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Though the Latin American market has improved a lot in the past five years, it's still a market for "risk-taking pioneers," according to Spanish banker and executive Ana Patricia Botn.
Botn, a keynote speaker at the conference, was recently voted one of the top ten businesswomen in Europe in a poll conducted by The Wall Street Journal. She was a key player in opening up the Latin American market for Spain's Banco Santander between 1989 and 1995. She now heads an "e-builder": the Internet services company Coverlink.com, and remains a board member of Banco Santander as well as a member of its executive committee. Botn is also chairman and CEO of Suala Capital Advisers, a 100-million private equity fund that focuses on the Spanish market.
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| Much more than other regions, you know, Latin America does not lend itself to investment at arm's length. | |
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| —Ana Patricia Botn |
In her remarks at HBS, Botn emphasized that Latin America is a vital part of any large global company's corporate strategy. There are still countries with problems, she acknowledged. "We have seen some turbulence in some markets: That's an understatement around the world," she said. Yet many of the most exciting investment opportunities in the next decade will lie in Latin America, according to Botn, and these include opportunities for Latin American companies as well.
She reminded the audience that of the 100 largest U.S. companies at the start of the 20th century, only 16 exist today. "The point of this is that we must look beyond our current assumptions," she stressed. "What is successful today may not be tomorrow.
"We must not wait for the future to overtake us. You can also invent the future."
Long hours of complete darkness
Botn began her talk by citing an advertisement that appeared in The London Times a century ago. "Men wanted for hazardous journey," she read. "Low wages, bitter cold, long hours of complete darkness. Safe return doubtful. Honor and recognition in the event of success." The ad, she said, was signed by Ernest Shackleton. The polar explorer was planning an expedition to the South Pole and needed adventurous crew members.
"And the next morning—this is all history—there were about 5,000 people queuing up who wanted to take part in this mission," she said. "They did in fact reach the Pole in 1907."
"The point of this story is that people will respond to almost any challenge as long as the rewards, and in this case, glory and honor—what we all work for today, right?—outweigh the risks."
A similar kind of ad, if it had run in the early 1980s for investments in Latin America, would not have sounded good at all, she pointed out. Today, however, an ad for potential investors might sound a little more positive, she said, reading her own version: "Investors wanted for exciting but not risk-free investment opportunity ... Return on investment likely, in the middle maybe long term. And, large financial rewards for the brave and entrepreneurial."
If 5,000 people were willing to sign up for Shackleton's "infinitely less appealing" ad, Botn observed, maybe an equal number would be brave enough to recognize the potential in Latin America.
The critical aspect
"Everything is not perfect and you cannot generalize," she told the group. "You all know the problems of countries like Columbia or even Peru, and these days Argentina." In spite of "temporary political difficulties or different kinds of government," Botn said, the main path has been laid for investors in the region. While the average annual GDP growth between 1980 and 1990 was +2.6 percent, it grew to +3.7 between 1990 and 2000, and is expected to grow to +4.5 percent between 2000 and 2005. Her key incentive for investing aggressively in Latin America, she said, is, not surprisingly, finding "more or less" stable rules of the game.
Botn's prognosis for investors, however, favored strategic investors in Latin America over private equity investors. Although both must focus on the long term, she said, private equity investors are likely to have a tougher time without trusted on-the-ground partners who truly understand the contexts and diverse cultures of Latin America.
"Much more than other regions, you know, Latin America does not lend itself to investment at arm's length," she said.
In private equity, investord must also be very hands-on in terms of following up on their investments. "I would say it's not as important—[although] of course it is important—how you make the investment decision," she added. "It's much more important how you follow up and how you control your investments once you make them."
"This is true anyplace, but here it's the critical aspect."
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