The Multiple Realities of Latin America – The Latin Business Chronicle

Latin America as a uniform structure can become a delusion for those who have to make regional business decisions.

BY DARIO CUTIN

PUERTO VALLARTA, Mexico — The public and private dialogues during the 2012 edition of the World Economic Forum for Latin America have served as a reminder of the fact that considering Latin America as a homogenous region or market is a mistake that can have a negative impact in the organizational, business and communications planning process.

The more the leaders know about the region, the more they agree that this area of the world is not a block nor does it act as if it will become one. It is rather a theoretical aggregate of multiple realities and complexities that have common roots and characteristics, but also many nuances that differentiate one country and market from another.

This region has deep cultural connections – and only to some extent geopolitical and economic similarities – but it also has a diversity that is impossible to understand by reviewing a spreadsheet or looking through a computer window. The only way to comprehend this region is talking and expending time with its leaders and their people, which are essential ways to understand where their priorities and concerns are common or different.

Since many countries have Spanish as their official language, it is tempting for newcomers to perceive that everything is relatively the same in Latin America… Over time, however, they can recognize that not even language escapes from the differences in each corner of the region.

In regards to the economy, between markets that are emerging, submerged or in the emergency room, the differences are even more accentuated. For instance, the size of Mexico and Brazil makes those two countries impossible to compare with the rest of the region. This situation calls for objectives views while preparing plans for Latin America: it is difficult for regional business or communications leaders to perceive, remember and consider the nuances in the region if they are based on the two largest economies of the region. Otherwise, distance is necessary and indispensable to ensure a general view to consider commonalities and differences within the region.

From a communications perspective, if we had to name the most relevant common characteristic throughout the region, that should be the openness and interest in in-person and small group dialogues. Latin Americans are always eager to talk and exchange ideas. Consequently, organizations must allocate the resources and time needed to develop solid and credible spokespeople to serve as messengers during in person, live conversations.

Along these lines, one highlight of the Forum this year in Mexico is the absence of many private or public sector leaders from several countries, who did not join the conversation to help establish the common ground of priorities for the region, as well to communicate the nuances between the neighbors for the common good. The absence of those senior leaders creates a communication gap that will be perceived, regionally and locally, as a lack of interest and avoidance of business and communications responsibilities.

REGIONAL OR LOCAL COMMUNICATIONS?

A question came up frequently while speaking with many leaders in recent days about the multiple realities of Latin America: if there are so many differences between the key markets, do we need regional communication plans?

I firmly believe that regional communications plans are necessary and worthwhile because they allow organizations to have a consistent, coherent and effective message to support their business plans. However, these plans should include processes and tools to ensure that regional initiatives are leveraged, adapted, customized and even supplemented with local tactics that address the realities, priorities, special circumstances, needs and characteristics of each country or market.

Those regional plans must have a long term approach. They should avoid “easy” solutions, because strategic communications require time, professionalism, personal dedication and reasonable resources over time. Moreover, they call for orchestrated efforts instead of spontaneous and brief attempts to “do some magic,” have a smart, isolated “spin,” or “create some buzz.”

Despite that various leaders don’t like it, building the image and reputation of an organization takes a long term, meaningful and disciplined approach, with the direct involvement of the leaders themselves. It is impossible to establish a good reputation in an impersonal or isolated manner, and it certainly can’t be nurtured in two days or one month… conversely, it can be destroyed pretty quickly if not protected… locally and regionally.

Dario Cutin is Partner and Managing Director, Client Services Latin America, Fleishman-Hillard.

Better Education Quality Needed

Formal education and skills aren’t connecting in Latin America.

BY GABRIEL SANCHEZ ZINNY

Education advocates in Latin America have long pushed for expanded access for all students. Indeed, access has improved, with secondary school completion rates climbing from 30 to 50 percent over the past two decades. However, there is a growing realization that greater access alone will do little good without higher quality.

Business leaders, in particular, have argued that there is a profound disconnect between what schools are teaching and what is actually required for a worker to succeed in a globalized, innovation-driven, and knowledge-based modern economy. “There are very talented people in the region. All they need is a chance to develop,” says Felipe Vergara, co-founder of Lumni, a company that invests in students’ education in exchange for a fixed portion of the income they will go on to receive with their improved career path.

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What’s Watt’s Doing In China?

A Chilean dairy company finds success in China.

