Southern Exposure

By Hannah Wallace March 31, 2009

Times of rapid change turn prognosticating magazine columnists into gamblers. That said, two things I know for sure:

One, we are back to earth, and that forces us to adapt for survival. It turns out that neither billions of hard-working Chinese and their savings, nor our massive ingestion of Prozac, were enough to keep the high-flying U.S. economy up in the clouds. The savings of the world won’t flow automatically into our economy anymore.

But, gosh, doesn’t it feel good to have the solid ground of reality under your feet again? I, for my part, am happy because the gravity-defying “capitalism without capital” of the past two decades made me nauseous. My hope is that the crash of Wall Street’s highly leveraged investment bankers also brings down the casino they had built for us to play in—a transactional economy where the main entrepreneurial motivation had become the quick buying, merging and selling of assets produced by others, using other people’s money.

It looks as if the grounded way of doing business—patiently producing things while accumulating capital—is staging a limited comeback. Like it or not, we must now go “cold turkey” on borrowed money and turn our business thinking from a short-term transactional mindset to a long-term productive one.

But there are plenty of opportunities out there. What will help in this shift—and that’s my second “I-know-for-sure” point—is the fact that dynamic markets exist beyond Lakewood Ranch.

This is old news for the folks who run one of the most grounded larger businesses in our area, Sun Hydraulics Corp. The manufacturing company, founded more than three decades ago by Sarasotan Bob Koski, has been selling and producing its widgets—hydraulic cartridge valves, if you care to know—on three continents. And thanks to this geographic diversity, the business is on a steady course in times of upheaval. Sun Hydraulics had a net profit of $23 million through September 2008. Sales and profits will likely be lower next year, but the company’s even-keeled way apparently has a calming effect on jittery investors; Sun Hydraulics stock has been fairly stable and is trading not too far below its all-time high. 

The people in charge of a similar-sized economic asset in our region, PGT Industries in Venice, are just beginning to learn that lesson. Due to PGT’s dependence on one market, the manufacturer of windows and sliding doors for suburban homes still is in free fall. As construction of new subdivisions in the southeastern U.S. screeched to a halt last year, PGT in January laid off 10 percent of its employees. Company sales plummeted by one-fourth, and PGT logged in a head-turning $80 million net loss in the first nine months of 2008. The stock plummeted to the penny range, and credit for the company has become tight. Luckily for PGT, existing shareholders injected nearly $30 million into the business in September. Trying to slow the fall, the company has been scrambling to come up with new products for condos and commercial buildings. But everybody knows that construction in these markets isn’t exactly booming either.

Here’s the good news for PGT: There’s a world of opportunity beyond the new subdivisions of the U.S. Southeast and condos in Miami. Apparently, they are beginning to recognize this. In December, PGT announced the hiring of an international sales veteran.

As I am writing this, I am sitting in a café in the gritty but bustling downtown of Mexico’s second-largest city, surrounded by busy Mexicans going after their daily pursuits. Although hundreds of thousands of people here in Guadalajara are facing hard times—as their credit is drying up, as their Mexican peso is taking a dive vis-à-vis the dollar, and as their export-related jobs are shaky—they do go to work, have lunch, shop and continue to dream of owning their own little homes.

When driving through the periphery of this industrial city of four million, the business opportunity for the PGT’s of this world is obvious. Even though private bank credit is getting tighter, improved government lending programs keep fueling the construction of thousands of tiny townhomes in Guadalajara, and dozens of condo high-rises are still likely to make it beyond the drawing boards.

It’s the same story in São Paulo, Medellín, Guayaquil, Córdoba and Santo Domingo, even in Havana—all over the hemisphere—and this story will continue to unfold. As the United States and Europe slide further into recession, Latin America and the Caribbean will sustain some growth, according to forecasts by the United Nations’ Economic Commission on Latin America and the Caribbean (ECLAC), the Interamerican Development Bank and all kinds of other reality-grounded sources.

What will be driving this growth is the subcontinent’s effort to turn its biggest burdens into an opportunity: building and modernizing the region’s sorely lacking infrastructure, and—more importantly for Southwest Florida companies with a stake in residential construction—bringing the poor into the mainstream. Hundreds of millions of Mexicans and other Latin Americans still have basic needs to cover, such as a roof over their head, medical service, education, transportation, and other things we take for granted.

Here’s the tricky part: Since the private sector has been reluctant or absent in some countries to engage in these undertakings, the state took the lead role, staging a big comeback as an economic actor. This is not just the stuff of Raúl Castro and Hugo Chávez anymore. The finance minister of Colombia, one of the most pro-free trade governments in the hemisphere and a close partner of the Bush administration, announced in November that his government would try to stimulate the Colombian economy by providing massive service programs for the poorest.

Doing business with the state usually requires first partnering with well-connected local partners. And being at the whim of politics in a foreign country isn’t for the weak-hearted either.

But the rewards can be big.

Consider this opportunity in two smaller markets beyond the beaten path: A housing deficit of about one million units aside, three hurricanes that hit Cuba this season damaged or destroyed half a million homes. Resources are tight, but it’s one of the Cuban government’s top priorities to help citizens rebuild their homes while continuing to build new ones. What’s more, while it will take the Obama administration and the Democratic-run Congress to lift the Cuba embargo, this is not such a remote possibility anymore.

The biggest partner in Cuba’s effort is Venezuela, which has started its own massive housing program. The Chávez administration spent hundreds of millions of dollars to establish a state company called Petrocasa, which has begun to crank out thousands of pre-fab homes for low-income Venezuelans this year, using German technology. Venezuela is intent on exporting the Petrocasa technology to partner countries such as Ecuador and Haiti, and the member countries of the ALBA trade and integration agreement — Cuba, Bolivia, Nicaragua and Honduras.

It takes thinking outside the box to take advantage. But everybody with a stake in PGT should make sure the folks in Venice are at least aware of these million-dollar opportunities.



In that vein, it’s getting much more comfortable lately exploring the business opportunities south of Lakewood Ranch. All it takes to hop on a plane is a two-hour drive to Orlando, where Brazil’s TAM airlines has started daily service to São Paulo, in addition to the 28 weekly flights it already offers from Miami.

JetBlue announced it will start daily flights from OrlandoInternationalAirport to Bogotá beginning Jan. 29, the first-ever South American destination for the airline. That’s in addition to JetBlue’s Tampa-Cancún offering.

And Mexican carrier Mexicana began daily flights from Orlando to Mexico City in December.

This is great news in tough times for OrlandoInternationalAirport. While domestic passenger traffic keeps declining, international traffic is growing by two-digit rates.


Johannes Werner is a Sarasota-based business journalist who has worked in Europe,

Mexico, the Caribbean and the United States. Werner is the editor of Cuba Trade & Investment News and hosts the Florida-Caribe radio show on WSLR 96.5 FM. He can be reached at [email protected]

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