International Trade Deficit–Down This Month, Up This Year

By Bob McTeer

A graph of the U.S. international trade deficit in goods and services over the past two years by the Bureau of Economic Analysis shows no discernable change, although the surrounding commentary says that the deficit actually increase by $5 billion from June 2013 to June 2014. The latest month, however, showed a reduction of the deficit of $3.2 billion. That June change will help toward an upward revision in second quarter GDP.
That’s the way it’s been going for years now. We get monthly changes, some positive, some negative, but the changes always seem to offset so that the graph over time looks the same. By now we were supposed to be seeing some lasting improvement from our move in the direction of greater energy independence. Well, it hasn’t flowed through to the bottom line.
One reason, I assume, is that our more dynamic economy in terms of invention, innovation, and leading edge manufacturing and business practices, which should increase our net export balance is being offset by greater demand growth as our growth rate—pitiful as it is—exceeds the growth rate of many of our trading partners, especially European.
Perhaps a more fundamental reason is that exports and imports aren’t entirely independent of each other. More exports give us more money with which to import more. More imports give our trading partners more money to buy from us. Any lasting divergence would be corrected in part by internal economic adjustments and in part by small changes in the exchange rate.
It is probably a good thing that the international trade statistics go relatively unnoticed by the public lest calls to “do something about it” lead to foolish policies.

Argentina’s Secret Plan to Escape Default

By Sheelah Kolhatkar

“Default is not to pay,” Argentina’s President Cristina Fernández de Kirchner declared last week during a dramatic press conference in Buenos Aires. “Conditions for default are stated in the debt emission, in the contract, and a payment block is not in it.” She was referring to the fact that a Manhattan federal judge named Thomas Griesa issued an order blocking Bank of New York Mellon, the trustee that holds $539 million in funds Argentina deposited for a bond payment due by July 30, from distributing the money to holders of the notes until Argentina settles its dispute with a group of hedge funds. Because the payment was blocked, the country was declared to be in default on its debt, sending the markets into turmoil and triggering approximately $1 billion in credit-default swaps.

An examination of the terms of the bonds, however, suggests that Argentina may have outmaneuvered everyone. There’s a way for the country to escape default and still avoid settling with Paul Singer’s Elliott Management and other hedge funds. All Argentina has to do is drop a couple of checks in the mail.

Most bonds of this nature contain a provision saying that the debtor’s obligation to make a payment is fulfilled once it delivers the money to the trustee for the bondholders, which in this case is Bank of New York Mellon. Argentina has done that, so its argument, at least publicly, is that it’s up to the actual owners of the bonds to get their money from BNY Mellon. If a judge in New York is preventing that, it’s not Argentina’s problem.

Read the whole piece at

International Marketing: Three Steps to Muy Bueno

by Isadora Badi 

The most exciting part about international marketing is that you get to create or adapt your marketing mix to expand into a new country and connect with a whole new audience.

The truth is, it’s never as easy as “translating” your marketing communications and website to a new language—the key is to “localize” and better understand the unique qualities of different cultures.

You might need to modify your product to agree with local preferences, the way Coca-Cola and Fanta do. In Europe, for example, Fanta has a higher percentage of fruit juice, no high fructose corn syrup, a lighter color, and a taste that’s more refreshing than the way too orange and sweet American version.

Or, even if your product stays the same, you need to find a way to communicate with a new market. One example is the way multinational companies use different brand names in the US and the UK for the same products: Axe in the US is Lynx in the UK; Mr. Clean in the US is Mr. Proper in the UK.

Localization is the practice of adapting a product, service, or marketing content to conform to the language, culture, and legal and technical requirements of a country.

Here are three basic levels of localization to get you started as you gear up to expand into a new market in another country.

1. Functional requirements

These are the building blocks of your product launch in a new market, and the minimum investment you need to make to set up shop:

Language: It’s vital to connect with consumers with compelling content in their local language. Don’t make any assumptions—even in countries where “most people speak English.”

