New Commerce Secretary has an International Background

  New Year, New Currency

By Susan Dragotta, Commerce Latin America Specialist and Outreach Consultant for Southeast Wisconsin

On January 1 Venezuela launched a new currency called the “strong bolívar”, knocking off three zeros from the old bolívar.  With this move the Venezuelan government hopes to improve confidence in the currency and the economy, and curb rising inflation.  Venezuela’s Central Bank reported on January 2 that inflation had soared to 22.5 percent in 2007, the highest official rate in Latin America.

Venezuela has had a fixed exchange rate since February 2003, when President Hugo Chávez imposed currency and price controls.  While the strong bolívar's official exchange rate will be fixed at 2.15 to $1US, the black market rate has hovered around the equivalent of 5.60 to $1US.  During a six month transition period, Venezuelans will be able to use both currencies.

Further news from Venezuela includes a January 4 reshuffling of Chávez’s cabinet, naming a new Vice President, and making changes at several ministries.  While this is not unusual for this President, it is made more interesting considering the December 2 referendum resulting in a defeat of Chávez’s plans to modify the country’s constitution.  The referendum, which included a constitutional change that would have allowed Chávez to run for re-election indefinitely, was defeated by a very narrow margin of 1.4%.  Unless he manages to push through an amendment at a later time, Chavez’s presidential reign will close in early 2013 at the end of his current six-year term.

A December 6 article in The Economist, discussing results of the referendum, highlights four key areas of concern for the Venezuelan economy going forward; declining oil output, rising inflation, fiscal problems, and a growing shortage of dollars.  Latin America Monitor, which has estimated 2007 GDP growth in Venezuela at 8.5%, predicts a sharp economic contraction in 2008, with GDP growth of only 4.2%.  Venezuela will be a country to watch for political and economic changes in the new year. 

  Low-Priced Indian Car Unveiled

Families of four (or more) riding on a single motor scooter are not an uncommon sight on India’s streets and highways.  The four-seater Nano unveiled by Tata Motors on January 10 is intended to be a safer and more comfortable option.  Last year, Indian consumers bought 1.5 million cars and with new models like the Nano, India is expected to soon surpass China as the world’s fastest growing car market.

When the Nano hits the sales floor later this year it will sell for approximately $2,500 US.  While it meets India’s current safety and environmental regulations, the current version could not be operated on European or North American roads.  The Nano has a length of 3.1 meters (10 feet 2 inches), width of 1.5 meters (4 feet 11 inches) and height of 1.6 meters (5 feet 3 inches).  It has a rear-wheel drive, all-aluminum, two-cylinder, 623cc, 33ps, multi-point fuel injection gas engine.

The Tata Group is India’s largest business conglomerate with 98 companies grouped into seven business sectors: information systems and communications; engineering; materials; services; energy; consumer products; and chemicals.  Revenues in 2006-07 were approximately $28.8 billion, the equivalent of over 3 percent of India's GDP.  The Tata Group has operations in more than 85 countries, including the United States, and employs 289,500 people. 

  International Market Reports Available from the Department of Agriculture

By Jen Pino-Gallagher, Wisconsin Department of Agriculture, Trade and Consumer Protection International Marketing Consultant

The Wisconsin Department of Agriculture, Trade and Consumer Protection has begun producing 2-page international market reports that provide information about export opportunities, market situations and tips for exporting agricultural products. The reports are available in PDF format on the DATCP website.

Reports currently available cover the Mexican dairy sector, Argentine dairy and beef sectors, and the China World Bank dairy project.  Upcoming reports will cover the retail and gourmet food industries in Japan and Chile.  For more information, contact Ms. Jen Pino-Gallagher, Economic Development Consultant, jen.pinogallagher@wi.gov. ph: (608) 224-5125. 

  Brazilian Energy Targets

Brazil has begun plans to substitute 10% of the gasoline used worldwide with renewable fuels such as ethanol by 2025.  Brazil’s Management and Strategic Studies Center (CGEE, in Portuguese) will be inaugurating the Bioethanol Research Center in the town of Campinas , São Paulo later this year. 