BY RUTH MORRIS

SHANGHAI– It’s never been a problem for Chile to sell copper to China. The Chinese came knocking, hungry for the metal to wire new cities and factories as the Chinese economy hit full steam. Copper accounts for roughly 85 percent of Chile’s export sales to the Asian giant.

Knocking on China’s door is another story… and one Juan José Vidal knows well.

As the Asia business manager for Watt’s S.A., one of Chile’s leading food companies, it’s his job to bring an array of jams, juices, cheese and baby formula to the Middle Kingdom and beyond. The company’s products hit Chinese grocery stores three years ago.

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Argentina: Back to the Future

Argentina’s expropriation of YPF defies all logic.

BY JERRY HAAR

The well-received 1985 movie “Back to the Future” was followed by two sequels. The fourth sequel is currently playing in Argentina—not on the big screen but in the political economy of that nation. This nation of 40 million has once more slid back into an imbecilic morass of demagoguery, authoritarianism, mindless statism and self-destructiveness. Don’t cry for Argentina; this toxic elixir was 100 percent brewed and imbibed by the political class in that nation.

In a move that defies all logic, President Cristina Fernandez has renationalized YPF, the nation’s largest oil company, booting out Repsol as majority shareholder. The biggest natural resources renationalization since the Russian government took control of Yukos oil a decade ago, President Fernandez’s claim that the renationalization was done due to YPF’s failure to invest in the oil sector simply does not wash. YPF has had every right to repatriate profits and dividends to its Spanish majority shareholders. It is the Argentine government’s failed energy policy and setting of domestic prices far below international levels that are the true culprits here. Cristina’s vehement assertion that “I am a head of state and not a hoodlum” is akin to Richard Nixon’s assertion: “I’m not a crook.”

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(Reuters) – Argentine lawmakers took their first step toward nationalizing the country’s No. 1 oil company on Wednesday when a Senate committee agreed on the outline of a bill to put YPF under state control.

President Cristina Fernandez unveiled plans on Monday to seize a 51 percent controlling stake in YPF from Spain’s Repsol (REP.MC), sparking a chorus of condemnation from Madrid to Washington. Trade partners, already disgruntled by protectionist measures adopted by Buenos Aires, warned the move could hobble private investment in Latin America’s No. 3 economy.

Click here to read the article in its entirety direct from Reuters

However click here to read about the soap opera that has become Sinopec of China’s attempt to buy 57% of Repsol of Spain, stake in Argentina’s oil company YPF (Yacimientos Petrolíferos Fiscales) before it was nationalized by Buenos Aires.

Aljazeera added to the wealth today by publishing the transcript of a interview they conducted with former Peruvian Ambassador to China, and current Ambassador to the US - Harold Forsyth.  In the interview Aljazeera reporter Eddie Walshe discusses with Ambassador Forsyth his perspective on the growing importance of Asia-Pacific cooperation and more particularly, how Peru fits into the Asia-Pacific triangle of the Greater Asia region (with a special emphasis on China), North America and South America.

As someone who personally believes the growth of trade and exchange between nations of the Asia Pacific and the Americas (North & South) will be the most important network of exchange this century, I highly recommend giving it a read.

Click here to access Peru’s place in the triangle of Asia-Pacific security, published by Aljazeera

What people around the world define as the Asia-Pacific region varies widely, for your author (me) I consider it to include all nations, cultures and territories on both sides of the Pacific Ocean.  This means “Oceania,” despite being a region in itself must naturally be included.  It also tends to include India, because although India is usually not considered a “Pacific” nation, it is a major geopolitical power in this equation.

Within the Asia-Pacific region there is however a level of exchange and interaction which is far more significant when looking at the greater region as a whole — and that, in my opinion is the triangular interaction of North East Asia (China, South Korea, Japan), North America, and South America.  Of course, one could argue discounting Russia, India, Australia and the nations of SE Asia and leaves many players out of the equation. I only do so because their links to the America’s are relatively small when compared with China, South Korea and Japan.

