Ten years in Latin America. (Special Advertising Feature).

A DECADE OF MODERNIZATION FOR LATIN AMERICA 

Ten years ago, the possibility of free trade throughout the Americas as a distant dream. Personal relationships provided the foundation for business deals. Most consumers had only limited choices in goods and services, and the personal computer and mobile phone were considered luxury items.

In the 1990s, European and Asian multinationals in a wide range of industries joined the United States in investing in the region. Privatization of government-owned enterprises opened the door to greater competition and strengthened the region's ties with the rest of the world. Political democracy and free-market economies gained ground throughout the region, although changes in global investment flows resulted in greater volatility in the financial marketplace. The region's population climbed past 500 million, making Latin America one of the world's most promising consumer markets.

Today, the pace of business in Latin America and the Caribbean has accelerated. Trade goods flow more smoothly to their destinations, and service providers from banks to retailers can access a wealth of information about their customers. Wireless phones, the Internet, and e-mail allow regional and multinational organizations to operate more effectively and respond quickly to their markets.

"In my opinion, change is the only constant," says Herbert Molina, vice president and general manager, Sybari Software Latin America, who has 15 years experience in transferring technology to Latin America. "Business technology continues to evolve, and provide many benefits for companies that make the investment."

Clearly, the past 10 years have been a decade of modernization for Latin America, with new challenges and opportunities unfolding on a daily basis. "Latin America as a region has some tremendous opportunities for business today," says Rick Tobin, president, Miami-based Strategy Research Corp., part of Synovate. "Some Latin countries are at higher risk, but the opportunities are there if you make smart, well-informed decisions."

Here is a closer look at the key trends influencing Latin America's future.

A HEMISPHERIC EXPANSION OF TRADE

For Latin America, the past decade began with seven years of unprecedented economic growth. The Summit of the Americas Conference in Miami in 1994 resulted in a historic agreement to create a hemispheric Free Trade Agreement of the Americas (FTAA).

Since those heady days, the region's economy has slowed, along with the rest of the world. But the drive to lower trade barriers and stimulate the flow of goods and services continues.

The Organization of American States (OAS) notes that a charter to strengthen and protect the hemisphere's democracies, serious progress toward the FTAA, a modern anti-terrorism convention and specific goals for improving health and education are among the accomplishments of the ongoing Summit of the Americas process since 1994. With the next Summit to be hosted by Argentina in 2005, the OAS is firmly committed to this innovative and substantive approach to improving the political, economic and social conditions of the Americas.

Eduardo Gamarra, director of Latin America and Caribbean Center at Florida International University in Miami, notes that the FTAA, from its start, has been a collective approach to free trade in which the United States is one of 34 equal countries. "This is perhaps the only place in the world where multilateralism has worked effectively," he says. "In today's climate, it's likely that the FTAA will happen, but probably not in 2005, the original target date."

The creation of the FTAA in the near future would be a tremendous economic boost for the region that will substantially increase trade and commerce within the Americas, notes Ronald Young, vice president, Latin America, for Menlo Worldwide, a global leader in logistics services. "For the region to successfully compete in today's global economy, it must attract foreign investment and continue to promote privatization," Young says. "There must be commitments and continuous improvements in customs clearance processing and creating a business environment that generates investor confidence and encourages free trade. Market friendly reforms are critically important."

INVESTMENT FLOWS WITHIN THE REGION

In addition to the private investment flows of multinationals around the world, individual U.S. investors have played a major role in Latin America's growth over the past decade, though mechanisms such as American depository receipts (ADRs). In fact, after Canada and the United Kingdom, the top countries represented on the NYSE are Brazil, Mexico and Chile, according to Hernan Rodriguez, vice president, Latin American ADRs, Bank of New York.

"ADRs allow U.S. investors to diversity their portfolios while helping Latin governments maximize the proceeds from the sale of state-owned enterprises," Rodriguez says. "There is no question that ADRs will continue to play a key role in helping Latin companies raise capital in significant quantities. We fully anticipate that the next wave of financing is going to be more equity based."

