Korea Role Model for Latin America 

SEOUL – While China is getting the lion’s share of attention these days, another Asian nation is also boosting its business with Latin America: South Korea. Throughout Latin America, Korean companies like Samsung, Hyundai, LG and SK are expanding. At the same time, Koreans are increasingly playing the role of middleman in importing Chinese cars to Latin America. “A lot of Koreans are importing Chinese cars to Latin America,” says Jae-Sung Kwak, Associate Dean of the Graduate School of Pan-Pacific International Studies at Kyung Hee University. Business is expected to grow further as a result of a new free trade agreement with Peru (which took effect in August) and FTAs with Mexico and Colombia are currently being negotiated. These come on the heels of a 2004 trade deal with Chile. The Korea-Chile FTA led to a quadrupling of trade to $7.2 billion in 2010. “Now, Chilean wine and grapes [have] become regular features at the Korean dinner table. And made-in-Korea cars are easily seen on the streets of Chile,” Korea’ s Vice Minister of Strategy and Finance Je-Yoon Shin told the Korea-LAC Business Forum held in Seoul in October.     The event, the second one of its kind since 2007, was organized by the IDB and the Ministry of Strategy and Finance of Korea, in close collaboration with the Korea Export and Import Bank (KEXIM), the Korea Trade-Investment Promotion Agency (KOTRA) and the Federation of Korean Industries (FKI). Chilean wine now has a 25 percent market share in Korea compared with 6 percent in 2003 before the FTA, according to Cristian López, Corporate Export Director for Asia, for Chilean wine producer Concha y Toro, who adds that Koreans are now drinking more wine than before. “The Korea-Chile FTA changed drinking cultures,” adds ByungSoo Ahn, president of the Import Research Institute of the Korea Importers Association. And wine and grapes aren’t the only beneficiary of the FTA with Chile. “No one would have predicted the success of Chilean pork in Korean markets,” says Kwak. Korea’s trade with Latin America grew by 29 percent in 2010 to a record $43.8 billion. Korean exports to Latin America jumped 30 percent to $29.7 billion, while imports from Latin America increased 27 percent to $14.1 billion, according to the Korea International Trade Association. Korea’s top exports include automobiles, electronics, home appliances and petroleum products. About half of its exports went to Mexico and Brazil, where it operates factories making cars, electronics and other goods. Its purchases from the Latin American region included metals, agricultural products, fish and other basics.

KOREAN ADVANTAGES Both Koreans and Latin Americans say the two are closer culturally than are China and Latin America. “Koreans and people from Latin America are very similar emotionally,” Korea’s Minister of Strategy and Finance Bahk Jaewan said in a statement prepared for the Korea-LAC summit. “We both are very passionate, candid and open-minded.” Koreans also have a better reputation than their Chinese counterparts when it comes to delivering goods as agreed, several Latin American trade officials say. However, Latin American companies that want to successfully enter the Korean market should follow these two key tips, advises Kwak. First, bring your top-of-the-line products. “Only the best products will survive,” he says. Second, get a well-placed, local partner.

THE KOREAN MODEL “The Koreans are a role model for us,” Peruvian foreign trade and        tourism minister Jose Luis Silva told the Korea-LAC Business Forum. Korea’s economy in per capita terms in the 1960s was lower than that of Colombia and Argentina, points out Inter-American Development Bank president Luis Alberto Moreno. “Fifty years later, it’s higher.” The lessons for Latin America include Korea’s emphasis on education and developing global companies, Moreno tells Latin Trade. “When kids have exams, the airport is closed for two-to-three hours so kids don’t get distracted,” he says. Meanwhile, Korea has also led the way in terms of providing high-quality and extensive infrastructure, Moreno says. “Korea is willing to share with LAC countries the lessons that we learned from our economic development,” Bahk said. “Korea is ready to help LAC countries if there is an area, such as IT and infrastructure where we’re ahead.”

