UPS chief: Latin America can be next growth “hotbed”
UPS chief: Latin America can be next growth “hotbed”
“Latin America, home to half-a-billion people south of the U.S.-Mexico border, has the potential to be the next hotbed of trade and economic growth,” said Mike Eskew, UPS chairman and chief executive officer, in a speech Tuesday.
“We have so many complicated customs and security requirements in place that it’s often easier to import goods from Europe or Asia,” said Eskew at the U.S. Commerce Department’s inaugural Americas Competitiveness Forum.
“Although we’re neighbors, our border and customs policies make it sometimes seem like we’re enemies,” he told the group.
Eskew said because of proximity, Latin American countries have an advantage when trading with the United States.
“In an era of just-in-time supply chains, proximity is everything. Latin American markets can be accessed by land and sea. Another key advantage ' is the ability to take advantage of several free trade agreements,” he said. “While we still face the challenge of how best to knit them together, these agreements really matter.”
He noted the North American Free Trade Agreement between the United States, Canada and Mexico is the world's second-largest trading bloc behind the European Union, “and accounts for far more trade than the U.S. conducts with China.”
Latin America’s economies are growing faster than most of the world. “Between 1997 and 2020, Latin America’s real Gross Domestic Product is expected to grow 4.4 percent annually. That’s faster economic growth than Asia at 3.6 percent and much faster than the 2.8 percent global average,” he said.
Eskew said customs processes make trade challenging. For example, “the average North American-produced vehicle crosses the border more than seven times during production” and “faces a staggering 28,200 customs transactions.”
“By comparison, cars imported from Europe or Asia to North America involve a single customs transaction. If we delay cross-border shipments by just a day, the Americas lose their proximity advantage over Asia,” he added.
Eskew said government in Latin America should:
* Develop a single, streamlined customs clearance system.
* Identify trusted shippers and give them a “fast lane” for customs processing.
* Raise the minimum dollar value at which imported goods must receive customs clearance and separate the release of shipments from the collection of duties and fees.
* Increase spending on transportation infrastructure, particularly the road and rail networks. He said Latin America is spending less than 2 percent of GDP on infrastructure compared to 3 percent to 6 percent in China and South Korea.
* Improve the communications infrastructure, both wired and wireless.
He said private companies, meantime, should respond by using technology to improve their product supply chains.
He said there are huge gains in efficiency to be had by removing middlemen and unnecessary warehousing and creating information systems that keep track of every movement.
