WorldCity Business Magazine

The Achilles heel

by Joachim Bamrud

Let’s face it, business is good. Booming, some might argue. South Florida-based multinational firms with big stakes in Latin America are enjoying a second consecutive year of robust growth. Among those present at WorldCity’s monthly CEO Roundtable at the Miami City Club, there were no exceptions to that rule.

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Fernando Campo, who heads the Latin American division at Fort Lauderdalebased software company Citrix Systems, expects to grow his business more than 40 percent this year. He confidently predicts a 500 percent expansion in annual sales to $150 million within the next three to five years.

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Bart Doedens, the Dutch-born president of Palm Beach Gardens-based Implant Innovations Inc. 3i, for short the world’s third-largest manufacturer of dental implants with global sales of $200 million, is enjoying 18-20 percent annual sales growth. With an ever-increasing emphasis on dental esthetics, he doesn’t expect growth to taper off any time soon.

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Mike Carricarte, Chairman and CEO of Miami-based Amedex Insurance, who, over the past 30 years has developed a thriving niche business providing premium health insurance to the well-heeled of Latin America, is about as insulated as you get from a market downturn. His company starts off each year with more than 90 percent guaranteed repeat business, while new business continues to expand at a solid pace in more than 40 countries in Latin America and the Caribbean.

Finally, John Price, CEO of Miamibased InfoAmericas, a research and consulting firm with satellite offices in Mexico and Brazil, is riding the wave of investment and growth in Latin America. With more and more multinational companies exploring opportunities in the growing markets of the region, demand for market research and analysis multiplies.

So what’s to grouse about?

Campo, of Citrix, is concerned that, in Brazil, where sales jumped from $6 million to $10 million last year, business is just too good to be true. “Things are going too well right now,” he says.

After countless disappointments over the years in Brazil and other crisis-prone Latin American markets, you can’t blame multinational managers for seeing disaster around every corner. And Campo’s skittishness is easy to understand.

He has a lot riding on Brazil’s continued success. It accounts for 45 percent of regional sales and is the key to his ambitious five-year plan.

Doedens, of 3i, does 80 percent of his business in the United States and Europe, so a thriving Latin American market is not so vital. Nevertheless, it is a growing market in which 3i, with offices in Mexico and Brazil, is investing heavily, in training oral surgeons and dental specialists in the art of implanting his company’s “artificial tooth roots”.

A sudden reversal of fortune in a major Latin American market is almost sure to wipe out that investment. “Volatility is very high in Latin America; it’s always a little scary,” says Doedens.

As for Price, of InfoAmericas, his bugaboo is the strengthening of regional currencies against the dollar. With most of his revenues in dollars and his costs in Brazilian reals and Mexican pesos, he has reason to worry, especially given the shallow qualified labor pool in these two countries and the often sharp wage spikes.

InfoAmericas’ staff members are all bilingual and highly educated, which also makes them highly sought-after. “As big as these countries are and as many unemployed workers as they have,” explains Price, “it is still a very tight labor market when you are talking about that level of education.”

Price and the others also rattle off the standard litany of concerns about Latin America lax intellectual property rights, Brazil’s onerous import restrictions, stalled economic reforms but, as it turns out, the problems that are really worrying our CEOs are homegrown.

“I am more worried about the economy in this country than I am about any economy in Latin America,” says Price. “Interest rates have got to go up, the dollar could go down, there is no economic stewardship in this country and I don’t see politicians on either side of the spectrum waking up to the prob- lems ahead.”

Soaring health care costs, for example. Rising medical costs, over 20 percent per year, says Carricarte, are forcing Amedex to raise premiums and deductibles, or both. And, while the majority of his clients can afford the increase, no business is immune forever to that kind of acute price inflation.

The group’s attention focuses on another problem even closer to home education. What follows is blanket indictment of the local public school system.

“This city doesn’t produce the smarts it needs to become a Singapore or a Hong Kong,” says Price. “In our business,” agrees Carricarte, “we employ a lot of actuaries and analysts and to hire them out of Miami is tough.”

Not only is it hard to find local talent, says Doedens, but the sub-par public schools make it tougher to attract talent from other parts of the country. “Why would someone from New York or Boston want to come here if they have to put their kids in private schools to get a decent education?”

The solution for InfoAmericas, whose analysts need to have Latin American expertise, is to import “analytical brainpower.” But that is no longer as easy as it used to be. “Visa restrictions are making it tougher,” says Price, a Canadian, who founded his company in Mexico in 1983 and moved the headquarters to Miami in 2000. “Now I need a nine-month window to get an H1 visa applicant through and that is really tough for my business, which needs to have a flexible structure.”

By shifting the focus of our discussion to the deficiencies of South Florida’s education system, the executives hit the nail on the ahead. Managers at every one of the more than 1,300 multinational companies with offices in South Florida face similar problems of finding top talent in the local market and, when that is not possible, importing that talent from abroad.

A first-class educational system is key to building a world-class city. Price said it best: “Miami has to continue move up the value chain as a service hub just as Singapore and Hong Kong have done. What was Hong Kong 30 years ago? It was a place where cheap shirts were made. Today it’s a center for media, financial services, design and other high-end services. That’s where Miami needs to get to in order to maintain.