Latin America
Meeting in Miami
Loud and dear
The view from Chile
Careful optimism
General and operations managers from Latin America together with the New
York branch gathered in Miami early February to discuss ways to pull together
activities in the region and improve overall efficiency. One result to be
debated in March is a proposal to bring together administrative functions for
all the Americas in the custom built New Jersey building opened last fall.
Teething troubles
Original mandate
subsidized, cheap Brazilian imports.
'People are concerned about this,' he
agrees, 'and now there are talks to ensure
it does not happen. In our own export
oriented sectors, such as automotive,
we've already seen closures and increased
unemployment arising from the problems
in Brazil, our biggest market.'
The niuch vaunted dollarization of the
Argentinean peso is, according to Heyl,
more a signal to the market than a serious
attempt to adopt US currency. 'Our top
government financial and economie
people are travelling the world attempting
to differentiate Argentina from the rest of
Latin America,' he says. 'They are trying
Jo issue sovereign debt and the message to
*ivestors is loud and clear: devaluation
will not be an instrument.' In fact,
Argentinean companies are being subject
to increased interest rates as a result of the
credit crunch in the region and increased
country risk perceptions. The increased
cost of lending has prompted caution in
potential borrowers. 'Our customers are
more prudent than usual,' Abbenhuis
agrees. 'This kind of situation is not new,
experience tells thent to build liquidity
and cut costs. That's exactly what they're
doing.' One positive effect here will be an
increase in competitiveness.
Interest rates and devaluation have been
the preferred instruments in maintaining
Chilean economie stability. According to
our people in
It Santiago, the
1 llll government has been
consistent in attempts
to get its house in
order. The price has
been domestic
{■f recession. 'We've
gone from 7 percent
;;t to - 2 percent
growth in less than a
year,' says Willem Wagner, general
manager Chile. 'And that is a huge
slump, especially given previous
performance by this country.' Even
though recent months have been
extremely difficult for the Chileans and
their economy, there is some degree of
optimism. 'Indications show that we
could have come through the worst,' he
explains. A recent devaluation of 5
percent, with a total decline in the
currency over the whole year of 12
percent, is not dramatic, especially when
you look across the Pacific to some of
the countries in Southeast Asia. Many
forecasters insist we could be back on a
slow, but definite economie growth track
by mid-year.'
Chile is much like its neighbours, Brazil
and Argentina, in that its own house was
in order when the crisis began. It has no
trading positions, says Wagner: 'We work
within extremely small limits, because
that is all our business requires - the fact
we have no significant treasury activity
allows us all to sleep nights.' During the
day, our people in Santiago are very much
awake to the opportunities and the pitfalls
that mushroom in tintes of crisis. 'While
we certainly have a
degree of optimism,
there is also a healthy
dose of caution in all
we do. We know that
external factors, those
factors that are
beyond our control,
such as negative
developments in
Brazil, can still cause Willem Wagner
us a lot of problems.
Further recession in Europe or the US
would also be very bad news for us here
in the Santiago office and the rest of the
region.' In spite of the threats hovering on
the horizon, talking to our people in Latin
America leaves the impression that the
future may be uncertain and potentially
tough, but there remains a sense of careful
optimism which is hard to repress.
The regional meeting started off as a
classical general managers'
gathering, with
presentations from
Argentina, Brazil, Chile,
Cura<;ao, Mexico and
the US. Operational
results over the past
year were good, with
all offices bringing in
targeted or better
performance. In fact,
the Americas delivered
across the board in 1998. Reason for
celebration, of course. But much of the
Henk Gentis
focus was concentrated on the
presentations made by operations and
administration specialists who
participated in part of the meeting to
inform senior management on a possible
regionalization project proposal.
'We were looking for ways to build an
operational blueprint for the Americas,'
says Henk Gentis. 'We're considering
centering all our operations and
administration in New Jersey for a
number of reasons. One is contingency.
If anything should go wrong at the New
Jersey centre, there is always a
Manhattan back up.' Mexico is already
hooked up to the New Jersey operation.
There are some teething troubles, but
the US operations people are confident
these will be resolved shortly. If the
regionalization project, which was
agreed by all general managers, is
approved by the managing board, then a
staggered integration of all Americas
operations will be launched over the
coming year.
Managers we spoke to in principle all
responded positively to the move,
although they do not see it as a cost
reduction in the short term. The Latin
America contingent also wondered
whether a US booking system could
handle the region's idiosyncratic
transactions. However, this problem is
not new. We'11 keep you posted.