"The challenge for Brazil is to produce 10, 20 times more ethanol than it does today.  For this purpose, the country should modernize its agriculture, organized production and invest in research in various fronts to obtain ethanol from cellulose," says physicist Cylon Gonçalves da Silva, coordinator of the new center.  The research center will plan the production of ethanol in large scale throughout the country and define technologies to obtain ethanol from sugar cane and straw.  Sugar cane is considered to be the best plant among those used presently to produce ethanol.  It produces 10 units of energy for each unit spent in production.  

"Each cent saved will add up for competitiveness of the Brazilian ethanol: the costs of transportation from the field to the refining plant, the cost of storage and distribution," says Dr. Gonçalves da Silva.  To reach the target level of production, Brazil would need to produce 205 billion liters.  With today’s production methods, 42 million hectares of sugarcane would be needed to reach that level.  Currently, sugarcane destined for ethanol production occupies 3 million hectares of land in Brazil.  Studies have already identified another 53.4 million hectares, with good production potential.

  German Unemployment Drops Dramatically

During the first week of January, Germany’s unemployment rate fell to 7.9 percent and hit a five-year low, a development that was not expected by most analysts.  The overall sense of consumer and business optimism had been sinking in Germany but this data is expected to boost the moods of both in the coming weeks.  In 2006, Germany’s economy grew by 2.9 percent, its best rate in six years.  Estimates for 2007 are that growth continued at a similar level.  Throughout the slow recovery of the German economy, there had been concern that all the progress had failed to affect the chronically high jobless rate.  It now appears that German business has been expanding to meet the needs of domestic and global consumers and they have been hiring in the process.  The biggest growth in jobs came from the service sector but manufacturing jobs also increased.  German government economists predict another 200,000 or 300,000 jobs to be created in 2008, on top of the 650,000 generated in 2007.

Figures released by Eurostat, the European Union’s statistical office, on January 7 show that the jobless rate in the EU as a whole has also fallen.  Unemployment in the 27 countries that make up the EU stood at 6.9 percent in November, which is the same as in October, but lower than in November 2006 (7.7%).  The lowest rates in November 2007 were registered by the Netherlands (2.9%) and Denmark (3.2%), while Slovakia (11.0%) and Poland (8.5%) saw the highest jobless levels. 

  $200 Million Dairy Modernization Project in China

By Jen Pino-Gallagher, Wisconsin Department of Agriculture, Trade and Consumer Protection International Marketing Consultant

A delegation from Wisconsin’s sister-state in China, Heilongjiang Province, was in Madison on Wednesday, January 9 to meet with potential suppliers for a $200 million on a dairy improvement project.  Staff from the Wisconsin International Trade Team organized the meeting held at the Wisconsin Department of Commerce.

The delegation came to Madison to describe a World Bank project to modernize its dairy industry.  Wisconsin companies likely to benefit from the project include those that provide bull semen, milking and dairy equipment, dairy-related management software and information systems, feed manufacturing and mixing equipment and environmental and waste management systems.

For more information about the China World Bank project, or other agricultural export opportunities, contact Mr. Dan Vogel, International Marketing Consultant at the Wisconsin Department of Agriculture, dan.vogel@wi.gov , ph: (608) 224-5113. 

  Chinese New Year

Mark your calendars – The Chinese year 4706 begins on February 7, 2008.  The traditional Chinese celebration is 15 days long.  Although the recommended government holiday runs from February 6 to February 12, business is typically slow until the traditional holiday ends on February 21.  In addition, many manufacturing facilities have longer holidays because of the movement of the traveling population, estimated to be about one billion people, as they return home for the holidays.  Travelers to China should also be aware that just prior and just following the holidays, internal transportation ticket prices will be high and in short supply.  It is easy for travelers to become stranded, especially when returning to larger cities unless they have purchased tickets in advance.  It is a good idea to send New Year’s greetings to Chinese customers and associates, but do not expect to conduct serious business during this time period.

The coming year will be the Year of the Rat according to the Chinese zodiac.  In ancient times the Rat was considered a protector and bringer of material prosperity.  It is an animal associated with wealth, charm, and order, yet also associated with aggression, pestilence, and death.

