Globalization has given rise to challenges and significant opportunities. For those companies in countries who have seized this potential for expanded markets, it will bring additional customer relationships, sales, profit (perhaps) and recognition.

Of significant importance in the quest to seize the opportunity, is the company possession of the capacity to understand and manage:

a diverse group of customers,
operating in foreign venues, with widely different rules of law
cultural diversity which may be important but not obvious
a different and incomplete financial reporting process
economic stability or volatility
complicated or unstable foreign exchange regime
poor market efficiency in information distribution

The successful exporter will have researched and bridged these problem areas.

The process begins with a mastery of the home country business process. Each of the characteristics above noted are present in the home economy, and are part of the ordinary course of daily trade. It remains for the company to extend this understanding to each foreign market of interest.

Essential research into any foreign venue must include:

availability of trade performance information in the market
consistency of presentation of trade information:
- trade credit applications,
- official reports,
- financial statements
- registration and security transactions
- business failures
consistency in rule of law:
contract formation and enforceability
remedy for default of contract
effective bankruptcy regime

In the major economies of Latin America: Argentina, Brazil and Chile, and as well in most other countries, there are established mechanisms to address each of these areas. Each of them operates under a code of law derived from the Napoleonic Code. Regulatory processes are limited, and administrative process is extensive. These characteristics are common throughout the region.

Of particular interest in research into these areas, is the World Bank research on Doing Business. Perform an internet search on ¡§Doing business¡¨ and study the reports provided.

Chile, represents one of the most stable financial markets in Latin America, is hampered by its market size, but has a desirable market concentration and is a popular location for creating a foothold in the southern cone market.

In Latin America, remedy for default is reasonable, timely and cost-effective, with local assistance possible through boutique law firms and a large expatriate community of companies upon which to rely for trade group input. It is not unusual for customers to request 60 day open terms but with prudent administration by the seller, payment can be received approximating terms. Locally, a relationship with the buyer is critical to both cash flow and customer development.

Argentina and Brazil are the largest economies both in Mercosur (the Southern Cone Common Market) and in Latin America. Administration of trade is somewhat complicated and perilous for uninformed companies who venture south in search of markets and fortunes.

As a prime example, the key transaction legitimizer in Brazil is the Nota Fiscal. It is a document which serves numerous purposes:

memorializes the products/services purchased and delivered
records the point of transition through customs
records the taxes associated with each line item, and the invoice
identifies the customer approved dates and amounts of bank payments to be made to seller (duplicate)
officially records buyer signature for receipt of goods (canoto)
establishes the legitimacy of the transaction in Brazilian law

In conclusion, the decision to introduce export trade into a company, must be founded upon an existing risk management process that is perfected in the home country. The additional requirements of education and experience described above represent an opportunity to improve the existing organizational performance, sales and profit.

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The above article was originally published in the February 2007 issue of the FCIB China Newsletter.FCIB China is a joint venture of The ABC Companies, Inc. and FCIB. To learn more, visit the website at www.fcibglobal.com.cn.