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Monday, 25 June 2007

The Role of Networks in Internationalisation in Latin America

Frances Van Ruth

Networks are a powerful and expedient way for firms to gain knowledge about foreign markets and are integral to the internationalisation of Australian firms in Latin America. This is the finding of a recent research project into Australian foreign direct investment in Latin America conducted at the University of Melbourne in collaboration with the Council on Australia-Latin America Relations.

A wide variety of networks contribute to internationalisation for Australian firms in Latin America including both business and social networks; the two often being intertwined. Networks facilitate internationalisation by providing access to knowledge. Whether in relation to language, institutions, or cultural practices increased knowledge and understanding both reduces the ‘distance’ between Australia and Latin America and expedites market entry and expansion. Networks provide a range of knowledge including knowledge about the initial opportunity, knowledge about the competitive environment, knowledge about the institutional environment as well as knowledge about the process of internationalisation itself.

As well as providing knowledge, networks perform multifarious additional roles in internationalisation. These roles include generally ‘unlocking doors’; helping to find employees, agents or local partners; providing customers and suppliers; providing reassurance, providing credibility; as well as sharing and learning from each others’ experiences.

Notably, it is not one specific type of network that fulfils one specific role. For example, in relation to the role of finding employees or agents, the type of network ties mentioned as having carried out this role include customer relationships, parent company ties, previously working in the same company, industry associations, Austrade, social networks including friends and family as well as university alumni links.

Networks are important to business everywhere; they are not a uniquely Latin American phenomenon. The importance of networks is heightened in international business because firms are less knowledgeable about the environment in which they are operating. Networks help firms overcome the ‘liability of foreignness’ wherever they internationalise. There are some important caveats, however, that make networking in Latin America unique.

There is a precedent in Latin America, both cultural and institutional, that places greater emphasis on relationships. Due to an on-going perception of weak institutions, networks provide reassurance when institutions do not. It is possible that the negative reputational effect of opportunism is a greater deterrent than legal recourse. Having acknowledged the importance of networks and networking in Latin America, it seems that it is easier for Australian firms than networking in Asia; possibly due to the greater similarities in our cultural heritage. Additionally, networks in Latin America are relatively small due to wealth concentration.

For more information in relation to this research, please contact Ms Frances Van Ruth, PhD Candidate, Department of Management and Marketing, University of Melbourne at vanruthf@unimelb.edu.au.

"EXPOSIBRAM 2007" - BELO HORIZONTE, SEPT 24 TO 27 BRAZIL

Austrade will be again mounting a national pavilion at Brazil's premier mining exhibition in Belo Horizonte this September. In addition to Austrade's business matching services and other assistance at "Exposibram 2007", there will be Networking Workshops on the Thursday & Friday prior to the exhibition as part of Austrade's Exposibram Program.
This will give the Australian Exposibram delegation an opportunity to meet some of the key Brazilian Mining Industry firms prior to the exhibition, to learn how they do business and the potential for working with them.
For more details on the Austrade participation, you may navigate:
www.austrade.gov.au/exposibram2007

Nufarm acquires rest of Agripec

Agricultural chemicals firm Nufarm Ltd has taken full control of Brazilian crop protection group Agripec Quimica e Farmaceutica SA after acquiring a further 50.1 per cent stake in the company.
Nufarm, which bought 49.9 per cent of Agripec in 2004, will pay about $210 million for the rest of the shares, in a deal to be funded by debt.
Nufarm managing director Doug Rathbone said Brazil was one of the world's most exciting agricultural growth markets, and a fully-owned Agripec would be a platform for Nufarm to develop new business opportunities in South America.
"Given the confidence relating to recovery and sustained growth in the Brazil farm sector, and given our intentions to look at other opportunities in that market, the time was right to step up and acquire the balance of Agripec," Mr Rathbone said.
The existing major shareholder and president of Agripec, Beto Studart, will relinquish his position on completion of the transaction, due mid-August.
Nufarm said at the time that currency movements had resulted in a significant tightening of credit in the Brazilian farm sector.
Agripec contributed $13.7 million to group earnings, compared to $18.3 million last year.
But Mr Rathbone anticipated a stronger performance in Brazil due a more stable currency, stronger commodity prices and a sugar cane market boom.
For more information click here and read the article in The Age (AU) website

New Members

The ABCC representatives would like to welcome the following new members and thank you for your support.

