There
is no shortage of foreign investment in Latin America, says Jacqueline Vitali,
but companies setting up in the region face the challenge of attracting and
retaining skilled staff
Despite
the region’s past political and economic upheavals, Latin America’s recovery
has been very quick, and global companies are continuing to invest in the
region. In fact, foreign investors continue to pour money into Latin America –
especially in Brazil, Mexico and Argentina.
According
to Francisco Ropero Ramirez, general country manager of global consultancy
Watson Wyatt Brazil, the two countries that have benefited the most from
foreign investment are Brazil and Mexico. "Brazil is ranked third for
global investment preference, and first in the region. In the last three years,
for example, the volume of global direct investments in Brazil surpassed the
US$25bn mark per year," says Ramirez. "Mexico is ranked
fifth-favoured country in global investments preference."
Vodafone,
for example, recently purchased a large stake in Iusacell – Mexico’s
second-largest cellular operator. Spanish telecommunications company Telefonica
has also made significant purchases within the last year in Mexico, Brazil and
Argentina. Spanish banks such as BBV and BSCH have followed suit.
Oil
companies are investing heavily in the region too. The Spanish oil company
Repsol YPF is to invest Pts86.2bn (approximately US$47bn) to bolster the
quality and efficiency of its Latin American refinery operations over the next
five years. The company controls 55.3% of the Argentine oil refining sector and
holds stakes of 54% and 0.8% in the Peruvian and Brazilian sectors
respectively. Juan Pedro Maza, Repsol’s managing director for refining and
marketing in Latin America, states that Repsol’s access to pipelines and HR are
among the company’s main strengths in the Latin American sector. Â
Companies
in the automotive sector are also investing in the Mercosur (a common market
union agreement between Argentina, Brazil, Paraguay and Uruguay) region as they
can take advantage of the more favourable taxes when exporting cars between the
countries within that trade agreement.
According
to Carlos-Enrique Bengtsson, site director of recruitment consultancy Wideyes
in Spain, Internet companies are also heading for Latin America. "This
region is seen as one of the Internet’s great untapped growth areas.
Antfactory, the London-based Internet investment company that specialises in
on-line support, is jointly funding an on-line venture with CVC Latin America,
a private equity unit of Citigroup. They hope to bring in other strategic
partners from the region. Offices have already been opened in S‹o Paulo, Mexico
City and Buenos Aires."
Brazil
and Mexico have been more appealing to multinational companies than any other
country within the region because economic growth has been very strong and both
nations have enjoyed lower rates of inflation than experienced in the past,
explains Ramirez. "The two countries have excellent growth potential too.
Brazil, for example, has an internal population of 170 million people, while
that of Mexico is 100 million. That’s a huge consumer base to exploit."
 Although there is a flurry of expansion
activity within the region, it’s certainly not without its challenges, claims
Fernando Lanzer, ABN AMRO Bank’s HR director for the Latin American region.
"And it’s the ‘staffing’ issues that are probably the most challenging.
The main difficulty these global companies entering this region are faced with
is the culture. They are faced with a paternalistic culture, which is not only
collectivist in nature, but one that values work/life balance as much as
performance – something that is completely different from the Anglo-American
mentality of most multinationals. Many also make the mistake of overlooking
national differences within the region. Yet, they wouldn’t make that mistake in
Europe."
Like
many parts of the world, attracting and retaining skilled talent is another big
challenge for HR directors like Lanzer, simply because it is scarce and very
expensive, although he admits that better use could be made of the millions of
unemployed in the region.
Skilled
workers in general are attracted by the prospect of international exposure and
careers, especially in the US. So American companies venturing into the region
usually don’t have a problem attracting talent. But skilled talent even for
them is in short supply. And it is that that often hinders growth, points out
Ramirez: "Often, soon after entering new territory and having incurred
expensive setting up costs, they realise that the growth potential can’t be
exploited to the max because of the lack of available and skilled human
capital."
Those
in this position have four short-term solutions:
–
retention of key people
–
growing from within – training fast internally
–
hiring from the competition
–
importing talent from neighbouring countries.
"All
of which, of course, have cost implications," adds Ramirez. Although
training and development is a medium-to-long-term investment, Ramirez strongly
believes that governments in the region are doing a pretty good job to help
companies out, especially to ensure a steady supply of skilled labour in the
high-tech areas. "It is amazing, how fast those high-tech and IT firms are
getting the resources they need."
That
said, no company will consider venturing into an emerging market without
analysing the local labour pools carefully, concludes Ramirez. "And that’s
what companies like Watson Wyatt do. We’ve worked with several companies
landing in Latin America, and helped to support their arrival and growth."
Who’s
going where?
The
most popular countries for investment in Latin America are Brazil, Mexico and
Argentina. Companies venturing into the region are from the following sectors:
–
Telecommunications: Vodafone and Spain’s Telefonica
–
Finance: Banks such as Spanish BBV and BSCH
–
Petroleum: Oil companies such as Spanish Repsol YPF
–
Internet: On-line companies such as UK’s AntFactory
Further
information
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For
more information on venturing into the Latin American region, see the following
Web site:
Watson
Wyatt: www.watsonwyatt.com
