A seller's market: as trade deals kick in and economies ignite, Latin America's hot exporters reap the rewards.

As talks for a free trade area for the hemisphere seem mired down, the biggest actors in the market, Mexico. Brazil and the United States, are driving forward with side deals and global plans. A sluggish world economy would have been met in the past with giant government make-work programs and spending sprees to match. Those old reflexes are in place (the U.S. version seems to have been outsized tax cuts), but the hemisphere's powerhouses are also racing to diversify and open markets near and far. A LATIN TRADE examination of the top five global buyers of the region's goods--the United States, Canada, Germany, Japan and Brazil--found that Brazil is first or second in each foreign market.

China is clearly driving the expansion of much of the world's commodities markets. But a hungry China doesn't help Lula, or any Latin American exporter interested in moving beyond dollar-priced global commodities, without new trade deals. China accounts for just 6% of Brazil's exports now, and commodities--where prices have been pushed highest--account for only a third of Brazil's exports. Lula needs Chinese consumers to buy finished goods made in Brazil to pull his country out of its economic funk.

In an exclusive interview with LATIN TRADE, Brazilian Development, Industry and Trade Minister Luiz Furlan talked about his strategy to move industrial production from under 1% growth to the 6.6% it enjoyed in 2000. To do that, Furlan says, the government should push big public housing and infrastructure programs to help support the cement industry. But sales of farm machinery jumped 20% during 2003, driven by a record soy crop to meet foreign demand from places like China. "It's important to check the map to know where the problems are and apply microeconomic stimulus policies," Furlan says.

Lula and his team have made a lot of useful political noise about increasing ties to China and India at the expense of a hemispheric pact. Nevertheless, Brazil sends a quarter of its goods to Europe and almost the same to the United States.

Part of the problem, according to Furlan, is that the United States continues to stymie key Brazilian exports like sugar and oranges. Nevertheless, international demand for Brazilian goods out strips supply, high global prices reign and billions in new investments should put the country on a good foot to export. If Brazil can break through barriers against its products in Europe and the United States, growth will follow, Furlan says.

In both the United States and Canada, imports from Trinidad and Tobago are growing at a faster rate than shipments from any other country primarily because of one product--liquefied natural gas (LNG). Trinidad is the No. 1 producer of LNG in the Western Hemisphere and the fourth largest in the world, exporting more than 423.8 million cubic feet of LNG in 2003, approximately double the amount sent abroad in 2002, according to Review of the Economy 2003, a report by the Trinidad government.

The United States imports more than 70% of its LNG from Trinidad. That's because more U.S. power plants are switching from coal to natural gas. Production of LNG in the United States and Canada is declining. As a result, LNG prices are rising. Foreign oil companies have flocked to Trinidad to help it meet U.S. demand. "Production increased because we have had a lot of direct foreign investment. And we increased efforts to find more natural gas fields and are investing to develop them," says Natasha Mustapha, CEO of the Trinidad and Tobago Manufacturers Association.

Chile, which figures in four of the five top buyers in terms of growth and four out of five in size, is reaping the reward of more than a decade of trade talks. Cellulose provider CMPC Celulosa in 2003 saw export sales of $460.3 million on volume of 916 tons, up from $390 million and 860 tons, respectively, making it one of Chile's biggest exporters.

The company enjoyed a windfall from price hikes in major markets such as the European Union, says Eckart Eitner, director of research at CMPC Celulosa. To keep pace in a rapidly growing industry, the company added a plant last year to lower production costs and meet demand from Japan, China, South Korea, Germany, France, Italy and the United Kingdom. "Our principal competitors are usually expanding to boost competitiveness" says Either. "And 2003 was a good year for cellulose exports, both in terms of quantity and price."

Like the cellulose industry, copper companies targeted a rich variety of markets and saw prices rise on a 17.5% increase in volume during 2003, according to ProChile, the government-supported export promotion agency. State copper titan Codelco led country export sales in 2003 with $2.63 billion, with Asia and Europe importing the lion's share.

For an industry that nearly collapsed from weak global prices over the past few years, copper executives are upbeat--especially regarding Asian economies. "Demand for copper is increasing rapidly, together with the economic recovery in the United States and the economic expansion in China and India. We do not see a threat in that regard;' says Codelco President and Chief Executive Officer Juan Villarzu. "We believe that we will have a good price and a solid market for quite some time."

Chile's success isn't linked to just simple commodities. Take pork products exporter Exportadora Seira. Seira's exports to Japan reached $5 million last year, skyrocketing more than 2,000% from the $235,000 netted in 2002, according to ProChile.

