A keen observer of growing markets in the Dominican Republic and Puerto Rico, Russell Rainey realized long ago that exporting goods and services to the Caribbean could keep his company competitive. Rainey Compression Essentials, manufactures and distributes post-operative compression apparel garments worn after plastic surgery, and Rainey, the company’s president and CEO, says the islands are increasingly becoming a cosmetic surgery destination.
“There’s a lot of surgery going on in the Caribbean. It is a market for people who have surgery while on vacation,†says Rainey, whose 14-employee firm is based in Atlanta. “We reached out to doctors in the Dominican Republic, and they embraced our product, and we began to export it. The cosmetic surgery industry is a cutting-edge market. In the last few years, it has come to the forefront and is always looking for better ways to do things.â€
Identifying opportunities in the region, Rainey, who has other international clients, posted revenues just above the $1 million mark in 2007. He expects that figure grew by 10% to 15% for 2008. Rainey says being diversified is helping his company weather the U.S. recession. “We’ve seen a decline in U.S. sales but a growth in our global sales. It’s a balancing act,†he says. “We’re finding that globally, if the dollar is down, then people feel like they get better value by buying U.S. If you have a product you can sell to a global market, that will give you leverage during turbulent times. The more global sales a company has, the more stable its bottom line will be.â€
Rainey is one of many entrepreneurs and investors who has discovered the new face of Caribbean industry. While tourism, real estate, and agricultural exports are usually thought of, as the islands’ big businesses (and rightfully so), many of the islands have begun to embrace new economic drivers that include household consumer goods, building products, automotive parts, and financial services. And investors and entrepreneurs in Europe, North America, and Asia have taken notice; the islands have attracted more than $5 billion in net foreign direct investment annually.
Consider that while U.S. markets have been flailing, many Caribbean nations have been showing growth, despite economic ties to the U.S. economy. The Dominican Republic posted an economic growth rate of 9.3% in 2005, 10.7% in 2006, and 8.5% in 2007. Jamaica’s economy grew 1.4% in 2005, 2.5% in 2006, and 1.5% in 2007. Trinidad and Tobago showed economic growth of 8% in 2005, 12% in 2006, and 5.5% in 2007. The gross domestic product in the Bahamas and Barbados increased 3.1% and 4.2%, respectively, in 2007.
IMPORTING OPPORTUNITIES
The good news is that the spending power in the region has created opportunities on the import/export front. According to the U.S. Department of Commerce, Caribbean islands imported more than $18.5 billion in U.S. goods alone in 2007, making it the third-largest Latin American export market for American products. Other key factors that make the Caribbean attractive are its close proximity to the U.S., business-friendly trade programs, and the region’s large demand for products and services.
For the enterprising entrepreneur, prospective business awaits in exporting consumer goods, telecommunication equipment and services, franchising, computers and peripherals, food processing and packaging equipment, electrical power systems, hotel and restaurant equipment/services, and pharmaceuticals. “Not only are shipping costs and travel costs lower for American businesses operating in the Caribbean,†says St. Vincent and the Grenadine’s Prime Minister Ralph E. Gonsalves, “but the Eastern Caribbean currency being pegged to the U.S. dollar also eliminates the usual uncertainties surrounding currency fluctuations.â€
Exporting is providing opportunities for U.S. companies seeking to diversify their markets and to better weather the ups and downs of the domestic and international economies. And the Caribbean is a great place to start, says Brian Brisson, regional director of the Western Hemisphere for the U.S. Commercial Service, the trade promotion arm of the Department of Commerce’s International Trade Administration. “You can mitigate risks to almost zero in exporting,†he says. “The nice thing about small- to medium-sized firms doing business in the Caribbean is that they’re not so small in those markets.â€
FOLLOW THE MONEY
It’s no secret that Wall Street goes where the investment opportunities are–and some are setting their sites on the Caribbean. Last June, JPMorgan,
“I don’t feel that there’s yet that sense of urgent recession that you feel in the U.S. and in Europe. It’s more second-hand,†says Matthew Perks, director of the forum. “I think the concern is that further down the line you’re going to see a big tailing off in tourism and fewer people with less money to spend, which will have an impact on the region’s biggest economic driver.â€
Sebastian Canale, director of investment banking, Caribbean and Central America for Merrill Lynch, points out that Wall Street–and beyond–is exploring the potential of these islands. “We’re seeing a lot of interest in the area from Europeans investing in places such as the Dominican Republic, Jamaica, Barbados,†Canale says. “There are certain areas in the emerging markets that have wider options, and they have established a more consistent track record with respect to the markets. However, as investors go to the next frontier in terms of investment opportunities, the Caribbean is certainly there.â€
Among those opportunities are everything from the financial services of the Bahamas; the oil, natural gas, and heavy industries of Trinidad; and the diamond-, gold-, and timber-endowed sectors of Guyana. Barbados welcomes investments related to the creation of knowledge-based products and services such as asset management, international arbitration, pharmaceuticals, renewable energy, biotechnology, and health-information management systems. “Foreign investors are operating in Barbados either as wholly owned subsidiaries, joint ventures, or through outsourcing arrangements,†according to the Barbados Investment and Development Corp. Just last year, Barbados established an investment-promotion agency, Invest Barbados (www.investbarbados.org).
