The U.S. Dairy Exporter Blog: Market Analysis, Research & News

  • South America's Market-Oriented Shift may Yield Gains for U.S. Dairy

    By Margaret Speich June 15, 2016

    The head of USDEC’s South America office discusses Peru, Chile, Colombia, Brazil and other U.S. dairy export markets.

    Editor's note: During a recent visit to USDEC international headquarters in Arlington, Virginia, Jose Madeira, based in Brazil, discussed challenges and opportunities in South America with Margaret Speich, USDEC senior vice president, strategic and industry communications. Below is their Q&A.

    South America is experiencing political turmoil. What is your assessment of what's happening?

    You can’t put all of South America into the same basket. But it is true that we are experiencing a lot of change.

    Jose4.jpgTake, for example, Brazil, where our office is. The Brazilian economy is not doing well. We also have political problems. The president has been suspended from office for impeachment proceedings. The good news is you have a temporary administration in Brazil that seems to be more pro-business than what we had in the past. I would say there is more opportunity to export dairy ingredients than consumer products in Brazil. Brazil has its own established dairy industry, but you can’t ignore exporting to Brazil because it has 205 million people, representing 40 percent of the South American market.

    Argentina elected a new president, Mauricio Macri, in 2015. Many people felt his
    predesssor was bad for the economy. Macri brings a new economic perspective
    to Argentina, providing new hope. The country is a major producer of milk, as
    well as some dairy products.

    South_America_EnhancedHiDef.png

    Chile has a stable economy. It has been like that for many, many years. It is the only South American country considered a developed country, with a per capita income of more than $20,000. Chile is a growing market for exports. So is Colombia and Peru.

    Then there is Venezuela. You know the major problems that are going on there right now. It has been a good market in the past, but it's on hold now, awaiting some resolution of the political situation. Anything that you say about Venezuela today may or may not be true tomorrow.

    Is there an upside to this political change?

    South_America15-964275-edited-086698-edited.jpgYes. There is a strong movement in South America toward more market-oriented economies. The first place we saw change was in Argentina. We are also seeing changes in Brazil with the temporary administration. In Peru, we had a leftist government and now have a pro-business president who is U.K./U.S. educated (with degrees from Oxford and Princeton) and has an American spouse. Change is also afoot in Bolivia. The continent is moving toward a more open economic system because it didn’t work for most of the countries that took a different approach. South Americans see the stable, growing economies in Colombia and Chile and they increasingly want that for themselves. Big political change is happening in South America right now and it could, in time, create a more pro-business environment.

    How will this political shift affect U.S. dairy exporters?

    It’s going to have a very, very positive effect. You will be dealing with more open-minded people. They are in favor of free trade. In Brazil, for example, we have this new administration with a powerful minister of foreign affairs. He has already started conversations to negotiate free-trade agreements separately instead of as a group. This will help Brazil’s economy. In the last six months, there has been a change of mentality with these new administrations in South America, and that should be good news for USDEC members.

    Venezuela's whole milk powder imports fell from 216,000 tons in 2012 to 57,000 tons last year to a trickle so far this year. When will this trend end?

    Venezuela is not a market any exporter should be looking at right now. It’s on hold. They don’t even have hard currency. A lot of companies have stopped doing business in Venezuela because they are not getting paid. Airlines have canceled flights to Venezuela because they cannot take their money out of the country. Most of the imports are now made by the government.

    Venezuela-problems.jpg

    The falling price of oil has affected Venezuela and led to this political crisis. The Venezuelan economy is dependent on oil and oil exports. Something big will have to happen pretty soon. But even if there is political change, they will have problems bouncing back until oil prices rebound. It is going to take some time for Venezuela to recover.

    Bottom line: I think it's too risky for any dairy supplier to do business in Venezuela right now. Even some South American countries have stopped exporting to Venezuela.

    What services can you provide in South America?

    We have a full package of services for USDEC members. We can organize visits
     for the companies, prepare reports and explain issues related to registration of plants and products, especially in Brazil where it takes a little longer than other South American markets. We can help with plant registration and product registration in Brazil and other markets.

    It’s our daily job to deal with those issues to help USDEC member companies step into those markets. We can organize meetings and participate in trade shows. We can also help organize trade missions, buyers’ missions and things like that. Our ultimate goal is to help USDEC member companies be successful in our markets.

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    The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. How to republish this post.  

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