Why is this triangular network so important you ask?  Let’s quickly review some facts which come to mind pertaining to a few specific categories — Economic output & International Trade, Commodity production/ consumption (energy, metals and agriculture), and geopolitical security

• The Asia-Pacific region includes the world’s three largest economies — The United States, China (PRC), and Japan.
• These three economies make up a large portion of global economic output, commodity consumption/production, and trade.
• In terms of commodity consumption & production you find within this triangle (to name a few):
• Top 5 iron ore producers – Brazil, China, Australia, India and Russia
• Top 4 iron ore consumers – China, Russia, Japan and South Korea
• A few of the top energy producers, Russia (#1), the US, China, Venezuela and ever more significant levels of energy production coming from Brazil and Canada
• The top 5 oil consumers – United States, China, Japan, Russia, and India
• The Top 5 copper producers – Chile, Peru, the US, China, Australia
• 3/5 of the top copper consumers – China, India & the US
• Major sources of precious metal production (Gold & Silver) Russia, China, Australia, Peru, Chile & the US
• Major sources of precious metal demand – China, & the US
• Major centers of global food production – Russia, the US and South America as a whole
• Major centers of food consumption – China, India, & the US
• Finally, the Asia-Pacific region includes many of the 21st century’s most potentially volatile geopolitical security issues. To name a few:
• US-China relations
• NE Asia which includes everything from
• The balance of power between China, Japan, and Korea (and Russia) … and ultimately how the US factors into this region
• The Korean Peninsula and all the related issues from re-unification of North & South Korea to proliferation of arms by North Korea
• The South China Seas
• The quagmire of complex inter-country relations in SE Asia
• Taiwan
• ETC

China’s huge appetite for energy and minerals to fuel its expanding economy has strained international markets for oil, natural gas, iron ore, coal, copper, nickel, aluminum, and other resources. To satisfy China’s hunger for raw materials, Chinese companies, backed by the government, have been acquiring

equity stakes in natural resource companies, extending loans to mining and petroleum investors, and writing long-term procurement contracts for oil and minerals in Africa, Latin America, Australia, Canada, and other resource-rich regions.

In fact, more than half of Chinese foreign direct investment (FDI) in natural resources is in Latin America. It is concentrated in 34 major projects that stretch from Venezuela and Ecuador through Brazil, Bolivia and Peru to Argentina and Chile. Since China launched its “going out” strategy, encouraging companies to become more competitive, total Chinese FDI in Latin America has increased nearly sevenfold, from $226 million in 2003 to $1.6 billion in 2009.

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For Latin America, China Both Friend And Foe – Forbes

Is China more friend than foe for countries like Brazil and Mexico? A study to be published in Americas Quarterly journal this week shows that the relationship is actually quite well balanced.

By 2004, China’s arrival in Latin America was being felt with the full force of a fire breathing dragon. China imports totaled $17.9 billion to Latin American countries, more than double where they were just four years prior at $7 billion. At the time, I asked Brazil’s Trade Minister at the time, Luis Fernando Furlan, what the country could do to avoid China’s footsteps. His take at the time was basically to design better mousetraps, under the idea that Brazil’s trading partners would buy items like shoes because the design was cool. That might be true to some extent, but the textile and apparel industry in Brazil and throughout Latin America has lost market share abroad and domestically to China competitors. The good news, the ground they are losing is not as bad as some might have thought when China’s presence was just starting to be felt there.

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Latam: exporters rue Chinese rivals – FT report on the Quarterly America study

There’s no doubt that China’s growth has created a market ripe for Latin America exports, particularly natural resources. But have Chinese manufacturers – using those same imported raw materials – hurt the sales of their LatAm rivals? The evidence has mostly been anecdotal. Until now.

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Christopher Sabatini: China’s Geostrategic Designs on Latin America – Fox News Latino

In the last 5 years China’s military activities in Latin America and the Caribbean have grown at an unprecedented rate. Beijing now regularly hosts officers from Colombia, Chile, Mexico, Peru and Uruguay in its military academies, has expanded arms sales and technology transfers to countries like Argentina, Bolivia, Brazil and Venezuela, and in October last year even sent a navy ship to the Caribbean.

Is China—now Brazil and Chile’s number-one trade partner—buttressing its economic interests in the Western

Hemisphere with military ties and alliances? Is this the Middle Kingdom’s equivalent of President Barack Obama’s Pacific pivot to balance China’s saber rattling in Asia?

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China plants bitter seeds in South American farmland – Washington Times

BUENOS AIRES — Few were surprised when Venezuela announced a deal with China last week to restore 1.4 million acres of unproductive farmland across the oil-rich but impoverished South American nation.

China increasingly is buying farmland and agricultural companies in South America to feed its ever-growing population, currently estimated to be 1.34 billion.

The most important aspect of China’s agricultural investment in Latin America is that “it is a part of the increasing physical footprint of the People’s Republic of China that is just beginning to occur,” said Evan Ellis, an assistant professor at National Defense University in Washington.

