The other America: an interesting alternative.

Dear Editor,

I am a big admirer of your magazine and have followed your ongoing editorial concerns regarding the effect of imports on the U.S. furniture industry.

Being from Columbia, it just keeps going through my mind what an enormous potential South America offers for U.S. furniture, manufacturers and retailers to lay out a strategy of investing and/or sourcing production in the region. The present structuring of the Free Trade Area of the Americas has immense potential, not to mention a better correlation of cultures.

At a foreign policy level, and considering the meager economic growth Latin America will show for 2002, the worrisome employment situation and the threat of further social outburst (remember Argentina), who can doubt that South America is in deep need of developing local exporting industries? Certainly the furniture industry has enormous potential for employment and growth. After all, substituting 10% of Asian imports to the United States represents a potential that lies in the neighborhood of $500 million for the South American economy.

The readers (and hopefully open-minded industry investors) should remember that Brazil, South America's major furniture exporter, shipped only $167 million to the U.S. market in 2001. That's about 3.5% of what Asian countries exported to the U.S.

If, as the story goes, the main factor that explains the incredible growth of Asia's exports to the U.S. is low labor costs, then it is very interesting to note that in a country like Columbia, the going minimum wage is about $1.90 an hour. Very similar labor costs can be found in Venezuela, Ecuador and Peru.

Regarding investment promotion within the Andean region, visionary investors should also remember that the recent signing by President Bush of the Andean trade promotion preference act extends zero duties for furniture that is exported to the U.S. from the region through 2006.

Visionaries should also consider geography. If lead times are an important factor in the furniture business, it becomes difficult not to consider the closer proximity of South America to the U.S. It is also important to remember that the population of South America exceeds 400 million people. From an American manufacturing standpoint, when searching for manufacturing partners, the mix of local market know-how and geography blends in nicely when revising investments and opportunities toward the future.

There are many obstacles to be dealt with and nobody in his right mind will overlook the related risks. But, then again, and as the story told so many times goes: The higher the rational risk, the higher the returns.

I for one am convinced that there are important opportunities in South America for the "big guys" in the U.S., especially the RTA furniture segment. But that's another story.

Juan M. Carrasquilla

Furniture Supply Representative

Columbia South America

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