Policy makers, central bankers, economists and the media speak of "globalization" as if it represents a homogenous phenomenon. The real world is quite different. Continents view themselves as sovereign regions, with unique traditions and qualities that are to be prized, not compromised.
True, each continent wants to be linked to the rest of the world. But its citizenry will not fully embrace globalization if it means sacrificing their way of work and life.
Latin America is the embodiment of this creed. Over the past 50 years, the region has grown from a global backwater to a powerful force on the international stage. If we include Mexico, Latin America boasts more than 400 million consumers-many of which are gaining in affluence-and an abundance of world-class companies with talented people and superb products and services (see "Getting There Is More Than Half the Fun" on p. 44 of this issue for a further look at e-commerce logistics in Latin America).
Yet the region remains steeped in time-honored beliefs. It is reflected in the way Latinos live their lives, and the way they conduct their business. Any company, large or small, looking to expand into a new market, must adapt to their mindset to succeed.
Simple-But Important-Differences
For example, a US company seeking to tap the business-to-consumer market with an e-commerce strategy might be unaware that the use of credit cards, the typical vehicle for conducting transactions on the Web, is not nearly as widespread in Latin America as it is in the United States. That company may also be unaware that, in several Latin countries, citizens can use credit cards only within their borders and thus cannot use their plastic to execute cross-border transactions over the Internet.
A manufacturer looking to develop two-way trade with Chile might be frustrated with the lack of reliable air-freight service from Miami. The company may not know that air export, or northbound, lift is driven by the availability of perishable traffic. During the low season, flight reliability suffers. If there aren't enough perishables to fill a northbound leg, the aircraft may not fly at all. In addition, razor-thin margins on air-freight services require that a freighter be fully used in both directions, rates are therefore often calculated based on full payloads. If an operator cannot be assured of a full load on the return leg, it will sometimes keep a plane grounded until sufficient volumes can be built to justify a round-trip flight.
Intra-Continental Trade on the Rise
For Latin businesses and consumers, familiarity breeds contentment. And contentment breeds commerce. The most profound shift in the region's trade patterns in recent years has been the dramatic growth of intra-continental traffic. Commerce within Latin America is expanding at a faster clip than in the traditional trades to and from the US. This is hardly a shock to seasoned Latino business people. The Latin landscape has many powerhouse firms that aren't on the global radar screen but are household names in their respective countries or across the continent. Brazilian brewer Brahma Beer, whose products are largely unknown outside Latin America, is one of Brazil's largest companies, and that includes any multi-national domiciled in Brazil.
This familiarity-contentment matrix applies to the relationship between companies and their shipping providers. Of the shipping companies in Latin America-and there are many excellent ones-a good number are small, local "niche" providers who specialize on one country or on trade lanes between two countries. These providers, through their strong customer focus and superb execution, have built a loyal and satisfied customer base.
Being There Counts-A Lot
Multinationals also recognize the importance of a logistics partner with a presence and an infrastructure, in Latin America. Largely because of their experiences with needing to adapt to local cultures, these companies don't want to engage "virtual logistics" firms that have a web site and little else; they want to work with specialists who are on the ground and who bring "bricks and mortar" to the relationship.
Features such as warehousing and distribution centers, for example, are vital for multi-nationals that rely on "postponement" strategies to quickly react to sudden changes in local buying and shipping patterns.
There is enormous value that a seasoned 3PL provider can add. Specialists that have built a foothold in Latin America, and that are capable of bundling their capabilities to provide total business services, stand to gain share in what is still a very fertile market. Demand for 3PLs is growing faster than the supply of quality providers in the market.
Yet it won't be a free ride. The ultimate customer is more sophisticated and demanding than ever, and they expect the same level of sophistication from their logistics partners. 3PL companies that can offer a "one-stop shop" of customized solutions will thrive. Those who can't, will struggle
The Latin business climate is more favorable today than at any time in its history. New free trade agreements between the EU and Mexico, Germany and Brazil, and between the European Union and the Mercosur bloc should foster increased commerce between the two continents. Latin governments are streamlining their respective tax and regulatory programs. The air, road and port infrastructures are generally adequate, and governments are moving aggressively to modernize antiquated systems. Customs regulations, with some notorious exceptions, are largely bereft of red tape. Latin airlines, forced by US and EU noise rules to ground their aging fleets in favor of newer, quieter aircraft, will be required to offer more frequent flights and reliable schedules to squeeze as much revenue as possible out of their investment.
And while the region is not at America's level in information technology usage, it is making strides. The Costa Rican government, for example, provides every citizen with a free e-mail address. Today, one can walk into any post office in Costa Rica, log on to the Internet at one of the many PCs in the facility, and connect to the outside world.
Getting Paid-Still Slow
If there is a dark cloud for smaller companies looking to do business in the region, it is in the area of finance. Payment issues remain a thorn in the side of many businesses. Foreign firms that demand the timely repatriation of local funds to meet financial-reporting requirements find the process costly, frustrating, and time-consuming. What should be a routine task often becomes a nightmare. Companies not familiar with trade finance and even basic payment instruments lose market opportunities and this is happening both to importers as well as exporters in the region. A standard web-based payment model may offer a solution, and, if it does, it can't come soon enough.
On balance, however, there is far more upside in Latin America than downside. But success will be built from within. Inter-continental trade, while it will continue to be robust, will pale against the pace of growth inside the region.
A renowned US journalist, asked by a younger colleague what it would take to generate great scoops, replied simply: "Be there." Any company looking to plant its flag in Latin America would do well to remember that simple maxim.
