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Sharp’s Fuller: Tough times in Latin America, tomorrow nearly impossible to forecast

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Diaz Reus Managing Partner Michael Diaz said China is advancing in Latin America

For Ed Fuller, who oversees Latin America and the Caribbean for Sharp Electronics, there is before October of 2008 and after, and they are two very different worlds.

“In September 2008, we sold as many LCD TVs as we had sold in the previous two years,” said Fuller, speaking in August at WorldCity’s CEO Club, an event held nine times per year exclusively for the heads of multinationals with South Florida operations. “A month later, the market collapsed.”

The event series is sponsored by Telefonica and the international law firm Diaz Reus and hosted at the Hyatt Regency in Coral Gables.

For most of the CEOs in attendance, representing companies like Nokia, Wendy’s, Discovery Networks, Medtronic, Western Union, Chevron, Clorox, Novartis and numerous others, and for most business leaders around the world, the last 12 months has been as trying as any period in their careers.

In Latin America, for the first time in four or five years of unprecedented growth, it is not necessarily about managing increasing revenues.

“If we’re here, it’s because we have survived,” said Fuller.

“Where from here?,” though, is the real question, according to the Miami native.

“How do you handle what’s going to happen? In our 20 years (in Latin America and the Caribbean), this is the most difficult time to answer that question.”

 

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Nokia’s Olivier Puech said Nokia does about 10 percent of global revenues in Latin America

Part of what makes that question difficult to answer is the effect of the stimulus powered by most of the world’s leading economies, including the United States and China. That stimulus is a little like an energy drink, Fuller said.

“After the Red Bull wears off, what happens? You don’t want to go back to business as usual.”

“Good news for Latin America,” he said. “It’s less dependent on the United States. China invested a tremendous amount of stimulus in getting the economy going. How much of that growth is organic? How much is sustainable? When the crutches come off, what happens?”

Michael Diaz, the founding partner of Diaz Reus, which recently opened an office in Shanghai and has offices in the Middle East and Latin America, said this economic crisis accelerated China’s ascension in the region.

“China is a real player in Latin America, much to the chagrin of the United States,” said Diaz, whose firm was recently honored by South Florida Business Leader.

Sharp, a Japanese company does about 10 percent of the U.S. total in Latin America and the Caribbean, Fuller said. The more normal range for most multinationals in South Florida is about 3-5 percent of their company revenues in Latin America, according to previous WorldCity research.

Olivier Puech, vice president of Latin America for Nokia, said it does about 10 percent. Liz Alicea-Velez, executive vice president for Latin America and the Caribbean for Western Union, said it does about 10 percent also. Telefonica, the Spanish telecommunications giant, is something of an exception, registering about half of its revenues in the region.

As the executives look ahead to the fourth quarter of 2009 and into 2010, there is both opportunity and risk — opportunity associated with a still-growing middle class, risk associated with both the economy and political uncertainty.

That growing middle class showed up for Wendy’s during this recession, according to Ben Mansoor, regional vice president for the restaurant company.

“They traded down to us,” he said, meaning to save money, some of the growing middle class frequented Wendy’s over more expensive options. “The rest of the Americas behaved like the U.S. People traded down.”

The company even offered delivery service during the swine flu outbreak in Mexico, he said, acknowledging that French fries don’t necessarily travel well.

Nevertheless, that behavior of trading down was “very different” from 1994, during a similar downturn. Then, business just fell.

Going forward, the political risk weighs on the minds of many of the “CEOs” for the multinationals, given a rise in populist leaders less than friendly to multinationals, leaders like Hugo Chavez in Venezuela, Evo Morales in Bolivia and Daniel Ortega in Nicaragua.

Fuller contrasted those with Chile’s Michelle Bachelet, Colombia’s Alvaro Uribe, Brazil’s Luis Inacio Lula da Silva and Mexico’s Felipe Calderon.

“If you want to be in a room with Bachelet, Lula, Calderon, Uribe — that’s more than half the economy” of Latin America, he said, putting Chavez, Ortega and Morales in a second room.

“If you want to have predictability, you go into the first room.”

“Chile is far ahead of everybody else,” he said. “Argentina is on the brink of disaster, will collapse next year without a doubt.”

“In Venezuela, it’s all about the price of oil. In Chile, it’s not the price of copper.”

In the end, a tough, rugged economy forces change and reveals leadership, Fuller said.

“We have all passed the line of vice president of sales. The ‘one year’ isn’t our responsibility.”

“This allows you to see things you haven’t seen before.”

 

Diaz Reus Managing Partner Michael Diaz said China is advancing in Latin America