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China’s export to Latin America: Corruption – CNN

By Ariel C. Armony – Special to CNN

Shoes. Toys. Clothing. China has inundated Latin American markets with cheap goods. This flooding has jolted local producers and generated demands for government measures to protect domestic industries. But there is one Chinese export that has not received enough attention among policymakers, media analysts and public opinion: Corruption.

Though China and Latin America have different values and attitudes, both have traditionally lacked transparency in government. They operate according to informal business dealings which, in turn, undermine or further weaken the rule of law. Corrupt practices exacerbate distortions in public administration, impair sustainable development, erode a nation’s legal culture, and worsen inequality and poverty.

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Del canal Argentino – Infinito

Every day Luis Castilla, Peru’s finance minister, says he lights a candle and “prays that China won’t crash”.

His prayers are echoed by many in a region that remains one of the world economy’s few bright spots. South America’s commodity-rich economies grew 5 per cent in the first half of this year. Last year, these new motors of the world economy added half a percentage point to global output.

But slowing Asian demand and plunging commodity prices have raised the spectre that South America, having largely escaped the 2008-09 Great Recession, may not be so lucky this time around.

Main point = Potential new financial crisis in the “Developed World” + slow down in China = Scared Latinos

Click here to read the full article direct from the Financial Times

The Western media continually criticizes China’s role in Latin America as being “neocolonial” and claims it has an “insatiable demand for commodities”, so I was keen to observe the people’s attitude toward China during my trip to the region recently.

Judging from the enthusiasm for China displayed by government officials, businessmen, academics and ordinary people in Chile, the picture presented by the Western media has been seriously distorted.

At the UN Economic Commission for Latin America and the Caribbean, chiefs and experts attributed the fast trade and investment growth from China as a key factor for Latin America not only surviving, but thriving during the global financial crisis.

The same message was heard from top Chilean officials at the 5th annual meeting of the Chile China Business Council, which drew some 500 government officials and business people.

It is true that commodities are an important part of the trade between China and Latin America. However, that trade benefits not only China, but also Latin America and the rest of the world.

By being the world’s manufacturing workshop, China has paid a high environmental cost. Just half a century ago, that job was done in most of today’s developed countries when they were the global manufacturing center.

Many developed countries have an insatiable demand for China’s rare earth and, of course, the country’s cheap labor. But this never seems to bother the Western media.

In fact, China and Latin America are quickly diversifying and elevating their trade and investment as witnessed by the host of agreements signed by China and Cuba, Uruguay and Chile in the past few days.

China has already become Chile’s largest trade partner. Chinese businesses are increasing their presence in the South America country. The billboards on Santiago streets by automaker BYD and appliance firm Haier, and the Chinese businessmen who do trade, operate malls and run convenience stores are proof of China’s presence.

Both countries share a priority in development. Chile aspires to become a developed country and China wants to become a xiaokang (well-off ) society.

Chilean President Sabastian Pinera made constant reminders that the two countries are very close despite the geographical distance between them.

The mood among the ordinary people I met in Chile was also favorable to China. I have never heard the word “Welcome” as often as I did in Chile. Ordinary Chileans I met in cafes, museums, parks in Santiago and Pablo Neruda’s colorful and hilly neighborhood in historic Valparaiso greeted me with “Welcome to Chile”.

What Pinera said was true. China and Chile are very close. In South America, Chile was the first country to recognize China’s market economy status, the first to sign a free trade agreement with China, the first to establish diplomatic ties with China and the first to support China’s WTO accession.

Of course, China and Latin American countries, all belong to the developing world and are going to compete with each other. But we all know that competition is a good thing and there is no need to distort the picture simply because of competition.

Latin American nations are independent countries and they are no one’s backyard. For China and Chile, they are really neighbor countries separated only by the Pacific. You can literally fly from Beijing to Santiago without passing over any other country.

Presidents Dilma Rousseff and Hu Jintao in China last month can celebrate rising two-way trade. (Photo: Roberto Stuckert Filho/PR)

China’s trade with Latin America is growing twice as fast as U.S. trade with the region.

BY RUTH MORRIS of the The Latin American Business Chronicle

SHANGHAI — China’s dragon breathed fire into Latin America in 2010, as trade between the two sides shot up by a spectacular 51.2 percent, to $178.6 billion, and memories of the economic recession melted away.

China’s trade with Latin America is growing at nearly twice the level of US trade with the region. It also is significantly higher than the 31 percent increase in trade between the European Union and Latin America last year.

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