Posted on Mon, Feb. 20, 2006
Where have all the exporters gone?
BY JANE BUSSEY
jbussey@MiamiHerald.com
When Al Merritt arrived in South Florida in the late 1980s to launch his medical equipment exporting
company he flipped through the Miami telephone book to gauge his competition. He found hundreds of
exporters in the same line of business.
Still, his company, MD International, founded just as countries in Latin America and the Caribbean lowered
their tariff barriers and opened their markets to imports, enjoyed great success in its early years.
''Just showing up, it was easy to grow a company,'' Merritt said in an interview at his Miami headquarters.
But earning a living as an exporter has been tough in recent years. Bad economies, devaluations, debt
crises and even currency controls have all taken their toll on international business in South Florida.
A check of the Miami Yellow Pages tells the story of the dwindling number of local exporters. The 1994
telephone book listed 163 pages of exporters, the largest of any single industry group in the phone book. But
the 2005 Yellow Pages has only 45 pages of exporters listed.
Merritt has seen many of his competitors fade away. His own company has ridden the roller coaster of Latin
America's economies and was dangerously close to becoming one of the casualties.
By 2001, with serious financial problems in Argentina and Brazil, a slump in Mexico and the pinch of opening
a new headquarters in 1999, Merritt's company lost $2 million in a single year, forcing him to lay off one-third
of his staff, overhaul his business plan and take a 50 percent pay cut himself.
MD International survived, but hundreds of small, thinly capitalized exporters went out of business as
financial and economic turbulence hit export market after export market.
''Absolutely, there has been a big meltdown,'' said Tom Cornish, a former SunTrust banker who is now
president and chief executive of Seitlin Insurance in Miami.
''You can see the number of firms have continued to dwindle,'' Cornish said.
He said the drop-off was evident in diminished interest in trade financing and the smaller numbers of
exporters joining chambers of commerce or attending business gatherings.
Cornish links the boom years for South Florida's export sector to changes that began in the late 1980s when
reforms known as ''neoliberalism'' began to take hold in Latin America. Governments began opening
controlled markets to investment, lending and imports.
But many economies ran into trouble in the late 1990s, suffering reversals, devaluations and, in the case of
Argentina, a massive default on its foreign debt.
Hundreds of small mom-and-pop companies involved in exporting were unable to survive.
Unlike the Midwest, where exports are primarily the domain of large multinationals, Cornish said South
Florida's exporting sector is characterized by many small distributors.
''Our export demographics were much more driven by companies that had seven or eight employees and
doing $7 million of business in one country,'' Cornish said. ``If that country dipped, they were very, very
negatively affected.''
Cornish said since the exporting rage was opportunistic, driven by entrepreneurial energy often combined
with the ability to speak Spanish, many of the exporters simply turned to another aspect of international
business or jumped on the real estate bandwagon, investing foreign money in buildings.
''A lot of the people that were in [trade] were entrepreneurs who perhaps had several contacts in a given
market -- they had family in Bolivia and because of that they were able to garner some export-related
contracts,'' Cornish said. ''As the market dropped, they were interested in investing in the U.S. market.'' They
might, for example, go out and buy an apartment building, he said.
While a number of the small exporting firms appear to have moved into other areas of international
business, the transition wasn't being measured as it occurred.
''There is no market intelligence being collected in this town,'' said Charlotte Gallogly, president of World
Trade Center Miami. ``If we had the staff and time, we'd do that.''
Some exporters who could no longer sell or even collect their debts from foreign buyers exchanged
exporting for importing; others were acquired by bigger firms as consolidation rolled through the industry.
The computer and electronics export business in particular underwent consolidation as many of the big firms
of the 1990s closed shop, some because they bet wrong and self-financed exports to Brazil before the big
devaluation of 1999.
EARLY TROUBLES
Other companies ran into trouble earlier.
BakeryCorp, a Miami firm that sold more than $100,000 in pastry to Cancún, Mexico, before the North
American Free Trade Agreement went into effect in 1994, saw its business evaporate when Mexico
devalued its currency and decided to focus on the Florida market.
Some of the little exporting enterprises simply suffered the fate of many other mom-and-pop operations.
Statistically, 80 percent of small businesses fail within the first five years.
But even larger companies have run into problems.
