The personal side of business; smoothing a client in Mexico entiles long lunches and breezy chats, but beneath the casual exterior runs a cold business current.

Juan Carlos has a huge smile on his face. It is a sunny Thursday afternoon and he is standing in a private box at the Hipodromo de las Americas, Mexico City's horseracing track. He sips on a glass of his favorite tequila and shares a joke with friends. But there is more to Juan Carlos' good humor than meets the eye. He is hoping that his buddies will be signing a major distribution deal with his pharmaceutical company the following week.

"We won't be talking any business this afternoon," he told BUSINESS MEXICO between hearty laughs. "I just want the guys to have a good time. I want them to get to like me, and I want them to feel good about signing the checks."

But today it will be Juan Carlos (whose name has been changed) who will sign the check. "This is a very worthwhile sales cost," he said. "If these fellows go home happy, I will have a deal next week."

Such is the way thousands of business deals are closed in Mexico every year. As Ramon Ruiz Wallace, an executive at BBVA Bancomer, put it: "When you do business here there is one vital rule, know your customer."

"At the heart of every deal there is a relationship," he said. "It is that simple--if the guy at the other side of the negotiating table likes you, then you are more likely to get a deal and on better terms. If that requires a fivehour tequila-fueled lunch, it is probably worth it."

[ILLUSTRATION OMITTED]

The famous mantra, "It is not what you know but who you know," rings very true in Mexico. Understanding why and how personal relationships work and their importance, though, is a trickier business. The lines between conviviality and corrupt cronyism are at best vague and, at worst, non-existent.

[ILLUSTRATION OMITTED]

INTELLIGENCE AS ABILITY TO ADAPT

So what does it take to close the deal in Mexico? Does one really need to spend hours slumped over a bottle of tequila chewing the fat? Or can one just hand over a brown paper bag stuffed with cash? Or has Mexico finally entered an age where business is purely business--above board and efficient?

[ILLUSTRATION OMITTED]

The answer is a touch of all three. To survive the convoluted world of Mexican deal making, a businessperson needs to adapt to the situation and the client.

Business culture has changed dramatically in Mexico during the last 15 years. Until the early 1990s, cronyism was predominately the name of the game. Family and friends first, while quality, value and price came later.

Such practices were a major contributor to the financial meltdown of 1994, particularly in the banking world. Three years earlier, the Salinas administration had re-privatized the banks, which had been in public hands since 1982. The banks' new owners lacked experience and started loaning money prodigiously and often without applying the necessary risk analysis.

When the peso was devalued and interest rates soared, the banks were saddled with US$81 billion of bad debt and were bailed out using the public purse at cost of US$800 for every man, woman and child in the nation. A 1999 inquiry headed by Michael Mackey, an independent auditor from Canada, found that much of this orgy of lending was to friends, family and political allies.

ART OF THE KICKBACK 

Mexicans are acutely aware that such practices have cost their country dearly. This awareness has put much more pressure on creating a more transparent and competitive business arena. Thus, dodgy deals on such a scale are fewer and further between. Despite this, the banking scandal remains typically representative of a far more widespread issue: In Mexico, it takes more than the right product at the right price at the right time to close a deal.

[ILLUSTRATION OMITTED]

Depressingly, the comision remains a major way of ensuring the contract gets signed. Even the most respectable of firms are known to play dirty, as one of Latin America's most famous kickback case shows. In 1994, IBM was caught paying about US$37 million in bribes to secure a US$250 million contract.

"The kickback is the most common form of influence in the selling-buying process," one Mexico-based salesman told BUSINESS MEXICO on condition of anonimity. "Purchasing managers commonly get a commission for buying a particular product. My experience since about 1977 confirms this. I know of one grocery store supplier that sent the warehouse manager and his bride on their honeymoon to France for a week in first class with all expenses paid. I also know of a tractor-trailer supplier that systematically pays a commission to his clients."

Or, as one purchasing manager said. "Lunches and drinks are nice but what is needed is an envelope with the check in it."

[ILLUSTRATION OMITTED]

Once such behavior becomes part of the sales process, a vicious cycle is created that is very difficult to break. The phenomenon is perhaps best summed up by the words of a Mexico City police spokesman, regarding a bribery scandal earlier this year.

"If [the general public] did not offer the money, our men would not accept it," he said. And, likewise, bribers would not front the cash if they believed they would not get the results.

Thankfully, there is life beyond the bribe, and many companies both local and foreign are doing well without having to add creative line items to their accounts.

"Over the last two years we have gotten our product in over 14,000 points of sale and not once have we paid a bribe to get our cards on the shelves," said Eugenio Laris of Mexican Internet portal site Todito.com. a provider of prepaid Internet cards. "If any of our sales team attempted such an act they would be dismissed without question."

