WorldCity Business Magazine

CEO RoundTable: Bumps in the Road

by WC

Five executives say Latin America is handing their companies stellar revenues. Still, they wonder if there’s trouble ahead.

For multinationals with a presence in South Florida, Latin America is still a strong performing region of the world. But five executives who gathered for WORLDCITY’S most recent CEO Roundtable said they are starting to get anxious about what’s ahead.

Their concerns ranged from growing nationalism in some countries leaving international companies at a disadvantage to the region’s apparent inability to make needed labor, judicial system and regulatory changes.

“Everybody talks about Asia but, in the end, the biggest growth comes from Latin America,” said Dirk Van De Put, the president for Latin America at French food products company Danone, best known in the United States for its Dannon yogurt and Evian bottled water.

Danone only operates in three countries in the region Mexico, Brazil and Argentina yet the company’s Latin American division is its fastest growing globally. While Van De Put is, obviously, pleased by the current revenue growth of more than 30 percent, he worries.

“The thing I lose sleep over is that there’s no Latin American economic stability,” he said. “In Argentina the government is imposing price controls and, if you don’t follow the guidelines, you’re publicly scolded or government criticism can spark a strike. But salaries are up.

“So salaries are up but prices are not. Eventually the market is going to explode,” he continued. “We need to make some significant investment in Argentina but we’re holding off on that.”

Luis Dominguez, the president of Latin America and the Caribbean for Unisys, agreed that the region has not yet banished some of its old bogeymen, including corruption, inefficient labor laws and a burdensome bureaucracy. He said that until the media in Latin America are completely independent, there will always be a worry of too much government manipulation of the press.

He also said the region still has to embrace the idea that intellectual knowledge rather than traditional industries like farming and commodity exports will be the economic driver of the future.

Several of the executives also mentioned education in Latin America as an area that still needs attention.

Van De Put and Dominguez joined Patricia Menndez Camb, the head of law firm Greenberg Traurig’s international department; Dominique Virchaux, the managing partner of executive search consultants Virchaux & Partners; and Eric Williams, the president of logistics group G.O.A.L., for a recent breakfast with *WORLDCITY *Publisher Ian McCluskey to discuss the ups and downs of their businesses.

Once a month, *WORLDCITY *hosts a CEO Roundtable in which four to five multinational executives from diverse industries meet for wide-ranging conversations. The CEO Roundtable group, now 75 in number, also checks in at intervals to make predictions about what’s ahead for cross-border businesses.

For Virchaux, the worries are closer to home. He said he is having trouble recruiting adequate talent to manage the Latin American regional offices of the multinationals. The job placement of executives at that level is the specialty of his boutique executive search firm in Miami.

Van De Put concurred. Both he and Virchaux said talented top executives from Latin America, if assigned in the United States or Europe for a stretch, are not willing to return to their home countries. Virchaux characterized Brazilian executives as the best prepared for multinational assignments.

At G.O.A.L, an umbrella organization representing several logistics companies that have banded together to offer services, Williams said his industry’s biggest challenge these days is fluctuating fuel prices.

Still lagging

When it comes to the logistics sector in Latin America, he added, the potential is tremendous. “But the infrastructure has not caught up, yet,” he said. “And there is Latin America’s lack of discipline and lack of order.”

Dominguez agreed that logistics in the region can present challenges. Under its contract with Dell, Unisys handles the computer company’s logistics in Latin America.

Still, Williams was optimistic about some developments. His company is a key player in Americas Relief, a non-profit coalition of companies and agencies poised to quickly move supplies and other assistance into Latin America and the Caribbean during emergencies such as hurricanes or earthquakes. But government red tape from Customs tie-ups to shipping holdups in various countries has impeded the relief work in the past.

Now the coalition is lobbying to get agreement among several countries so certain processes can be sidestepped during emergencies. And he is heartened by the support the effort is receiving, including from government officials.

“The Achilles’ heel of relief in disasters is logistics. Non-governmental organizations don’t know anything about logistics,” Williams said. “So we’ve formed a board. The concept is to work with the countries cooperatively.”

Despite the preoccupations, the overall tone of the breakfast meeting was upbeat with all but Williams claiming outstanding results in 2006. Williams noted that the logistics and cargo sector went through a rough summer owing to skyrocketing oil prices.

High hopes for 2007

Van de Put said Danone was optimistic about its new focus on healthy foods, including products containing healthy bacteria or those that the company claims will lower cholesterol levels. He said Latin American consumers are becoming increasingly conscious about living healthy lives and keeping their children healthy.

As a result, he predicted that Danone’s business in Latin America will double by 2010.

Menndez Camb, meanwhile, said Greenberg Traurig has been doing a brisk business with Latin American clients. In particular, she said the mergers and acquisitions unit had seen good growth. She said the law firm is also involved with companies and individual looking at investments outside their home countries.

“For us, 2006 is turning out very good,” she added.

Virchaux, meanwhile, predicted that his company’s 2006 revenues would be 35 percent higher than those posted a year earlier.

“For 2007, we’re projecting a 20 percent increase, although I think that’s going to end up being rather conservative,” he said.

And Dominguez said Latin America will close 2006 as one of the fastest-growing regions for Unisys. In particular, the company’s business with banks and IT firms has been going strong.

“And I think 2007 will be good. The momentum will be there,” Dominguez said. “For the first time in a long time, we’re building on solid ground.”