SOUTH AMERICA THE NEW WORLD….. 12 Nations and 3 territories.

SOUTH AMERICATHE NEW WORLD….

12 Nations and 3 territories

HISTORY

History…• Asian inhabitants

• In 1494, Portugal and Spain – duopoly

• Around 1497, South America discovered by Amerigo Vespucci

• Beginning in the 1530s, the people and natural resources of South America were repeatedly exploited by foreign conquistadors, first from Spain and later from Portugal.

• African slaves were brought in large quantities for several centuries for hard labor in tropical climate such as sugar cane plantations or gold mining

• Eventually, the natives and the Spaniards interbred, forming a ”Mestizo” class.

• Between 1804 and 1826 in the Spanish American wars of independence, Venezuela and Argentina won their independence followed by Peru, Chile and Ecuador.

• In 1822, Brazil got its independence from Portuguese rule

• A few countries did not gain independence until the 20th century:

Guyana, from the United Kingdom, in 1966. Suriname, from the Dutch control, in 1975 Trinidad and Tobago, from the United

Kingdom, in 1962 French Guiana remains an

overseas department of France.

20th Century…. The era of dictatorships…

• The continent became a battlefield of the Cold War in the late 20th century.

• Some democratically elected governments of Argentina, Brazil, Chile, Uruguay and Paraguay were overthrown or displaced by United States-aligned military dictatorships in the 1960s and 1970s.

• To curtail opposition, their governments detained tens of thousands of political prisoners, many of whom were tortured and/or killed on inter-state collaboration.

• Revolutionary movements and right-wing military dictatorships became common after World War II, but since the 1980s a wave of democratization came through the continent, and democratic rule is widespread now

DEMOGRAPHICS…..

Population….

Estimated population - 558 million (2005 estimate)

Ethnicity….

BLACKGuyana 30.2%Venezuela 10%Brazil 6.9%Ecuador 5%Colombia 4%Uruguay 4%

AMERINDIANBolivia 55%Peru 45%Ecuador 25%Guyana 9.1%Chile 4.6%Paraguay 3%Suriname 2%Colombia 1%Brazil 0.4%

WhitesWHITESUruguay 98%Argentina 97%Chile 92.7%Brazil 53.7%Colombia 40%Venezuela 40%Bolivia 15%Ecuador 15%Peru 15%Suriname 5%

MESTIZOParaguay 3%Colombia 58%Ecuador 55%Venezuela 50%Chile 4.7%Brazil 40.6%Peru 37%Bolivia 30%Uruguay 1.2%

In terms of ethnicity, the demographics of South America shows a mixture of Europeans, Amerindians, and Africans.

Languages Spoken….• Spanish and Portuguese are the most spoken languages in South

America

• Spanish is the most spoken language as a first, second and third language in South America.

• Portuguese is the official language of Brazil, spoken by nearly half of the continent's inhabitants

• Dutch is the official language of Suriname;

• English is the official language of Guyana, although there are at least twelve other languages spoken in the country such as Hindi and Arabic.

• English is also spoken in the Falkland Islands. • French is the official language of French Guiana.

• Other than these Quechua, Aymara, and Guarani are the indigenous South American languages spoken in parts of Equador, Peru, Chile, Argentina.

Currency…

Religion….• An estimated 90% of South

Americans are Christians (82% Roman Catholic, 9% other Christian denominations), accounting for ca. 19% of Christians worldwide.

• Guyana and Suriname are exceptions, with three major religions: Christianity in general, Hinduism, and Islam.

• In lowland South America, as well as the Andes, animism and shamanism are common, as noted among the Urarina of Peruvian Amazonia.

CULTURE

• South Americans are culturally influenced by the historic connection with Europe, especially Spain and Portugal, and the impact of mass culture from the United States of America.

• South American nations have a rich variety of music.

• The literature of South America has attracted considerable critical and popular acclaim, with the rise of authors such as Mario Vargas Llosa, Gabriel García Márquez in novels, and Pablo Neruda and Jorge Luis Borges in other genres.

• South American cuisine takes on African, American Indian, Asian, and European influences.

Sports….• South American nations have regularly performed well in

football competitions, with Brazil winning 5 World Cups, Uruguay, and Argentina have won the World Cup twice each.

• The continent has produced many of the most famous and most talented players including Pelé, Diego Maradona, Teofilo Cubillas, Arsenio Erico and Alfredo Di Stéfano.