People born during a Year of the Rat are said to be leaders, pioneers and conquerors.  Rat people are supposed to be endowed with charisma and great leadership skills.  They are the most highly organized, meticulous, and systematic of the twelve zodiac signs.  Rats are highly ambitious and strong-willed people who are keen and unapologetic promoters of their own agendas, which often include money and power.  They are energetic and versatile and can usually find their way around obstacles.  A rat's natural charm and sharp demeanor make it an appealing friend for almost anyone, but rats are usually highly exclusive and selective when choosing friends and so often have only a few very close friends whom they trust.  Previous Years of the Rat were:

January 24, 1936 - February 10, 1937
February 10, 1948 - January 28, 1949
January 28, 1960 - February 14, 1961
February 15, 1972 - February 2, 1973
February 2, 1984 - February 19, 1985
February 19, 1996 - February 6, 1997

  Be on the Watch for Business Scams

Several Wisconsin firms have recently received e-mails from China claiming to be interested in purchasing millions of dollars worth of products.  In the case of enquiries from Xi'an Tonya Import Export, these may be part of a scam to get money or gifts out of the supplier without any real sale taking place.  The Wisconsin Department of Commerce’s China Office contacted the Shaanxi Province Department of Commerce during a background check of the Chinese firm and was told that Xi'an Tonya Import Export has never filed/registered for its import and export business rights with the Shaanxi Province Department of Commerce or the Xi’an City Foreign Economic and Trade Cooperation Bureau.  Since the company has never properly filed/registered with these government agencies, it is not eligible for import or export business.

There are many legitimate business opportunities in China and sales by Wisconsin firms to Chinese customers are growing.  As with sales to any customer from any part of the world, a little homework at the start can reduce the chances of losses in the future.

Issues that should raise a cautionary red flag include:

• the buyer has contacted you via the internet
• the buyer wants a large quantity with little or no negotiation on price
• the buyer invites a senior executive to travel to it's location to sign some type of agreement
• the buyer requests money prior to the trip to pay for a reception in your honor, and/or money or goods to "grease the wheels" with local officials
• the buyer can provide no verifiable references

If your firm receives orders from this “firm” or has questions about the legitimacy of other orders from China, contact the Wisconsin Department of Commerce’s Asia Specialist, Ms. Beng Yeap, beng.yeap@wisconsin.gov, ph: (608) 266-1480.

  Refresher on Export Regulations

By Susan Dragotta, Commerce Latin America Specialist and Outreach Consultant for Southeast Wisconsin

Exporters need to remember that the Export Administration Regulations (EAR) are not the only set of rules that can affect their ability to sell to foreign customers. The International Traffic in Arms Regulations (ITAR) cover military products, defense services (consulting services to the military in any way), and technical data.

Similar to the Commerce Control List within the EAR, the ITAR lists defense products and services in the U.S. Munitions List (USML). USML categories include firearms, missiles, explosives, military vehicles, aircraft, electronics, and many more, 21 in total.  Components, parts, accessories, etc., if specifically designed or modified for use with USML items are also covered by the ITAR. Tooling and equipment for the production of military equipment is also included. A miscellaneous category covers "any article not specifically enumerated in the other categories of the USML which has substantial military applicability and which has been specifically designed or modified for military purposes." Some commercial items, including night vision products and satellites, are covered by the USML, even though they may be for commercial use only.

The major difference between ITAR and EAR is that any product within the ITAR jurisdiction needs an export license from the Department of State for EVERY EXPORT to ALL COUNTRIES. The list of countries for which ITAR licenses would likely be denied is different than for EAR. The list for ITAR includes Venezuela, Vietnam, and China, among many others.

An ITAR license is valid for four years. The license expires when the total value or quantity authorized has been shipped or when the date of expiration has been reached, whichever occurs first. Defense articles to be shipped thereafter require a new application and license. The new application should refer to the expired license.

A manufacturer of a military item, even if just for the U.S. military and not for export, MUST register with the Directorate of Defense Trade Controls. Registration is a prerequisite for applying for a license for export. If a company was not aware of the licensing requirement, and subsequently starts to apply for licenses, the Department of State will likely determine that all prior exports were violations of the ITAR. Therefore, it is recommended that if a company is in this situation, it should submit Voluntary Disclosures with their first license application, under the advice of a trade attorney.

For more information regarding these regulations, see www.pmddtc.state.gov.  You can learn more about export compliance in general at the upcoming Wisconsin International Trade Conference, May 13, 2008 in Milwaukee.

