Management in Latin America: Threats and Opportunities in the Globalized World

165 Pages·2014·2.223 MB·English

by  Paulo Roberto Feldmann (auth.)

Paulo Roberto Feldmann
Management
in Latin
America
Threats and Opportunities in the
Globalized World
Management in Latin America

Paulo Roberto Feldmann
Management in Latin
America
Threats and Opportunities
in the Globalized World
Paulo Roberto Feldmann
Department of Business Administration
University of São Paulo
São Paulo , Brazil
ISBN 978-3-319-04749-2 ISBN 978-3-319-04750-8 (eBook)
DOI 10.1007/978-3-319-04750-8
Springer Cham Heidelberg New York Dordrecht London
Library of Congress Control Number: 2014932691
Translation from the Portuguese language edition: Empresas Latino Americanas: Oportunidades e Ameaças
no Mundo Globalizado by Paulo Roberto Feldmann, © Editora Atlas 2010. All Rights Reserved
© Springer International Publishing Switzerland 2014
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Contents
1 Introduction ............................................................................................. 1
2 Culture, Geography, Wealth in Natural Resources,
and Technology: Ingredients That Could Make
Latin America More Developed and Innovative .................................. 7
2.1 Factor Conditions ............................................................................. 9
2.2 Demand Conditions ......................................................................... 9
2.3 Correlated and Support Industries ................................................... 9
2.4 Strategy, Structure, and Rivalry ....................................................... 10
3 The Latin American Economy and Its Main Countries
from the Point of View of Economic Representativeness:
The Industrialization Process of the Region ......................................... 15
4 The Business Environment in the Eight
Most Important Countries Economically ............................................. 21
4.1 Brazil ................................................................................................ 21
4.2 Mexico ............................................................................................. 23
4.3 Argentina .......................................................................................... 25
4.4 Venezuela ......................................................................................... 26
4.5 Colombia .......................................................................................... 27
4.6 Chile ................................................................................................. 27
4.7 Peru .................................................................................................. 28
4.8 Ecuador ............................................................................................ 29
5 Management in Latin America: Where Are the Problems? ................ 31
6 The Sectors That Concentrate the Largest Companies
in Latin America and Their Respective Business Environments ........ 39
6.1 Steel and Metallurgy ........................................................................ 44
6.2 Aerospace ......................................................................................... 45
6.3 Agribusiness ..................................................................................... 45
6.4 Food and Drink ................................................................................ 46
v
vi Contents
6.5 Diversifi ed Conglomerates ............................................................. 47
6.6 Heavy Construction........................................................................ 47
6.7 Electronics and Informatics ........................................................... 48
6.8 Entertainment/Media ...................................................................... 48
6.9 Mineral Extraction ......................................................................... 49
6.10 Finances: Banks and Insurance Companies ................................... 49
6.11 Manufacturing of Durable Goods and Their Suppliers .................. 51
6.12 Raw Material and Input ................................................................. 51
6.13 Paper and Cellulose ........................................................................ 52
6.14 Oil and Gas .................................................................................... 52
6.15 Chemical/Petrochemical and Pharmaceuticals .............................. 53
6.16 Telecommunication Services ......................................................... 54
6.17 Transport Services .......................................................................... 54
6.18 Public Services: Electricity, Sanitation, and Others ....................... 54
6.19 Textile ............................................................................................. 55
6.20 Retail and Commerce ..................................................................... 55
7 The Importance of Large Companies for the Rise
of Innovation in the Continent ............................................................... 57
8 Technological Panorama of Latin America .......................................... 65
9 How Latin American Companies Could Become Innovators ............. 75
10 Biotechnology: Latin America’s Big Chance ........................................ 83
11 Conclusions .............................................................................................. 87
Appendix: Succinct Description of the 100 Largest
Companies Mentioned .................................................................................... 93
References ........................................................................................................ 161
Chapter 1
Introduction
Today, it is clear that not everything that has to do with economic development of
nations can be explained by traditional economic theory. There are numerous fac-
tors that do not constitute the habitual tools of economists and which have a decisive
infl uence about a country’s economic delay or advance. For example, the history of
a nation defi nes values which perpetuate for generations and end up defi ning the
behavior of its citizens. In other words, it is because of these values that the indi-
viduals will be willing to assume greater or lesser risks, will be more or less patri-
otic, will be willing to share profi ts, and so forth. The geographic location also
impacts people’s habits and customs and consequently the level of economic prog-
ress. Jeffrey Sachs (S achs in Harrison and Huntington, pp 31–32), currently one of
the most cited economists, says that geography is so important that social scientists
should dedicate more time to looking at maps to better understand the roots of
economic development.
T echnology, in turn, is one of the most important factors for promoting economic
growth. The greatest proof of this statement is in history itself. Throughout almost
all of the history of mankind, economic advance was slow and unperceivable for
decades. However, beginning 1850, this scenario completely changed, and the
world economic growth, from then until now, has been present during almost all the
years with little exception. Industrialization provoked this boom of growth. Thanks
to this boom, material prosperity has increased annually in such a manner that, in
the more developed countries, the people expect their standards of living to improve
every year. But what is behind this industrialization? The answer is the search for an
increase in productivity. And to get this increase, so many companies, as well as
nations, need technological innovation. In other words, upon discovering new ways
of doing existing activities or launching new products and services to oppose the