• Motor Sports: The continent has produced two of the most famous Formula One Grand Prix drivers Ayrton Senna of Brazil and Juan Fangio of Argentina. Brazil has hosted the Brazilian Grand Prix every year since 1973 and Argentina has hosted Formula One on 21 occasions.

• South America has produced a number of talented Tennis players such as 4 times grand slam winner Guillermo Vilas, US Open winner Gabriela Sabatini, 2004 French Open winner Gastón Gaudio and double Olympic Gold medalist Nicolás Massú. Marcelo Rios and Gustavo Kuerten were No. 1 in the ATP rankings

Tourism….• Historical relics, architectural and

natural wonders, a diverse range of foods and culture, vibrant and colorful cities, and stunning landscapes attract millions of tourists every year to South America

• Some of the most visited places in the region are Machu Picchu, the Amazon Rainforest, Rio de Janeiro, Salvador, Isla Margarita, Natal, Buenos Aires, São Paulo, Angel Falls, Cuzco, Lake Titicaca, Patagonia, Cartagena and the Galápagos islands

CARNIVALS…..

RIO CARNIVAL…..

http://www.youtube.com/watch?v=F7iTGOM7F1U

Geert Hofstede Cultural Dimensions

• Uncertainty Avoidance: South American society has low level of tolerance for uncertainty. In an effort to minimize or reduce this level of uncertainty, strict rules, laws, policies, and regulations are adopted and implemented. As a result of this high Uncertainty Avoidance characteristic, the society does not readily accept change and is very risk adverse

• Individualism: Other than Brazil, virtually all the Latin countries are considered to be Collectivist societies as compared to Individualist cultures. This is manifest in a close long-term commitment to the member 'group', be that a family, extended family, or extended relationships. Loyalty in a collectivist culture is paramount, and over-rides most other societal rules.

• Power Distance: This is indicative of a high level of inequality of power and wealth within the society. This condition is not necessarily subverted upon the population, but rather accepted by the culture as a whole.

• Masculinity: This society experiences a higher degree of gender differentiation of roles. The male dominates a significant portion of the society and power structure. This situation generates a female population that becomes more assertive and competitive, although not at the level of the male population.

Talking South American???• All speak Spanish, except in Brazil• Many South Americans like to talk in close proximity to each other.• Stepping back, an unconscious gesture to reclaim your space, is seen as a

rebuff, a rudeness. • Keeping eye contact while speaking is an asset• Latin Americans are both more effusive, flowery and more formal in their

speech. • A South American tends to be more diplomatic and tactful• The attitude toward time is less rigid and a 30 minute delay should not be

a surprise• The honorific Donor Doña, used with the first name in a friendly or family

relationship, or with the surname, is a token of respect.• Latinos are very warm and friendly people and enjoy social conversation

before getting down to business. This is a calculated process aimed at getting to know you personally

• Latinos tend to be more interested in you, the person, than you as a representative of some faceless corporation.

Some specific tips….• Argentinians aren't thrilled to discuss the Peron years and past human rigths issues. They are also

sensitive to the Falklands War, and call the islands the Islas Malvinas• Bolivians are sensitive to the loss of territory to Chile.• Brazilians are not Hispanic. They are proud of their Portuguese heritage. They are also exuberant,

talkative, but sensitive to discussions about the rainforest destruction. Marital status is not a good conversational topic.

• Chileans love to talk about their country, but avoid politics and the Allende/Pinochet years. Human rights is an ultra-senstive topic.

• Colombians like bullfighting, so negative comments aren't welcome. Don't discuss drugs, political situations, or terrorist activity. Interest in emeralds and coffee are welcome.

• Ecuadorians like to talk about their families and their jobs. Discuss their country in favorable terms, but avoid politics, sexual or personal topics.

• Paraguayans are tremendously proud of their hydroelectric dams. Discuss famiy. sports, touring, but avoid any political talk. Conflict between the liberales and the colorados is still tense.

• Peruvians enjoy talking about families and jobs. They'll ask about your country, and welcome discussions of their own, but avoid politics, money and government.

• Uruguayans enjoy talking about their country - what to see and do, where to eat - but are more reticent about personal matters. You can discuss international politics.

• Venezuelans are sensitive about politics, government and family matters. If you are asked, be prepared to discuss the economy.

