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Across a panel of CEOs discussing business in Latin America, the consensus was that money can be made in the region. “Enormous wealth is being created in Latin America,” said Pedro Azcué, CEO of Jones Lang LaSalle for Latin America. “LaSalle is there because there are deals.” Azcué spoke at the fourth annual Latin American Business Conference May 12 at Gleacher Center. His panel, “Doing Business in the Region,” was moderated by Marianne Bertrand, Fred G. Steingraber/AT Kearney Professor of Economics. The event was sponsored by the student-led Latin American Business Group.
Over the past 25 years, Azcué said, capital has begun to flow across countries, which has created business opportunities for multinational companies seeking prospects in new markets.
For example, in Latin America, said Ray Young, ’86, CEO of GM do Brasil, “There are tremendous opportunities to make risk adjusted returns. The market goes up and down, so you reduce fixed costs. That’s critical to survival in Latin America.”
Still, in Mexico, said Ricardo Haneine, ’84, vice president and director of AT Kearney Mexico, “We’ve seen growth but it’s not a structural thing. The power group struggle has prevented Mexico from going forward.”
This includes rampant informal trade practice. “In Mexico, informality creates a great challenge to development,” Haneine said. “Some industries, like trucking, operate completely informally. That creates a huge cost to the infrastructure. It doesn’t allow a country to be more competitive.”
Education is another problem across the region. “The IT industry is growing at 30 percent a year in Mexico, and we don’t have enough people,” said Haneine. “We need to develop people through education. Then we can have a workforce that’s profitable.”
Young said he encounters similar challenges in Brazil. “It’s hard to find educated people in Brazil. We spend a lot of time with in-house training.”
Said Haneine, “We’re starting to require job training.” But that’s just one step. “There’s a lot to do; lots of politics in the education system. A major challenge is how to ensure education complements for-profit companies. There needs to more coordination between academia, industry, and government.”
The labor market also needs to be less rigid, said Ray. “In Brazil, there’s a democracy; they debate everything. Labor market rigidity is big disadvantage.”
In Mexico, Haneine said, “Social labor costs are high, but not as high as Brazil. We have reduced the role of government, but we didn’t get to next step, which is investment in infrastructure.”
Nevertheless, as Azcué said, “Capital is not waiting for the world to be perfect. Private equity is coming.” And there is growth potential in several areas, including high tech development and the aerospace and automotive industries. “In Mexico, there are several areas where you can begin to meet value-added activities.”
Now, said Young, “Countries need to stop thinking of themselves as low-cost countries. They need to diversify. At GM, we’re trying to build several businesses to export. Brazil is going to be more of a resource country than an industrial country.”
Indeed, “We see it as a region of opportunity,” said first-year student Daniel Echavarri, co-chair of the event. “But in order for it to grow, we need more MBAs.” Echavarri’s father returned to Chile after earning his MBA at Chicago 30 years ago.
Today Echavarri said he and his classmates are looking for opportunities in Latin America. “The conference helps education us about the possibilities.”
And, according to Azcué, the possibilities are almost endless. “When you look at world of the future, you can’t just think of it in the context of the past.” He says. “There are lots of problems, but the successful businessman can’t necessarily worry about how to improve the world—it is what it is. You need to focus on what works. There are also lots of opportunities; I think we’re in an exciting time.”
—Carmen Marti