I interviewed Jose Vitorelli who discussed Latin American Supply Chains.
It’s good to speak with you today, Jose, and I look forward to hearing your views on Latin-American supply chains. Can you first provide a brief background of yourself?
First of all, Dustin, I would like to thank you for this opportunity. I think it’s important to share with the audience about such important information on Latin America. To introduce myself, I am Jose Vitorelli. I’m a professional of the supply chain and logistics industry. Currently, I’m dedicated to develop solutions and innovations for global accounts in Latin America for DHL. DHL is part of the Deutsche Post DHL (DPDHL)
What is the current growth in Latin America?
Okay, thank you for asking, Dustin. Based on many information we gather on the source of the media, United Nations, these reports of the United Nations and Economic Commission for Latin America, we expect GDP growth of approximately 2.6, but we expect that for 2014, these numbers will go to 3.2 percent growth. That means that although it’s not a huge number, but we have to consider all of these effects that Latin America suffers from Europe situation, also U.S. Still, we are going to a positive growth. It’s expected 3.2 percentage on the GDP, which will be good. Some of the countries in Latin America are above the average. In terms of average, we have Argentina, we have Brazil, we have Cuba, some of Central America, but also, we’re going to have countries, small countries but with significant growth expected for 2014.
As an example, Chile. Chile expects a growth of 4 percent; Colombia, 4.5 percent; Costa Rica, 4.0; Ecuador, 4.5. It shows that Latin-American countries will keep growing, the consumer market is stronger, and we expect that most of these manufacturing companies like U.S., Europe, and Asia will include Latin America as one of their main destinations. As a consequence, we have to consider supply chain connectivities. We know that Latin America, because of an emerging region, requires a lot of investment in terms of airports, roads. We still suffer a lot in some of the countries of the failure of these infrastructure investments. We have up from and consider that 2014, as an example, we’re going to have the World Soccer Cup. This World Soccer Cup means a lot of tourists coming to Latin America, which will also impact the transportation networking, so we expect an increase of the rates.
Normally, we have the peak season, Dustin, as you know. In Asia we have this peak going the second semester of the year, but considering this World Cup, there is an estimation of a big slew of tourists coming, which will impact the space of the aircrafts. We’re going to have some impacts on the prices, and, as a consequence, this will impact, also, the flow of the airports from the normal flow in the ports. We expect to have a huge impact on that. The challenge, now we have some investment in countries like Mexico, some of the ports in Brazil. We are having investments in Argentina, in Colombia, in Panama; Panama also has been a great investment for all of the companies coming from Asia and using Panama as a port for redistribution into Central America and South-American countries. We expect that ports will be good in a couple of years. If you consider the movement from the ports to the main cities because of this effect of consumer and urbanization processes, we still have a big gap that also impacts the costs, like the road from port to the main cities.
The supply chain in these countries are not totally integrated, which means we have isolated operators and carriers. Some of them have their own autonomy, but we need to have more connectivities in their supply chain. It is still a challenge for all of the professionals in supply chain in the region. We’re probably going to have to look for alternatives. We do have alternatives. We have agreements. Some of the shippers normally try to negotiate directly with carriers, so they don’t have a good 3PL, for example, to monitor them. We are still in this process to integrate 3PLs, shippers, and carriers. That’s probably the biggest challenge we’re going to have, Dustin.
Did you mention everything about the infrastructure challenges?
Oh yes, as infrastructure challenges, I think the main problems are related to the move. We need to invest in more roads for the domestic distribution. We still have a gap for warehousing to move cargo until the endpoint, so there are needs to be invested in the infrastructure. Countries are starting, but as you know, infrastructure cost requires heavy investment from the government with long-term visibility. Because of the characteristics of Latin-American governments, some of these governments don’t prioritize these investments, so we still have some gaps. As an example, we have small countries like Peru, we have Venezuelan, we have Ecuador. These countries are still suffering, even Argentina. There is a need for these governments to invest more in long-term infrastructure. Also, for the other countries like Brazil, Mexico, Colombia, we already have investments, but it requires these long-term until we have more roads, more warehouses, and an overall infrastructure ready to support this supply chain.
Do you have any recommendations on things to consider in supply chain planning over the next few years?
That’s a good question, Dustin. I think, as a professional in the supply chain industry, the forecast planning is a key point. But also forecast considering not looking for Latin America as a whole, but looking for each of the target countries and it’s characteristics. For example, because we talked about infrastructure, this is also important, but as you are planning to go and expand into these markets, it’s important to take into consideration that each of these countries in Latin America, they have specifics on their customs regulations, for example. We mentioned the infrastructure, which is key, but also, customs regulations takes a big role when you’re planning to put your products, competing directly with the local market. Considering the customs regulations, how you calculate defined prices, considering the local-domestic distribution, I would say this is very important. Basically, of course, try to have a good communication process with the countries, because each country has its, although it’s Latin, we have different cultural aspects which should be considered. For example, in terms of entering into the market and understanding the consumer minds or the way you act into the local distribution. These are the main points I would consider, Dustin.
Thanks, Jose, for sharing your views on Latin-American supply chains.
Oh, this was very important. I really appreciate your attention. I thank you very much also, Dustin, for speaking with me about Latin-America and the challenge of the supply chain. If any of your audience has questions, I’ll be more than happy to answer. Anyone can find me on LinkedIn.
Thank you, all the best. You guys have a great 2014.
About Jose Vitorelli
Customer Solutions and Innovation
- Regional Customer Manager