A vibrant middle class is emerging in Latin America, changing the rules for doing business in the area and transforming operations at regional headquarters in South Florida, according to members of WorldCity’s CEO Club.
Club members explored the positive trend at their June 11 meeting in talks led by Henry Martinez, managing director for Discovery Latin America/U.S. Hispanic, the pay TV company whose business has soared in the past decade as the growing middle class buys more cable and satellite TV services.
Martinez said the share of Latin American households subscribing to pay TV jumped from roughly 26 percent to 34 percent in the past six years and could reach 50 percent this decade, a number that seemed impossible when he started out in the region in the more volatile 1980s.
“For the first time, Latin America is the sweet spot,” Martinez proudly told the group. “I get more calls from the CEO, and it’s mostly good news.”
Spurring the change in Latin America is a mix of factors: growing wealth from strong sales of steel, soy and other commodities from Latin America to Asia; better economic management, with inflation in check in most nations; and new policies aimed to close the gap between rich and poor in a region long known for inequality.
The newfound wealth and rising middle class mean more demand for consumer products, home improvement stores, banking services and even professional managers, CEO Club members said.
For workplace consultants Right Management Services, the fastest growing segment of business in Latin America nowadays is not outplacement but developing talent for promotion, said Tom Shea, chief executive for the Florida and Caribbean.
Executive search company Diversified Search Odgers Berndtson even sees a shortage of middle managers in the region and “a fight for talent because of these sudden needs,” said Lorena Keough, managing partner.
Many Latin American professionals are returning to their homelands from regional headquarters in Miami, reducing the relative weight of South Florida offices compared to company offices within the region itself, said Ruben Rotulo, president of consulting firm Robles Advisors.
The construction industry also is humming in Latin America. As tens of millions of people can afford for the first time to qualify for a mortgage and buy a home, sales of low-income houses are surging, especially in Brazil and Mexico. And shopping centers are sprouting beyond major urban areas into secondary and tertiary cities, said Jorge Hurtado, Aguirre Newman America’s director for the Latin American region.
Last year, Wal-Mart opened roughly 350 stores in Mexico alone, from supercenters to small neighborhood shops, and this year, it expects to open another 350 in Mexico, Hurtado said.
The building boom has offered Western Union new opportunities to locate money-transfer offices at stores that sell construction materials. Emigres in the United States and Europe often send money to their families back home to buy goods to build and improve their homes, said Liz Alicea-Velez, Western Union’s executive vice president for Latin America and the Caribbean.
Fast food companies are cashing in, with McDonald’s, Wendy’s and Burger King all expanding operations in Latin America to appeal to the growing middle class, said Diversified Search’s Keough.
Consumer products companies also are benefiting. Clorox, for instance, now can sell more small packages directly to consumers. Those buyers might have depended before on middlemen with pushcarts who divvied up gallon-bottles and may have modified their contents. “Now, we can sell more safely,” said Michael Costello, vice president and general manager for Clorox Latin America.
Club members say the pace of Latin America’s growth and middle-class expansion could slow.
Brazil’s economy grew by a record 9 percent in the first quarter, a speed not likely to be sustained. Many economists expect Brazil to grow about 5 percent for the year, still outpacing the United States and Europe but slower than the first-quarter rate, Discovery’s Martinez said.
And some Latin American nations still present headaches for multinationals, especially Venezuela, which has revised its foreign exchange system and now makes it tough for companies to get money out.
But the trend toward growth seems clear for the near future, opening new business opportunities from adding pay TV subscribers in Latin America to hosting more Brazilian tourists in Florida, participants said.
“There is a foundation building for greater stability in the region for the next five to 10 years,” said Martinez, whose 13 networks already reach 160 million people in the Americas.
The CEO Club is one of six event series hosted by WorldCity to discuss international business topics. The series is sponsored by the Diaz Reus law firm, the University of Miami School of Business Administration and telecom giant Telefonica. The next CEO Club meeting is set for July 9.