CHALLENGES However, all is not completely rosy. One of the consistent complaints from Korean companies operating in Latin America is the region’s inefficient infrastructure, says Won-Ho Kim, the dean of the Graduate School of International and Area Studies at Hankuk University of Foreign Studies. “Korean companies [invest and do business in Latin America] despite a lack of efficient infrastructure,” he says. “That means that with efficient infrastructure in Latin America…Korean investment would be higher.” Another reason for concern is growing protectionism in countries like Brazil. Its recent 30 percent tax hike on cars with imported content is facing harsh criticism from a leading Korean auto industry official. “That was a setback and I believe it goes against the provisions of the WTO [World Trade Organization],” Huh Wan, executive managing director of the Korea Automobile Manufacturer’s Association, told the Korea-LAC Business Forum. “I hope the Brazilian government will reconsider. Many people are paying attention to this.” –With additional data from Latin Business Chronicle.

Korea’s apparel company SAE-A is betting on Latin America to keep it competitive globally.

SEOUL — Korea-based SAE-A is one of the leading apparel manufacturing companies in the world, with exports to the United States and Europe exceeding more than $1.1 billion. Its major clients include Walmart, Target, Kohl’s, and Gap in the United States, and H&M, Zara, Mango, Adidas and Tesco in Europe. And it is counting on Latin America to keep it competitive. Most of its manufacturing plants are located in two countries in the region – Guatemala and Nicaragua – as well as in Indonesia and Vietnam. It is now also expanding into another country in the Americas: Haiti. SAE-A currently has five sewing factories and one printing facility in Guatemala, with more than 5,000 employees producing more than five million garments a month, valued at $240 million a year. “When textile quota limitations still existed, we selected Guatemala as our first country for investment because of several factors [such as] relatively low-cost labor, reasonably high productivity, good government support and an adequate infrastructure as well as its close proximity to the U.S.” O.Y. Hwang, SAE-A’s Vice Chairman, told the Korea-LAC Business Forum here. “Guatemala is still important to our overall sourcing strategy but rising wages are adversely affecting its competitive advantage….In 1998, when we opened our first factory there, the monthly average wage was less than $250 but now it has more than doubled.” The duty-free benefit from CAFTA (the free trade agreement between Central America and the United States) is not enough to offset rising costs when compared to Southeast Asian countries, he points out. SAE-A’s second-largest Latin American investment is in Nicaragua, where it began operations in 2004. It currently has five factories there with more than 6,000 workers producing four million garments a month valued at $150 million a year. “The duty free program which has helped Nicaragua to nurture a growing textile industry is unfortunately set to expire in 2014,” complains Hwang. “Hopefully, those responsible with the authority to extend this agreement will take this matter under careful review and will come to the conclusion, as we recommend, that Nicaragua needs an extension.” SAE-A’s next big project is in Haiti, where it is building an $85 million manufacturing complex in an industrial park located in the northern part of the country, near Cap Haitien, that will create more than 20,000 jobs and double the existing Haitian garment industry. It will be one of the world’s largest vertical fabric mills and apparel manufacturing complexes, according to Hwang. It is expected to open by mid-year when the first phase of construction is scheduled to finish. Given the difficult post-disaster environment, many consider Haiti high-risk, Hwang acknowledges. “However we have identified numerous opportunities and advantages that actually make Haiti attractive for investment.” They include Haiti’s proximity to the United States (which gives the advantage of shorter delivery time), an abundant and motivated labor force and duty-free shipping to the United States of Haitian-made apparel. The SAE-A investment is part of a $300 million project in partnership with the IDB and the U.S. and Haitian Governments. The United States is building a power plant and employee housing near the park that will be made available to workers through low interest loans. It is also upgrading the local port and other infrastructure. Meanwhile, the IDB is funding creation of the industrial park itself, including providing financing for equipment and machinery. SAE-A isn’t only bringing business and new jobs, but also know-how. It is training group of Haitians to run the new plant. “Haiti’s existing garment manufacturing industry is relatively small so the availability of experienced factory supervisors is very limited,” Hwang says. “We could bring in all Korean or other foreign talent but we believe in the localization of management.” Meanwhile, SAE-A is working on plans to build a school for local children living near the factory who currently don’t have access to a quality education. It also plans to offer adult education classes at the school in the evenings, open to any workers wishing to pursue their education after work. “With our investments in garment and fabric manufacturing in Guatemala and Nicaragua and  Haiti, we hope to maximize the development of business and economic prosperity in the region.