Sealing the International Deal

With the expansion of the Panama Canal set for completion in 2014, the leaders at Florida’s Great Northwest figure they have about five years to establish business ties in Panama.

Sealing the International DealCultural due diligence can help ease business transactions overseasBy Kathy Bushouse    

With the expansion of the Panama Canal set for completion in 2014, the leaders at Florida’s Great Northwest figure they have about five years to establish business ties in Panama.

That’s why they’re starting now.

With an eye toward taking a bigger slice of Florida’s booming international business trade and developing relationships in Latin America, the Northwest Florida economic development group has planned several trade missions for this year. The first was to Panama in January.

The hope: By getting an early jump, Northwest Florida businesses can start engaging potential clients, improving infrastructure and capitalizing on the area’s location — a straight shot from the international shipping channel — to boost the local economy, said Al Wenstrand, president of Florida’s Great Northwest.

More than $115 billion in merchandise came through Florida’s airports and seaports in 2007, according to statistics from Enterprise Florida, the statewide economic development organization. Northwest Florida hasn’t been as active a participant in that trade compared to other parts of the state.

“It’s time for that trend to change,” said Wenstrand, who is looking internationally to grow Northwest Florida’s target industries of aerospace and defense, health sciences, energy and environment, transportation and logistics, and strategic support industries such as engineering and information technology.

But finding international business partners isn’t as simple as going on a trade mission and returning with a fistful of orders. It takes research, strategy, planning, patience and attention to detail to develop and maintain relationships with international clients.

Do Your Homework

This is a critical step, experts say. You need to know about the country’s economic and political climate, but you need to know whether you’re selling or offering anything that they need.

Business owners need to view this as an exchange, not a one-way transaction. Often, when American businesses decide to engage in international trade, “we have a distinct idea of what we want them to do for us, but we have no idea what we’re putting back into this process,” said Alan Carsrud, executive director of the Eugenio Pino and Family Global Entrepreneurship Center at Florida International University in Miami.

Businesses also need to understand the different political and social structures. For instance, before doing business with Panama, take time to research the country’s history, its ties to the United States, and the way Panamanians view Americans, Carsrud said.

One place to start: the U.S. Department of State, which offers frequently updated background notes on many countries. Business organizations such as Enterprise Florida and the U.S. Chamber of Commerce also have sections on international trade, including tips for business owners, on their Web sites.

Also remember that it’s important not to take a one-size-fits-all approach to research. Business owners looking to expand into areas such as Latin America should know that customs and cultures vary widely in those countries.

For instance, although Chile and Argentina share a border, the countries and their people are “night and day,” Carsrud said. While Colombia once ruled Panama, “they’re not the same, either,” he said.

That can even apply to regions of the same country. In the same way that North Florida differs in many ways from South Florida, it’s difficult to find generalities that apply to northern, central and southern Brazil.

Take a Trip

Anyone hoping to do business with a foreign country should plan to visit — multiple times — and play host to delegations from that nation.

“You’re building friendships and relationships. And in Latin America, one visit does not a relationship make,” Carsrud said. “They’d better look at this as a long-term investment.”

For small business owners, organized trade missions are a good way to establish relationships while letting the group handle the details. Groups such as Enterprise Florida and government agencies such as the U.S. Department of Commerce’s International Trade Administration list trade missions or events on their Web sites.

Such trips “open up a lot of doors” for small business owners, Wenstrand said.

A successful trade mission takes a significant amount of advance work and planning. Before leaving on their trip to Panama, Florida’s Great Northwest officials coordinated with the U.S. Department of State and U.S. Department of Commerce to set up briefings on how to do business with Panama. The two agencies also helped arrange receptions and meetings with Panamanian officials and businesses.

Attendees on the trade mission to Panama were guaranteed a minimum of three pre-screened business meetings with potential clients.

“This is as much a learning experience on how to do business in foreign countries as it is actually coming out with business,” Wenstrand said.

Know the Cost

Another factor business owners should understand is the cost of doing business with a foreign-based company. Business owners need to consider packaging, pricing, translation from English into another language, competition and even potential legal costs before entering into a deal with a company from another country.