Take, for instance, the wise words of Nelson Mandela: “If you talk to a man in a language he understands, that goes to his head. If you talk to him in his language, that goes to his heart.” To reach people’s hearts (and pockets), you need to invest in resources that develop content in their native tongue.

Currency: Be sure to have the local currency loaded on your website, catalogs, and other sales collateral. Don’t expect consumers in other countries to know what the exchange rates are when they are shopping online.

Local regulations: In different countries there might be regulations on how you can advertise. In the Province of Quebec, for example, you can advertise in French only if your call to action promotes a website, call center, or other distribution channel where the information is displayed in French. That makes so much sense and it’s fair to shoppers, who need to be confident they understand what they are signing up for before making a purchase. For example, people need a crystal clear idea of what the return policy is before making a purchase. However, translating an entire website or opening a call center in a new country is also expensive. Factor those requirements in as part of your entry costs into a new market.

Weights and measures: Do your homework. Different countries display times, distances, weights, temperature, and other forms of measure differently. How to display time, for example: Month first? Day first? In the US, 04/07 is April 7, while in Germany that’s July 4. In China and Japan, for example, the year comes first, followed by month and day. You also need to choose the appropriate time system: 12 hours or 24 hours.

Eye movements in reading: Take into consideration the way different countries read marketing collateral (including signage): Vertical or horizontal flow? Left to right, or right to left? In the Middle East, many stores display the Western name of the brand on the left, and the Arabic version on the right, since Arabic speakers will read the sign from right to left.

Now that you’ve done your research, think about how you are engaging these folks.

2. Local Culture

To adapt your product or campaign to a different country, you need to be able to understand the local culture.

Imagery: Ask yourself what visually captivates this new audience. What’s beautiful or appealing in this new market? Who are the local sex symbols? What type of photography or design is popular? What’s cheesy and what’s sophisticated?

Tone and Manner: Find out how people communicate. Are they informal or formal?

Sense of humor: The sense of humor of different cultures likely varies from your own culture’s. Find out what’s funny and what references people understand in other countries. “Knock-knock” jokes, for example, don’t exist in Italy. You might be able to explain your way until your Italian friend gets it, but any references to “knock-knock” will be completely lost.

Rituals: Gauge the daily rituals and habits of your targeted cultures. At what time do most people have dinner? How often do people bathe? Do people have lunch at home or do they go out on weekdays?

Religion: Determine the influence religion has on a person’s day-to-day. How often people pray? What are the observed religious holidays?

Colors: Colors have different meanings in different cultures. For instance, white is the color of mourning in China, while red represents luck and good fortune. Take note on this type of symbolism when developing packaging and visual collateral.

Taboos, extracurriculars, and the like: Superstitions, interests, hobbies, views of sex and relationships, local politics, opinion about other countries and cultures. All of these can immensely affect how well your targeted culture receives your message.

3. Local consumer behavior

Gauge how your target buys. Working on the following areas is extremely important to getting your campaign off on the right foot:

Availability of credit: How easy is for people to buy on credit? Are people buying through layaway or cash? In Brazil, for example, the majority of apparel retail sales are done through private-label credit cards issued by large department stores, not banks.

Saving vs. spending: Are consumers more motivated to spend or to save? Is shopping a distraction, a pleasure, or a necessity?

Research: Determine how much in advance people research before making a purchase. How many touchpoints are consulted when shopping for a product? Do people wait for payday to shop?

Vacation: To successfully sell a product or campaign, find out the typical schedule of your target. For instance, the duration or time of vacation, how many days a year, etc.

Distribution channels: Determine the optimal distribution channels for your target. Bookstores and book printers, for example, are vanishing in the US, as the use of e-book readers increases. In Latin America, however, the market is way behind that trend. Consumers are slowly moving from brick-and-mortar to online bookstores, but they’re still buying paper, as e-book offerings are still scarce in that market.

* * *

Research, research, research is the best way to go about international marketing. The idea is to build the foundation for your brand to succeed in a new market. Translating is one of the steps, but after that there’s way more work to do.

Once your team has a true understanding of local culture and shopping behavior, that’s when you’re fully equipped to localize your efforts and create a stronger connection with consumers globally.