  PERU FTA Legislation Signed

President Bush signed the U.S.-Peru Trade Promotion Agreement Implementation Act into law at a December 14 meeting with Peruvian president Alan Garcia.  The legislation was passed by the U.S. House of Representatives on November 2, 2007 and by the U.S. Senate on December 4, 2007.  Currently, the U.S. and Peru enjoy a two-way trade relationship of nearly $8.8 billion dollars.  With implementation of this agreement, 80 percent of U.S. exports of consumer and industrial goods to Peru can enter duty-free immediately, with remaining tariffs phased out over 10 years.  Additionally, more than two-thirds of current U.S. farm exports will become duty-free immediately.

  New EU Patent Rules

The revised European Patent Convention went into force on December 13, 2007, providing Europe with a new legal framework for patent protection.  The convention governs the granting of European patents by the European Patent Office (EPO) and applies throughout the 32 member states of the European Patent Organisation, plus Norway and Croatia.

"The new convention is a further milestone in international patent law in Europe", said Alison Brimelow, President of the EPO.  "It simplifies access to Europe-wide patent protection and makes procedures before the EPO easier for applicants and patent proprietors, while maintaining the Office's reliable structures and high quality standards".

Applicants and patent holders should benefit from simpler procedures before the EPO, reduced bureaucracy, lower overall costs, and more legal certainty.  A major change means that patent applications can now be filed in any language, though translations will have to be submitted in English, French, or German (the EPO's official languages).  More information on the European Patent Office and the new convention are available on-line at www.epo.org/index.html.

  New Job for John Konkel

John Konkel, the Department of Commerce’s Outreach Consultant for the northern part of Wisconsin, has retired from state service to take a position in the private sector.  Mr. Konkel joined the State’s international division in June of 1998 and worked one-on-one with firms seeking to initiate or expand their export efforts.  He worked tirelessly to build partnerships between the business, community, and academic groups in northern Wisconsin and promoted the resources that were available to firms seeking to succeed in international markets.  Prior to working for the Department of Commerce, he spent twenty years in international sales as a product manager, marketing manager, and vice president - marketing and sales, working in various industries including medical/plastics, HVAC, fire/safety, and high technology products.

Mr. Konkel has been named International Marketing and Sales Director at Kretz Lumber Co., Inc. of Antigo.  John will be missed by his colleagues and associates, but we are happy that he will remain an active member of Wisconsin’s international business community.

  Business Plan Contest Could Finance International Efforts

• are Wisconsin residents 18 years old or older and who have a business plan that employs or leverages technology.  Examples of technology include an eCommerce platform, a life sciences application, or an advanced manufacturing process or system;
• are a Wisconsin-based firm and/or plan to locate a business in Wisconsin;
• have not already received private equity funding for your idea in its current form.  (For the purposes of this contest, private equity funding includes ONLY angel or venture funding.  It does not include SBIR/STTR, bank loans or funding from friends or family who are not angels or venture capitalists.)

  Limited Space on South America Mission

  International Business Matchmaker Service at BIO2008

By Brad Schneider, Commerce European Specialist and Outreach Consultant for East Central Wisconsin

The world’s largest marketplace and idea exchange for the biotech industry, BIO2008, will be held in San Diego, June 17-20, 2008.  Participants will have the opportunity to make contacts with potential joint venture partners, investors, academics and researchers, and customers from over 60 countries.  To help Wisconsin attendees identify key contacts from among the 20,000+ participants and schedule one-on-one business meetings with international counterparts that may have complimentary interests, the Wisconsin Department of Commerce is again offering the International Business Matchmaker (IBM) Service.  We will work with our overseas trade offices and other international contacts to introduce Wisconsin’s biotech community to key players from Australia, Canada, Europe, Japan, and elsewhere in order to maximize international business contacts at BIO.  The IBM Service is free of charge and will be available during all three days of the conference.  For more information contact Mr. Brad Schneider, brad.schneider@wisconsin.gov, ph: (920) 420-1796.

