Reflecting on our experiential learning from Montevideo, and our 16 day journey across Peru, Chile, Argentina and Uruguay.
After crossing the widest river of the planet or Rio de la Plata, like the porteños like to call it, we arrived by ferry to Uruguay’s capital, Montevideo. A sleepy town if compared with the bustling intensity of Buenos Aires (BA).
From our first meeting we heard similar pronouncements to those of Dr. Domingo Cavallo during our lunch in BA few days before. Several Uruguayans opinion leaders agreed: the best thing that has happened to Uruguay in the last century, is the Kirchner couple (Cristina, the current president and widow of former president Nestor) across the river, since they have tested every possible populist policy and the simple observation of their disastrous consequences, have minimized the chance of repeating the same mistake here. Furthermore, many Argentines corporations and its citizens are moving to Uruguay seeking the stability and predictable rule of law that Argentina has failed to provide.
Uruguay has recovered very well after the financial crises a contagion from Argentina’s in 2002. A decade of robust GDP growth and continuity of purpose in its public policies has fueled growth based in agribusiness, tourism, financial services and more recently since the late 90’s Global Services. They have also diversified their trading partners as China has entered the scene – as one of the top trading partners, in all countries we have visited. The business leaders we met displayed confidence and a positive outlook about the future of their country. From our visits and meetings we were able to identify some key conclusions:
Uruguay has developed Free Trade Zones as attractive destinations for foreign companies that use Uruguay as a platform country for re-exporting their products or services to other Mercosur or Latin American destinations. We visited Aguada Park and ZonAmerica, both have been very successful and attracted companies as Globant (we visited in BA and Montevideo), Sabre Holdings, TATA Consulting Services, etc. All of them global services providers. There are about 10 of them in Uruguay and they all provide a vast regime of incentives and tax exceptions for foreign firms.
- Plan Ceibal was an extraordinary visit. Since 2007 the government has embarked in providing one laptop to every student attending public school (K to 9th grade), including vocational and trade schools and of course their teachers. Over 570K laptops have been deployed as well as the communication network. In addition, a vast network of repair and maintenance, phone support, refurbishing, software services and educational support services have been developed. The impact is phenomenal as the computer literacy shooting-up enabling a massive participation in the knowledge economy. We can only guess the extraordinary competitive advantage Uruguayans human capital vis-à-vis other similar countries next decade. Its budget just a 5% of the education budget or about US$50MM per year offer a refreshing experience of impact, massive spills overs and value with a cost of around US$100/student-year, the cost of one textbook in the USA. Actually they have licensed the 90 top textbooks used by the public school system and they are distributed electronically!
3. The challenge of thinking big: Uruguayans are set thinking that “small is beautiful”, justified by their relative smallness compared to the size of their two very large
neighbors: Argentina and Brazil. However their country is not that small as its size would seem large when compared to most European nations. While I respect their interest to maintain their quality of life, beach surrounded/sun kissed relaxed lifestyle without the complexities the dynamic global economy brings, they may miss out. Uruguay offers the conditions to innovators and entrepreneurs to grow well beyond their country and the promise to scale-up well beyond their borders. However, an important constraint remains beyond their mindset. They are confronted with a population of 3.3MM and not growing as their fertility rate is one of the lowest of Latin America and their immigration policies are not deliberate and friendly enough to attract human capital from the world, in the quantities to position as a true “boutique power-house” of the south cone.
Reflecting on the last 16 days journey with my MBA students
Visiting places I had many times, seeing and meeting old and new friends with my students enabled to relive an already seen movie with new eyes and listen with new ears a dynamic and always changing reality and uncover surprising and refreshing opportunities. No doubt the world and its 7+B inhabitants need of Latin America now. A region endowed with incredible natural resources and entrepreneurial citizens are key to support a new world which will approach 9B inhabitants in less than 30 years. Clearly in our journey, we have seen that Peru and Chile are taking a formidable competitive posture. Uruguay is set to benefit through the success of the region, in particular its neighbors. The black sheep of the countries visited: Argentina, remains a puzzle and I already reported its contradictions and self-inflicted challenges in prior posts.
As we prepare for this journey the questions posed for this class was “Can Latin America Compete in the Global Services?” The answer is without doubt YES! They have created the macroeconomic conditions to become an attractive destination for foreign investments and attract global firms to their shores. Furthermore, they have invested a “commodities dividends” afforded by high commodity prices in their innovation and entrepreneurial ecosystem taking a solid posture to compete in the knowledge economy. This in turn, is enabling and encouraging local entrepreneurs to create companies and participate in the global services in the most rewarding (highest value added) segment: innovation and knowledge processes outsourcing. However, they are taking one step forward: creating their own stand-alone companies, to max-out the value capture from the value chain. We also recognize that Latin America, has become less competitive in outsourcing commodity services (call centers and telemarketers) and even uncertain in Business Process Outsourcing, due to rising cost afforded by higher living standards.
The net-net of this class has been a transformational experience for all of us and in particular for my students. Suddenly Latin America has become a comfortable destination in their professional careers and personal lives. They have met hundreds of professionals, managers and entrepreneurs in the same age group, they have forged relationships with peers, visited dozens of new ventures, established businesses and governments officials. I have seen their confidence and comfort level grow in dealing with the Latin realities, to venture into the Spanish language and adapt to the local customs with ease.
At one of the last company visited in Montevideo (Sabre Holdings), the young receptionist offered to drink mate when asked what was that thing next to her phone, by one of my students. To his surprise in matter of seconds he was sucking from the silver straw the traditional drink from Argentina, Uruguay, South-Brazil and others in the South Cone. Awkward as he felt drinking from the same straw, and unable to master the conversation protocol that is a required part of this ritual; this missed photo opportunity has become a great metaphor of the transformational experience that everyone in the group of 15 experienced. The willingness to adapt, engage and collaborate, breaking the old North-South paradigm to a give birth new win/win opportunities, forged as peers and grounded in mutual respect.
I am grateful to my students for the opportunity to experience the journey through their eyes, regain my ability to be surprised by the ordinary, enabling me to see many previously unseen opportunities.
Until my next posting on the flattening of global innovation – Carlos B.