Source: http://worldcityweb.com/home/MIA/publications/magazine/5/630/

Land of plenty

by Mary Dempsey

For James Bullen, there’s good news and there’s bad news.

The good news for the CEO of Etek, a computer security provider and consulting firm with four offices in Latin American and headquarters in Miami? A boom in business. Etek’s corporate group has annual sales of $100 million and expects them to grow 50 percent, on the heels of 34 percent growth last year. That comes after two flat years.

Now the bad news. “I don’t have the talent or the financial resources to keep up with this kind of growth. I get a great reception from the analysts. But the venture capital markets are still very cold on Latin America,” Bullen said at a WorldCity CEO Roundtable in mid- August. His other option tapping capital within Latin America is prohibitively expensive, with double-digit interest rates.

Bullen was one of four multinational executives who shared their stories at WorldCity’s monthly breakfast roundtable. From vastly different industries, they had something in common: Strong business growth in Latin America was bringing with it unexpected concerns. IDC, which offers marketing and consulting services to the technology industry, entered Latin America 15 years ago, then opened a Miami office as its Latin American headquarters four years later. As international competitors like Gartner, Yankee Group and Pyramid Research reduced their exposure to the region after Latin America’s economies began to decline in the late 1990s, IDC hiked its investments. “Argentina, Peru and Mexico previously were partnership arrangements,” said Eric Prothero, group vice president for IDC Latin America and a roundtable participant. “They are now our subsidiaries.”

Those investments positioned IDC to take advantage of the region’s turnaround, at the same time the technology market improved globally after falling off in 2002. “It looks like 2005 will be one of the best years we’ve had since 2001. All our Latin American offices have grown double digits, except Mexico,” said Prothero.

The Economic Commission for Latin America and the Caribbean, or ECLAC, projects 4.3 percent GDP growth in Latin America and the Caribbean this year, with Argentina leading the pack at 7.3 percent growth, followed by Venezuela at 7 percent growth. Mexico’s performance, however, has not kept pace with projections and four key investment banks recently revised their forecasts. JPMorgan cut its growth forecast to 2.4 percent, from 3.2 percent, while Credit Suisse First Boston pared its to 3 percent, from 4 percent. ING forecast that Latin America’s largest economy would grow only 2.8 percent, a decline from the 3.6 percent it predicted earlier in the year. Santander Central Hispano lowered its estimate to 3.2 percent from 3.5 percent.

Prothero noted that IDC, a $2.5 billion company, generates 5 percent of its global revenues in Latin America. In addition to its consulting services, IDC has tech research operations and hosts tech-related conferences. (Its publishing arm, IDG, puts out magazines, including Macworld, PCWorld and TechWorld.)

The IDC executive said he worries about retaining key staff during a time of strong growth. “I have more than 100 people and 15 or 20 of them are the stars. That’s 20 percent of our folks that we’ve got to keep,” he explained. “We’re a company where the [work] environment is fantastic. But from the compensation perspective, we’re just average. In Brazil and Mexico, the top tech people are earning the same as what the best people would cost in the United States.”

Etek’s Bullen said it took his company three years to find a qualified manager to lead its Brazilian operations. “Information security growth in Latin America is the highest in the world because it’s so much catch-up. And in order for us to keep pace, we need quality people. But finding quality people in Latin America is tough,” said Bullen. “There is a lot of extremely good talent, world-class talent in the region. There is just not enough of it. The top talent is going to the U.S.” He said Etek’s greatest needs are formanagement and technical experts with at least 10 years’ experience.

Robert Garcia, senior vice president of global accounts for career management services company Lee Hecht Harrison, said companies may need to move recruitment out of the hands of top executives. He also said fastgrowth firms may need to invest in developing key management players.

Lee Hecht Harrison offers a range of services, from consulting to assistance for employees affected by downsizing to corporate training. The company has 240 offices throughout the world.

