El Norte: Avianca’s strategy offers hope for Latin American carriers

Monkfish was originally known as goosefish, sea urchins were called “whore’s eggs” and orange roughy was once known as slimehead. That US$30 serving of Chilean sea bass was once known as Patagonian toothfish and unceremoniously tossed back into the ocean by fishermen looking for catch they could actually sell. As air cargo connections between Latin America and the United States improved, these seemingly worthless fish were rebranded to sound more palatable and started arriving on plates in North America, underscoring the importance that value-added products play in sustaining carriers and forwarders in Latin America and their potential to create new products for the continent’s main export market.

Ecological implications aside, this lesson in branding is especially cogent in light of today’s flat air cargo market. “South American countries have to develop more value-added products,” explained Sebastien Aponte, marketing manager for freighters at Airbus. Sometimes the value-add involves looking for new trade partners.

It wasn’t long ago, about three or four years back, that South American carriers were riding high – when larger volumes of high-value goods moving south correlated pretty closely to upswings in local currency valuations and strong regional economies. Back then, Brazil, the continent’s largest economy, was attracting investment. “Major automotive companies were going into the market to invest,” said Eric Hartmann, vice president at SkyTeam Cargo. Investors saw Brazil as an affordable source for auto parts and other value-added exports to Mexico, which, in turn, meant free trade access to the U.S. and Canada – Mexico’s partners in the North American Free Trade Agreement (NAFTA).

That’s all changed. When Brazil’s economy began to implode, carriers started looking elsewhere for volume. One such airline was Avianca Cargo, which made a strategic pivot towards the north, with an eye to Mexico, where the automotive industry was booming, as well as to the U.S. and beyond, where demand for perishables was on the rise.

To South American exporters and forwarders, Mexico’s membership in NAFTA makes it practically indistinguishable from other North American markets in terms of access and value. Eighteen years after NAFTA was ratified, Colombia, Avianca’s home country and the third-largest economy in Central and South America, entered into its own free-trade agreement – the United States-Colombia Trade Promotion Agreement (CTPA). Since going into effect in 2012, CTPA eliminated tariffs and other barriers to U.S. exports, setting the stage for increased trade between the two countries.

A third trade bloc, Mercosur, enables free trade between Bolivia, Chile, Peru, Colombia, Ecuador and Suriname. The deal integrates the aforementioned markets into the majority of the Western Hemisphere, with Colombia representing a critical node in the larger trade network.

A modern day, airborne “silk road” running north and south seemed to be emerging, and over the subsequent four years, Avianca has taken steps to realize this.