If you're like most Americans, you don't know much about things in other countries outside of the U.S.
You most likely don't know that the capital of Canada is Ottawa, Ontario, and you probably don't know that the full name of Mexico is the United Mexican States.
In this issue of Tire Business, we are looking south of our border to Latin America.
Latin America consists of the countries of Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela, so this is a lot of territory to cover.
The largest players are Argentina, Brazil, Chile, Mexico, Colombia and Peru, so when I write about the trucking industry in Latin America (Lat-Am), I am focusing primarily on these countries.
As you know, the trucking industry in the U.S. lives and dies by the economy. This is true in all countries, so a look at the overall economy in Lat-Am is necessary to understand exactly what is going on down there.
Latin America's overall economy has been in the dumper in recent years, plagued by high inflation (7.6 percent in March) and unemployment, slow economic growth, and political uncertainty.
This year, it is improving due to a faster recovery in Brazil as a result of a more strategic monetary policy and a smaller drag from Argentina, whose inflation rate hovers around 50 percent but which received $10.8 billion in financing from the International Monetary Fund in April to help protect the peso and revive its economy.
Mexico is struggling with uncertainty over domestic policy, softer dynamics in the U.S., floundering oil output and contracting industrial output.
Colombia is dealing with sliding oil prices, a decline in coal production, soaring unemployment and downbeat consumer sentiment that weighs on household consumption.
Despite all of these drags on the economy — as well as increasing trade coming from China — the Latin American economy is projected to grow 2.1 percent in 2019 and 2.5 percent in 2020, which is creating a boom for the trucking industry and increasing truck sales.
It is expected that annual sales of commercial vehicles throughout the region will top 200,000 units by 2023.
The trucking industry in this region is highly fragmented, with providers ranging from owner-operators (about one-third of the industry) to sizable fleet operators and experienced freight forwarders who may not own any trucks at all.
It also is very outdated and inefficient since it uses old technology such as faxes and pen and paper to organize shipments that result in slow-moving freight, miscommunication between the shippers and freight haulers, and low productivity.
For example, Brazil has an excess of 300,000-350,000 trucks running 40 percent empty all of the time. Packages can take as long as 45 to 60 days to reach their destination, and transportation costs in the region are high, averaging about 15 percent of the cost of sold merchandise.
For many consumer goods companies, their largest single cost line item, after labor, is logistics. Further getting a quote for freight shipments is difficult as rates are not available online and prices fluctuate greatly.