The Global Marketplace Will Double, Adding 1 Billion Consumers by 2020
Throughout the next 20 years, the size of the global marketplace will double, adding more than one billion new consumers by 2020. More than 95 percent of the world’s economic activity will take place outside of Florida. Florida’s ability to secure our future prosperity depends in part on how we are able to capture portions of that growth.
We live in an era unlike any before. The speed of global communication, the exponential advances of technology and the ingenuity of entrepreneurial activities have created a new landscape for global commerce that we continue to adapt to. According to global trends research from Ernst and Young, “estimates show that 70% of world growth over the next few years will come from emerging markets, with China and India accounting for 40% of that growth.”
Take manufacturing costs in America for instance. Recent in-depth research on the global manufacturing landscape conducted by Boston Consulting Group (BCG) states that current conditions have led to a “redrawing of the map of global manufacturing cost competitiveness.” Simply put, the United States is now benefitting as one of the top 25 leading export economies. In fact, according to the BCG report, the U.S. is now ranked as a rising global star:
Cost structures in Mexico and the U.S. improved more than in all of the other 25 largest exporting economies. Because of low wage growth, sustained productivity gains, stable exchange rates, and a big energy-cost advantage, these two nations are the current rising stars of global manufacturing. We estimate that Mexico now has lower average manufacturing costs than China on a unit-cost basis. And except for China and South Korea, the rest of the world’s top-ten goods exporters are 10 to 25 percent more expensive than the U.S.
What Does This Mean for Florida?
In our own state, the nation’s growth is echoed. In fact, as manufacturing trends shift away from Asia and toward North America, Florida firms can leverage this to expand economic growth. This will mean a growing emphasis on the skill-sets needed to compete in the 21st Century economy. As the global market grows, so does the need for greater manufacturing capacity, high-tech skills, and logistics systems to get goods to market.
“Continuing to promote the growth and expansion of manufacturing in Florida is vital to our success as a state,” said Al Stimac, Owner and President, Metal Essence, Inc. “With the influx of new residents and increasing opportunities to sell and ship Florida-origin goods internationally- the future for Florida’s manufacturers’ looks bright. With Florida’s top-notch business climate and trade and logistics assets, it’s like we’re sitting on a goldmine.”
In Florida, we have a great opportunity to use these global trends for our benefit. Florida’s global resources, current international trade relationships and infrastructure lend our state to work with growing markets and become more globally competitive. Consider that there are more than 10,000 multinational companies operating in our state and in 2011, foreign direct investment by multinational companies employed more than 238,000 Floridians.
Additionally, Florida’s existing logistics infrastructure makes us uniquely suited to capture a good portion of this shift. Consider that:
- Florida’s infrastructure is ranked No. 1 in the US
- Florida has the 3rd highest cluster of logistics and distribution establishments in the US
- Florida is the 6th largest exporting state in the US and a leading global hub
- Florida is No. 5 for Foreign Trade Zone warehouse and distribution activities in the U.S.
- Florida is No. 2 for Foreign Trade Zone exports in the US
More than ever, trade equals new high-wage jobs. According to data released by the U.S. Commerce Department, just in 2013 alone Florida’s exports supported more than 275,000 jobs. Research completed by the Florida Chamber Foundation highlights as many as 150,000 new jobs in trade, transportation and logistics in Florida are possible. But realizing the potential requires vision.
“This is a long-term advancement opportunity,” said John Hartnett, V.P. of Global Business Development, Endoscopy Replacement Parts, Inc. “Understanding the current global economic patterns presents an incredible advantage for our state just in manufacturing alone. Florida is positioned to capitalize on these shifts if our approach is comprehensive, strategic and aggressive. By continuing to address our manufacturing capacity and aligning our resources such as our STEM talent pipeline, business expansion ability, logistic infrastructure and high-tech job growth, we can become the epitome of 21st Century global competitiveness. We have many of the pieces in place, and we have much of the plan identified.”
Recognizing the shift and its implications for Florida is just the first piece – how we strategically plan for leveraging the dynamic changes in the global market will make the difference between being a passive participant and a global leader.
You Can Help Secure Florida’s Future:
Join us at the 2014 Future of Florida Forum, September 29 – October 1,as business leaders, industry experts and elected officials discuss and explore how to secure Florida’s future. The program features top level executives and identifies connection points and partnerships that will make Florida a state with vibrant communities, high-wage jobs and endless opportunities for global competitiveness. Register today and be part of generating solutions.
Tell Us Your Story:
How is your organization impacted by global manufacturing? Where do you see room for Florida to improve its competitive position?
