Searching For Trade Options Oregon Companies Look To Latin America To Replace Asian Customer Base
Northwest companies are feeling pressure to find other markets because of economic woes in Asia, and Latin America appears a likely customer.
Esco Corp., a Portland company that makes mining and construction equipment, does business in Indonesia, where panicked citizens stockpiled food last week as the rupiah fell to about a quarter of its June value against the dollar.
“When the cost of your product to your customers has increased by a factor of four, it’s pretty hard to figure out how you’re going to keep selling,” said Mark Mallory, Esco international general manager.
The company now is looking at Latin America, where economies are recovering from a decade-long debt crisis.
Last year, Oregon exports to Latin America amounted to only 4 percent of sales to East and Southeast Asia.
Japan, South Korea and Southeast Asia bought Oregon products in 1996 worth $4.5 billion, almost half of the state’s $9.8 billion in total exports.
But early trade figures show a 23 percent decline in exports to Japan for 1997 through September as compared to 1996. Exports to Southeast Asian nations plunged even further compared to with the same period in 1995.
The rupiah’s latest fall alarmed the international divisions of many Northwest companies that had hoped to weather Asia’s financial crisis.
“We’re concentrating on South America and Eastern Europe right now,” said Joe Potter, president of AKI Dryer Manufacturers Inc. in Eugene. The company makes large dryers used in factories that produce wall board.
AKI sold two of its dryers, which cost about $6 million each, to a wall-board manufacturer in Thailand last summer. Thai Gypsum put one dryer in Jakarta, Indonesia, and the other in Shanghai, China.
The Thai firm lost one-half of its net worth as the baht toppled. Both dryers sit idle. And AKI, whose annual sales are less than $16 million, is still owed about $630,000.
“There’s nothing we can do except sit and wait and hope for an outside investor from somewhere else in the world” to start up the factories, Potter said.
While waiting, AKI sold a dryer in Poland and one in the Czech Republic. Potter notices that some of the major building supply manufacturers that buy his equipment are signing agreements with small South American firms.
“We’re starting to see some exploration by the major companies, out of the U.S. and Europe, of South America,” Potter said.
But one of the largest companies based in Oregon, Nike Corp., could benefit from the rupiah’s decline because Indonesian wage rates will become cheaper.
The Beaverton athletic shoe and clothing giant relies on Indonesian factories to make one-third of its shoes.
Jerry Karver, Nike footware product director, says Nike remained remains committed to Indonesia. “They’re going to go through some strife; we’re going to go through it with them,” he said.
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