Business Environment

Political Structure• Present democratic rule has been achieved after years of

dictatorship• Poverty and inequality were the outcome of left influence• Embraces Free Market Policies• Formation of Union of South American Nations Community by

merging Mercosur and Andean community– Thereby forming the third largest economic bloc in the world

• Women in South American Politics– 15% in executive power– 13-14% in legislative power

Political Structure

• South America can be roughly divided into two groups– Andean countries - Venezuela, Colombia, Peru, Ecuador

and landlocked Paraguay display signs of instability– Brazil, Argentina, Uruguay, Bolivia and Chile are rapidly

becoming solid democracies • Are there chances of return of autocratic rule?– International pressure– People are educated and will raise voice against any such

idea

Political Structure

• Problems– Corruption of political leaders; bribery is prevalent– Illegal drug trade, with money finding way in the

pockets of people in power

Industries• Countries like Venezuela, Argentina, Peru, Chile, Colombia and Ecuador

used there petroleum reserves to develop capital intensive industries• Agriculture and related industry is an important part of the economy; 12

% GDP• Coffee, sugarcane, tobacco and many other agricultural products are

exported from South America• Mining industry attract a lot of money in exploration• Fifty percent of the area is forest and the continent has a rich marine life

yet fishing and forestry are still small and usually cater to domestic market• Some hardwoods and tropical woods mainly coming from the Amazon

Basin where large areas are being deforested are exported, as well as pine from southern Brazil and Chile. Vast areas of commercial forests have been planted in Brazil and Chile for lumber.

Industries

• Leading sectors by production value are food processing Chemicals and pharmaceuticals, auto parts, iron and steel, aluminum, petroleum and home appliances

• Brazil, Chile, Argentina and Venezuela have begun privatizing transportation and communications industries– Fallout has been a higher unemployment rate

Globalization• Concept of free trade and the third largest trading

bloc points towards globalization• Globalization was actively pursued to get out of debt

crisis, hyperinflation and economic downturn of the 1980s; Washington Consensus

• Communication and information revolution integrated the region to globalization

• The mid 90s saw eroding belief in globalization; however it has become a part of its economy

• Coffee crisis in Peru and Brazil was due to increased production in south east Asia

Globalization• Civil Society groups such as Alianza Social Continental, ALOP,

Plataforma Inter actively campaign against globalization• The key elements of anti globalization groups in the region

include:– Trade does not assure justice and development and international

agreements and institutions such as WTO or FTAA do not recognize the asymmetries of markets.

– Globalization is a multinational led process, where a small number of huge enterprises control the direction of the international economy.

– International Finance markets are a source of instability and speculative behavior, with no relation to the real economy.

Globalization

• Chile has been an implicit supporter of globalization Chile's booming global economy has been touted as a model economic system for South America

• McKinsey report says that Brazil provides a suitable environment for foreign companies as there is lower cost of capital in plenty of financial liquidity

• Argentina was a success story till 2001, though the belief has been shaken yet the country exports a major chunk of its produce

Globalization

• Measures taken by various governments– Floating exchange rates– Tackles inflation effectively, esp Brazil– Open market policies

Management Strategies

COMPANY IS LIKE A FAMILY!!• Business model as a hybrid of globalization and the

region’s historic traditions.• Simpatia, personal dignity• Personalism –personalismo: can rely on employees

and colleagues because of personal loyalty• Collectivism and in-group/ out group behaviour

• Recruit new workers through their current employees and employees’ family members and close relatives

• Employees generally put the well-being of their families ahead of their professional careers

• Small budget allocated to training• Compensation usually comes in the form of fixed

salary. Only multinational companies and large Latin American firms provide variable compensation based on corporate performance

• Manager’s role and responsibilities• Approach towards change• Approach to time and deadlines• Communication and negotiation styles• Decision making

Motivating Factors

• Need for affiliation• Path goal theory• Maslow’s need hierarchy theory

Leadership traits

• Paternalistic leadership:- expect bosses to take an interest in their non-work lives- has two main aspects-the power of the father, government, or boss to make decisions for others as well as the responsibility for those who are dependent on them

• Supportive and directive leadership

STRENGTHS• a serious and effective commitment to the individual

and his or her job; • a willingness to provide social benefits to employees

via the company, since governments have few resources to offer them;

• a culture in which managers transform companies into centers for community development; and

• a willingness by companies to support community development

WEAKNESSES• developing HR policies that properly reflect the

economic deregulation of the region;• creating alliances with educational and technological

institutions for the training of personnel;• cooperating with governmental institutions in order

to deal with violent and turbulent conditions;• increasing corporate investment in HR-related

information technology, and• developing HR practices that are more appropriate

for the size and resources of small and midsize companies.

