New Mexico: Growing Exports-Developing Markets

Exporting vs. Market Development • Exporting is largely a “static” measure. • Usually a one time, oneoff event. • Reactive process, short term orientation “Order Taker” role to fill the occasional order. • “Interested” in succeeding in the international market

• Market Development is a continuous process of building market share. • Proactive process, long term orientation to build international customer loyalty and repeat business. • “Committed” to succeeding in the international market.

Virtuous Circle of International Market Development

Export Market Development Criteria Market Research

Market Distribution

•Income per capita

•Knowledge of the industry

•Competition

•Professional sales staff

•Demographics

•Technical support capabilities

•Trade and economic statistics

•Coverage of the sales territory

•Participation in trade shows

•Credit history

Product Adaptation

Market Support

•Consumer Preferences

•Sales and technical support

•Standardize or differentiate

•Marketing materials

•Fit local tastes of culture, customs, language and religion

•Product training and orientation

•Sidestep “Homogenized” market outlook

•Financing and credit

NAVIGATING BARRIERS TO INTERNATIONAL TRADE

Barriers to International Trade •

Linguistic-Language, Communications

•

Cultural---A system of identities and beliefs that differ between populations and influence the ability to communicate across cultures.

•

Structural---Licenses, Patents, Copyrights, Tariffs, Quotas (Statutory=Given force of Law). Economies of Scale, Vertical Integration, Brand Loyalty, Consumer attitudes, Government procurement regulations and Government ownership of the means of production.

•

Regulatory---Product registry, restrictions on sales and marketing.

•

Legal---different legal framework regarding enforcement of contracts.

Export Training Programs

• Basics of Exporting Seminars/Workshops • Export Finance, Letters-of-Credit Seminars • Export Licensing (ITAR) Workshops • International Shipping and Documentation Workshops • “How to do Business” seminars focused on a specific country or region.

Synergy across state incentive programs

• JTIP---Jobs Training Incentive Program subsidy for worker salaries to improve job skills and increase productivity. • ISO-9000 Certification Program---State subsidized ISO program • High Wage Tax Credits---Incentive program designed to promote value-added manufacturing

Access to Export Financing Programs • SBA Export Finance Programs: – Export Express Loan up to $500K for export start up basics. – Export Working Capital up to $5 million to provide working capital (W/C). – International Trade Loan financing for fixed assets and W/C.

• Eximbank Loan Guarantees: – Fulfill export orders – Convert export inventories to cash – Compete against foreign competitors – Reasonable rates to increase profits – Structured trade financing.

New Mexico International Trade Offices

• Greater China Trade Office in Taipei, Taiwan with coverage of mainland China and Hong Kong. • New Mexico Middle East Trade Office in Jerusalem, Israel coverage of the Middle East region. • New Mexico Brazil Trade Office located in Sao Paulo, Brazil.

New Mexico SBA STEP Grant Program • Funding of $188,000 under the SBA STEP Grant provides the entire budget of the Office of International Trade. • Focus of the use of funds is on New-to-Export (NTE) and New-to-Market (NTM) companies. • Cover the cost of booth space in major trade shows and Gold Key Service matchmaking. • Due to limited budget, OIT does not cover airfare, meals and lodging expenses.

Trend Towards Western Hemisphere and Asia-Pacific Markets • Movement away from a “Eurocentric” view to exporting globally. • Predominance of Free Trade Agreements (FTA) with Western Hemisphere countries including Canada, Mexico, Chile, Colombia, Peru, Panama. • Prospects for a major breakthrough in the Transpacific Partnership (TPP) agreement with major Asian markets. U.S. already has FTA with Korea, Singapore, Australia, New Zealand. • Energy independence shifting manufacturing and foreign direct investment to U.S., Mexico, and Canada. • Prolonged recession, high unemployment and uncertainty about the Euro as a common currency in Europe.

U. S. EXPORTS BY REGION In billions US$

700,000 600,000 European Union

500,000 400,000

Western Hemisphere Asia-Pacific

300,000 200,000 100,000 0 2008 2009 2010 2011 2012

New Mexico Exports by Region

In thousands US$

Top Ten New Mexico Exports Product Category

YEAR 2008

2009

2010

2011

2012

Computer and Electronic Products

1,762,027,4

381,835,9

517,857,1

881,134,6

1,669,062,9

Fabricated Metal Products, NESOI

97,961,526

90,158,94

133,862,0

157,393,8

230,597,106

Food Manufactures

111,058,976

77,727,60

104,849,4

181,689,3

179,453,436

Machinery Except Electrical

156,729,124

174,683,1

184,989,8

169,021,4

177,624,578

Transportation Equipment

146,304,881

112,022,5

132,202,9

165,801,0

135,244,992

Plastics & Rubber Products

49,678,628

39,075,99

45,390,92

45,334,68

88,996,013

Electrical Equipment Appliances & Components

63,776,766

65,499,13

76,723,65

76,224,06

79,201,591

Chemicals

60,233,385

59,037,60

76,279, 96

72,318,79

76,070,792

1,894,516

347,628

42,32,10

76,030,23

72,147,339

Primary Metal MFG

40,933,482

29,763,08

28,252,01

56,320,20

70,488,589

Agricultural Products

38,143,164

35,082,62

37,066,37

41,435,61

35,248,915

Petroleum & Coal Products

Source: Foreign Trade Division, U.S. Census Bureau

Millions

New Mexico Top Ten Export Markets 1,400

Israel Mexico

1,200

Canada 1,000 China 800

Germany

600

Japan United Kingdom

400 Brazil 200

Saudi Arabia Australia

0 2008

2009

2010

2011

2012

New Mexico Exports to Mexico MEXICO

Millions

MEXICO 700 600 500 400 300 200 100 0 2008

2009

2010

2011

2012

A Brave New World: Global Free Trade Agreements • Transpacific Partnership (TPP) – US, Canada, Australia, Singapore, Vietnam, Chile, Peru, Mexico, Malaysia, Brunei, Japan

• Transatlantic Trade and Investment Partnership (TTIP) – US and the European Union

• Pacific Alliance – Mexico, Chile, Colombia, Peru with US and Canada having observer status and Costa Rica and Panama soon to join.

Thank You

Edward R. Herrera New Mexico Economic Development Department 1100 St. Francis Drive Santa Fe, New Mexico 87505 Tel: (505) 827-0315 / Cell: (505) 670-5957 Email: [email protected]