Podcast Transcript - The Caribbean: More than sun and sand

Host: Michael Mancini

A population spread over thousands of tiny islands; diverse colonial pasts; some sixty languages; disparate legal systems; various levels of development. Sound like your dream market? I’m talking about the Caribbean region. In fact, it was a hundred years ago in January 1908 that the Canadian Trade Commissioner Service opened its first office in the Caribbean region. But if you’re like most Canadian companies asked in a recent poll, the chances are you’ve never really considered this region as a viable market for your products and services, or as an investment destination. But today, as much of Canada is under a blanket of snow, we’re going to get you warmed up to the surprisingly lucrative markets of the Caribbean; a place that is far more than just sun and sand. I’m Michael Mancini, editor of CanadExport, the government of Canada’s magazine for entrepreneurs who want to trade, invest and prosper in the global marketplace. Look for our magazine at CanadExport.

Today, we’ll speak to one Canadian entrepreneur who is hot for the Caribbean. Mark Bain, president of KitchenTek Invisa, manufactures Canadian kitchen cabinets in the Dominican Republic, and sells them to clients on islands all across the Caribbean. But first, I have Patrice Veilleux on the line. He’s a senior Trade Commissioner at the Canadian embassy in the Dominican Republic. Hello Patrice.

Patrice Veilleux: Hello, good afternoon. I’m pleased to talk to you.

Michael Mancini: Patrice, in a recent survey of Canadian executive doing business abroad, only 4% said they saw opportunities for them in the Caribbean. In such a small and sparsely populated region, how lucrative could the Caribbean market be for Canadian firms?

Patrice Veilleux: Talking to Canadian firms that are already active in the region, such as Scotiabank, SNC-Lavalin, Vancouver Airport; but also some SME, KitchenTek, Above Security, who are active in the D.R., Napier Reid in Guyana, Genevar in Trinidad, many others, they are extremely happy about their activities in the region. One of the reasons they often site is the fact that the profit margins are pretty attractive. And considering the size of the market, they do not have to compete against the whole world; competition is less fierce. Many Canadian firms have found a niche here and they are extremely well positioned in the market. Proximity to Canada is also a major advantage, which reduces considerably the costs compared to other distant regions, such as Asia for example. This is particularly true for SME located in eastern Canada.

Michael Mancini: So for those looking to export their products from Canada, what are the biggest opportunities there?

Patrice Veilleux: Well the region being a tourism magnet, with millions of tourists coming every year, the obvious sector of opportunity is the Agri-Food sector. The demand for high quality products from North American and European tourists is very high, and the local production is limited. The growing cost of natural resources also brings opportunities to Canadian firms all over the region. Oil and gas exploration is growing as well as mineral prospecting. Just as an example, Barrick Gold is currently looking at a 2.5 billion dollar project in the Dominican Republic, and there are more to come in a country like Guyana in particular. Major investments are also taking place all over the region in developing new tourism infrastructure, and in the renovation and upgrading of the existing facilities. There are therefore plenty of opportunities in the construction and building products sector for Canadian exporters. There are also significant capital projects for water supply and treatment as well as electrical power and distribution. Alternative energy technology is also in very high demand, in particular in countries that do not have oil production.

Michael Mancini: What are some of the challenges in doing business in the region?

Patrice Veilleux: Like in every other market in the world, there are some challenges. The local bureaucracy and the government’s red tape can sometimes slow the implementation of a project. Transport logistics can also be a challenge, in particular to reach the smallest countries. Local financing, although available, can be more expensive than what we are use to in Canada. However the proximity to Canada, the abundance of relatively cheap, good man power, the continuous improvement to the legal environment, the enormous efforts made by governments to attract and facilitate foreign investment, and the availability of support from the Trade Commissioner Service, EDC, CIDA Inc, contribute greatly to make things easier for Canadian exporters and investors. One has to keep in mind that the vast majority of products manufactured in these regions enjoy duty free access to the largest markets in the world that are North America and Europe.

Michael Mancini: Thanks Patrice. We’ll come back to you at the end of the show to talk about how the Canadian Trade Commissioner Service can help companies tackle this market.

Let’s go now to one Canadian company that is seeing green in the Caribbean. In fact, Trade Commissioners in the region say that KitchenTek Invisa, a Canadian manufacturer of high end kitchen cabinets, has made all the right moves. With me on the line is Mark Bain, president of KitchenTek Invisa. Thanks for joining me today, Mr. Bain.