Laris explained that this is not only due to the discipline of his team but also thanks to the fact that none of the major retail chains with whom he deals, such as Oxxo, Walmart and 7-11, will accept payoffs. This is a promising sign of a network effect that could turn the vicious circle into a virtuous one.

[ILLUSTRATION OMITTED]

A QUESTION OF ETHICS

So what else do Mexican businessmen do to help them clinch the deal? It appears that many are willing to invest in all kinds of expensive dinners, gifts and trips to help them get what they want from their customers. Is this legitimate or is this just as suspect as the brown paper bag? How does one make the distinction?

"It all comes down to motivation," said Luis Manuel Guaida, a partner in the Mexico City-based law firm of Guaida y Asociados. "No matter how small it is, if it is intended to directly affect the buying decision of the purchaser, then under Mexican law it is deemed illegal."

In reality, it is often impossible to understand the motivation behind such actions in a clear-cut manner. But there are plenty of legitimate reasons for cozying up to a customer. And ironically, honest relationships can often serve as a way of fighting corruption.

"Friendship is very important in the business world. I think this can be said of many countries, but I believe it to be especially true here in Mexico," said Alan Skinner, director of SolutionsAbroad.com, an online expatriate community in Mexico.

[ILLUSTRATION OMITTED]

"It is vital to gain the trust of a Mexican business associate, because traditionally it is very difficult to have any legal recourse if there is a problem with the transaction," he added. "Subsequently, the courting period lasts much longer than in many other countries."

DO SOME BACKGROUND

Getting to know the person who writes the checks can also allow sellers to run informal background checks on their customers by getting to know their family, associates and other points of reference.

Anyone who has done negotiating in Mexico will also see the personal relationship as a useful means of gaining other sales intelligence. "Many multinational corporations negotiate like one does in the United States, but in Mexican business circles 'yes' can mean 'no' and 'no' can mean 'maybe,' "said Skinner. "People like to promise you the world while they are leading you up the garden path. Spending a little quality time with one's contacts can help one understand their real intentions."

However, by far the biggest driver for schmoozing in Mexico appears to be the same as elsewhere on the planet. "Just like anywhere else, you have to get close to your clients," noted Ruiz of BBVA Bancomer. "Getting to know them on a personal basis can often give you the edge in the business deal. The more that deal is worth, the more sellers are willing to invest in getting close to their customers."

WHY IS THIS SO?

"It is all fair and well to say business is business, but you can never remove the human element from the client-vendor relationship," said Diana Snare-Klein, a London-based personnel consultant. "We are social animals and our instincts attract us to those close to us and tell us to keep strangers at an arm's length. Even the most hard-nosed businessmen can be mollified by the personal touch. It may not always be good for the bottom line, but that is the way we work."

Rachel Wood, an advertising buyer, described the phenomenon from the customer perspective. "If somebody takes me out for an amazing lunch, charms me stupid and sends me a huge bunch of flowers the next day, then of course that is going to affect my buying decision. It may not swing me 180 degrees, but where there is a close choice between two providers, I know which one I would pick."

And while such a modus operandi remains, customer carousing will continue. A glance around any of Mexico City's restaurant districts (such as the Condesa, Polanco or Lomas) bears testament to this. Despite an economic downturn, flashy new bars and restaurants are opening every month to be filled, more often than not, by shirts and ties.

"Business entertainment is a vital source of income for us," noted Crispin Somerville, who owns Bar Colmillo, an up-market drinking spot in downtown Mexico City, and is opening a large Italian restaurant, Prima, in November. "In the new restaurant, we expect over half our revenues to come from corporate customers."

THE LONG LUNCH

So, while corporate carousing is not unique to Mexico, Mexicans still have their own distinct way of showing their clients a good time.

The Mexican business lunch is an institution in its own right. The rule of thumb is if you want a power lunch, then meet for breakfast. Otherwise neither expect to sit down before 2.30 p.m. nor get up before 5.30 p.m. Between those times, eating, drinking and idle chit-chat with a smattering of silly jokes form the menu.

[ILLUSTRATION OMITTED]

"We ate for four hours," said British citizen Haroun Appiah, who came to Mexico to help close a large software deal. "The banter was anything but business. And when our sales manager tried steer the conversation onto our client's business needs, they answered his questions with one-word replies and then went straight back to talking football. We were very frustrated. In the end, we only talked shop while waiting for the valet. But, according to our local contact, it was a very successful lunch, and they were really impressed by us. Within a month, the deal was signed."

[ILLUSTRATION OMITTED]

Drinking alcohol is another local idiosyncrasy. While north of the border the standard business tipple is Evian. Mexicans have no qualms about quaffing a bottle of Bacardi with their meal. Although these days it is not mandatory to get drunk, among many circles, it is perfectly acceptable to get down to some hard boozing. Thus, many executives will plan to meet for a late lunch with no intention of returning to the office, instead the restaurant becomes the first stop on a bar crawl.

