Economic and political landscapes will continue to change, even more dramatically, in 2015 in many of the most attractive global investment markets for U.S. businesses. Companies that plan strategically for these changes and best prepare for those that are still to come will increase its chances of success in those markets.
In 2015, many global investment options should be evaluated by international companies. In this article, we call out five markets in particular because of the significant changes that each are undergoing.
This South American powerhouse economy faces turbulent headwinds from many factors, including record droughts and a slowing Chinese economy. Brazil is recovering from hosting the World Cup, but the eyes of the world remain fixed on this market as it prepares to host the 2016 Summer Olympics. We will also be watching closely as the macroeconomic policies of President Rousseff's newly appointed Finance Minister, Joaquim Levy, come to fruition. Can they stave off a recession? Will the country's continued crackdown on corruption and kickbacks – particularly the implementation of Brazil's new anti-corruption law –have a meaningful effect on imports and will the Petrobras corruption saga undermine President Rousseff's government?
Canada is not only the U.S.'s largest trading partner, it is also one of the oldest markets for U.S. goods and services. So, do any new opportunities exist? Yes- the recently negotiated EU-Canada Comprehensive Trade and Economic Agreement (CETA) can benefit U.S. investors in Canada. Once CETA comes into force, its trade provisions may allow a U.S. company that also has manufacturing or other operations in Canada to sell its goods and services into Europe from Canada at lower duties (and with lower non-tariff barriers) than by selling from its U.S.-based operations, subject to CETA's "rules of origin." CETA will also facilitate the temporary movement of key company personnel between Canada and the E.U.
The newest Office of Foreign Assets Control (OFAC) regulations addressing the Cuban embargo provide more flexibility and opportunities for U.S. individuals to travel to Cuba and for U.S. businesses to enter into commercial transactions with Cuban nationals and businesses. New business opportunities include: (1) telecommunications, (2) financial services, (3) trade and shipping, (4) renewable energy, (5) exports of U.S. goods to private Cuban entrepreneurs, and (6) imports from Cuba to the U.S. of goods manufactured by private Cuban entrepreneurs. For the latest on Cuba, visit our dedicated and regularly updated Cuba resource page.
European Union (E.U.)
American companies doing business in the E.U. need to be aware of the potential implications of the new European Union Data Protection Regulation that is currently being negotiated, which is intended to replace the E.U.'s current mixture of 28 different state laws on issues involving data protection, cross-border data transfer and copyright. The proposed legislation would require everyone who holds data on European citizens, even if the company or organization is not based in the E.U., to implement appropriate security measures to protect data, including names, photos, email addresses, bank details, social network postings, medical information or even a computer's IP address. The Regulation would also introduce significant fines of up to €100 million or 5 percent of annual turnover for personal data breaches. Because an E.U. regulation is directly applicable to all E.U. member states and no act of implementation is necessary, E.U. law makers are hopeful to complete the negotiations with member countries and adopt the Regulation before the end of 2015.
U.S. companiesshould continue to follow the developments in India as the new Prime Minister, Narendra Modi, delivers on rapid development in the country's infrastructure and transportation system, which should ease many of the logistical frustrations faced by U.S. businesses investing in the subcontinent. Other developments include meaningful changes to its external affairs practices and improvements to defense technology, energy sufficiency and internal security. The government's first full-fledged budget clearly lays the path for tax reforms and key policy initiatives focusing on: (1) reducing corporate tax rate to 25 percent from 30 percent over a four-year period beginning next year, (2) withholding taxes on royalty/fees for technical services payments to non-Indian companies reduced to 10 percent from 25 percent, (3) no increase in surcharge rates for foreign companies, and (4) changes to service tax to 14 percent to include a wider sector base. The theme of the budget and the policy thrust is on the government's "Make in India" initiatives, leading to incentivize domestic manufacturing through correction of inverted duty structure by increase of custom duties and reduction of excise duties on raw materials, inputs, intermediates across sectors like metals and chemicals.
For businesses looking at these and other markets as part of a global investment strategy, please keep in mind these important tips:
- Consider how to cost-effectively penetrate rapidly growing and emerging markets unlocked by globalization.
- Rigorously define your core business and articulate clearly how it differs from your competitors worldwide.
- Understand that there is no one-size-fits-all approach – "Think Global, Act Local" is still a key to success.
- Create and implement a consistent global social media strategy, while staying on top of the differences in regulations from country to country.
- Develop long-term relationships with trusted business partners both in the U.S. and on the ground in markets targeted for investment.