Mark Bain: Oh, it’s my pleasure Michael.

Michael Mancini: Why is the Caribbean market good for your company?

Mark Bain: Well, I guess the major reason, Mike, would probably be the labour savings that we had. Through my research initially I looked into it and it was looking very, very good. As coming down here I found out that my overall labour savings would be about 90% of what I was paying in Canada. So let’s say I have a payroll of about $782,000 in Canada, I’m back down to $82,000 here in the D.R.

Michael Mancini: Wow. And tell me about what the market demands in the Dominican Republic, and the Caribbean region. What are they looking for, and why was it a good fit?

Mark Bain: Well, they’re looking for a higher end product. What they have here in the Caribbean, the old school way of doing things just doesn’t cut it anymore. There’s a lot of high end developers moving in here and they’re basically looking for higher end construction products; it could be windows, doors, in my case kitchen cabinets, different construction methods. They’re looking at the entire world and they’re not simply cost conscious anymore. They need to construct faster and with better building products. You deal with the Cayman’s, you deal with Turks and Caicos, you can go to the States, Puerto Rico. Every island has its own little unique development going on there. And they’re all looking for higher end products to put in. They’re not looking for the typical products that they’ve been using in the past. So if you have a unique construction product that works well in Canada, you’re guaranteed it will work well here. It has to be marketed right, but you know, through the right people, and if you want to manufacture here… Of all the places I visit, this is the best place to look at, as far as manufacturing products. I can’t state enough how much Made in Canada means down here. It goes a long way as far as developing your product. If you’re coming down here to sell directly to the market, then it does go a long way. If you’re coming down here to manufacture in this market, utilize labour but still use Canadian products, it does get your foot in the door.

Michael Mancini: Mr. Bain, how easy is it to operate out of the Dominican Republic to serve these many islands?

Mark Bain: Very easy. Providing you’re in a Dominican free zone. Because all of your product comes in duty free, and as long as you’re not selling to the local market, you export it duty free. So if you do all your correct paper work, the actual manufacturing process is the same as what it would be in Canada. We just take the same prototype company you would have in Canada, move it down here, and nothing changes, other than you’re dealing with a cheaper labour force. You have to spend a little more time training them, but really for the cost savings, I think it’s more than worth it. And then for the fact that you’re here, proximity makes a huge difference, as far as selling to this market.

Michael Mancini: So what was the strategy you chose to enter the Caribbean market?

Mark Bain: We started researching back in around the year 2000, and I started coming down to the island on vacation many times, but basically I started researching the free zones and what the opportunities here were back in 2000. Then I was put in touch through some of the government agencies, mainly the Trade Commission of Canada, which is located down here by a gentleman by the same of Andy Jacques, and he’s been fantastic in answering a lot of my questions. So that’s one of the main aspects that I do recommend a lot of people do, is use the government services that are at hand. But from my standpoint that’s what I did, and I just kept on researching. The web has a lot to offer; and be here first hand, do a lot of interviews with a lot of different companies. And it’s amazing what you’ll find out. In doing that, I also found that having a local partner would be a great advantage. I was put in touch with a couple of local fellows. One of the fellows, my current partner, he had a company here in the free zone, he was pressing his own plywood. And a lot of the machinery that I was going to need to do my product he had already in stock. So he and I made a deal and he has a lot of the contacts at the port, the government, and it worked out great.

Michael Mancini: So what challenges have you faced in the region?

Mark Bain: Well, government red tape, like any country. There’s a lot of that here. But you’re dealing with a different culture, language barriers, different things like that. What I find is that you have to get your product to the people. If you just send out brochures and send them web mail and so on and so on, sure that’s great and that might get your foot in the door but you have to have product on island. People need to feel, touch, examine your product versus what they’re currently using. And when you have that advantage, then that will get your foot in the door a lot easier than trying to smooth them over with some fancy brochure. Trying to find a good labour force is the key. Your biggest key is your upper management staff. Once you get a good upper management staff, then finding the local labour… the local labour is abundant, and it’s amazing how skilled they are here, but having the people that are familiar with, you know, you’re PR people, your human resource people, those are the little bit harder positions to fill, so that’s what you have to look harder at. Whether you’re going to bring your own people in from North America, or whether you’re going to hire local.

Michael Mancini: How did the Trade Commissioner Service help you?

