Doing Business in Latin America ‘Not for the Faint of Heart’

“You have to absorb the culture,” said Matt Bramson, CSO at wholesale carrier Inphonex, during VON’s Latin America Summit on Tuesday. “It’s really not for the faint of heart,” echoed Fernando Rodrigues, CTO at IT integrator eLandia Group. At the same time, “Latin America is a must,” said Roberto de la Mora, director of technology architectures, Cisco Systems Inc..

In short, doing business in communications in Latin America means understanding local customs and realities, and can be challenging, but the opportunity in the area is vast for the savvy operator willing to find a good regional niche. That was the general message coming out of VON’s inaugural regional summit, as panelists in four sessions shared their expertise in doing business in CALA.

Speakers shared tips: “Doing business in Mexico and Brazil is very much a know-“who,” know-how approach. It’s all about the personal relationships,” said Bramson.

They also shared potential pitfalls: “Consider payment terms,” noted Rodrigues. “The average time to pay in the United States is 30 days. But it takes 30 days for a product to even reach the border in Latin America, then you need more time for customs.”

If one is successful in navigating the cultural differences, the rewards can be immense. For one, the area‘s governments are behind increased penetration. “The growth there represents one of the greatest economic shifts in the last 100 years,” said de la Mora. “The year 2005 was an inflection point where the GDP of the emerging world matched that of developed countries. By 2050, Brazil and Mexico will be among the top five. They’re both exploding as we speak.”

In fact, the GDP was $2.6 trillion last year for the region – it’s risen 12 percent since 2003. And inflation is at a 40-year low for the region.

IT and the Internet can be seen as the fifth great technical revolution of modern times, the others being the Industrial Revolution, the age of steam and machines, the steel era, and oil and automobiles. As IT as a percentage of capex increases, productivity of countries goes up: There’s about a 98.7 percent correlation. Thus, if one invests in IT, one improves the country. Governments have noticed this, and IP connectivity has become a key measure for CALA. “If the infrastructure in Latin America was upgraded to the level of South Korea, social inequality would be reduced by 10 to 20 percent,” said de la Mora.

For two, it’s a great market for niche players.

“Be a niche player,” counseled Alex Costa e Silva, CEO at Sao Paulo-based, wireless-only data-only operator Neovia. “We’re about one-1000th of the size of Telefonica. The story is that you can do this and stay alive in the marketplace.” Neovia targets lower-income customers with a WiMAX service that gives them the basic connectivity that they need.