International Business

Business leaders: Outlook is better; challenges ahead

José María Álvarez-Pallete,chief operating officer of Spanish telecom company Telefónica spoke at the recent Latin Trade Symposium in Miami.
José María Álvarez-Pallete,chief operating officer of Spanish telecom company Telefónica spoke at the recent Latin Trade Symposium in Miami. Latin Trade Symposium

What lies ahead for Latin America in the next decade? What challenges will the region’s economies face?

Those are among the questions that two of the most respected economic minds in Latin America — Enrique V. Iglesias and Enrique García Rodríguez — and a host of regional business and financial leaders tackled at the Nov. 7 Latin Trade Symposium in Miami.

From a region mired in hyperinflation and staggering debt during the lost decade of the 1980s, Latin American nations — with some exceptions — have emerged as countries with growing middle classes, respectable economic growth and solid market management policies.

But that doesn’t mean challenges don’t remain as Latin America becomes 85 percent urbanized by 2025, its poor struggle for inclusion, and its burgeoning middle class demands more services, more reliable utilities, more food and better roads and other infrastructure.

By 2025, per capita annual income in Latin America is expected to climb to $20,000, the region’s economic output is forecast to reach $14 trillion, and there may be as many as 140 million cars on Latin American roads.

In the short term, the world economic slowdown is having an impact on Latin America, but the sound economic policies of many countries help them navigate the slower growth environment, said García, president of Caracas-based CAF-Development Bank of Latin America, during the symposium organized by the Latin Trade Group in partnership with the Inter-American Development Bank at the JW Marriott Marquis.

“We have a right to be optimistic but not complacent,” said Iglesias, the former president of the Inter-American Development Bank and now president of Fundación ASTUR, a nonprofit dedicated to the progress of Uruguayan society.

“We foresee growth of 3-5 percent in the next five years,” said José María Álvarez-Pallete, the chief operating officer of Telefónica, the Spanish telecom company that counts two-thirds of its customers in Latin America.

But if Latin America wants to converge with the industrialized nations in the future, its economies will need to grow 5.5 to 6 percent annually — and that growth must be sustainable and inclusive in nature, García said.

To spur more growth, he said, higher investment levels, better quality education and stronger institutions are all necessary.

“Regional integration isn’t a luxury; it’s a must,” García added. Poverty reduction also is key, he said.

But Iglesias said it’s easier to reduce poverty than it is to eliminate inequality in Latin American countries.

He agreed that integration — regional cooperation on energy, transportation, trade and other issues — is a “must.

And despite the allure of China and its huge appetite for Latin American metals, foodstuffs and energy resources, the region must continue to develop its relations with other parts of the world, Iglesias said.

Trying to find solutions to the violence and corruption that are so pervasive in some countries must remain high on the agenda too, he said.

Latin America countries also need to concentrate on raising low productivity levels and managing their economies with “maximum flexibility’’ as they seek to transform themselves, Iglesias said. “We are still looking at a lot of uncertainties and unknowns. The situation in the world is not what it used to be.”

Álvarez-Pallete said that despite the softening global economy, growth in the telecom sector has been “amazingly high.” The penetration of smart phones in the region, for example, has more than doubled in 18 months and telecom technology is skipping stages in Latin America, he said.

As the digital society makes inroads in the region, “people want everything on the spot,” said Álvarez-Pallete. “Latin America is turning very self-demanding.”

To nurture the budding tech sector, he said, Latin America needs to create an environment that encourages top tech talent to stay home rather than leave to do start-ups in the United States.

Innovation is crucial, Álvarez-Pallete said. “You need to innovate when you’re growing,” he said, not just when a country runs into problems.

Another obstacle to innovation in Latin America is lack of support for small businesses, said Fabián Gosselin, chief executive of Mexico-based Alsea, a food service company that operates Burger King, Domino’s Pizza, Chili’s and other franchise brands in Latin America.

It takes 75 days to start up a business in Mexico, he said, compared to just a few hours in Germany. “Small businesses need the finances and facilities to grow,” Gosselin said.

As Latin America innovates, it also needs to bring women into the fold, said Angelica Fuentes, chief executive of Mexico-based Omnilife, a multilevel nutritional supplement company, and founder of Angelíssima, a cosmetics and beauty line. Angelíssima’s sales force is 70 percent female

“We’re missing a huge amount of untapped talent in the region,” she said. “We’re not creating opportunities in corporations to bring in all the talent we’re wasting.”

More academic encouragement for school girls also is a necessary ingredient, she said.

Fuentes said her companies are bringing women workers from the informal economy into the formal economy by not only providing jobs and basic job skills but also by giving them training in how to pay taxes and use the banking system.

“I think everything is in place for an amazing decade in Latin America,” Álvarez-Pallete said. “Challenges, yes. Things to do, yes. Social demands, yes.” But overriding it all, he said, is an “amazing opportunity.”