competition, companies seek to make better use of their resources and increase their
productivity which likewise refl ects in their country’s economy. The bigger the
chase after new products and procedures, the bigger is the growth of the economy.
The role of innovation in economic growth is undeniable. Nonetheless, economics
resents a persuasive long-term theory for growth which incorporates innovation and
P.R. Feldmann, Management in Latin America: Threats and Opportunities 1
in the Globalized World, DOI 10.1007/978-3-319-04750-8_1,
© Springer International Publishing Switzerland 2014
2 1 Introduction
which generates innovation, and that is knowledge. A short time ago, it was believed
that the comparative advantages such as land, climate, and low salaries could be the
instruments to attract investments and development; in other words, besides capital
and work, it is the third fundamental input for the creation of wealth.
Economists have spoken and written about the reasons for the delay in the eco-
nomic and social development of the Latin American countries. Lately, this subject
has been much more present, even in the newspapers, due to the comparisons that
have been made with the Asian countries especially China, India, South Korea, and
others, which during the last 20 years, in the 1970s and 1980s, have known how to
exit a situation of stagnation, even worse than the average Latin American country,
to occupy an outstanding place as active actors in the globalization process.
L atin America houses almost 8.5 % of the global population and answered for
8.2 % of the global GDP in 2011. But among the 500 biggest companies in the
world, according to the principal international yearbooks, only 12 of them are Latin
American, in other words, 2.4 %. What is the reason that there are so few companies
getting international projection? Is it a structural economic problem? Much has
been analyzed about the Latin American economy and all its countries, from a
structural point of view, principally from a macroeconomic point of view, but rarely
has there been an attempt to explain the delay of our continent from the vision of its
companies and how they are administered. As Michael Porter says in the preface in
the book “Plowing the Sea” by Fairbanks and Lindsay, a book dedicated to analyz-
ing the reasons for the delay of Latin America: “The increase in a company’s
national productivity depends on the simultaneous progress in the sophistication of
strategies and the quality of the national managerial entrepreneur.” In other words,
as Porter himself states: “Although there has been quite a lot of progress in the
understanding of the macroeconomic side of development, there is also the growing
recognition that macroeconomic reform is necessary but not suffi cient. Of equal or
greater importance are also the microeconomic fundamentals of development,
enrooted in the nature of company and institutional strategies, resource and guide-
lines which constitute the environment of corporate competition.” The main objec-
tive of this book is to seek to explain, exactly, the delay of Latin American nations
and the small number of companies in the region that have found world expression
calling attention to the importance of Latin American “management.” In fact, is
there a Latin American way to manage a company? Or, in other words, is there a
Latin American way that is clearly different from the North American or European
way or the Asian way? Showing that there is a Latin American way to manage com-
panies and trying to understand it, and showing the main characteristics of this, is
one of the main objectives of this book.
W e intend to contribute with the discussion of the delay of development in Latin
America, showing that there is a lack of greater discussion about the questions that
involve productivity and management of the companies in the region.
T he impetus for this book arose from the author’s interest regarding the question
of the quality of entrepreneurial management and a nation’s economic development,
undoubtedly, very infl uenced by Michael Porter who, when speaking about a
nation’s prosperity, is very emphatic: “The economy of any given country can never
1 Introduction 3
be productive if the companies working in this country are not.” He goes further
highlighting that the microeconomic fundamentals of productivity are in two inter-
related areas: sophistication of the strategies and operations of the companies, as
well as the quality of the business environment.
I n turn, the importance of the business environment has been exalted by some
economists that have studied India and China. Therefore, we highlight Amit Shovon
Ray (2 006) who, when explaining the reasons for strong growth of India, highlights
“…progressive and radical reforms in the areas of fi scal consolidation, simplifi ca-
tion in the legal structure, modernization of the companies, strengthening of the
fi scal and social infra-structure, making capital markets and fi nancial institutions
more dynamic and the incentive for technology and other sectors of the scientifi c
base.” All measure of a microeconomic character, as Joe Studwell, one of the great-
est specialists on China, also highlights that the secret of Chinese success is in the
entrepreneurial environment developed during the last few years, where the compe-
tent prosper and the ineffi cient fail corroborated by the fact that the Chinese authori-
ties guarantee the existence of an independent legal system. Studwell further
emphasizes “…that the great success of Chinese exports derives from the effi ciency
and fl exibility of its factories” and that the continuity of the success of the Chinese
model in attracting global companies to their territory depends on the maintenance
of the current rules that are very clear and precise. When speaking of the microeco-
nomic measures, Studwell mentions that in China, for many years now, the govern-
ment has been doing a survey about the main bottlenecks that exist in the productive
chain and has created the mechanisms to eliminate them. Therefore, each sector
received a different type of support. Some had fi nancial subsidies, others had fi scal
incentives, and most of them support forming their labor. India has a stable and
known industrial policy for more than 20 years. Everyone knows the rules. Some
years ago, the government launched a program of microcredit, by which the poor
people could equip themselves with machines that were able to generate production
and income (sewing machines for dressmakers and tailors, bicycles for delivery
boys, etc.). This program is one of those responsible for an annual growth of 6.0 %
during the last years.
Summarizing, in India as well as in China, the respective governments perceive
the importance of acting in behalf of the business environment of the companies.
M aybe b ecause of the fact that in the past almost all of the Latin American coun-
tries had lived with very high rates of infl ation, it is interesting that today, the debate
about economic growth was always under a background of a reduction of the infl a-
tion rates and was almost always centered on three themes: devaluation of the cur-
rency to stimulate exports, a reduction of the interest rates, and cuts in government
spending. These are all very important macroeconomic themes, but little has been
discussed, for example, with respect to the low effi ciency of the Latin companies as
a factor that is also responsible for the delay in the region; almost nothing is spoken
of the low technological production of the region’s companies; rarely are discussed
the chains of value where Latin American companies perform. Some people can
disagree saying that companies are the fruit of the macroeconomic environment, but
it is exactly for these that we intend to demonstrate that there is very much that can