3/15/2004

A Minnesota Outsourcing Solution: "Go South, Young Man"

By Doug McGill
The McGill Report

ROCHESTER, MN -- A terrific story in the Minneapolis Star-Tribune last week, about a young southern Minnesota man who moved to Brazil to become a farmer, brilliantly defines a powerful counter-strategy for Minnesotans who feel their jobs are threatened by foreign competition.

Outsource yourself!

The article by reporter Kevin Diaz, the second installment in a three-part series on how central Brazil is fast replacing the American Midwest as the world's breadbasket, focuses on Josh Neusch, a 22-year-old farmer who grew up in Fairmont.

When Neusch graduated from high school four years ago he had two options: to help his Dad and two brothers expand the family farm, or try to start a farm of his own. With farmland in southern Minnesota averaging more than $2,000 per acre, option two was well out of reach.

Neusch's solution: move to Brazil, where farmland costs $150 per acre. Last year he bought 7,500 acres in the Mato Grosso region of central Brazil, where he now lives full-time growing soybeans and rice. He pays his workers twice the Brazilian minimum wage of $88 a month, compared to more than $1,000 a month in wages he'd pay in Minnesota.

The man is a modern pioneer following economic opportunity just as thousands of Scandinavian and German immigrants did when they settled the challenging frontier territory called Minnesota in the mid 19th century.

Little-Known Secret

Starting life as an expatriate may sound like a radical solution to tough economic times, but examples such as Neusch show it's a potentially appealing one. The federal government estimates 4.1 million American citizens presently live and work overseas, though expatriate groups and job agencies estimate the number is easily twice that large and growing.

A little-known secret about expatriate life is something I discovered first-hand when I moved to Tokyo in 1989, beginning a decade of travels there, in England, and in Hong Kong. The secret is that if you can put up with the stresses of living in a foreign country, the economic rewards can be big.

A little bit of risk on the front side can turn into a big reward later on.
My first discovery came when I filed my 1989 U.S. federal income taxes and discovered that the first $70,000 that an expatriate earns while working abroad was tax free. (The amount is now $80,000.)

Then I learned that my company, a New York-based news organization, used the standard corporate "balance-sheet approach" to determining my salary while living overseas.

The idea, followed by most companies with offices overseas, is to set a salary that ensures the maintenance of a "home lifestyle" for its expat employees. Because the American lifestyle is more luxurious than in many other countries, especially in Asia, expatriate employees thus very often live like kings and queens compared to their local surroundings.

Brazilian Girlfriend

Of course, not everyone works for a big corporation with offices overseas. Yet the economic disparity between the United States and other countries, especially in the developing world, is so great that the comparative advantage usually holds.

I don't mean to minimize the hassle factor -- if hassle is a big enough word for turning your life upside down. Being separated from loved ones back home for months or years at a time is tough. Neusch, in Brazil, has to travel 600 miles to the nearest fast food joint, a Domino's Pizza in a town called Goiana. His Brazilian girlfriend lives 120 miles down a bad road.

Did I mention you need to learn a whole new language?

As globalization rages on, though, more and more of us are going to feel its fiery tingle at our toes. Once upon a time, the U.S. dependence on Middle East oil was almost the single area where the American way of life depended on the unbroken flow of a single strategic substance.

Today, there is an OPEC of commodity food goods rising in the world that is called Brazil. There is an OPEC of low-cost manufactured goods upon which our economy is already utterly dependent, called China. There is an OPEC of software services called India -- have you telephoned your American computer maker recently for technical support?

In each of these cases, there is a possible "join them" scenario like the one that Josh Neusch is living in Brazil. True, true, snakes keep getting into his house, and he hates snakes. But he's got the consolation of knowing that he's building something. He's not living in the past, but creating his future.

Copyright @ 2004 The McGill Report