All in the Family: Trading Legal Security for Trust, and Export Growth, in Latin America
By Barron, Jacob | |
Proquest LLC |
In terms of export growth, the world has been focused on
Average tariffs on sales to the region fell from 48.8% in 1990 to 10.7% in 1999, mostly due to the enactment of the North American Free Trade Agreement (NAFTA), according to
He noted that economic opportunity is widely available due in part to the efforts by Latin American economies to open up to sales from their northern neighbors and also in part to key characteristics of the region with great growth potential, but that these shifts toward greater opportunity have not necessarily resulted in a reduction of risk for sellers.
Less of a Bloc. More of a Family
Poza observed that many US exporters decrease their potential for success in the region by considering the entirety of
Unifying characteristics in the Latin American economy do exist, however, and can further confuse attempts by American companies to increase their exports to the region. First, history has proven
A second characteristic of the Latin American economy that makes some exporters uneasy is the fact that more than any other region of the world, with the possible exception of
This fact can make a lot of American companies wary, simply due in some cases to the presence of stereotypes around family-owned enterprises, and also because "while being businesses, they do reflect the reality of other influences, some very powerful, that affects the basic strategy of a firm," Poza observed. The connotation of the term "family-owned business" too, at least in the US, conjures up the image of a simple storefront on
Trust and Sacrifice
Another mostly-unifying theme that fits Latin American economies is that while growth there has been speedy, and efforts to increase American imports have been steady, the legal systems in these nations have not kept pace with exporter interest. This complicates the nature of risk management when it comes to conducting transactions with these companies because the same protections that apply to sales between American companies don't necessarily apply in
In other words, in
Companies hoping to do business in a region where more than nine times out of ten the customer will be a family enterprise should first take a look at the realities of how these entities function, and what differentiates them from their non-familyowned counterparts. Additionally, they should also find out what separates them from every other enterprise and get to know the business as though it were an individual. "Familyowned, family-controlled companies are the bulk of businesses in
By long-term, Poza doesn't mean a few visits, but a lengthy period of enterprises getting to know one another, almost as though it were a courtship. As a clinical professor, Poza practices as much as teaches, and shared a story from years ago when he was involved with a firm that built "a multi-million dollar pulp mill to export pulp to
"That was collaboration between two families that learned to trust each other, and not by legal means," Poza said, noting that the family structure can often present risk management benefits to the US seller if they're willing to put in the time to build the relationship. "Grupos [a Spanish term for groups of companies] are extremely adept at dealing with the volatile environment that
Unifying characteristics in the Latin American economy do exist, however, and can further confuse attempts by American companies to increase their exports to the region.
In
...and often results in payables turnarounds that are much quicker than exporters are used to in other markets and with other ownership structures.
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