Billionaire Michael Lee-Chin saw potential in banking within his native Jamaica. Portland Holdings Inc., a privately held investment company of which Lee-Chin is chairman, purchased 75% of the National Commercial Bank of Jamaica from the government for 6 billion Jamaican dollars. In 2004, he announced plans to set up the AIC Caribbean Fund to invest throughout the region. In 2006, Portland acquired an 85% stake in the United General Insurance Co., the largest auto insurer in Jamaica.
Diversification is found among the islands. Even tiny St. Kitts and Nevis boldly closed its 300-year-old sugar industry in 2005, yet continued to register positive rates of economic growth and now ranks No. 1 in the Eastern Caribbean on the United Nations Human Development Index. “We are now focusing on services,†says Prime Minister Denzil Douglas, also the country’s minister of finance, “but our development thrust remains rooted in a multipronged, diversification strategy.â€
In an effort to become more trade- and investment-friendly, Barbados places no restrictions on foreign ownership, and foreign investors pay no capital gains tax. There is full repatriation of capital and duty-free access to the United States and other Caribbean countries. “Barbados has traditionally focused its efforts on attracting companies in the areas of information and communication technology services, financial services, and manufacturing to all investors in North America. However, we do welcome the opportunity to specifically reach the African American business community, a segment of the market which to date has been virtually untapped,†says Annalee Babb, former chief executive officer of Barbados Invest.
BIG DEBTS OF THE CARIBBEAN
While they may be poised for growth and ready to move beyond one-sector economies, Caribbean nations face the challenge of sustaining the industries they hope to draw. Their relatively small size and high debt levels have caused investors to either overlook or shy away from the region’s emerging business opportunities. Years of fiscal mismanagement and large national debts have also encumbered many island nations, making them appear risky to foreign investors. According to Ratna Sahay of the International Monetary Fund, 14 of 15 Caribbean countries ranked among the top 30 highly indebted emerging markets in 2003. Since the mid-1990s, the average national public debt in the region has virtually doubled, with debt-to-GDP ratios exceeding 100% in some countries.
Free trade agreements, however, together with ease of transportation, the Internet, and government programs are creating favorable conditions for business sectors in the Caribbean. And U.S. exporters stand to capitalize on the untapped potential. In 2006, there were nearly 246,000 exporters in the United States, an increase
of 2.3% over the previous year. Small and medium-sized companies with fewer than 500 employees account for 97% of all U.S. exporters but represent less than one-third of the known value of U.S goods exports.Despite the downturn, many are seeing value in the Caribbean. “We’re still finding companies are still pursuing diversification,†says Curt Cultice, senior communications specialist for the U.S. Commercial Service. “Some are traveling a bit less to ease costs, but I didn’t have a single trade specialist telling me that [companies are] dropping their [Caribbean] strategies because of the financial situation or anything like that.â€
Gaining access to these markets, Rainey says, isn’t difficult. It requires a little research and a quality product thats in demand. “You’re sending things overseas, so it’s a big investment,†he says. “You have to ensure accuracy and make sure your response time is minimal. Getting an account is one thing; keeping it is another. Quality delivery and service is what keeps them.â€
Top 10 Tips on Exporting
– Develop a clear export strategy.
– Identify your market, research your potential area, and conduct a risk/reward assessment.
– Make sure your product is export-ready (standards compliance, regulations, labeling, licensing, etc.).
– Be patient and realistic when going international. Take a long-term approach.
– Seek professional help from the U.S. Commercial Service (www.export.gov), District Export Council, bankers, international legal firms, and freight forwarders.
– Understand and select the best distribution channel for each country. Research potential distribution partners.
– Create payment terms and conditions that meet the market’s needs/standards. You can offer terms to your foreign buyers.
– Meet your competitors head-on by using the EXIM Bank and Small Business Association export programs.
– Design your Website to be attractive and responsive to foreign buyers.
– Take advantage of U.S. government export promotion services, everything from export financing to market research to advocating for your products in overseas markets. These services are affordable and effective, regardless of company size.
— Hazel Ross-Robinson, Chana Garcia, LaToya Smith also reported for this story.
This story originally appeared in the February 2009 issue of Black Enterprise magazine.