South Australia:
University of Adelaide
DES-International Business Services
Opto Global Pty. Ltd.
Mr. William Frogley

Victoria:
TradeData International
Seraphim Risk Management

New South Wales:
UBI World TV
Layer2 Australia
Brazil Connection

Queensland:
Australia Opportunity Solutions Pty. Ltd.

Trade balance surplus rose 11.6%

The Brazilian trade balance surplus reached US$ 18.579 billion in the first 114 working days of the year, an increase of 11.61% over the same period in 2006, according to a bulletin published by the Ministry of Development, Industry and Foreign Trade.
In the year, foreign sales reached US$ 66.559 billion to date, with growth of 20.18% or US$ 11.175 billion, but the purchases of foreign products grew more, mainly due to the appreciation of the Brazilian real against the dollar, and reached US$ 47.980 billion, with growth of 26.38% or US$ 10.014 billion.
The greater increase in imports caused market analysts to forecast a 10% lower trade balance surplus at the end of this year as against last year's, which was a record US$ 46.077 billion.
For more information click here and read the article in ANBA website

Brazilian revenues with poultry exports grew 84.9%

Brazil exported around US$ 400 million in poultry during the month of May, an increase of 84.9% over the same month last year, according to the Brazilian Poultry Exporters Association (ABEF). These revenues are from exports of 274,000 tonnes of meat, i.e. 39.4% more than in May 2006.
Amongst the exports last month, the whole chickens sold are prominent for the revenues of US$ 120.5 million, 125.5% more than in the same period last year. According to the acting executive president at the organization, Christian Lohbauer, the large percentage growth is due to the fact that sales fell in May 2006 due to avian flu in the European and Asian markets.
In the first five months of this year, Brazil exported 1.28 million tonnes of chicken, 22.6% more than in the period from January to May last year. Revenues were US$ 1.75 billion, 41.3% more in the same comparison. Most prominent are sales of industrialized chicken, which reached US$ 188.6 million, 80.3% more than in the same period in 2006.
For more information click here and read the article in ANBA website

Crusader Holdings is moving into the backyard of CVRD

Crusader Holdings is winning over some fans for its move into the backyard of the world's biggest iron ore producer, Brazil's Companhia Vale do Rio Doce (CVRD).
Previously covered in Garimpeiro for the Brazilian gold ambitions of its chief executive, Rob Smakman, the tightly held Crusader has picked up an option over an iron ore prospect in Brazil's famed "Iron Quadrilateral", which contains dozens of iron ore mines.
The option is over the Posse Iron prospect in the northern part of the quadrilateral. High-grade hematite ore at the prospect was recently uncovered during upgrade work on a local highway.
Smakman, who is based in Brazil, jumped on the opportunity when the exposed mineralisation was shown to be hosted within a typical banded iron formation (locally known as itabirite).
He told the Australian Stock Exchange that the itabirite appeared to be the same as the other major mines from the area. Limited sampling by the vendors included results of more than 61 per cent iron.
A fast-tracked due diligence program is now under way, with geologists on site mapping and sampling in preparation for drilling. Posse lies 30 kilometres from Belo Horizonte, the capital city of Minas Gerais, and a hematite-finding highway runs through the tenement. So there will be no hardship payments to the exploration crew.
Should it shape up, Crusader will pay the vendors a total of $3.4 million — a small amount given the leverage the deposit could deliver.
For more information click here and read the article in The Age (AU) website

Bovine meat exports from Brazil hit record high in May

Brazilian exports of bovine meat yielded US$ 443 million in May, a new monthly record high according to the Brazilian Beef Industry and Exporters Association (ABIEC). The value amount is 28% higher than recorded in the same month last week. Shipments totaled 266,000 tonnes, a 28.6% increase compared with May 2006.
During the first five months of 2007, foreign sales reached US$ 1.8 billion, a 39.4% increase over the same period last year. In total, 1.1 million tonnes were shipped form January until May, 33.4% more than in the first five months of 2006.
According to a press release by ABIEC, the president of the organization, Marcus Vinicius Pratini de Moraes, ascribed the growth in May to the increased cattle supply, the increased sales to emerging markets, and the increased supply of special cuts, which have greater value, and to the increase in the price of shipped offal.
For more information click here and read the article in ANBA website

