“They are maturing to the point where they are the next United States in terms of consumer market,” he continued. “India, Brazil, Russia—none has the kind of appeal that China can offer in terms of labor force and market size. India—much more known as a services economy—would love to have the manufacturing export platform that China has, but they don’t.”
But just as manufacturers deploy to China to serve its middle-market, so too can be said for U.S. companies looking to India.
“The projects we are working on right now in India are inwardly-facing,” said Buelow. “Manufacturers are going to India to make products to sell. So as people move up the income stream in India, they are going to be able to afford products just as in China—and so we’re seeing more hits from American companies wanting to deploy manufacturing there.”
In the case of Brazil, a number of Western manufacturers set up shop in its region in order to stay competitive. “Western companies cannot be competitive with the local Brazilian manufacturers unless they build a plant in Brazil and make it local,” Buelow confirmed.
Nonetheless, it is important to understand the challenges that U.S.-based companies operating in Brazil—or those looking to expand to Brazil—face.
“Brazil attracted so many manufacturers that some of the communities in Brazil have 50,000 to 300,000-people towns,” said Buelow. “And while the unemployment rate is below one percent, Brazil can’t continue to have manufacturing deployed there because they won’t be able to find the labor. The Brazilian labor force is not as mobile as in other countries—it’s difficult for people to commute. Many people don’t have cars so they are stuck in these towns. And a lot of these over-populated towns just don’t have the labor force, which means that wages are going to increase. And as wages increase, Brazil products will become more expensive. What Brazil has is a very restrictive customs and duties regime that inhibits companies from making money who want to import their finished goods into Brazil and then sell it within Brazil. So your iPhone will cost two times in Brazil what you would pay for it in Manhattan because of import duties,” Buelow explained.
In the wake of the 2008 U.S. recession and ongoing European debt crisis, it is evident that no country can absolutely predict what will be of its economic condition. Nonetheless, businesses must weigh all the possible odds when expanding their global footprint to come out on top. Is the talent available in the region? Is the area a pro-business area? Are the necessary suppliers and vendors in the area your business is looking to expand to? Such qualitative factors are key in determining your company’s global plan.