[ILLUSTRATION OMITTED]

Many such occasions end with a more shady side of business entertainment--in a table dance bar. Getting drunk and behaving badly is perhaps not the most mature way of doing the deal. But it is a very good way of cementing the relationship. There is no better way, especially for younger execs, to bond than a bit of good hard partying.

[ILLUSTRATION OMITTED]

Back at the Hipodromo, the two-to-one favorite romps home and Juan Carlos cheers, hugs his customers and orders more tequila. "They are happy, I am happy--what a fine way to do business," he exclaimed.

* Butter 'Em Up

By Rawdon Messenger

Written above the threshold of the Oracle at Delphi was the slogan "Know Thyself." For those searching for success in the world of business entertainment, one must edit this eternal proverb to "Know Thy Customer." Press the right buttons and you may find yourself well ahead of the competition.

Here are 10 suggestions on how to butter up a business contact:

1. Gi-Gi's

Horse racing is the sport of kings and happy customers. For those who like a tipple, Mexico City's recently renovated Hipodromo de LasAmericas (photo bottom right) is a delightful way schmooze.

Don't expect to talk much shop, however.

www.amh.com.mx

Avenida Industria Militar

Colonia Residencial Militar

Mexico City

tel. [phone]

2. A Bottle

Fine wines and malts are often hard to come by in Mexico. This provides a huge opportunity for those who bear such gifts to distinguish themselves as a cut above the rest. La Naval is one the few retailers to proffer a reasonable selection of booze. La Europea throughout the country is another fair alternative.

La Naval

Insurgentes Sur (on the corner of Ave. Michocan)

Colonia Condesa

Mexico City

tel. [phone]

3. Hit the Golf Course

Many a deal has been brokered on the back nine. In fact, top salespeople learn the sport just to grease up their pipeline. Golf is expensive and requires at least half a day. If either you or your client don't know a birdie from a bunker, then it is best stay in the clubhouse.

www.infogolfnexico/chiluca

Club Campestre Chiluca

Av. Chiluca No. 1

Col. Residencial

Atizapan de Zaragoza, State of Mexico 

tel. [phone]

4. The 19th Hole

Drinking can do wonders for relationship building. Many Mexicans like a tipple and have no qualms about going for a few bevvies with business associates. The city has thousands of bars--some more respectable than others. It is best to start somewhere smart and go downhill from there. Try Capicua--an elegant tapas bar.

Capicua

Nuevo Leon 66, Colonia Condesa

Mexico City

tel. [phone]

5. High Flyers

For billionaires it may be the only way to travel, but for commoners, flying in a helicopter is thrilling way to get from A to B. If it is cash-rich/time-poor kind of deal, then tell your corporate prey that the chauffeur will pick them up from the roof and not the lobby.

6. The National Sport

A trip to Mexico City's impressive Azteca Stadium to watch Club America, its most glamorous soccer team, is a cunning way to kick off a business relationship. Not all the seats in the 100,000-seat stadium are corporate friendly, so contact the ticket office in order to make appropriate reservations.

www.esmas.com/clubamerica/

Mexico City ticket office

tel. [phone]

7. Stylish Stationery

These days, as any visitor to a business expo knows, plastic pens and cheap key rings just do not cut it in the world of corporate freebies. If you would like your gift to not to be thrown out to the typing pool, consider investing in a Mont Blanc pen--a brand that appeals to all vain businesspeople. A subtle hint that you expect them to sign on the bottom line.

www.palaciodehierro.com

tel. [phone]

8. Chowtime

If the true way to a person's heart is through their stomach, then a top meal is a sure-fire way to cozy up to a customer. They say that gastronomic delights release the same endorphins in the brain as sex--so wait until you pass the port before discussing terms. For those who have a big expense account and want to impress, try Champs Elysees, possibly the snootiest restaurant in the whole of Mexico.

Le Champs Elysees

Paseo de La Reforma 

Colonia Zona Rosa

tel. [phone]

9. Puros

Cigars or cigar accessories can make a tremendous gift in this nation of machismo, especially if the customer lives in the United States where Cuban cigars are un-available. A line of shops that were once favored by Porfirio Diaz is located blocks away from the Palacio de Bellas Artes.

Calle Rep. De Uruguay

Colonia Centro Historico

Mexico City

[ILLUSTRATION OMITTED]

10. Stealing Beauty

Like their Japanese counterparts, many Mexican businessmen find it acceptable to decorate important events with leggy models. Glenda Modelos provide bright young beauties who will help you charm your would-be associates.

www.glendamodelos.com

tel. [phone]

Rawdon Messenger is a Mexico City-based freelance writer and columnist for the Evening Standard of London.