Eduardo Szasz, Seira's CEO, credits a price increase in pork products, as well as the sector's favorable labor costs relative to European and U.S. rivals. But Chile also benefited from strict, regulations the European Union imposed on raising pigs, which boosted production costs for competitors like Denmark. "Consequently, Japan is looking for new production in countries that don't have those restrictions," says Szasz.

Cattle diseases scares like foot-and-mouth boosted Japanese demand for meats like pork, which consumers considered safer, and Chile's export-oriented governments have made the right moves, Szasz says.

Tomas Soccia, president of the Venezuelan Food Chamber, says that Venezuelan exports grew thanks to increased shipments to Europe such as tropical fruit and flowers. Problems at home, rather than a coordinated export campaign, pushed Venezuelan industry to took abroad. That crisis-driven opportunity has meant good returns, putting the country on the map not just for oil but for Venezuelan rum--now a favorite in Japan, says Francisco Mendoza, president of the Association of Venezuelan exporters.

To Japan Venezuela sells products made from aluminum and oil, as well as chocolate and rum. Non-traditional exports rose 20% to $2.5 billion dollars in 2003. Despite the drive outward, Venezuela's non-traditional exporters face a complex domestic situation, Mendoza says: logistical costs, no government incentives and no way to negotiate with shipping companies. Exporters "have to double their working capital every six months to face up to the consequences of exchange controls," he says.

Turnaround. Pummeled by the 1999 devaluation in Brazil, cattle diseases and the debt default in Argentina, Uruguay has since re-entered the ranks of major Latin American exporters. Much of the turnaround came from swelling demand from its main client: Brazil. Uruguay was the third-largest and fourth-fastest-growing exporter to Brazil in 2003, with sales reaching $537.9 million, a 10.9% leap over 2002, thanks largely to an appreciation of the Brazilian real to the dollar and higher rice prices in Brazil. Rice represented the chief export sector to Brazil, accounting for $160 million and 30% of Uruguay's total exports to its neighbor, according to the Uruguayan Embassy in Brazil.

Rice prices soared 50% to an average of $283 per ton in 2003, compared to $191 per ton in 2002, enabling it to account for 53% of Brazil's rice imports in dollar terms. Brazilian-bound exports of plastic containers, malted barley, rubber derivatives, naphtha and meat also rose.

And, as usual, the milk sector was responsible for heavy export volume. With $27.7 million in exports to Brazil in 2003, Uruguayan milk producer Conaprole led the sector. "Brazil is and will continue to be an important client for us due to its proximity and the volume it purchases," says Nelson Laurino, export director for Conaprole.

Companies like leather manufacturer Curtiembre Branaa, which sells to Audi and BMW, were responsible for Uruguay's position as the fifth-fastest exporter to Germany, with $182.4 million in sales in 2003. "Our growth was due to a greater demand for autos with leather upholstery," says Cristina Malcuori, the company's sales supervisor.

Costa Rica cashed in on its newest and oldest industries to become one of Latin America's fastest exporters to Japan and Canada in 2003. Although bananas still matter, the Central American country served up another reminder in 2003 that it has a high-tech economy, too, by chalking up $226 million in exports to Japan, based on the strength of its microchip business. The country's exports to Japan rose 43.7% last year over 2002, making it the second-fastest-growing exporter to the Asian nation.

Food first. Sergio Navas, executive vice president, for the Costa Rica Chamber of Exporters, says demand rose due to a moderate improvement in Japan's outlook. "For economies like Japan. when there's a recession the first products that consumers stop buying are high-tech," he says. Sugar and coffee, as well as ornamental plants and juice concentrate, are close to half of Costa Rica's exports to Japan.

Companies like seafood processing firm Sardimar also boosted exports to Japan, largely due to that market's particular demands. "Consumption of tuna, and fish in general, in Japan is high and quality is very important to be able to sell in that market; those two factors are in our favor to get products into that country," says Eugenia Valle, Sardimar's project promoter.

Exports to Canada in 2003 came to $210.5 million, a 34% increase over 2002's figure. About two-thirds of that was bananas, computer chips, and pineapples. Better weather and increased production pumped up banana sales to 102.7 million 40-pound boxes in 2003 from 89 million boxes in 2002, according to Jorge Sauma, CEO of Costa Rica's National Banana Corporation. "The free-trade deal with Canada gives us advantages not only against other countries but it also permits us to buy Canadian raw materials, if we need them, at better prices,' says Valle.

