Sacramento importers feel sting of global economy

Scott Farrell has traveled the globe for years searching for jewelry and gifts for his midtown Sacramento boutique Zanzibar Trading, sometimes trekking as many as 300 days a year from Niger to Nepal, Tanzania to Thailand.

But the importer's world is changing before Farrell's eyes. A sinking dollar, a rampaging euro, skyrocketing oil, political instability – it's a tough time to be an importer.

In Bangkok, the baht is gaining on the greenback. In New Delhi, his artisans and vendors say no to the dollar. Their request? Rupees, please.

This year, for the first in nearly 20, Farrell is staying home.

"I've been traveling for 18 years – they wanted dollars. Now, they don't want dollars," Farrell said. "In Mexico, they want pesos. In India, they tell me, 'Please don't send us dollars. We want rupees. The dollar's falling too quickly.' "

Importers like Farrell are finding challenges literally all over the map.

The U.S. dollar's weak performance against foreign currencies means importers are paying more for products and fuel. Investors turning to silver and gold as hedges against a dropping dollar have forced jewelry costs higher.

Then there's getting the goods from point A to point B.

"The challenge is finding products that are going to sell, but the bigger challenge is shipping," Farrell said. "We've seen a 400 percent (cost) increase in two years."

Much of the increase goes back to the dramatic spike in fuel costs. Oil again reached a record high, passing $145 a barrel on Thursday.

As overseas currencies continue to rise, U.S. importers are getting more competition from other nations, where cash goes further and consumers are willing to pay more for the product.

And other factors are at play. The influential European Central Bank, which is responsible for monetary policy for the 15-country Eurozone, raised its interest rate a quarter-point, to 4.25 percent, on Thursday.

The euro traded late Thursday at nearly $1.57to the dollar.

The interest rate hike could further weaken an already slumping dollar, widen the gap between the euro and the greenback, and put more pressure on U.S. importers, said London-based currency expert John Hardy of Saxo Bank.

Hardy writes the bank's Forex Market Update, which covers daily news, comments and charts on the major G10 currencies.

"Is this going to kick off the euro going to $1.60 (to the dollar)?" Hardy asked. He's laying 50-50 odds. Only 50-50, he says, because of tensions within the European Union. While Germany's economy has continued to chug along with relatively little damage, others like Spain's and Italy's, are struggling, he said.

As for the dollar, Hardy said he believes a floor will soon be reached. "How much weaker can it get? Not much," he said.

Meanwhile, emerging markets like India and Thailand, are experiencing increases in commodity prices that have exerted inflationary pressures of their own, affecting those currencies.

Local importers such as Gurbakhshish Grewal, owner of India Spices and Music in Elk Grove are finding it difficult to adjust to commodity price hikes in India and soaring fuel costs at home.

What used to be $2,000 orders of cooking oil, rice and other store staples are now $3,000 or $4,000.

With diesel at $5 or more a gallon, his Bay Area suppliers say they have to justify the trip to Elk Grove. Complicating matters, he said, was a recent export ban in India on one of Grewal's key goods, basmati rice.

But to keep customers coming in, he has to hold the line on prices. He delays orders, figuring out what he needs and when.

"If I'm not making enough sales, my order gets smaller," he said.

Amid the bleak news for importers is a potential boon for U.S. exporters of goods and services, said Dion Dwyer, executive director of the Sacramento-based Northern California World Trade Center. A weaker dollar means the price of U.S. goods has become more attractive in the global marketplace, he said.

"We see the products we manufacture become more viable," Dwyer said. "Not only do we consume, but we have products for export."

About the writer:

• Call The Bee's Darrell Smith, (916) 321-1040.