WorldCity Business Magazine

Growing pains

by Joachim Bamrud

Barring any major economic or terrorist disaster, Latin America is on its way to posting a second consecutive year of robust growth. The majority of multinational companies with regional offices in South Florida are enjoying strong first-half performances, on the heels of an exceptional 2004.

Among the participants in our latest CEO Roundtable Hyatt, Nortel, PanAmSat and the global consulting and outsourcing firm, Hewitt Associates there were no exceptions to that rule. But each one is now facing new challenges, as Latin America beckons once again, and as these companies look for ways to take advantage of newfound opportunities.

For Victor Lopez, senior vice president of field operations at Hyatt Hotels Corporation, who is responsible for 27 hotel properties in Florida, Latin America and the Caribbean, the big challenge is making up for lost time.

“We really haven’t focused on the region as we should have,” said Lopez. “Take Brazil, for example. It’s a huge market and we have only one hotel, in Sao Paulo. That’s criminal.”

After a major restructuring to coordinate strategies and sales activities between what were essentially two independent companies Hyatt Hotels Corporation and Hyatt International—Lopez was given a mandate at the beginning of this year to double the number of Hyatt properties in Latin America over the next couple years, “at least on the drawing board.”

That kind of aggressive growth in a region that, up until now, has been largely ignored, requires plenty of adjustments and new kinds of thinking. One of Lopez’s biggest challenges is to integrate sales operations between North and South American sales centers. “In our business,” he explained, “it’s not just how well our facilities are doing in Latin America, but also how many people from Latin America are coming North to utilize out facilities here.”

Bettye Baldwin, Latin America regional manager at consulting firm Hewitt Associates, faces a similar dilemma of building a regional business as a relative newcomer to the region. Hewitt has only recently established a significant presence in Latin America. It set up its regional office in Miami less than two years ago.

But Baldwin faces the additional challenge of refocusing her business at the same time, as her company shifts dramatically from one business model, that of traditional human resources consulting, to outsourcing, as a result of Hewitt’s takeover last October of Exult, an industry leader in the human resources outsourcing.

With the acquisition, Baldwin now oversees three large outsourcing centers, in Brazil, Puerto Rico and Mexico. That kind of sudden growth has stretched her management team at seven offices throughout the region to the limit.

“The big challenge right now is managing our workload,” said Baldwin. “Our business is growing, which is great, but we aren’t 100 percent staffed. And, in our line of work, you can’t add staff until you have secured the new business. As a result, I have people working flat-out and it is tough to manage that situation.”

Ah, the problems of success.

Nortel knows all about success in Latin America and the Caribbean. The Canadian company, which has had its regional headquarters in South Florida for 30 years, generates 6 to 7 percent of its global sales from the region, a higher percentage than most multinationals. And right now Nortel business in Latin America and the Caribbean is booming, growing faster than anywhere else.

That, explained Martha Bejar,**Nortel’s regional president, is being driven by the continued expansion of the telephone networks throughout the region (in particular wireless, which is expected to jump from 30 percent penetration today to 40 percent by 2007), as well as the accelerating migration of large companies to VoIP (Voice over Internet Protocol) and a greater concern about, and investment in, network security.

But underlying these industry and technology trends that are common to most markets, is the accelerated economic activity in the region. “Business is really looking strong and it is driven by enterprise customers, like the Hyatts of this world.” More enterprise business, in turn, leads to more network expansion by the region’s major telecom carriers, like Telefonica and America Movil, and more direct business for Nortel.

Of course, the inevitable consequence of a booming market is more competition. And, in the Latin America telecom industry, Chinese manufacturers, such as Huawei, have people like Bejar constantly looking over their shoulders.

“We see a lot of pressure in our sector from the Chinese coming into the market and driving down prices,” she said. “They are very aggressive and putting a lot of money into the region. As a result, companies like Nortel and Cisco are having to re-assess their pricing strategies.”

For Carmen Gonzalez-Sanfeliu, vice president of Latin America operations at*PanAmSat Corporation, one of the world’slargest global satellite service providers,competition is also a major worry. PanAm-Sat, which was born in Latin America, whenMexican visionary Rene Anselmo launchedthe first privately-owned international satellitein the early 1980s, today faces competitionfrom a dozen satellite service providers.The company enjoys a 28 percent marketshare in the region. More importantly, LatinAmerica accounts for 20 percent to the company’stotal revenue, an almost unheard-ofproportion among global firms. Still, this isno time for resting on one’s laurels.*

“This is definitely the time for companies to move back into Latin America,” said Gonzalez-Sanfeliu. And the key to success against the competition, she added, are local partnerships and alliances. “They provide instant credibility and access to the market.”

The U.S. economy is another source of concern for Gonzalez-Sanfeliu, mindful that rising U.S. interest rates, a falling U.S. dollar and other economic factors in the U.S. can have potentially devastating consequences for the often-vulnerable economies of Latin America. “The influence of changes in the U.S. economy is inevitable, so our ability to mitigate the impact of those changes is crucial.”

Last year, PanAmSat’s Latin American business, headquartered in Miami, grew by 11 percent. And Gonzalez-Sanfeliu is hopeful for at least as good a showing in 2005.

The Hot Markets

Despite their companies’ growing pains, all our CEOs were clearly delighted about the general trend of business in the region. But “what are the hot markets?," we asked. There was a general consensus that Brazil and Mexico—the “usual suspects” continue to be the major economic drivers. But they are not the only bright lights.

Central America received some high marks. Costa Rica is a priority for Hyatt and an attractive market for Nortel. Hewitt recently won two major contracts to do due diligence studies following corporate acquisitions, one in Costa Rica, the other in Guatemala.

Incidentally, our CEOs were confident that the DR-CAFTA free trade agreement, despite the tough odds, will receive U.S. congressional approval.

Gonzalez-Sanfeliu drew attention to Colombia. “It’s interesting that no one has mentioned Colombia and yet it used to be such a hot topic, often for the wrong reasons,” she said, adding that Colombia has "always been good business for us, with solid customers and tremendous growth."

Meanwhile, Nortel’s Martha Bejar singled out Peru. “The country’s telecom market is underserved, but the investors the Spaniards and the Mexicans—are coming in and there is tremendous opportunity there from both a wireless and a fixed line perspective.”

Finally, Hyatt’s Victor Lopez shone a positive light on Venezuela. “You’re probably asking yourselves why anyone would want to do business in Venezuela,” said Lopez. “But the fact is that there is a great need for a good hotel, where you can get a good meal and good service and where you can feel secure.”

Lopez, who has spent his entire 30-year hotel career with the privately held Hyatt group, added: “We think of it as the glass being half-empty. We sell the positives. And there are definitely some positives for having a hotel in Caracas.”