Case study 1

Petrobras

Brief history

• Founded in 1953 (oldest national oil company worldwide), with sole rights of domestic oil exploration and production.

• Diversified into petro chemicals in 1960• Monopoly scrapped in 1997• Issued $4.3bn in an IPO in brazil and NYSE

(both institutional and retail investors)

• The Brazilian government owns 55.7% of Petrobras' common shares with voting

• In 2003, commemorating its 50 years, Petrobras doubled the oil and natural gas daily production, surpassing the mark of 2 million barrels.

• It is a world leader in development of advanced technology from deep-water and ultra-deep water oil production.

• In 2006, Petrobras achieved Brazilian self-sufficiency in oil.

International expansion• Petrobras’s long history of international

expansion started with the creation of Braspetro in 1972

• At that time, oil imports covered more than 80 per cent of domestic demand and Petrobras’ international branch had as its main purpose to guarantee supply security.

• The first investments were made in Iraq, Colombia’s Caribbean Sea, Angola (1979), and the Gulf of Mexico, where Petrobras currently owns more than 300 deepwater blocs

• Nowadays, Petrobras holds more than 100 production licenses in 27 countries in Latin America (Argentina and Venezuela), Gulf of Mexico, and Africa (Angola, Nigeria, Tanzania, Libya).

• Argentina 2nd largest market• Overseas refining capacity has gone from zero

barrels in 2000 to 126.2 thousand barrels of oil per day in 2007

• According to its 2009-13 strategic plans, Petrobras expects to realize overseas investments of US$15.9 billion in both exploration and production, along with the expansion of international biofuels production.

• Agreement with ONGC in 2007 for mutual stakes in exploration blocks

Bolivian controversy

• On May 2006, Bolivia's president Evo Morales announced the nationalization of all gas and oil fields in the country

• Petrobras was heavily affected• Relationship strained:- Petrobras represented 24% of the Bolivian

industrial taxes, 18% of the country's GDP and 20% of the foreign investments.

• Agreement signed on October 28, 2006: the company would take 18% of the profits, and the Bolivian government would take the remainder

Case 2

REVLON Perfume in Latin America

Brief History

• Found in the midst of great depression in 1932 by Charles Revson, his brother joseph and a chemist Charles lachman, starting with anail enamel in NY

• By 1940, it became multi-million dollar co., selling major dept. stores and drug stores

• Black n white hand made ads till 1940, from 1945 full-color photographic ones (fire n ice, fashion plate, Love pat, cherries in the snow, etc.,)

• November 1955, Revlon went public with IPO priced at $12/ share, reaching #30 within 8 weeks.

• 1960s: Segmentation into different divisions focusing different markets

• Crossed $1 bn mark in 1977, acquiring Armour Pharmaceutical Company, carlos colomer (a spanish professional beauty distributor) and Fermodyl and Roux (ethnic care brands: crème of nature, milk & honey)

• 1983- attempted an unsuccessful hostile take over of Gillette.

• In 1985, at a price of $58 per share, totaling $2.7 billion, Revlon was sold to pantry pride (later renamed to Revlon Group, Inc.), a subsidiary of Mc Andrews and Forbes Holdings.

• 2000s: dropped supermodels from their ads and instead focussed on female movie stars

• Faced 27 consistent quarterly losses till june 2007 after which again start showing profits, (inconsistent though)

The trouble

• In 1985, they entered brazil in the form of foriegn subsidiary, Revlon Ltda. (Brazil)

• After 4 years of success, in 1989, they launched a perfume which smelt of camelia flowers under the brand name of roux

• The management was taken by surprise by strange sales pattern across different parts of America: In certain countries, it was just not moving.

• Many parts of South America, including Brazil, Bolivia, Paraguay, Uruguay and Argentina were just still: no sales at all

The reason

• The company came to know that in these countries, camellia flowers are Funeral flowers !!

• It was recalled in early 1990 (within 3 months) from these parts of America

• In 2008, they have sold a number of brazillian brands (including Men’s hair care brand) in order to concentrate on its core brands around the world