WorldCity Business Magazine

Loyalty Pays Off

by WC

Five multinationals experiencing strong growth in Latin America point to their deep roots in the region.

A range of corporations are doing well in Latin America these days, but the economic good times are especially sweet for companies that have stood by the volatile region through thick and through thin.

Executives in charge of Latin American operations for five such multinationals came together at a recent CEO Roundtable breakfast to discuss where they’ve seen the strongest gains in the past three to four years as well as what still troubles them.

Once a month, WorldCity brings together a handful of top executives at multinationals for wide-ranging conversations. Members of the roundtable group, now numbering more than 85 and representing diverse industries, also take part in regular surveys to test the pulse of cross-border business.

The men who met over coffee at the Biltmore Hotel in January came from companies that all have deep roots in the region.

Logistics and e-commerce company Trans-Express may have debuted in Miami 25 years ago, but its origins are in Central America. Market research and consulting firm InfoAmericas was born in Mexico and established itself in Brazil before relocating its headquarters to South Florida. Meanwhile, advertising and public relations company GrupoUno in Coral Gables has carved out a niche by handling global corporationsmarketing in a single geographic area: Latin America and the Caribbean. As evidence of its ties, it has 12 offices in the region, where its strongest markets are Venezuela, Brazil and Argentina.

The two other companies at the CEO breakfast MasterCard and human resources consulting giant Mercer are long established in Latin America, where they are seeing strong growth. MasterCard, in fact, has posted 22 consecutive quarters of revenue growth in Latin America and the Caribbean, making it the fastest-expanding unit within the company.

“The level of consumer confidence in Latin America is the highest that it’s been in years,” said Richard Hartzell, MasterCard’s president for Latin America and the Caribbean. He said his division has been seeing revenue growth of 25 to 35 percent annually in recent years more than in Asia.

Business has been robust for market research company InfoAmericas, too. “Last year we grew a little more than 20 percent. Our business in Brazil more than doubled,” said John Price, president of the firm.

Jaime Basagoitia, the general manager of 25-year-old TransExpress, said his e-commerce and logistics company expects growth of 20 to 30 percent this year, boosted by business expansion in Central America thanks to the Dominican Republic-Central America Free Trade Agreement.

Business dexterity

Agility has been important to the success of most of the companies represented at the roundtable. Last year, MasterCard celebrated its 40th anniversary in Latin America. In that time, it has evolved from a company that helped five banks in the region to market charge cards into a global giant with services that run the range from financial transactions to advisory services.

Logistics and e-commerce company Trans-Express launched with a remittances service for Latin Americans in the United States, but it saw opportunities and shifted into logistics and, later, e-commerce. In 2006, some 80 percent of its revenue came from a service focused on Internet and catalogue shopping by Latin Americans. Trans-Express provides a Miami shipping address for purchases made by non-U.S. residents then forwards the purchases to their final destination outside the United States.

“We are Latin American. We are in Latin America,” said Basagoitia. “We know how to maneuver through Customs and get items cleared.”

At human resources consulting firm Mercer, 2006 was a positive year, with revenues for the region rising 12 to 13 percent and similar results expected this year. Latin America accounts for about 2.5 percent of the global company’s business.

“In Latin America we had a good year,” said Lawrence Woerner, managing director in charge of Canada, the United States and Latin America for Mercer. “We tend to be very much linked to how our clients view Latin America and to the foreign direct investment heading into Latin America.”

He said while the company is still seeing double-digit growth in the region, it has slowed down, perhaps reflecting nervousness about how long Latin America’s golden stretch will last.

Although 2006 marked the fourth consecutive year that Latin America and the Caribbean have enjoyed notable economic expansion, executives who are old hands in the region remember too well the past boom-and-bust cycles. And economists are cautioning that the biggest economies
Brazil and Mexico are growing below their potential.

“From our clientsperspective,” said GrupoUno President Tino Reiser, “it’s ‘let’s enjoy the ride.’” But he said that when it comes to pumping money into the region, they’re not as eager.

Andean strength

Mercer, like most of the other companies, relies on Brazil and Mexico for most of its business. But Woerner called Colombia “a strong No. 3” and said Argentina and Chile were also important markets for the firm.

InfoAmericas’ Price described Colombia as a “bright spot” in the region, adding that “the money that left is now rushing back.” Hartzell said MasterCard has seen “major growth” in the Andean country thanks to a reduction of the value-added tax on electronic transmissions.

But it is Colombia’s neighbor, Venezuela, which is providing the business community with the most complicated scenario. On one hand, many multinationals are doing a booming business in the oil-rich nation. Demand for consumer products from the United States has exploded and the
government of President Hugo Chvez is on a spending spree, buying supplies for major infrastructure upgrades.

On the other hand, corporations are hesitant to tie their fortunes to Venezuela, which recently announced it will take the 87 percent stake that U.S.-based AES Corp. has in power company Electricidad de Caracas and nationalize the country’s largest phone company, CANTV. U.S. telecom Verizon owns 28.5 percent of CANTV.

Basagoitia described Venezuela as Trans-Express’ single- biggest market. “They buy about everything,” he said, adding that a big chunk of his company’s growth comes from business in Venezuela.

“We’re concerned about that, but we feel that it’s going to be hard to put that genie back in the bottle,” he said. “Besides, all our businesses are consumer driven and the demand is there.”

When analyzing Latin Americas future, the executives said, it is important not to confuse the regions political influence with its business appeal.

“I do think that Latin America and [Brazilian President] Lula and Chvez and others think that they matter a lot more to the Fortune 200 CEOs than they actually do,” said Price. “Latin America, more than any region in the world, has a huge gap between its political relevancy and its economic relevancy. The region has lost huge political relevancy.” WC