The article was written by Jasmin Valade, foreign exchange broker at MF Global Canada Co., a subsidiary of MF Global Ltd., who has been an active contributor for several months now in the LTIBC Network which includes ten exporting companies from Laval.

The article is primarily intended for business leaders who are in the initial stages of developing a hedging strategy, particularly to those who have never taken steps to manage the currency risks. It explains how to assess its actual exposure from its budget and gives key financial tools in planning a hedging strategy. The text is concise but gives a good overview.

To learn more, there are obviously several sources of information on the Internet or in bookstores, such as a practical guide for SMEs Maintenez votre avantage concurrentiel – La gestion du risque de change published in 2007 by Normand Faubert, Optionsdevises, a consulting and training firm specialized in the management of currency risk.

You can also contact the international exchange services of a broker or of your financial institution, which should in principle, be able to enlighten you.

The important thing here is to get support and ask questions. Too many companies have in recent years either quit or tried to improvise and many have paid dearly for their mistakes.

October 8th, 2009

You need patience and perseverance to do business in India

On September 21, I attended a seminar organized by the Manufacturiers et exportateurs du Québec, intended to present business opportunities and the future outlook in India. Quebec Premier was on hand to announce the 2010 Quebec India mission, which will take place from January 31 to February 6, 2010.

I’d like to share with you the comments of some Quebec companies that have been successful in this market. There were testimonials from, among others, MPB Communications and EXFO (IT), SNC-Lavalin and Premier Tech (infrastructure, energy and environment), and CAE and CVTECH (aeronautics). Everyone agrees that opportunities abound in this market.

Here are two examples of successes in this complex market.

  • CAE exports to India since 1971. Initially, sales were direct. In 2004, CAE chooses to set up in the market and they went from 13 to 320 employees in 2009. To be successful in India it is important to establish good relations with government and local partners, says Mr. Marc St-Hilaire, Vice-President, Technology. In addition, business in India has allowed them to have a direct point of contact with the market
  • CVTech was approached by Tata Motors for its expertise in order to develop a continuously variable transmission (CVT) for the NANO car. Mr. Alain Charest, vice president indicated that the market potential is enormous as the government invests a lot, the English language facilitates negotiations and wages are low for skilled labour.

However, despite the abundant opportunities in India, doing business there is a challenge. First, red tape can make negotiations very slow and complicated. The country’s legal and tax system is extremely cumbersome. Consequently, we recommend taking a regional rather than a global approach. That said, bear in mind that each of the 28 States has its own particularities. You’ll find plenty of consultants ready to help you out but be aware that they don’t always have the requisite skills. Ask the Canadian authorities in India for referrals. Second, employee turnover is high: 100% every five years. Third, road, port, airport, rail and urban infrastructures are lacking. And fourth, energy demand has outstripped supply for many years with the result that power failures are common.

Other than these challenges, there also cultural differences to consider, for instance:

  • The notion of  ‘yes’ (yes in India doesn’t always mean yes);
  • The notion of time is quite different (things are done much more slowly);
  • Cell phones rule, even in business meetings (never turned off);
  • Negotiations move at a very slow pace;
  • Family and religion play an important role in Indians’ lives;
  • Caste barriers persist despite being outlawed many years ago;
  • The group takes precedence over the individual;
  • Hierarchy is very important in business, hence less room for initiative-taking.

In conclusion, opportunities abound for Quebec SMEs in India. However, before jumping in, you should carefully evaluate whether the benefits will outweigh the efforts required to develop this market.

For more information about the Indian market, I highly recommend EDC’s guide on how to do business in India and take knowledge of the following statistics:

  • India is expected to become one of the four largest economies in the world within 20 years. Its population, estimated at 1.166 billion this year, is growing at a rate of 1.6% per year.
  • About half of the population is under age 25 and highly educated. For example, the country turns out 300,000 engineering and 1,000,000 IT graduates every year.
  • India has a massive pool of qualified workers who speak English.
  • Consisting of about 300 million consumers, the middle class will make up 41% of the population by 2025 or roughly 600 million people.
  • India was less affected by the financial crisis than most other countries because of its solid banking system, robust domestic consumption (accounts for about 60% of its GDP) and the government’s prompt and aggressive monetary and fiscal response, for instance, a $500 million investment in infrastructure over the next five years.
  • There are a number of sectors with strong potential for Laval firms, such as energy/environment, infrastructures, aeronautics and IT.

If you’d like to know more about a particular sector, I invite you to post your questions on this blog.