Amazon Brazil Expansion Rumor Boost to Miami HQ2?

It is the day of “people familiar with the matter” stories about Amazon. Reuters reported Friday that Amazon is planning to lease a 50,000 square-meter (538,000 s.f.) warehouse just outside Sao Paulo, Brazil.

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Amazon entered the Brazilian market in 2012 with a Kindle store. Last April the company expanded to physical books, and later in the year added select electronics to its product mix.

The rumored new facility would be about four times the size of its existing operation. It is believed that an expanded warehouse maybe another signal that Amazon is taking the Brazilian market seriously again.

There was a bit of a pause between opening the Kindle store with digital books and bringing physical products to Brazil. But one needs to remember that Brazil’s economy started to dive right around the time Amazon entered the country.

Last year, Brazil finally showed a rebound after being in the longest recession of its history. And for 2018, the government estimates upwards of 3% growth in GDP.

A rebounding economy might be a good opportunity for Amazon to expand their operations in Brazil. Internet users in Brazil exceeds 122 million users in a country with a population of about 207 million and that is large pool of potential customers to start with.

Despite a poor economy over the last few years, Brazil’s eCommerce has grown and in 2016 represented 3.8 percent of total retail sales.

Reuters puts the 2017 market share of eCommerce in Brazil at 5%, which would be larger then the forecast by export.gov of 4.3 percent for the same year.

Many people may not realize the size of the economic power of Brazil, even with the recession. According to IMF data, Brazil was still the eighth largest economy in the world.

Compare this to Australia, which has garnered a lot of news lately with Amazon starting physical product sales in late 2017. It ranks number 13, trailing over $600 billion behind in GDP.

Brazil is Growing, But How Does This Impact U.S. SMEs?

Go to any major mall in Miami and you hear Portuguese. Unlike most other South Americans, Brazilians speak Portuguese instead of Spanish.

Over one million Brazilians visited Florida in 2016, which was actually a 30 percent drop from 2015. But that number is steadily increasing again and “Brazilian Shopping Tourism” is alive and well in South Florida.

Visitors from Brazil are the third largest group after Canada and the UK. And while not all come to Florida to shop, go to the Miami airport check-in for Brazilian airlines or flights and you see a larger than normal amount of checked luggage.

There are 88 weekly non-stop flights between Miami and eight Brazilian cities from four airlines as of February 2018. This is down from the peak years before the recession in Brazil but back on an upward trend.

And the Miami airport is the busiest international cargo airport in the U.S. Only Memphis, TN (FedEx hub) and Louisville, KY (UPS hub) surpass Miami in total cargo and mail volume.

Brazilian airlines alone make up over 10 percent of cargo volume at Miami Airport. And because so much northbound air freight is perishable product, there is an excess of available cargo volume heading back to Brazil and South America.

The middle to upper-class of Brazilians love to fly to the U.S. to shop. There is a whole cottage industry of small freight forwarders around the Miami airport that specialize in sending locally purchased goods via cargo routes back to Brazil.

And bringing U.S. products to Brazil via Amazon could become very interesting for U.S. SMEs.

Miami HQ2 ?

If Amazon is taking a serious stab again at the Latin American market, and specifically Brazil, Miami may be the best option for HQ2.

Virtually any major U.S. corporation that has significant Latin American distribution operation has an office in Miami.

Miami, or South Florida as the Amazon bid apparently includes neighboring counties, may have an ace in the hole if the company looks at Latin America as the next frontier.

To a degree, Miami is not an “obvious” choice based on Amazon’s RFP. The area is lacking in some of the key requirements.

Public transportation is at best a mess in South Florida. There is no significant tech talent from Florida universities as none of them rank anywhere near the top in that category. And the cost of living is on the high side for Florida or even the Southeastern U.S.

But, Florida is a business friendly state. Domestic and international travel options are abundant. Quality of life is pretty good with sunny weather and pristine beaches all year around.

Utility companies are increasingly investing into renewable energy with solar. The area has a large bilingual workforce (English/Spanish and to a lesser extend English/Portuguese).

And for a major metro area, traffic congestion is fairly reasonable with a lot of road projects underway to expand road capacity.

The Port Miami is known as a cruise ship port, but cargo is taking larger role with nearly half of all container cargo volume being with Latin America. Recent improvements to port depth allow for larger container ships to dock now.

If Amazon believes Latin America is ready for expansion, then Miami offers a lot of positives for Amazon and SMEs. The area’s cargo resources and existing capacity going south could be very beneficial to export U.S. goods to Latin America.

In theory, Amazon could develop a Latin American logistics division within HQ2, offering full freight forwarding services to simplify export of U.S. products by SMEs.

Overall, it is still a bit of a long shot for South Florida to become the location of HQ2. For U.S. only operations there are a lot better options in Atlanta, Dallas, or a few other cities.

But if Amazon choses Miami/South Florida, it is game on for Brazil and the rest of the Americas. And U.S. SMEs should benefit from an Amazon expansion into Latin America.

We’d love your thoughts about the possibility of Amazon expanding in Latin America. Head over to our Facebook Discussion Group or use the comments section below.