In contrast with the traditional "north-south" flow of capital, wealthy Latin American's personal investments will continue to move in the opposite direction. Whether purchasing U.S. securities to investing in a California business or buying a second home in South Florida, affluent Latins will continue to move assets northward and diversify their portfolios, according to Thomas P. Noonan, president and CEO, BAC Florida Bank in Coral Gables.

Looking at the private banking marketplace, Ray Juncosa, managing director for BAC's international division, says, "Latin Americans today are highly sophisticated clients. They expect professional, personal service and a multidimensional product offering."

It's not just the wealthy who are demanding more financial options--the growth of Latin America's middle class is also creating demand for new services. "As competition across industries continues to grow in Latin America, consumers will continuously look for options that save time, money and offer more security," says Mario Mello, executive vice president for Visa International Latin America and Caribbean Region. "Also, the payments industry is looking beyond traditional credit card businesses. Offering innovative and competitive solutions to new market segments, such as governments, youth or even the un-banked population, is a key factor of success."

PRIVATIZATION AND COMPETITION

For aviation, telecommunications, and many other Latin American industries, privatization was the number one trend of the 1990s. In the airline industry, government-owned carriers like Aerolineas Argentinas, Viasa and Air Panama were privatized or went out of business. In addition, a wave of consolidation reduced the number of carriers, including Grupo Cintra, Taca, Lan Chile, Varig and Copa Airlines.

"The beginning of the 21st century should mean the arrival of more open sky agreements and liberalization," says Pedro Heilbron, CEO Copa Airlines. "This will mean more competition and options for consumers, an increase in intra-Latin American partnerships and a stronger, growing aviation industry."

Within the telecom sector, government-operated monopoly providers were sold to private investors, while the deregulation of wireless, satellite and online services ushered in a new era of competition. The world's largest telecom manufacturers, including Nortel Networks and Avaya have partnered with U.S. and European service providers like AT&T and BellSouth to offer new services and connectivity options for businesses and consumers.

Fiber optic cables now link major Latin American business cities with the United States, speeding the flow of data. "Several high-capacity cables came on line in 2001," says Ron Mudry, president and CEO, Progress Telecom in St. Petersburg, Florida. "We serve international carriers who want to provide reliable, cost-effective services to their customers, and we are anticipating strong double-digit growth in 2003."

Overall, the telecommunications market in Latin America experienced 5 percent growth in revenue terms during 2001, according to a recent report from IDC Latin America. Brazil and Mexico continued to capture the largest share of these revenues, accounting for 65 percent of the 2001 market.

Data services and Internet access grew at a rapid pace while mobile services operators continued to experience subscriber growth in most major markets, according to the DC forecast, which projects continued growth through 2006. The mobile services industry has played an increasingly important role in the development of communication services throughout the region and grew at over 31 percent in subscriber terms in 2001.

INTERNET USAGE GROWS

Worldwide usage of the Internet grew 400 percent in 2002, with a thousand-fold increase in broadband connectivity, notes Shanker Trevedi, vice president for marketing, global sales operations, Sun Microsystems. "We are seeing more phones connected to Internet, more computers and TVs," he says. "That trend is just beginning, and it presents a global opportunity."

Throughout Latin America and the Caribbean, the number of Internet users continues to rise. AOL Latin America projects the region's almost 28 million Internet users America at year-end will double by 2005. "The flow of information and communication has increased dramatically," says Charles Herington, president and CEO, AOL Latin America. "Latin Americans today have access to the same level of information flow as in the United States or Europe."

Latin America is also leading the way in some aspects of online services. For instance, Brazil has the highest percentage of people in the world managing their money through online banking (49%), according to a recent AOL LA survey. Also, about 93 percent of all Brazilian tax returns are submitted electronically.

BUSINESS TRAVEL

Most recent studies indicate that travel between the United States and Latin America is expected to increase significantly through 2010, says Tracy O'Donnal, a spokesperson for Delta Air Lines' Latin America/Caribbean region. "This trend is due in part to the strong business ties between large corporations in the U.S. and their operations throughout the region.