One of Miami's oldest medical equipment export firms, Calmaquip, closed its doors last year after
experiencing financial difficulties and then facing a federal grand jury indictment on charges of rigging the
bidding for the Piarco International Airport in Trinidad.
Arca Knitting, which made knitted fabric at its Hialeah plant, closed last October.
Unlike many South Florida firms, which are just distributors, Arca actually exported its own textiles to Central
America after apparel firms moved offshore in the 1980s and 1990s.
MOVE TO ASIA
But with the end of quotas for Chinese apparel in January 2005, big apparel makers switched their orders
from Central America and the Caribbean to Asia.
Arca's orders plummeted, said Jorge Canals, the owner. He waited through three agonizing quarters hoping
the orders would pick up again before finally closing last fall.
His former employees scattered in many directions but, some of them have gone into real estate,
construction or real estate-related businesses. ''Everyone is doing a little bit of everything,'' Canals said.
Possibly, he, too, might end up in real estate, which is what he is engaged in as he tries to sell the knitting
mill property.
Among the area's seasoned exporters is Neal Asbury, who moved to South Florida and in 1999 founded
Greenfield World Trade, a Davie distributor of kitchen equipment in Latin America, the Middle East and Asia.
Much of his work is devoted to putting together commercial kitchens for U.S. restaurant franchises and
hotels around the world.
For 20 years he ran a similar business from Hong Kong and Shanghai, and his firm barely survived what he
called the ''devastating'' Asian financial crisis in 1997.
But he came to South Florida because no matter what has happened to small firms, it is a great location for
an export business. ''Miami is the Hong Kong of Latin America. What city has a better infrastructure?''
Asbury said.
Asbury, who got into the exporting business by getting a mailroom job in a New York export firm 25 years
ago, said that today it is much harder for small companies to make a go of it.
MORE SOPHISTICATED
Back in the 1970s and 1980s, he said, large U.S. manufactures used to give away their export business to
any distributor, but today they are much more sophisticated.
''Before it was easy to get good lines; today it's not easy. You have to have something to offer,'' said Asbury,
who exports a number of U.S-made goods such as KitchenAid products.
Competing against experienced and better-capitalized medium-sized exporters such as himself is also
difficult for small exporters, he said.
''It's hard to compete against us unless you really know what you are doing,'' said Asbury, whose company
sells about $30 million annually. ``There are going to be people who can weather the storm; others, there's a
bump in the road and [they're] out.''
Merritt, whose company sells everything from equipment for entire hospitals to surgical instruments, said
that back in 2001-2002, his firm had a near-death experience.
Now he said that rough patch can provide lessons on what it takes to keep an exporting business going.
''I was the poster child of companies that were never going to make it,'' Merritt said.
The problem was that he expanded and diversified at an inopportune time, opening offices in Argentina just
as the economy headed for its 2001-2002 collapse and in Brazil as the real devalued by one-third in 2002.
Even the Mexican government cut back on purchases, while most of the economies in the rest of the region
were shrinking. ''It was kind of like the perfect storm,'' Merritt said.
''In retrospect, it was not good planning on our side,'' Merritt said. He accepted the blame and turned to a
management coach to find ways to cut costs.
SLASH AND BURN
It was slash and burn. Merritt cut his staff from 105 to 60 people, something he called ''the hardest thing I
have ever done.'' His salary was reduced by 50 percent for several years; other members of the
management team took 20 percent salary cuts.
The Argentina office was closed, and Brazil was downsized. ''We survived just by tightening our belt,'' Merritt
said.
He rescheduled his company's debt and eventually many of his clients paid what they owed as times got
better. Now Merritt sticks to his medical line, although he did recently open centers in Miami and Mexico City
where technicians rebuild used endoscopic equipment, which is used for visually examining internal organs,
for the Latin American market.
Business is going well again and Merritt expects to sell more than $50 million this year. He credits his own
employees with the company's survival and he tries to take every employee on a company retreat each year
-- backpacking in the West or to a dude ranch in Lake Wales.
Merritt said Cornish, who was his banker, also helped him face reality and get back on track by refusing to
lend more money.
Cornish remembers that he told Merritt to get back to his core business to face the tough times.
''It's been my impression as a banker and an insurance professional that when most medium-size
companies diversify, they diversify their way into bankruptcy,'' Cornish said.