Latin America: fertile ground for growth

Feb 1, 1998 12:00 PM, TINA D'AVERSA-WILLIAMS

Over the past five years, trade in South and Central America has almost doubled. Despite the devaluation of the Mexican peso, which triggered a recession in 1995, South American and Mexican imports have risen by 30 percent during the past two years.

Brazil, with 50 percent of the region's population, dominates the South American marketplace and is ranked as the 14th largest global market for U.S. exports. Venezuela is second in the region for American goods as it recovers from the political turmoil and financial difficulties of the early 1990s. Brazil, Argentina, Colombia, Peru and Chile have doubled business with the U.S. since 1991.

The economic resurgence is reflected in a 1996 U.S. Department of Commerce poll that indicates 84 percent of the U.S. Fortune 1000-class companies have expanded their operations into Latin American countries.

Security required Industrial growth and high crime create a demand for security services and systems by both domestic and foreign firms. Central and South America's private security market is expected to grow 11.8 percent annually through the year 2000, according to a November 1997 survey of U.S. security product manufacturers by Intertec Publishing.

More than 65 percent of U.S. security product and equipment manufacturers have expanded their businesses into Latin America, and more than 28.5 percent expect to move into Latin America in the next five years, the survey revealed. On average, U.S. manufacturers and suppliers of security equipment and systems estimate that 30 percent of their growth through 1999 will come from Latin America.

Industry privatization, trade liberalization, revolutions, deregulation, tax reforms and public interest in electronic security in Latin America all contribute to the enormous interest among North American manufacturers and suppliers of security products, equipment and systems in reaching these countries.

According to the Intertec survey, product categories with high potential include: electronic access control, surveillance and CCTV, fire protection and detection, intrusion detection and controls, burglar and fire alarms, x-ray systems and detectors, perimeter security, photo ID and badging, door entry (locks and hardware) and integrated systems. Another high-growth category is vehicle monitoring systems used to protect driver and cargo.

The Latin American economy Latin America is comprised of Mexico, Central America, South America and the West Indies. The two largest economies are those of Mexico and Brazil. Other principal economies include those of Argentina, Colombia, Chile, Peru and Venezuela.

Brazil has the largest economy in Latin America and the world's eighth largest economy. Its 1995 gross domestic product (GDP) was greater than all other South American countries combined. The estimated GDP in 1996 was U.S.$817.9 billion.

Mexico recovered from negative growth during the recession of 1995, growing by 5.1 percent in 1996. 1996 nominal GDP is expected to equal U.S.$316 billion.

Overall economic growth for the region is expected to be 5 percent in 1997. There has been a dramatic decline in inflation from 23 percent in 1996 to 13 percent expected for 1997.

Banks have increased the number of their branches in major Latin American cities.

Factors and trends The Latin American security industry is in its infancy and has strong growth potential through the year 2005. The largest users of security equipment are the industrial, commercial and financial services sectors.

Increasing crime, especially in densely populated areas, is a serious problem for many Latin American countries. For example, a survey by the Mexican Chamber of Commerce indicated that 7 percent of commercial establishments experienced at least one robbery attempt in 1995.

Many end-user groups, as well as the general public, feel that criminal groups have overwhelmed the capabilities of the police. Investing in security has become an important business factor. The greatest demand is for guard and monitoring services, which do not require the same investment commitment as electronic security equipment.

The majority of security products are imports - 60 percent in Mexico and 80 percent in Brazil. More sophisticated electronics are virtually 100 percent imported.

Mexico's imports of security products are expected to grow 5 to 8 percent for the next three years. The Brazilian market could grow by as much as 20 to 25 percent annually during the same period.

While the U.S. enjoys a 50 percent share of the Mexican import market, Asian countries are targeting the industry aggressively. The Asian strategy is to offer similar products at lower prices.

Because of a growing deficit, on March 27, 1997, Brazil announced a provisional measure to restrict import finance periods to less than 360 days. Trade sources suggest that this may translate into a 10 to 15 percent increase in the cost of imported products. Illegal imports into Brazil may be as high as 30 percent, according to trade contacts.

Indicators point to a growing global need for security products. Today, more than ever, the Latin American security market is fertile ground for American suppliers.

New magazine to cover security in Latin America In May 1998, Intertec Publishing/PRIMEDIA will launch a new magazine, Seguridad Hispana. Developed and written for Latin American security professionals, Seguridad Hispana will have an initial circulation of 15,000 and will be available in Spanish and Portuguese. It will be published three times in 1998 and six times in 1999.

Seguridad Hispana, produced by the publishers of Access Control & Security Systems Integration, will feature application-oriented articles focusing on the challenges and decisions facing those responsible for the security of companies, people, property and information in Latin America.

Offering analysis and commentary on the security industry at large, our goal is to keep readers informed of the market growth and forward movement within the industry. The column is written by Tina D'Aversa-Williams, publisher of Access Control & Security Systems Integration, whose background includes work in market research and analysis.

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