A Latin Play
The boom in California exports to Latin America, which has helped to offset the effects of Asia’s economic crisis, is proving to be a big opportunity for all manner of companies.
One of them is toy maker Equity Marketing of Beverly Hills, whose main business is selling tiny, plastic toys, cards and games to companies that give them away as premiums to boost sales. Argentina was the company’s biggest offshore market in 1997, said Al Ovadia, Equity Marketing’s executive vice president.
Equity Marketing’s toys provide promotional tie-ins to movies such as “Godzilla” and “Mulan,” cartoon characters such as Daffy Duck and the Simpsons, and sports stars like Michael Jordan and John Elway. Customers include hamburger chains, soft drink bottlers and purveyors of baked goods.
“We usually make 500,000 of something,” said Ovadia, a former head of licensing at 20th Century Fox Film Corp.
A Batman trading card promotion for the YPF gasoline station chain in Argentina was among the company’s largest deals last year. It also produced Michael Jordan figurines as giveaways for the Baladini baking goods company there.
For Equity Marketing, the real action now is in places like Mexico, Central America and Peru, while the business climate has cooled in Singapore, Indonesia, Hong Kong and Taiwan.
“Major Asian users of premiums have become a little more risk-averse,” said worldwide promotions manager Samuel Nieto, adding that many Asian deals have been canceled.
From tentative beginnings in Mexico selling Lion King figurines to the giant Bimbo bakery concern, Ovadia’s Latin American business has grown to $22.5 million, or 15% of its $150 million in sales last year, Nieto said.
Equity Marketing’s market shift southward is being emulated up and down the state, if trade statistics are any indication. California’s exports to Latin America last year grew 28% to $15 billion, as export sales to the 10 largest Asian countries declined 2.5% to $51.8 billion, according to the California Trade and Commerce Agency.
Mexico accounted for $12.1 billion, or 80% of the goods and services the state sold in Latin America in 1997.
“Most of the markets down there are just opening up,” said Brian Bugsch, policy analyst at the Trade and Commerce Agency. Although South America’s population is more than twice Mexico’s, it’s only one-fifth the size of Mexico as an export destination, Bugsch notes.
The Mexican market, which last year absorbed 11% of California’s total exports, keeps booming. During 1998’s first three months, the state’s exports there shot up 30%. Shipments to the Mercosur countries--Brazil, Argentina, Paraguay, Uruguay, Chile and Bolivia--leaped 16%.
That compares with a 13% drop in California exports to its major Asian trading partners over the comparable period. About half of all California exports go to Asia, Bugsch said.
Exports are gaining momentum in Latin America not just because the Asian outlook is so bad, but because the business climate south of the border is more favorable, said Howard Roth, an economist with Bank of America in Los Angeles.
As economies shrink in Asia, reducing the demand for California goods, the output of products and services in Argentina, Chile and Mexico are forecast to expand 4% to 7% this year, auguring a corresponding increase in orders for California’s telecommunications, computer and power-generation equipment, among other categories.
“There is more confidence that we are going to see sustained changes in the way business is done in Latin America, so businesses particularly here on the West Coast are looking at it as a market that will grow rapidly,” Roth said.
