South American markets are the future for US firms

As companies reveal their second quarter figures, it has become more apparent than ever that South America and its markets have been a huge part of the rising numbers. The economies of the US and Europe have begun to recover, but are doing so slowly, in minute increments. However, many European and US companies have been saved by large demand from South America, particularly Argentina and Brazil.

There are two saline treasons behind this: firstly, exports, particularly of agricultural and mineral products, have precipitated a growth in gross domestic product, and secondly, the factors which used to be prohibitive for American companies, such as hyperinflation and political volatility, are noticeably less pronounced.

Nicholas Heymann, an analyst for Sterne Agee and Leach, a brokerage firm, said, There's nowhere else in the world that's had the dramatic change in the middle class like Brazil, not even China. You've got an unfathomable amount of money there.

A variety of companies are either indebted to the Brazilian market, or are scrambling to become a part of it. PACCAR, makers of DAF trucks, has announced that it plans to construct an assembly facility in Brazil, in order to launch new and used DAF trucks across the continent of South America. They have decided that South America is actually a sounder investment than the vast emerging market of China, as the Chinese government often demands that Western companies enter into joint ventures with indigenous firms. Chairman and chief executive officer of PACCAR, Mark Pigott, said:

There's still been no Western truck manufacturer that's ever made any money in China in a partnership. Any of our competitors that are in South America seem to gain an inordinate amount of their net income from those markets. We're looking forward to growing in South America.

One company which demonstrates the potential of the Brazilian market is Whirlpool Corp., which manufactures appliances under the Brastemp and Consul brands, and have a huge market share in Brazil, with half of all Brazilian households, according to Whirlpool, owning a Consul appliance. Their rate of profit increase in South America was four times that of North America. Whirlpool chairman and chief executive officer Jeff Fettig said, In Latin America, the underlying economic fundamentals remain strong and we continue to see full-year growth [in appliance shipments] in the range of 10%.