About the Florida Scorecard Did You Know:
The Florida Scorecard, located at www.TheFloridaScorecard.com, presents metrics across Florida’s economy. Each week, the Florida Chamber Foundation produces a Scorecard Did You Know that takes an in-depth look at one specific statistic. If you would like additional information on the Weekly Scorecard Did You Know or on the Florida Scorecard, please contact Tracey Lowe with the Florida Chamber Foundation at 850.521.1200 or TLowe@FLFoundation.org. You can also follow the Florida Chamber Foundation on Twitter at @FLChamberFDN.
Brazil Risks a Recession as Presidential Campaign Heats Up
By Walter Brandimarte
RIO DE JANEIRO (Reuters) – Brazil’s sluggish economy faces substantial risk of falling into a light recession in 2014, and may already have done so, providing opposition candidates with extra ammunition in the run-up to October’s presidential election.
Latin America’s largest economy has slowed to average growth of just 2 percent a year since President Dilma Rousseff took office in early 2011 and, coincidentally, global demand for commodities ebbed.
Attempts to boost activity by spurring consumption largely backfired as investment failed to catch up with demand, driving inflation higher and eventually forcing the central bank to drive up interest rates.
The economy has stagnated over the past 12 months and industrial output fell for three straight months through May.
Now, some economists say the economy likely shrank between April and June and that growth in the previous quarter could be revised into negative territory from its previously reported 0.2 percent gain.
“That would give you a technical recession,” warned Alberto Ramos, Goldman Sachs senior economist for Latin America. “It wouldn’t be a deep one, but it would have a relevant political cost.”
If the numbers do come in negative when gross domestic product data is released on Aug. 29, it would be more than just another sign that once-booming Brazil remains stuck in an economic rut – it would allow opposition candidates to use the “R-word” for five weeks before Brazilians vote on Oct. 5.
Rousseff currently leads the presidential race with 38 percent of voters’ support, according to the latest opinion poll. Aecio Neves, her main opponent with 20 percent support, has criticized Rousseff’s inability to bring inflation under control and says her interventionist policies have failed to foster economic growth.
Both Neves and Eduardo Campos, who is running third in the presidential race, have promised to cut taxes and restore investor confidence with a pro-business agenda, including changes in state-run oil company Petróleo Brasileiro SA, whose financial performance has suffered because of a government policy forcing it to sell fuel at below-market prices.
While it’s unclear whether Brazil’s hosting of the World Cup soccer tournament will have any lasting impact – positive or negative – on Rousseff’s popularity, her re-election chances are much more dependent on Brazil’s economic success.
And that’s where the opposition might have a chance.
Brazil’s second-quarter gross domestic product, as well as any potential revision to previous figures, will be released on Aug. 29, but there are widespread signs of economic trouble.
Consumer confidence in the city of São Paulo, Brazil’s biggest city and business capital, dropped in June to its lowest level in nearly 11 years, hurt by a combination of stubborn inflation, smaller wage increases and higher interest rates that have eroded Brazilians’ purchasing power.
Slowing economic activity caused government revenues to fall more than expected in May, resulting in the second-largest monthly primary budget deficit ever. That means Brazil did not have enough revenue in May to cover all of its expenses, including interest obligations.
Retail sales are also forecast to dip for a third straight month, according to a Reuters survey..
Even Brazil’s tight job market, one of Rousseff’s main calling cards on the campaign trail, has started to falter. The pace of job creation in May was the worst for that month in 22 years as a net 30,000 industry workers lost jobs.
Take the labor-intensive automotive sector as an example. Car sales are forecast to drop more than 5 percent this year while truck sales, which move hand-in-hand with investment decisions, are expected to plunge 14 percent, according to industry associations Anfavea and Fenabrave.
“We’re not expecting an improvement any time this year,” said Roberto Cortes, president of German truck maker MAN in Brazil.
“You only buy a truck if you expect to transport more merchandise. And all growth indicators, either in the agricultural or the industrial sectors, are not growing or growing so little that it isn’t worth increasing your truck fleet.”
“Economic activity as a whole is very low, especially in the industrial sector, which is suffering the most.”
Sales of corrugated board, used for all sorts of packaging and considered a gauge of overall economic activity, fell year-on-year in each of the last three months.
Recession fears have been around since the second half of last year, the direct result of a long central bank anti-inflation campaign that has lifted borrowing costs by 375 basis points since April 2013 to 11 percent.
“Effectively, the Brazilian economy has already been stagnant since the middle of 2013,” said Bill Adams, senior economist with PNC group in New York. “The odds are that Brazil will see a technical recession at some point in 2014.”