Ethanol generates investment and partnerships between producer countries

Investments in research, infrastructure and transportation, and partnerships between ethanol producer countries are the measures required in order to ensure the future of renewable fuels. The statement was made by the vice president of the Archer Daniels Midland Company (ADM), John Rice, during the panel Global Paradigms: The experience of ethanol in the United States and in Brazil, 04th June at the Ethanol Summit 2007 held in the World Trade Center in the southeastern Brazilian city of São Paulo. ADM is the world's largest producer of biodiesel and of maize ethanol.
"In the future, we hope that the developments aimed at increasing productivity in the United States can also be used in other producer countries, such as Brazil," said Rice. The executive said that the company, a global leader in the bio energy market, with annual production of 4 billion litres of ethanol, is going to increase production to 6 billion litres in 2008. The US-based multinational company has been operating in Brazil since 1997.
The president of the São Paulo Sugar Cane Agro Industry Union (UNICA), Eduardo Pereira de Carvalho, also believes a partnership between ethanol producer countries to be the best strategy for the success of renewable fuels. "Maize ethanol produced in the United States does not compete with our ethanol.”
The president of UNICA presented a brief overview of the development of alcohol and ethanol in Brazil. " Today, 30 years after the establishment of the Proálcool (a program for alcohol developed by the Brazilian government), we are living our best phase, one of maturity and innovation," he said.
Carvalho also stated that the environmental issue is crucial to the future of renewable fuels. "Global warming and climate changes have become key issues for the entire world, and we must take advantage of our 140-million-hectare potential for sugar cane production," he claimed.
For more information click here and read the article in ANBA website

Doha - Latest world trade talks collapse

The latest negotiations to try to secure a new global trade deal have collapsed without agreement. Trade leaders from the European Union, US, India and Brazil had been meeting in Germany to find a breakthrough on the long-delayed Doha round of talks.
Brazil and India blamed the latest failure on the EU and US not offering enough concessions on agriculture. The EU and US countered that Brazil and India were not opening up their markets to Western manufactured goods.
Brazil's Foreign Minister Celso Amorim said the Brazilian and Indian delegations had walked away from the negotiations in the eastern German city of Potsdam, because they had proved to be "useless".
This week's negotiations could not generate political consensus to meaningfully open markets to new trade - particularly in manufactured goods Susan Schwab, US Trade Representative India's Commerce and Industry Minister Kamal Nath added that "there will have to be a substantial attitude change" from the EU and US.
US Trade Representative Susan Schwab said: "To meet the Doha Round's promise, developed and advanced developing economies need to open their domestic markets for agricultural goods, industrial products, and services."
EU Trade Commissioner Peter Mandelson echoed this argument, saying that "while in Europe we are prepared to pay a lot, we cannot do it on less to nothing in return".
The collapse of these secretive trade talks is a good opportunity to develop an alternative approach to trade Joe Zacune, Friends of the Earth, trade campaigner Environmental pressure group Friends of the Earth greeted the collapsed talks as good news.
Trade campaigner Joe Zacune said: "The collapse of these secretive trade talks is a good opportunity to develop an alternative approach to trade that works for developing countries and the environment."
He said the proposals had been driven mainly by the EU and the US putting "commercial interests of their corporations before the needs of poor communities and their natural resources".
For more information click here and read the article in BBC website

President Lula says low inflation is as vital as growth

“ Brazil is committed to responsible economic policies and low inflation is vital”, President Luiz Inacio Lula da Silva said on radio broadcast.
"Obviously we could be growing more ... but distributing income and controlling inflation are just as important."
Lula also said he expected growth to pick up in the second half of the year.
The economy grew 4.3 percent in the first quarter compared with the same quarter a year ago and 0.8 percent compared with the fourth quarter last year.
Lula, who followed a market-friendly economic policy on his first term despite his leftist background, said he would do everything necessary to make sure Brazil's economy kept gaining credibility. Stability was the best thing for the working class, he said.
In recent months Lula has pledged to increase government investment and to make the economy grow at least 5 percent per year.
"All the world can see that we have managed to combine growth with inflation control," Lula said.
For more information click here and read the article in Reuters website