Mark Bain: Well, basically they can do a lot of the heads up work for you. They can put you in touch with the various websites; they can do a lot of the market research for you. They’ll set you in the right direction in a lot of areas. And like I said, the key is that these guys have so many other contacts, but they don’t have the answers. They’ll put you in touch with Peter, Bob, Harry, whoever will have the answers, and then that just gets the ball rolling because it’s quite a network of people that are very willing and able to help you, in any industry; electrical, construction, and so on. There’s a vast amount of knowledge down here. So once you get the ball rolling that way, there’ll be so much for you to absorb when you first get here, you might need that time just to sit back and go, “Wow, okay.” And take a few months to kind of absorb everything and decide what you’re next best option is.

Michael Mancini: Thanks for speaking with me, Mr. Bain, and best of luck to you.

Mark Bain: Not a problem Michael, my pleasure.

Michael Mancini: I was speaking with Mark Bain, president of KitchenTek Invisa. He was in Azilda, Ontario, near Sudbury.

Patrice as you’ve heard, one of Mr. Bain's biggest challenges was dealing with government red tape. How challenging is it to manage so many markets with different import and export rules and regulations, legal systems, cultures and languages?

Patrice Veilleux: Well it is effectively a challenge, but as Mark indicated however, these barriers can easily be avoided. A good market analysis before entering the market, the identification of a solid and well connected local partner, the assistance of the Trade Commissioner Service, and other Canadian export promotion agencies, such as EDC, can greatly help to make a project a success. Further more, the recent trade deal signed by Caricom and the D.R., with the U.S. and Europe, and hopefully soon with Canada, will make the Caribbean region an integrated market which undoubtedly facilitate greatly the conduct of business.

Michael Mancini: And how can you help Canadian firms manage these challenges?

Patrice Veilleux: First of all, a good discussion should take place to evaluate the real market potential for the product or service you have to offer. Evaluate the size of the market, look at the competition, know about the custom duties, the transport, the legal aspect, the price, and all other aspects of this is essential to be discussed. Then we meet with the Canadian companies to discuss the best strategies to enter the market they’re interested in. We introduce them to key potential local contacts from the private sector and the government officials; and a thorough analysis, evaluation of the risk, develop an entry strategy, and a marketing plan, and you’re off for success.

Michael Mancini: What would you say are the most effective approaches for entering the Caribbean market?

Patrice Veilleux: Well, there are different ways, depending on the type of product or service you have to offer. Of course, the most traditional way is to simply try to sell your products, just export. So you visit the market, or you participate in local trade fair, or regional fair, the outgoing missions, the incoming missions, shows; if you’re in the Agri-Food, Seattle brings a lot of buyers from the region; Globe, the environment fair in Vancouver, brings quite a number of Caribbean participants. The PDAC. There’s a number of shows in Canada where visitors from the Caribbean are going and that you could meet there. The local regional office of the Trade Commissioner Service can help you identify those incoming buyers. So this would permit you to go the traditional way, find a good local agent, a representative or a distributor, and then start selling your product. The second way is to sell to an already established Canadian or foreign firm that are already working. Like if there is a big mining project, they buy their things all over the world, so selling to them from Canada could be an entry strategy. Third is investing, create a joint venture, enter into a partnership with local manufacturing to serve the region at lower cost than if you were manufacturing in Canada. For big guys, public-private partnership that is developing slowly but surely. And another way is to look at the IFI finance project, there is the Caribbean bank is active in the region, the World Bank is active, and the Inter-American development bank is active. So those are five ways of looking at how to approach the Caribbean region.

Michael Mancini: Thanks for your time Patrice.

Patrice Veilleux: My pleasure.

Michael Mancini: That was Patrice Veilleux, Senior Trade Commissioner with the Canadian embassy in the Dominican Republic.

Well that’s all for this podcast edition of CanadExport. Be sure to check us out online at tradecommissioner.gc.ca to learn more about the benefits of the Canadian Trade Commissioner Service. You can also download our other podcasts at iTunes with the search word CanadExport. We’d also like to hear what you think of our podcasts, so write us a review on itunes or drop us a line—your feedback is appreciated. And don’t forget to visit canadexport.gc.ca to subscribe to CanadExport, our free twice monthly magazine. Stay tuned for our next podcast in early February, as we look at managing risk in China. I’m Michael Mancini signing off for now.

To download our other episodes, just go to www.canadexport.gc.ca or go to iTunes and use the searchword “CanadExport.”