WorldCity Business Magazine

Sliding ahead

by Mary Dempsey

An ongoing thirst for value-priced oil products has turned refined petroleum into South Florida’s No. 1 import when measured by value, according to WORLDCITY’S analysis of government trade statistics. Some $1.1 billion in non-crude shipments entered Port Everglades in the first six months of the year. That compares to $600 million in the first half of 2004.

The boost in energy cargo came as the Miami Customs District, which includes air and sea ports from Fort Pierce to Key West, saw an overall 12 percent jump in trade. South Florida posted $32 billion in exports and imports in the first half of the year, with a $1.1 billion trade surplus. That performance sets the stage for a record-breaking $60 billion-plus in annual trade in 2005.

Miami’s top trade partners played a crucial role in the strong results.

“Latin America’s markets are doing well and our trade is picking up smartly as a result of that,” says Tony Villamil, CEO of Washington Economics Group, an economics consulting company in Coral Gables. “Especially important to Florida, you have Central America, the Dominican Republic and the Andean countries and Venezuela doing well.”

Forty-two of Miami’s Top 100 trade partners are now found in the Americas, up from the 40 that made the list during the same period of 2004.

The volume of non-crude petroleum entering South Florida rose only modestly, but the value of the shipments skyrocketed, knocking aircraft into second place on the import roster. Fortified by the soaring value of its exports, oil-rich Venezuela skipped an impressive three notches higher on South Florida’s list of top trade partners. It marks the highest Venezuela has ranked on the list since 1997 and leaves it nipping close at the heels of the Miami’s No. 2 trade partner, the Dominican Republic.

Brazil holds solidly to its position at the top of the roster. Brazil and Miami did nearly $4.5 billion in trade for the first half of the year, an increase of nearly 11 percent when compared to the same period last year.

The Dominican Republic, meanwhile, was responsible for more than $2 billion in trade, nearly evenly split between Miami imports from the Caribbean country and Miami exports to Santo Domingo. Most of the trade comes in the textile sector: fabric and other clothingmanufacturing components are shipped to the Dominican Republic for assembly then returned to South Florida as garments.

Incoming Petroleum Products

Venezuela’s good showing reflects ongoing economic growth in a country that is considered by many to be a political renegade. According to the Economic Commission for Latin America and the Caribbean (ECLAC), Venezuela posted 17.9 percent GDP growth last year and is expected to see 7 percent growth again this year. The country’s overall trade with the Miami Customs District leaped a whopping 47.5 percent in the first half of 2005.

Venezuela sent nearly $507 million-worth of shipments predominantly in non-crude petroleum products to South Florida in the first half of the year. (Most of Venezuela’s crude oil destined for the United States enters the country at Houston.) The Venezuelan imports to South Florida represented a 48 percent jump from the $344 million registered last year. For its part, South Florida sold $1.5 billion in goods to the South American country, up from less than $1 billion a year earlier.

Energy analysts say Florida’s energy imports in the first half of 2005 may have carried a hefty price tag, but they actually reflect the area’s penchant for value. Since Florida has no pipelines connecting it to domestic energy supplies on the U.S. Gulf Coast, it must ship in gasoline and foreign petroleum products are often more economical than domestic supplies.

“Florida is a unique case. You can’t supply that Miami market domestically by pipeline. The refineries in Mississippi or Louisiana ship to Florida cities on the west coast,” says Curtis Hyatt, associate director of the global oil group at Cambridge Energy Research Associates (CERA).

He says Europe’s ongoing trend toward cleaner diesel fuel has left foreign non-diesel gasoline-suppliers with extra supplies and they’re adjusting prices downward to make them more appealing to the U.S. markets. “That makes it price competitive along the whole East Coast, and that includes Florida,” Hyatt explains. “As part of all this, of course, is the fact that the U.S. has a very strong demand for gasoline as a primary transportation fuel.”

Overall, Miami saw an 11.5 percent jump in imports from around the world, to exceed $15 billion for the first half of 2005. Exports from South Florida during the same period grew 12.4 percent to value more than $16 billion.

On the export side, technology dominated. Computers appeared at the top of the list of goods leaving South Florida. Computer traffic grew 34 percent when compared to the same six months in 2004, to surpass $1 billion, and push it ahead of computer parts exports, which remained flat. Cell phone transmission systems and electronic components came in third and fourth, respectively, among exports.

The computer export growth follows a global trend: People all over the world are clamoring for laptops. Industry analysts say the downward shift in computer prices combined with easier wireless access in many place is powering the demand.

South Florida’s proximity to Latin America makes it a natural source of computers for that region, which has had a lower penetration especially with laptops than the United States or Europe.

Reflecting a nationwide trend, Miami’s exports of industrial supplies and materials also grew. Foreign trade statistics for the U.S. Census Bureau indicate that nationwide exports of industrial supplies and materials in June reached $19.6 billion. The all-time record, $19.8 billion, was posted just a month earlier.

Rising Tide

Oil imports, computer exports and a growing Venezuelan economy weren’t the only drivers behind Miami’s trade growth. China’s rush of imports continued, swelling 36 percent to nearly $1.5 billion for the first half of the year. On the other side, Miami saw its exports to China blast off: rising nearly 83 percent. But that increase masks a dramatic 18-to-1 imbalance: Miami still managed to send only $83 million-worth of shipments to the global powerhouse.

In mid-August, the Bush Administration responded to the troubling U.S. trade deficit with China by announcing that it would launch talks aimed at restricting imports of Chinese textiles.

Closer to home, Miami’s trade with Latin America posted an uptick behind higher prices on copper, gold, steel and other minerals and the steadily rising prosperity of the region. Ecuador and Peru, in particular, fared well, edging a few steps higher in the roster of South Florida’s top trade partners and nudging out Mexico, which slipped to the No. 16 spot, two positions back from 2004. The strong river of commodities fueled overall trade growth of 17 percent for Ecuador and 20 percent for Peru.

But the growth was one-sided when it came to Ecuador, which was plagued by domestic problems in the first half of the year. The chaotic political landscape came to a climax in April when Lucio Gutirrez was forced to resign from the presidency and Vice President Alfredo Palaccio assumed control. In the stretch leading up to the change in power, street demonstrations and strikes disrupted the country and took their toll on trade. Although overall trade reached $427 million, it was largely due to a 33 percent rise in exports from Miami. Imports from Ecuador fell nearly 5 percent in the first six months of the year.

Miami’s imports from Peru, meanwhile, swelled more than 14 percent while South Florida’s shipments of goods back to Peru rose even more impressively, to nearly 23 percent. Peru and South Florida had $415 million in trade for the first six months of 2005.

Villamil at Washington Economics Group predicts that the trade upswing will continue. “I think that for the rest of the year, we’ll be OK,” he says. “Getting into 2006, there are some questions as to how sustainable this all is. A lot depends on oil prices and commodity prices for some of the Latin American countries.”