Garcia is not an uninterested party when he advocates development of executives’ skills. Leadership-development consulting for U.S. companies in Latin America has driven Lee Hecht Harrison’s growth in the region. “We’ve seen an explosion of business in Latin America,” Garcia told the roundtable.

Like IDC, Etek and Lee Hecht Harrison, fashion label Ferragamo is seeing a dramatic uptick in the region. The company’s Latin American operations are prospering at such a level that Diego Stecchi, Ferragamo’s director of Latin America & the Caribbean, expects the number of stand-alone Ferragamo stores to double from eight over the next three years. The newest shop, Ferragamo Chile, is slated to open in October, followed by three new shops in Mexico and the debut of Ferragamo stores in Argentina and Uruguay.

Stecchi said the number of Ferragamo franchises in Latin America should rise to 48 by 2008, nearly triple the number in the region today.

When Stecchi opened Ferragamo’s Miami office in 2000, it brought the company full circle. Just more than 80 years earlier, the company had been founded in the United States by Italian immigrant Salvatore Ferragamo, who made his mark keeping Hollywood stars and starlets well-heeled. Eventually, the company relocated to Italy where all its products are now manufactured. “But the United States has always been our biggest market,” said Stecchi. “For us, Asia as a region is bigger, but the United States is the biggest market as a single country.”

Although haute couture can ride out recessions, fashion is not completely insulated from economic upheaval. As a result, the early 1990s were not great years for Ferragamo. “Starting from 1990, there was a flattening of the market,” Secchi told roundtable participants. “In 1993, our worldwide revenues were about $130 million. But in 2000, things changed all over. They rose to $600 million.”

This year, he says, the privately held company’s worldwide revenues will exceed $700 million. The strongest growth comes behind double-digit increases in Latin America and Asia.

The company saw strong opportunity in Latin America, where men are just as likely as women to buy shoes and clothing under the Ferragamo and Ungaro labels. (In other regions of the world, women make up 60 to 65 percent of the market.) After 9/11, Latin Americans no longer flew to the United States or Europe to buy designer-label clothing. Rather, they shopped at home. AFerragamo Mexico subsidiary debuted in 2002.

As Ferragamo price tags in Latin America began to more closely match those in the United States, sales jumped. Latin America now accounts for 5 percent of the company’s total business.

Stecchi said the challenge with the expansion has been finding the right staff in Latin America. For two and a half years, while he tried to find a manager for the company in Mexico, Stecchi had to spend a week of every month in Mexico City, overseeing operations himself. “There just weren’t enough good professionals in that high end of the market. I really wanted a local person but I ended up interviewing French, Italian candidates,” he added. In the end, he found a Mexican candidate with an MBA and U.S. work experience.

Lee Hecht Harrison’s Garcia said Stecchi was lucky. He explained that many Latin American professionals prefer to stay in the United States than to deal with the crime and security issues in places like Mexico, where kidnappings have become commonplace.

Mexico’s Citizen’s Council for Public Safety recently released results of a study that found Mexico had the highest kidnapping rate in Latin America, surpassing Brazil and Colombia. During the first six months of 2005, according to the study, 194 people were abducted in Mexico. That compared with 172 kidnappings in Colombia and 169 in Brazil.

While it may be difficult to fill key executive positions in Latin America, there are also complications in recruiting people for Miami regional offices, Garcia noted. “Latin Americans don’t have any problem coming to Miami. They see it as paradise,” he explained. “But a lot of people elsewhere in the United States are under the impression you have to speak Spanish. Some executives view it as a place with crime, and programs like Miami CSI’ don’t help. And even the weather is both a good and bad thing because of the sweltering heat in the summer.”

That said, Garcia said the job market in both Latin America and South Florida has become more fluid. “There are now more jobs available here as well as in Latin America,” he explained. “Clients are landing jobs sooner. And there is more investment in employment in Latin America the first positions we usually hear about are sales.” He added that the Sarbanes-Oxley Act, which tightens accounting requirements for corporations doing business in the United States, has boosted the demand for CFOs.