Bolivia's bane and salvation, natural gas, got most of the credit for the country's exports' leap forward in 2003. Bolivia exported $380 million worth of gas in 2003, compared to $260 million in the year-earlier period, according to the Bolivian Chamber of Hydrocarbons. About 95% of that went to Brazil, with the remainder exported to Argentina. "In a single week Brazil consumes in Bolivian natural gas what Argentines consume in Bolivian gas in a year," says Raul Kieffer, president of the chamber. "Natural gas was most responsible for the increase in exports in 2003 from Bolivia to Brazil, and the revenues obtained have made the Bolivian pie grow," In 2003, Brazil gave the green light to start operations on thermoelectric power plants that had been closed down, Kieffer says, explaining the rapid growth in gas exports

Glitches. Exports from Antigua and Barbuda to Germany have apparently grown too quickly and too recently for officials of the Caribbean island country to track. The German government reports that imports from Antigua are growing at a faster rate than shipments from any other country. The island shipped $379.3 million in goods to the European nation in 2003, a 41.2% increase from the previous year. German officials didn't provide details about the exports. Antiguan government officials aren't sure what accounts for the rise. In fact, the figure took them by surprise.

"I think it's a mistake," says Rohan Anthony, a supervisor of trade in the Ministry of Finance and the Economy. Says Frank Jacobs, director of statistics in the Antiguan Ministry of Finance and the Economy: "I have heard figures like that before and I find it laughable."

Here's why, he explains: Antigua exported of total of about $3 million to all nations in 2000, according to the Antiguan government's latest statistics. Germany accounted for only $32,635 of the amount. Agricultural products such as melons most likely made up most of the exports to Germany in 2000, and probably account for any increase in 2003, says Jacobs.--with Michelle Guevara

Top Five Buyers of Latin American Exports

                                  FASTEST

                        2003 imports   % change
                        US$ millions   2003/2002

UNITED STATES
1 Trinidad & Tobago        4,321.7        77.3%
2 Ecuador                  2,720.9        26.8
3 Peru                     2,406.8        24.6
4 Colombia                 6,385.5        13.9
5 Venezuela               17,144.2        13.5

CANADA
1 Trinidad & Tobago          165.5        55.9%
2 Chile                      627.8        47.1
3 Costa Rica                 210.5        34.0
4 Argentina                  269.0        30.9
5 Cuba                       264.8        27.9

GERMANY
1 Antigua & Barbuda          379.3        41.2%
2 Mexico                   1,937.1        17.6
3 Chile                      892.6        16.8
4 Venezuela                  304.8        11.3
5 Uruguay                    182.4         5.4

JAPAN
1 Venezuela                  206.0        47.1%
2 Costa Rica                 226.0        43.7
3 Panama                     114.7        25.0
4 Chile                    2,839.3        13.2
5 Brazil                   3,112.4        -0.1

BRAZIL
1 Bolivia                    519.8        31.3%
2 Paraguay                   474.8        23.9
3 Chile                      797.6        23.0
4 Uruguay                    537.9        10.9
5 Peru                       233.8         7.4

                                 BIGGEST

                       2003 imports   % change
                       US$ millions   2003/2002

UNITED STATES
1 Mexico                 138,073.3         2.5%
2 Brazil                  17,884.0        13.1
3 Venezuela               17,144.2        13.5
4 Colombia                 6,385.5        13.9
5 Dominican Republic       4,455.1         6.9

CANADA
1 Mexico                   8,686.9         7.1%
2 Brazil                   1,420.6        17.1
3 Chile                      627.8        47.1
4 Venezuela                  506.1       -35.5
5 Argentina                  269.0        30.9

GERMANY
1 Brazil                   4,837.3         1.0%
2 Mexico                   1,937.1        17.6
3 Argentina                1,204.7         1.9
4 Chile                      892.6        16.8
5 Colombia                   553.7        14.0

JAPAN
1 Brazil                   3,112.4        -0.1%
2 Chile                    2,839.3        13.2
3 Mexico                   1,925.2        -8.4
4 Argentina                  472.3        -8.7
5 Peru                       467.4        -6.6

BRAZIL
1 Argentina                4,673.2        -1.5%
2 Chile                      797.6        23.0
3 Uruguay                    537.9        10.9
4 Mexico                     532.9        -8.2
5 Bolivia                    519.8        31.3

SOURCE: Individual countries, IMF, LATIN TRADE

HELLO, WORLD
Brazil sells finished goods to developed markets.
Now it wants to grow with the emerging markets.

Export markets
United States                     23%
European Union                    25%
Mercosur                          11%
China                              6%
Mexico                             4%
Andean Community                   4%
Japan                              3%
Rest of World                     24%

Export composition
Commodities                       29%
Manufactured goods                56%
Semi-manufactured goods           15%

SOURCE: Secretaria de Comercio Exterior do Brasil

Note: Table made from pie chart.

LISETH CAMARO * CARACAS DANIEL A. JOELSON * SANTIAGO DEREK REVERON * MIAMI