|English Articles >
January 26, 1998
Miami in face of Asian crisis :
Florida hopes imports growth will balance exports.
To grow or not to grow? That is the question many countries face when pondering how the Asian crisis really affects them. The consensus forecast by economists for growth in the United-States Gross Domestic Product (GDP) has already been downgraded from an expected 3.7% growth in '97 to a more modest 2.5% in '98, according to Tony Villamil, president of the Washington Economics group in Coral Gable. But what does the Asian crisis mean at the local level for Florida and Miami? Experts here see a more cautious environment, though not a gloomy outlook.
see a domino effect
"There is absolutely nothing to be concerned about", declared Marry Farrell, a member of the investment policy committee at brokerage firm Paine Webber, who flew from New York last week to deliver her message of hope to Miami investors. "I'm not suggesting that the Asian crisis is contained but I don't see a domino effect collapsing the world economy." Her opinion is echoed here by some optimism too. "Most predictions are that growth in 98 will be 3.5% in Florida, 3.4% in Georgia, 3.1% in South Carolina and 3% in North Carolina", said Mario Sacasa, vice president of international economic development at the Beacon Council. And Asian business is not expected to evaporate overnight.
"We're still seeing a trend of Asian businesses looking to locate in Florida, believe it or not", said Gary Schuman director of business recruitment for Asia at Enterprise Florida. "The decision is to be made from their US headquarters as opposed to their Asian headquarters. "What I've observed there is interest by Asian companies to form joint venture with Florida companies", he said. "Asian companies are looking to share projects rather than going alone. I'm also aware of one major company relocating to Florida from another Latin American country because it's much more convenient." Mr Schuman sayd he cound not disclose the company's name but said it is a brand name from a big Asian country.
are expected to be hit
According to Mr Schuman, some Asian investments are shrinking or closing in the South East but that trend hasn't been observed yet in Florida, albeit he acknowledges that "Korean companies are being much more cautious than in the past. A lot are downsizing and re-evaluating what they should be doing". Even in the face of the slowdown, economies in Asia have to emphasize exports to make the sales they need to keep their companies going. Based on that principle, Mr Schuman sayd he expects Florida to gain transshipments as a distribution center to Latin American markets. If foreign investment is still an interesting indicator, observers say trade is the key for the Florida economy.
"Total Florida international trade expended by 14% in '97 to $60 billion, of which 17.6% was done with Asia", said Mr Villamil. Compared with a total Florida GDP figure of $369 billion in '96, international trade accounts for about 16% of the economy, and Asian trade for 2.9%, which is yet significant.With that in mind, the Asian crisis can have a mixed impact, according to experts. First, exports are expected to be hit, but not blown out. "It is very important that we are increasing our exports every year to increase jobs", explained Mr Sacasa, noting that for each million dollars of Florida exports, 20 000 jobs are created or supported annually.
clients are Latin American
"Some hi-tech companies doing business with Asia may be somewhat affected and there can be an impact of an indirect manner because our biggest clients are Latin American countries, said Manuel Mencia, vice president of international trade for Enterprise Florida. "The best example is Brazil. There is no question the Asian crisis has steepened the Brazil economic crisis, and it's the number one market in the world for Florida", admits Mr Mencia. "In that matter, the impact indirectly affects our clients and it affects us." Economist Villamil is nevertheless confident: "We still expect a 3.1% growth in Latin America, it will slow, but we still expect exports growth to Latin America to slow around 8% or 9% in '98 versus 15% in '97. There will be less sales growth, but it's still a very good growth."
But some see opportunities in this challenge. "From the US perspective we anticipate less exports to Asia which means we will have to increase our exports to Latin America and Europe. And we're at the connecting point", argues Mr Sacasa. "It's a dangerous time for Asian countries but if we play our cards well we can use the situation to our advantage, adds Mr Schuman. "We've got a large number of multinational companies, with 60 Japanese, 100 Taiwanese and 20 Koreans in Miami Dade and Broward counties." Many Asian companies have offices or a distribution center to Latin America in Miami, and they're going to use it. "In the process of increasing their exports they're looking at this area to improve their infrastructure, explains Mr Sacasa. "I think it's very suitable because we're at the center of the largest economy in the world. If we look at all the hemisphere to the objective of a free trade area by the beginning of the century, it's 800 million people with a total income of $12 trillion a year."
happen in the second half
In any event, international trade patterns don't shift as fast as financial markets. "Don't expect immediate change, it will happen more in the second half than in the first, predicts Villamil. "Asian companies are looking for new markets and it will take six months to change the integration with these markets. They need to visit clients and to establish distribution." Overall, he expects the decrease in exports to be compensated by an increase in Asian imports. "Trade growth in '98 will come slightly lower but close to the '97 figure, in a 10% to 13% range", he said.
If things don't seem to be changing dramatically on this short term prognosis, the Asian crisis may have long-term consequences that have yet to be felt. "Despite the 25% plunge in the nominal trade-weighted value of Asian currencies relative to the dollar since last summer, prices of products from Asia fell only about 3% cumulatively over that period", observes a recent Chase Economics Research research report by Chase Securities Inc. in New York. "Many products are coming into the US under contracts that were arranged well before the Asian crisis. Therefore, import prices are only in the initial adjustment stage. When that adjustment is completed - and it could take a full year for that to occur - the US trade deficit with Asia likely will widen substantially further", they warn. "Already Asian businessmen are scrambling to find new markets in the US - and American companies will search for new ways to outsource in Asia, the Chase report adds. "This process has only just begun".Gilles Pouzin