Microfinance faces debt test in Brazil

In the shantytowns that surround Brazil's cities, plenty of peddlers and vendors say they could use a small loan. The trouble for microfinance lenders -- who believe loans as small as US50 can help poor entrepreneurs grow business and climb out of poverty -- is that many would-be borrowers in South America's largest economy are already loaded with debt.
With some of the world's highest interest rates, Brazil is fertile ground for aggressive commercial lending. And after decades of hyperinflation, rich and poor have learned that it's smarter to spend than invest.
Brazil seems like the perfect place for microfinance, a development strategy that emerged in the 1970s. As microfinance rides a new wave of global attention and more private capital flows into the segment, lenders may want to consider what went wrong in Brazil. Globally, cross-border investment in microfinance tripled in the last two years to $1.4 billion. Microlenders sold shares, private funds invested and even profit-driven giants like ABN Amro and Citibank started taking an interest.
But critics have slammed private capital's arrival, saying loans can hurt poor people by encouraging them to consume beyond their means and charging them interest to pile on debt.
Stores hand out credit cards, banks cash post-dated checks, and retailers sell everything from TVs to T-shirts on payment plans with high interest rates built into the price.
At the other extreme, the government sets limits on lending rates charged by nonprofits and offers discounted loans -- which often go unpaid, causing federal debt and market rates to rise.
In an effort to expand microfinance services to the poor, President Luiz Inacio Lula da Silva's government decided in 2003 that banks must invest 2 percent of sight deposits in microfinance at capped interest rates.
The move has created a pool of domestic capital, but critics say the measure simply encourages banks to make loans to slightly poorer clients without doing the hard work required to reach the neediest and to make sure loans are used productively.
Real Microcredito, founded by Dutch bank ABN Amro a few years ago, serves a growing number of hairdressers and shop owners in the outskirts of Sao Paulo, one of the world's five biggest cities.
General Manager Giovani Anversa estimates Brazil has some 10 million potential micro borrowers and he expects competition for their business to grow.
For more information click here and read the article in Reuters website

Amazon River 'longer than Nile'

Amazon River 'longer than Nile'
Researchers in Brazil are claiming to have established as a scientific fact that the Amazon is the longest river in the world. The Amazon is recognised as the world's largest river by volume, but has generally been regarded as second in length to the River Nile.
The claim follows an expedition to Peru that is said to have established a new starting point further south. It puts the Amazon at 6,800km (4,250 miles) compared to the Nile's 6,695km.
The new claim in Brazil follows an expedition by scientists which is said to have discovered a new source for the Amazon in the south of Peru and not the north of the country as had been thought for many years. While the exact location has yet to be confirmed from two choices, scientists say either would make the river the longest in the world.
The Amazon is now said to begin in an ice-covered mountain in southern Peru called Mismi. Researchers traveled for 14 days, sometimes in freezing temperatures, to establish the location at an altitude of 5,000m.
There has been a healthy academic debate over the world's longest river for some years and the claim from Brazil may not go unchallenged.
For more information click here and read the article in BBC website

UBI World brings Globo TV to Australia

UBI WORLD TV broadcasts Brazil’s hottest channel – TV Globo – as well as RTP International and SIC. Australia’s largest multicultural subscription TV and radio broadcaster, UBI WORLD TV, is proud of its long and vibrant association with the Brazilian community. They have been enthusiastic supporters of the many festivals and other events the Brazilian community holds in Australia, including the Brazilian Festival at Darling Harbour in Sydney.
They would like to build on their relationship with the Brazilian community and get even more involved in the events and activities that celebrate the culture and traditions of Brazil. They are inviting members of the Brazilian community to contact them with details of any up-coming events that are being organised, so that they can promote your event and possibly also screen it on their channels.
Tell UBI WORLD TV about your event – large or small – by emailing them a short brief at events@ubiworldtv.com. Please include your contact details, and any photos or promotional material you can provide.
More information in www.ubiworldtv.com