Texas small businesses should invest abroad

Posted Tuesday, Jun. 25, 2013  comments  Print Reprints
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Small businesses do not have to be local businesses. They have an important role to play in the global marketplace.

Take the case of ZAO Solntse Mexico, a small, Texas-based manufacturer of Mexican food products. In 2007, ZAO identified an appetite for its ethnic food in Russia of all places.

That might not have seemed like the most logical target market, but ZAO’s expansion was a success. ZAO used a loan from the Overseas Private Investment Corporation (OPIC) to successfully introduce its products into Russia, spending a large portion of its financing on tortilla-making equipment that was produced in the U.S.

When its revenues approached $10 million, ZAO was acquired by Mission Foods of Irving, Texas.

If an American small business can find a way to sell Mexican food in Russia, where can other entrepreneurs take their businesses? With the right support, almost anywhere.

ZAO is one of countless success stories of American entrepreneurs and small business owners working to expand beyond borders to reach the 96 percent of the world’s consumers residing outside of the U.S.

As the U.S. government’s development finance institution, OPIC has helped hundreds of businesses in Texas expand into emerging markets.

And for good reason. Emerging markets have grown from 23 percent of the world economy in 1999 to an expected 50 percent in 2013, and they will be the majority of the global GDP soon.

While exports are an important factor to grow the American economy, so too is foreign investment, as ZAO Solntse Mexico shows.

Small firms that invest abroad tend to grow more quickly, have higher survival rates, use more advanced technology and show higher levels of labor productivity. Investing abroad also creates jobs at home and can lead to procurement of U.S. goods and services.

There are some foreign markets that cannot be satisfied with exported goods or services from the U.S. It probably does not make sense to export water, but investing in a water desalination plant can bring both profits and jobs to the American investor company.

U.S. companies that invest abroad tend to create more jobs in the United States — even during the height of the most recent recession — and pay higher wages than companies focused solely on the domestic market.

So why do small businesses not invest abroad more often?

First, there is a misperception that doing business overseas creates a zero-sum game between American workers and their foreign counterparts.

Not true. OPIC has invested $7.9 billion in insurance and financing commitments in Texas company-sponsored projects alone. Those projects are expected to generate $7.2 billion in total U.S. exports; 31,108 U.S. jobs and 9,119 local Texas jobs.

Second, small firms contemplating expansion into global markets still face significant challenges, including finding reliable foreign partners, protection for intellectual property, financing and navigating the complexities of foreign tax regulations and political risks.

To help address the concerns of businesses that want to know more about expanding abroad, OPIC each year travels across the country to host a series of Expanding Horizons workshops.

These events educate small businesses about the opportunities of investing in emerging markets and the finance and insurance tools OPIC offers to support them.

On Thursday, OPIC will host a workshop at the Sheraton Fort Worth, 1701 Commerce St.

Texas is full of enterprising small businesses that stand to benefit from expanding into high-growth markets abroad.

Small firms are at the heart of the American economy. They can become part of the global economy as well.

Elizabeth Littlefield is the president and CEO of the Overseas Private Investment Corp.

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