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Brewing logistics business has Latin flavor.

      I attended the March CONECT conference in Newport, R.I., a beautiful setting by the ocean, contemplating the future of the logistics industry with some friends over a wonderful dinner at the Briarcliff Mansion at sunset.

      The group was so focused on the 'American' financial crisis that they were forgetting about the rest of the world, especially Latin America. Our firm does business in Latin America, and our local business in Brazil always keeps me up to date about what is happening there. Of course, speaking Portuguese and Spanish helps, as I read the most meaty news and reports in the local languages throughout Latin America.

      Growth is still a word used frequently in Latin America. We have ongoing projects in Brazil and Andina (the collection of countries in Colombia, Ecuador, Peru, Venezuela and Bolivia), and Central America. For many firms like ours, this is going to be the first year where our Latin American business will outperform our U.S. business, in part because U.S. business is slowing down, but more because Latin American business is booming.

Need for knowledge, expertise

      Consumer goods, retail, electronics, agriproducts and many other industries are growing in Latin America. Logistics services providers (LSPs), though fragmented, are still performing reasonably well, mostly due to internal trade and growing international trade from unexpected areas. Local businesses lack sufficient people with advanced knowledge and expertise in the logistics and supply chain areas. We find managers and directors in their 20s and 30s who are western educated and have worked overseas returning to executive positions locally due to their knowledge, exposure and expertise gained abroad.

Roads less traveled

      At the recent CONECT conference, we discussed the expansion of a Mexican retailer to the rest of Latin America as recently as last month, in the midst of this financial crisis, because they see a tremendous growth potential in the rest of Latin America not just when the economies pick up again, but even now. Thanks to the relative fiscal prudence of many Latin American countries (having faced several local financial upheavals such as currency fluctuations of more than 1,000 percent, devaluations, overburdened with International Monetary Fund debt, vast amounts of perennial corruption, and domestic economic crises).

      A recent LatinFinance article discussed how Wal-Mart was on an acquisition spree, agreeing to 'acquire Chilean retailer DyS for about $2.8 billion.' DyS has apparently already opened offices in Peru and had planned to open stores in a smaller format. But with the Wal-Mart acquisition they may migrate to larger format stores. This paves the way for Wal-Mart in not only Chile but also Peru.

      'Market rumors indicate Wal-Mart could soon make an acquisition in Colombia also, with a potential target being Supertiendas y Droguerias Olimpica,' paving the way for a Colombian presence, the article said.

      Meanwhile, LatinFinance also mentions that Bimbo, a large Mexican retailer, is looking north for acquisition targets. 'Bimbo is close to acquiring U.S. assets belonging to Canada's Weston Foods for $2.38 billion. The deal will give Bimbo the Boboli, Brownberry, Entenmann's, Freihofer's, Stroehmann and Thomas' brands of breads, rolls, muffins and bagels.'

      Whereas Bimbo had first acquired the company's western U.S. distribution assets in 2002, it has long sought to increase its stake in the U.S. bread market. This deal would give Bimbo 4,000 distribution routes and 22 factories in the United States to propel the company into the American mainstream market.

      Meanwhile, back in Peru, the Chinese trade delegation has struck some very mutually lucrative deals with Peruvian President Alan Garcia, an unabashed Sinofile, for minerals and other local products. Chinese President Hu Jintao was recently accompanied by mining, banking, and manufacturing executives to strike the deal himself.

      'Peru and China have become great friends and partners with reciprocal and sincere cooperation,' Garcia said. One of Peru's largest immigrant populations is Chinese, which lubricates the deal even further. From 2001 to 2007, growth has been almost 10-fold, an amazing amount by any standard. Further, China may actually be looking at Peru to be a manufacturing base, taking advantage of the U.S.-Peru free trade agreement signed last year and in the final stages of implementation.

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      Logistics service providers need to start looking outside their traditional boundaries and start catering to their current customer base in new and different countries, and along different trade routes. Start opening local offices. Those with strong balance sheets and an advantageous cash position need to start looking at local acquisitions to cater to their current client base.

      They need to start opening their doors to new and different deals with contracts in different languages with non-traditional (local) terms of payables and receiveables. It's certainly an exciting adventure and a chance to move ahead of the competition.

'The new normal'

      In a recent short essay by Ian Davis, McKinsey & Co.'s worldwide managing director, he writes about 'the new normal,' the post-crisis era, where the battle-scarred organizations, governments and public define a new way of running organizations, integrating information across businesses and through government intervention, and creating a new form of accountability of companies to their shareholders ' the people.

      'This much is certain: When we finally enter into the post-crisis period, the business and economic context will not have returned to its pre-crisis state,' Davis said. 'Executives preparing their organizations to succeed in the new normal must focus on what has changed and what remains basically the same for their customers, companies and industries. The result will be an environment that, while different from the past, is no less rich in possibilities for those who are prepared.'

      Deep R. Parekh is a partner with Equus Group LLC, a supply chain advisory services and management consulting firm based in New York and Sao Paulo, Brazil. He welcomes your feedback and comments at [email protected], and can be contacted at (917) 940-7538.

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