Today, customer travel demand for the industry remains low, despite a steady increase in returning leisure travel which is expected to continue over the next several years. Airlines like Delta have implemented cost-cutting measures, and offered specialized fares and promotions to stimulate travel demand.

Pete C. Garcia, vice president, Latin America & Caribbean, Continental Airlines, notes that the region's airlines will continue to be on the cutting edge of the economic cycle. "As a result, we have to move fast to identify the right opportunities--and the hazards, where they exist. Airlines are fortunate that their key hard asset--aircraft--are highly portable and can deployed and redeployed wherever they earn the best return for the company. The goal is to continue to match the overall growth opportunities that the Latin region offers, without making the costly mistakes that can occur when you are working in a changing environment."

For the hotel industry, a major concern is the oversupply of first-class hotel rooms in major markets, says Michael Stein, vice president of Latin America, Hilton International. "From our perspective, Hilton is very keen on being in the secondary markets, especially in Brazil, Argentina, the Andean countries and Central America.

Today's business travelers are extremely cost conscious, says Alvaro Diago, president, Latin America, Six Continents[TM] Hotels. Fewer individuals are traveling to business and sales meetings, and hotel stays are shorter than in the past. "There has also been a natural migration of business guests from the upscale to the midscale hotels," he says. "Fortunately, many of the midscale hotels in Latin America are jewels, where the pride of ownership is reflected in the buildings, the services and the amenities."

NEW TECHNOLOGY SOLUTIONS

From network services to security to business intelligence, Latin American organizations rely on state-of-the-art technology to improve their operations. "As economies integrate in a global environment, companies have to become more competitive," says Enrique Perezyera, senior vice president, Latin America, PeopleSoft. "They have to improve their services and products, respond in shorter time periods, reduce their costs, and take very good care of the customers they already have."

In the next few years, SAS Americas--which provides business intelligence software for enterprises--expects to see an upward trend in IT spending in Latin America's academic, financial, manufacturing, oil and government sectors. Al Cordoba, general manager of Latin America and the Caribbean, says, "Many companies today want to take advantage of technology investments already made, and that means increased spending on solutions for customer acquisition and retention, e-business intelligence, fraud detection, financial intelligence and cost analysis, risk management and enterprise-wise performance management."

Network security to protect against intruders and viruses, and data storage solutions will be among the most important applications for Latin organizations, adds Sybari's Molina.

Manufacturing companies will continue to invest in enterprise resource planning (ERP) systems, according to a recent DC study. The ERP market is expected to shift from North America to the rest of the world," notes Anne Lu, a senior analyst. "The spending on ERP by Asia/Pacific, Latin America, and EMEA [Europe, Mideast, Africa] will be on the upward expectation."

A MORE EFFICIENT OFFICE

Technology is also enhancing virtually every aspect of office operations--including making them more colorful. "New generations of technology are dramatically reducing the cost of color printing and fueling growth in the office," says Raymond Wier, marketing operations vice president, Xerox. "Studies have shown that using color in general business documents dramatically improves a reader's ability to comprehend, retain and act upon the information."

The color revolution in the office extends beyond the printed page. Computer monitors and video projection equipment are designed to take maximum advantage of the color spectrum, according to Fabrice Commelin, vice president for Latin America, Epson.

Along with that evolution, businesses are moving quickly to digitize their paper documents. "Digital records are easier to share, faster to create, highly portable and durable," says Commelin. "When you digitize a document, you create a permanent record that can be transformed, printed, produced and distributed almost instantly."

Another aspect of office efficiency is the growing use of multifunctional equipment that can easily be linked to internal networks. "Previously, a copier machine was just a copier," says Allan Fredericks, associate vice president and director general, Sharp Electronics, Mexico. "Now you can have a fax, copier, printer and scanner all in one machine. This increases the productivity of employees and work groups, while reducing costs."