  Wisconsin Participation in the Global Petroleum Show

Wisconsin’s Trade Office in Canada will again be coordinating one-on-one appointments for Wisconsin firms visiting the Global Petroleum Show, the premiere showcase for the latest in technology in exploration, production, and transportation which takes place in Calgary, Alberta June 10-12, 2008.  On January 31 the Stateline World Trade Association (SLWTA) will present a program in Beloit on current business opportunities presented by Canada’s booming oil and gas industries.

More than 60,000 visitors and 1,600 exhibitors from around the world are expected to attend the Global Petroleum Show in Calgary.  While the show covers markets around the world, the Province of Alberta is a key market for Wisconsin firms because of its massive reserves of oil and natural gas, second only to Saudi Arabia.  Alberta leads North America in crude oil production.  Canada also has significant, untapped natural gas reserves and is the world’s 3rd largest producer of natural gas.  In the last five years, nearly $25 billion has been allocated to Albertan oil sands development.  Over $150 billion in new projects are in the development and sourcing phase for this region, covering the next 10 years.  Because of the extreme labor shortages and manufacturers reaching maximum capacity, the province is actively looking beyond its borders to find suppliers to meet critical needs in sectors like:

• specialty welding and boutique steel;
• structural steel, pressure vessels, tanks and heat exchangers;
• turbines and pumps for petrochemical applications;
• forging suppliers supplying valves, wear materials and pressure fittings;
• logistic and transportation solutions;
• industrial maintenance services/products;
• instrumentation and control systems; and
• related environmental equipment.

Robert Moore, partner at QGI Consulting in Edmonton, Alberta and Bill Werra of Sentry Equipment, Inc. will be speaking at the monthly meeting of the Stateline World Trade Association (SLWTA) on January 31st at the Belwah Café, 500 Pleasant Street, Beloit.  The program will start with a networking session at 5:30 pm with dinner at 6:15 pm followed by  the presentation.  Mr. Moore will discuss the massive impact that development of the oil sands in Alberta has had on the region.  His experience includes: market forecasting as due diligence for acquisitions, industry cluster competitiveness, and issues related to rail transportation policy and operations.  Mr. Werra will share his firm’s experience providing design services and producing sampling equipment for the oil sands industry.  He will cover the growth Sentry has experienced in the market, the demands of the client base, and the nuances of the region's business culture.

To register for the SLWTA program in Beloit, please call Tom at (262) 785-1981 or Carla at (715) 887-2133, or send an e-mail to info@slwta.org.  Cost of the program is $25 for members, $30 for non-members, and $15 for students with School ID.  Registration must be made before Tuesday, January 29th.  For more information about the Global Petroleum Show, or the Canadian market in General, contact the Department of Commerce’s Canadian Specialist, Mr. Stanley Pfrang, stanley.pfrang@wisconsin.gov, ph: (608) 2670-639.

  Exhibit Opportunity in China Open to Wisconsin’s Food and Beverage Companies

By Jen Pino-Gallagher, Wisconsin Department of Agriculture, Trade and Consumer Protection International Marketing Consultant

Wisconsin’s food and beverage companies interested in expanding their reach into China can benefit from exhibiting at the USA Pavilion at the SIAL China Food Show.  The event is scheduled for May 14-16, 2008 in Shanghai, China.

SIAL China is considered the event not to be missed in Asia for professionals in the food, beverage, wine, and spirits industries.  In 2007, more than 22,000 visitors from 87 countries attended SIAL China from across Asia.  This was an eight percent increase over 2006.

The cost for the USA Pavilion booth package is $5695.00 for 9 square meters.  Funds are available to help Wisconsin companies defray the costs of exhibiting.  The Branded Program of Food Export-Midwest provides up to a 50% reimbursement to eligible companies for exhibit and travel fees.  Visit www.brandedprogram.org for more information or contact Ms. Lisa Stout, Wisconsin Department of Agriculture, lisa.stout@wi.gov, ph: (608) 224-5126.

In addition to exhibiting, companies can also participate in Food Show Plus! TM services offered by Food Export-Midwest.  These services help companies make the most of the tradeshow experience and include:

• registration assistance with show organizers;
• pre-show competitor analysis for two products;
• dissemination of targeted invitations to qualified buyers for one-on-one meetings;
• translation services, and
• on-site assistance.

Food Show Plus! fees are $200 for participants who register by February 20.