Failure to understand the true cost of business with a foreign company is the biggest pitfall Carsrud said he’s seen with American business owners attempting to engage in international trade. As part of their research, business owners should ask whether their goals of foreign trade are realistic.

They also should work with an attorney who knows the inner workings of a particular country’s legal system, because the Latin American legal system is not as transparent as that of the United States.

 “If you’re going to have a deal in Latin America, have somebody who understands the legal system in that country write the papers,” Carsrud said.

Know the Culture

Each country has its own customs and traditions that any American business owner must know before embarking on international trade.

“Those are where a lot of the pitfalls come,” Wenstrand said.

Consider: While Americans think nothing of scribbling notes on a business card, that’s deemed rude in Asian cultures.

Americans may want to instantly get to deal-making, which many cultures consider improper.

“In Latin America, they really tend to do business with friends. This is not, ‘Gee, let’s cut a deal the first time,’ ” Carsrud said. “If they think you’re trying to cut a deal too fast, they say, ‘We don’t even know you yet.’ ”

This is where research is extremely important. On past trade missions he has attended, Carsrud said the State Department handed out dossiers on individuals they would meet on the trip.

Seemingly small gestures, such as giving gifts brought from home to the people you meet abroad, is considered good business sense. For instance, Carsrud said a North Florida business owner should look for illustrated books of the region to give as gifts, since the books give potential business partners a peek into life back home.

Such a gift “says you took the time to think about it,” he said.

Be Patient

While you may return from a trip abroad with contacts, it’s unlikely you will return with contracts.

How long it takes depends on the country. Trade with Canadian businesses is easier than, say, Chilean businesses, because many Canadians own second homes in Florida and are familiar with the state, Wenstrand said.

With Latin American nations, “it’s a real slow process, and probably the most important aspect is building trust between the American business and the foreign business,” he said. “It’s not something that happens overnight.”

In fact, pushing a deal quickly could prove offensive. Carsrud points to business relationships he has built with counterparts in Finland in which it took two years before any actual business was done.

“I think the biggest blunder I see with American business owners and American business students … is immediately trying to get down to business — ‘Let’s make something happen,’ ” Carsrud said. “That, in Latin America, just doesn’t work.”

Wenstrand hopes that developing a relationship now with Panamanian businesses will give Northwest Florida an advantage in the future.

Five years should give the region enough time to develop infrastructure, as well as establish those critical long-term relationships that lead to increased trade.

Wenstrand hopes opportunities in Panama will expand to other Latin American countries, such as Argentina, Brazil and Chile, while casting an eye to areas such as China. He figures an expanded Panama Canal could open up shipping opportunities in Northwest Florida, since ports along the west coast of the United States are crowded.

Ports in Northwest Florida are in a prime spot to take advantage. After all, Wenstrand said, “somebody’s got to fill those containers and ship them out.”

Helpful Resources

Looking for more information and advice about foreign trade? Here are some helpful Web sites that list tips, trade missions and other important information for those who want to broaden their business into foreign markets:

International Trade Administration: trade.gov — The International Trade Administration is part of the U.S. Department of Commerce. The site directs people to local offices, to trade missions, helps people to file complaints about trade barriers and offers other advice and information to businesses looking to conduct foreign trade.

U.S. Chamber of Commerce: uschamber.com — Go to the Chamber’s “International” section for business resources, including the American Chambers of Commerce Abroad, which works for American business interests in international markets.

globalEDGE: globaledge.msu.edu — Created by the International Business Center at Michigan State University, this site provides country-specific links and advice about doing business with foreign countries.

Enterprise Florida’s International Assistance section: eflorida.com — This portion of Enterprise Florida’s Web site contains trade leads, statistics, exporting assistance and other help for Florida businesses looking to expand into international markets, as well as for international companies that want to do business in Florida.

Florida’s Great Northwest: floridasgreatnorthwest.com — Check out the “Business Environment” link on the Florida’s Great Northwest home page and learn more about Foreign Trade Zones in Northwest Florida. To learn more about upcoming trade missions, check out the “Press and Events” link.

“Background Notes” from the U.S. Department of State: state.gov/r/pa/ei/bgn — Up-to-date information on foreign countries, including background on the country’s people, political climate, economic data, government and relations with the United States.