Flat-screen LCD monitors are another growth area for office technology, according to Yong Jin Park, president, Samsun Electronics Latino America S.A. "Because flat screens save space on the desktop and are easier on the eyes," Park says, "the LCD monitor is the solution of choice for Latin American business sectors from banking and finance to corporate meetings."

INTEGRATED LOGISTICS SOLUTIONS

Over the past years, international logistics companies have increased their investment in the region, helping Latin companies capitalize on growing trade flows and expanding service offerings to gateway destinations, such as Miami. Rafael Couttolenc, senior vice president, Latin America and the Caribbean, DHL Worldwide Express, says, "This has clearly impacted customers' demands, and today, more than ever, customers are seeking a provider that offers technological innovation, customs expertise, dedicated customer service and inventory management."

For Latin American manufacturing and service businesses, effective supply chain management will be an important aspect of continued growth and profitability. Currently, Latin American logistics costs--those related to getting a business' product from factory to end user--are over 14.8 percent of the total regional gross domestic product {GDP), according to Juan N. Cento, president, FedEx Express Latin America and Caribbean Division.

"The introduction of supply chain solutions can provide speed to market, improved communication and information, and a greater array of value added services--and do it all at lower cost," he says. "It allows businesses to concentrate on their core competencies, thus giving them the opportunity to improve their products and quality and continue to do what they do best."

For multinationals doing business in Latin America, global connectivity is critical, adds Mike Arias, managing director, UPS Logistics Group Latin America. "They want to see the flow of information around the world," he says. "They are looking for standardization of services, operational excellence and a single-point-of-contact for their global networks."

Frank Larkin, senior vice president in charge of Latin American services for Hamburg Sud North America--and its affiliated lines, Alianca, Columbus Line and Crowley American Transport sees the year ahead as being a strong one for northbound cargo on both the east and west coasts of Latin America. "Brazil and Chile, the economic leaders on the two coasts respectively, have embraced a policy of expanding exports as a percentage of their overall economies," he notes. "Those policies are strengthened by the strong buying power of North American currencies in the Latin American market and a steady expansion in the volume and quality of both commodities and finished goods, ranging from fresh and frozen produce to footwear, wines, lumber and seafood."

INTO A NEW DECADE

While Latin America and the Caribbean enter 2003 facing a variety of political and economic challenges, many multinational companies believe the mid- and long-term outlook remains strong. "Latin America is Cessna's third largest sales market and is crucial to Cessna's current and future growth," says Todd Duhnke, director of international Citation sales for Cessna Aircraft Company. "We anticipate that the Latin American aviation market will grow significantly over the next several years."

Undoubtedly, there will continue to be economic bumps on the road. Attorney Raul Valdes-Fauli, partner, Steel Hector and Davis' Miami office expects to see more consolidations in various business sectors. "In the beer industry, for instance, we have seen bigger brewers going into Latin America, and fewer and fewer independent companies," he says. "We also see a pattern of more professional management in Latin companies. There will be fewer family-owned firms in the future.

Raimundo Monge, director of planning, Grupo Santander Chile in Santiago, notes that the ongoing process of privatization and deregulation--along with investments by major European and U.S. institutions--will broaden the scope of Latin Americas financial services industry. 'The pace of this process can vary from country to country," he says, "but the financial markets are becoming more flexible, which clearly benefits both consumers and businesses."

In summary, veteran players in the region from financial institutions to logistics companies remain confident about business opportunities in Latin America over the next decade. "We continue to maintain a long-term view of our business prospects even as we make adjustments to address short-term concerns," says Jorge A. Bermudez, executive vice president and chief executive officer of the Latin America franchise. "At all times, but especially during challenging times, it is important to remember that success is driven by excellent services and products provided to customers."

RELATED ARTICLE: TEN KEY BUSINESS TRENDS

* Internet usage will continue to grow

* Shippers will seek integrated logistics solutions

* Public and private investment flows will continue to fluctuate

* More companies will benefit from office technology

* Competition for customers will intensify

* Demand for consumer goods and services will expand

* Business travel will remain relatively low

* Trade with European and Asian partners will expand

* Security will remain a top priority

* The pace of business transactions will accelerate.