WorldCity Business Magazine

Andean surprises

by Mary Dempsey

Top executives from a range of businesses say they’re seeing strong results from two unexpected places: Colombia and Venezuela.

When five executives from South Florida multinationals met for breakfast, their conversation strayed from one hard-hitting topic to another. They discussed the U.S. government’s position on Venezuela, the unexpected power of Colombia’s economy and anti-American sentiment floating around the Latin American markets they oversee.

They also jousted over the question that all companies with business in Latin America are asking: How long will Latin America stay strong?

The future may not be clear, but the five men gathered for WorldCity’s monthly CEO Roundtable in June said they know where they stand in the present: present Business is doing well and growth rates strong. In particularly, most said they have seen unexpectedly strong performances in Colombia and Venezuela.

“We had a record year last year, and this year’s going to be bigger,” said Wilson Grava, vice president for Latin America at security software giant Symantec. “We work around a 20 percent growth goal, which is standard in our industry, but I think this is one of the few periods in history where we’re going so strong everywhere. There’s growth in Brazil, in Mexico, in Venezuela, in Colombia.”

He said strong anti-piracy laws have boosted Symantec’s business in Colombia. “The intellectual property law is strong,” he said. “When we decide to pursue intellectual property actions, people go to jail.” In the case of Venezuela, he said the political drama that came with the recall and coup attempts against President Hugo Chvez has settled down and business is returning to normal.

“Chavez is there. He’s going to be there. And the people have all decided to get back to business,” Grava said. “People didn’t invest in Venezuela for awhile and now they are. Business is rebounding.”

Henrik Bergstrom, the president of Latin American operations for Swedish appliance manufacturer Electrolux, said his company has also seen notable growth in Venezuela and Colombia, with demand rising as interest rates fall. Like most of the other executives at the breakfast, Bergstrom’s company must work around consumer spending levels in Latin America that are far below those of the United States and Europe.

Bergstrom said Latin American households buy major appliances with far less frequency than in the United States. “If U.S. replacement is every 10 years, then it Latin America, it may be every 20 years,” he said.

Still, he said sales in the region are accelerating, and Electrolux is hiring additional staff in Colombia, Venezuela, Mexico and Chile. He declined to give sales figures but noted that revenues growth was “in the high double digits.” He cited increased consumer access to financing as key.

Fernando Figueredo, Porter Novelli’s CEO for Latin America acknowledged that credit access is growing although it is still a hugely untapped market. “Latin America is a prepaid culture. Only 13 percent of people in the region have credit cards,” he said. “In the United States, the average person has nine credit cards. In Latin America, 10 percent have one credit card. Latin America”

The Latin American client list for public relations firm Porter Novelli includes MasterCard, so Figueredo follows credit trends. He said the lower interest rates are sparking more vibrant commerce and that, in turn, is creating economic stability. “We see it with our clients like Nortel and Microsoft. They’re doing very well, they’re growing.

“And because our clients are doing well, we’re doing very well,” he added. “Latin America is for us and for most of our clients a small segment of overall business, but it is a growing one.”

Still, attorney Milton Ferrell, president of Miami-based law firm Ferrell Schultz, worried that rising gasoline prices will inflate other prices and push up pressure to increase wages. “People have to buy things,” he said. “But if we see wage pressure increase, we’ll see interest rates go up. I think this is a time of tremendous uncertainty.

“Look at it this way, we’re seeing the highest corporate profits ever in some industries. And yet people are buying bonds because they’re fearful,” added Ferrell, whose company’s wealth management practice has a large base of clients in Latin America, particularly Venezuela.

Price pressure has come into play for Gary Urban, the head of Latin America for global industrial machine-maker Fabio Perini.

He said Latin America has been an up-and-down region for his company but ongoing growth in local economies and access to capital has helped. “There are several areas doing well. Trinidad is very good right now and Mexico is better than it was,” he said. “Colombia is a good market and profitability is returning there.”

Still, Urban said there are still obstacles for the German-owned group, which in Latin America sells machinery that converts tissue paper into rolls. “Since some of our equipment is designed and manufactured in Italy, we’re subject to exchange rates. Plus we’re feeling the Chinese effect, Wal-Mart effect that pressure on price. We’ve been able to maintain volume but with lower profitability.

“You lose a customer in a business like ours, it’s a capital investment. And it’s not just the machine you lose, it’s also future parts and replacement,” he noted.

Sleepless in south Florida

Although business is going well, the executives said they still worry about what’s ahead.

“My question is how long the oil boom will continue and how long Latin America’s boom will continue after the oil boom,” said Electrolux’s Bergstrom.

High oil prices have boosted the economies of Latin America’s biggest producers, principally Brazil, Mexico and Venezuela. But higher oil prices have also put pressure on the economies of oil importers in the region, including Central America and most of the Caribbean.

The other executives not only wondered how long Latin America’s good times will continue, as the region moves through yet another year of strong GDP rates, but they talked about global security, the Iraq war and what they see as growing anti-U.S. feelings in Latin America. Ferrell and Urban were especially critical of the United States’ position on Venezuela.

Bergstrom, a Swede, said he has a pool of customers in Latin America of Lebanese heritage and “there is now anti-American sentiment that is significant.” Ferrell, who closed his law firm’s office in Beirut when the war started in Iraq, said “people who were once pro-American are, at best, now neutral. It really affects my business out of the United States. I think people are still investing in the U.S. economy but they’re doing it through London.”

Urban, meanwhile, said he has noticed that there is an advantage to working for a European company. He is the only American in Fabio Perini’s Latin American team.

Anti-American sentiment has been less of a factor for Symantec and Porter Novelli. The long-term strategy at Porter Novelli has been to create a local brand through local offices. “We position ourselves as multi-local, not multinational,” Figueredo explained. Porter Novelli has 400 employees in the Latin American region, 175 of them in Brazil.

For Symantec, since services are offered locally, Grava said his company must have a good local footprint. Symantec has a support center in Argentina, although all its production is done in the United States, Europe and, to a small degree, India.