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.
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
frontier territory called Minnesota in the mid 19th century.
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
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
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.
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
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
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