Latin American guide to China: a practical guide to doing business in China for Latin American companies.

Author:Morris, Ruth
Position:SPECIAL REPORT - Editorial
 
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SHANGHAI -- A Bolivian executive lands at a Chinese airport and politely kisses the cheek of an assistant sent to greet him, as she recoils in astonishment. A Dominican businessman buys a container of red beans in China, but when the shipment arrives it's half full of pebbles. A Peruvian chef steps onto the streets of Shanghai, surveys the black sedans, the gray sky, the rusty bicycles, and asks himself: "Do these people really want to eat ceviche?"

It hasn't always been smooth sailing for Latin Americans doing business in China. From hulking multinationals down to adventure-driven entrepreneurs, the journey has been fraught with regulatory headaches, marketing missteps and copy-cat competitors, not to mention a yawning cultural divide.

But despite the challenges, many Latin American companies are forging ahead, moving beyond the tried and true commodities trade, and seeking out Chinese buyers for value-added products like Brazilian shoes and Mexican tequila. Others are launching trading companies, communications ventures, tourism services and Latin-themed restaurants, all with a common goal: to stake a claim in the world's fastest growing major economy.

I'm quite amazed at how many people are coming and taking the chance to start something up here. And in Latin America, I don't think they're seeing this," says Edgar Puch, director of the procurement and trading company Pryme Group, in Shanghai.

While many large Latin American companies have struggled to find a toehold in China, Puch says a growing army of Latin American entrepreneurs is scrambling up the learning curve; they are getting their hands dirty, and immersing themselves in China's business culture.

"Small companies are doing an important job here, opening our eyes, accumulating knowledge, and I expect more and more to come," he says. "And they must come."

A glance at the numbers explains why: With a staggering 1.3 billion inhabitants, China has posted economic growth rates of around 10 percent for three decades. What's more, trade between Latin America and China is on fire--shooting up 51.2 percent in 2010, to $178.6 billion.

In other words, Chinas trade with Latin America is growing at nearly twice the level of US trade with the region.

"The Chinese market is truly becoming an attractive market," says Efren Calvo Adame, president of the Mexico-China Chamber of Commerce. In the context of Europe's debt crisis and the United States' limping recovery, he added, "China is healthy, emergent, and sustainable over the long-term. What other market offers that?"

Yet by most accounts, Latin America has arrived late to the game, and several of Latin America's large multinationals have had a bumpy ride in China so far. Experts point to the case of Brazilian airplane maker Embraer, which stood by for months with an inactive factory in China while it waited on government authorizations.

"China is not for a first-timer in Asia. You don't enter the Chinese market in a gung-ho spirit," says Mario Ignacio Artaza, Chilean consul-general in Hong Kong. "The first rule of success is investing in a plane ticket, in a hotel stay, in a cab, and seeing for yourself.."

THINK NICHE, THINK RICH

Puch, who is Bolivian, came to China as an executive for a Chilean company in 2005. He struck out on his own two years later, selling his car and sinking all his savings into Pryme Group. The company has grown swiftly ever since and recently added a research and analysis division.

Puch says his most important piece of advice for Latin American clients is to find a niche in China, preferably one that taps into the country's luxury spending spree. Chinas millionaire households surged 31 percent last year, a recent Boston Consulting Group survey showed; the group expects China's middle-class and affluent consumers to double in number over the next decade, to more than 400 million.

"China has more millionaires than any country outside Japan and the United States," Puch says, "and Chinese society has become aspirational."

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