Latin America Flexes Economic Muscle | State of Business magazine | spring 2010

Georgia State University | J. Mack Robinson College of Business

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Latin America Flexes Economic Muscle

New Strategy Makes Region Player in U.S., Worldwide

by Gary McKillips

a man flexes his bicep on which appears a silhouette of South America

For years, says David Bruce, professor of international business at the Robinson College, Latin Americans sought to be different from their neighbors to the north. They were proud of their customs and cultures and resented the fact that to many in the United States the Frito Bandido and the “big sombrero” represented everyone from Tijuana to Tierra del Fuego.

“Today, Latin Americans are playing a different card,” said Bruce. “Instead of saying, ‘we are different than you,’ they are looking at things in the broader perspective and saying that being ‘just like you’ is not so bad after all.”

While no less proud of their individuality, they now realize that being viewed as having a similar Western European heritage as the United States, helps this group of 20 nations compete against the likes of China, India and Russia with their much different history and culture.

USLAT

Robinson’s new U.S.-Latin American Trade program (USLAT), launched in 2008, is helping Latin American firms in a variety of sectors (food and beverage, healthcare, IT, etc.) come to market in the United States, and American companies to open markets in Latin America. “What these firms are selling,” said Bruce, “is not only their products, but the advantages of doing business with companies nearby rather than those in the Far East or even Europe.” They stress a much shorter commute and a much easier learning curve. Bruce notes that English is the language of business in Latin America and Spanish and Portuguese, the two languages primarily spoken by the general populace, do not have as many variations as Chinese, for example. All this makes for an ease of doing business between countries and for the easier exchange of talent.

Mexican companies are selling Italian pizza in Kansas City; Gerdau Ameristeel, a Brazilian steel company, has purchased several mills throughout the eastern United States including in Georgia; Cemex, headquarted in Mexico, operates throughout the world and is the largest supplier of cement and ready-mix concrete in the United States According to BusinessNews Americas, Peruvian cement companies are prepared to invest $1.2 billion in the United States by 2016.

Also prospering is Petrobras, a big oil producer and refiner that, although government owned, sells shares of stock on both the Brazilian and New York exchanges. So successful are Brazil’s efforts at producing its own energy that the country has gone from being 85 percent dependent on foreign oil in the mid-70s to completely self-sustaining today.

Big Business

Salomao Farias, director of the MBA program at the Federal University of Pernambuco located in the northeast region of Brazil, and a visitor to Robinson earlier this year, points out that Brazil also has one of the world’s largest aircraft manufacturers in Embraer, which produces midrange commercial planes and private jets. He also notes that Latin American executives are making a major impact. Carlos Goshn, a Brazilian native, is the head of both Nissan of Japan and Renault of France. Brazilian native Eike Batista, the eighth- richest man in the world according to Fortune magazine, has energy holdings in Brazil, Chile and Russia.

Atlanta-based Coca-Cola says Latin America is one of its hottest regions. First quarter 2010 results show revenues up 15 percent and operating income up 33 percent for the region.

According to Pedro Carrillo, also with the Institute of International Business and along with Bruce a driving force behind USLAT, “Students are amazed at what they see when we take them on study abroad trips to Latin America. They have no idea, for example, that Sao Paulo, the business center of Brazil, has a population of 11 million, three million more than New York City.” Carrillo also says that students are impressed by what they see and hear as they visit companies in Brazil and Argentina.

World Cup and Olympics

Two major events sure to have an effect on the economy and enhance the worldwide prestige of Latin America are soccer’s 2014 World Cup and the 2016 Olympics – both to be held in Rio de Janeiro. According to Carrillo, “Unlike Atlanta, which had never experienced anything like the 1996 Olympics, Rio is familiar with a large influx of tourists and knows how to manage crowds like they do every year at Carnival. They will do well, and the ripple effect will help all of Latin America.”

Farias, the Pernambuco professor, cautions that all is not roses in Latin America. He says there are still problems with traffic, crime and corruption. The latter two are largely, he adds, “a product of poor income distribution, which has led to poverty in certain countries.” He also notes that there is political instability in countries such as Venezuela.

But the overall picture is good. Good enough that many Latin American countries have done well even during the past year’s economic downturn. In the process the region has become not just a destination, but an initiator of capital and investment in the United States and worldwide.

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