LARC 2000: The E-Business Transformation

By Martha Lagace, Staff Writer, HBS Working Knowledge

Changes the Internet has brought to Latin American commerce have been positive and irreversible, and the potential exists to change not just business, but education and society as a whole.

That was one of the themes as four top executives all immersed in the complexities of Latin American e-business joined HBS Professor Lynda Applegate and the conference audience to talk about the unique opportunities and challenges they confront.

Wenceslas Casares

One transformation for the better, said Patagon.com CEO Wenceslas Casares, has been a rise in entrepreneurship in Latin America. Even if the Internet revolution turns out to be merely a passing fad, he said, if it will have made entrepreneurship fashionable in Latin America, then that will have been sufficient.

"This is the first time you see talented Latin Americans coming back in large numbers," Casares enthused. "Large amounts of capital are going directly into the hands of entrepreneurs." And, so long as the Internet doesn't fall apart, he predicted, then "economies that have been dominated by a few families will be more professional and more efficient in ten or 15 years."

A New Landscape

Zsolt Agardy, an angel investor as well as the chairman of Patagon and president of Fiducorp, said the new landscape has also given birth to a "new breed" of venture capitalists, bringing investments to his part of the world in a way that was virtually unheard of prior to the advent of the Internet.

In a wry aside, Agardy also noted that the very language of commerce in the region has been transformed. When his son, along with Casares—who was then 23 years old—first approached him for financing, he said, he didn't understand what the two were getting at, even after an hour of discussion.

Zsolt Agardy

"A couple of kids asking me for money, and telling me I would lose money," Agardy said, with an amused shrug. "Was this normal?"

Carlos Sicupira (OPM 9), managing partner of GP Investimentos and an investor in Submarino.com, highlighted another outgrowth of the growth of Latin American e-business: a mini-revolution in service.

The idea of having products delivered to the home was an unfamiliar concept to Latin Americans, he said, but, for those who can afford it now, the impact of this kind of service is felt more deeply in Latin America than in the United States. Subsequent consumer empowerment and the enlargement of markets are new and exciting changes, too, he said.

Added Antonio Bonchristiano, CEO of Submarino.com and a partner of GP Investimentos, "We [Latin Americans] never had catalogs. And, in any case, prices would have gone out of date immediately."

Though Sicupira conceded that while delivery fulfillment is not easy to cope with in the present business environment, the Internet's potential remains vast. In particular, he said, it creates jobs and spawns entrepreneurs. "In the end," he said, "we will influence how people will live in the future."

True Innovation?

Antonio Bonchristiano

When a member of the audience questioned whether Latin America was seeing real innovation or merely "opportunistic movements," Bonchristiano shook his head. Latin American Internet firms are just as able as those anywhere else in the world, he replied. And there is nothing wrong with copying the business models of others, he said.

"Copying is a very clever strategy," he said, and spurs an entrepreneur to do business faster, better and cheaper.

As for competing globally, he noted, there are other issues at stake. His own company competes in Spain with the likes of Bertelsmann, he said. But in the Internet world, everyone is more or less equal. "We are on the same ground," Bonchristiano pointed out. "They know as much about the Internet as we do, which is very little. There is no right and wrong; you're just as likely to get it right."

The real factor in distinguishing one company from another, Bonchristiano explained, was scale: how fast a company could scale.

Television as the Pacesetter

Countering members of the audience who challenged the potential of the Internet in Latin American societies which have a dramatic gap between rich and poor, panelists pointed out that, from a business point of view, entrepreneurs can be cheered by the overall penetration of television.

Carlos Sicupira

In his native Brazil, noted Sicupira, television penetration is at 98 percent. And while the key motivator for such strong penetration, he speculated, has been Latin Americans' passion for soccer, for the Internet, he said, the main driver for penetration could be something else: education.

The Internet is already used for a variety of educational purposes in Latin America, where its multiple uses draw people much closer to technology, said Sicupira. This access, he added, inspires a need to be more educated—which in any society can only be for the good.

A member of the audience noted that the Internet is growing not only Latin American's largest countries. Guatemala is setting up wired areas for new small businesses, he said, and Costa Rica has the Internet available in local post offices.

Added Sicupira, "The Internet will bring education at a lower cost to people in the same way that it brings products at a lower cost. By lowering the cost of education, it creates more access to education."

What's more, said Bonchristiano, the Internet extends still another advantage.

"It gives an additional incentive for people to go through education because they can change their lives," he noted. And, he added, with the influx of venture capitalists in Latin America who are prepared to listen to the ideas of budding entrepreneurs, "There is someone out there willing to back them."