Team Project

Business Environment of Latin America

Group Members:
Hussain Ashraf (Group Leader) Muhammad Abdullah Muhammad Furqan Zeb Uzair Bin Zafar Rao Sabir Vaquar Ibrahim Sohail Dar

Contents
Objective of the Study ............................................................................................................................. 4 Introduction of Latin America .................................................................................................................. 4 Sub- division of Latin America ............................................................................................................ 5 Map of Latin America .......................................................................................................................... 6 Countries in Latin America .................................................................................................................. 7 Introduction of major countries of Latin America ..................................................................................... 8 Brazil................................................................................................................................................... 8 Argentina ............................................................................................................................................. 9 Mexico .............................................................................................................................................. 10 Culture of Latin American ..................................................................................................................... 11 Culture of Pakistan ................................................................................................................................ 12 Corporate culture in Latin America ........................................................................................................ 13 Appearances ...................................................................................................................................... 13 Personal Space................................................................................................................................... 13 Punctuality ........................................................................................................................................ 13 Business Dress Code .......................................................................................................................... 14 Conversation ..................................................................................................................................... 14 Eating ................................................................................................................................................ 14 Holidays ............................................................................................................................................. 14 Corporate culture in Pakistan................................................................................................................. 15 Meeting and Greeting ........................................................................................................................ 15 Gift Giving Etiquette .......................................................................................................................... 15 Building Relationships & Communication ........................................................................................... 16 Business Meeting Etiquette in Pakistan .............................................................................................. 16 Negotiating ........................................................................................................................................ 17 Legal Issues in Latin America.................................................................................................................. 18 Political & Other Risks in Latin America .................................................................................................. 20 Political & Legal Issues in Pakistan ......................................................................................................... 20 Hofstede Cultural Dimensions of Latin America ..................................................................................... 22 Latin American style of management ..................................................................................................... 23

Nation ............................................................................................................................................... 23 How Culture Affects Work Practices in Latin America ......................................................................... 23 The Company Is Like a Family............................................................................................................. 23 The Importance of Social Status ......................................................................................................... 24 Teamwork, Subcontracting and Geographical Mobility ...................................................................... 26 Their Own Styles of Confrontation ..................................................................................................... 27 Latin American Communication Styles ................................................................................................... 27 Communication tends to be predominantly oral rather than through the written word ..................... 27 Verbal Communication ...................................................................................................................... 28 Entry Barriers for MNC s in Latin America .............................................................................................. 28 Comparison between Latin America & Pakistan ..................................................................................... 29 Hofstede Cultural Comparison ........................................................................................................... 29 Time Orientation ............................................................................................................................... 30 Context of Communication ................................................................................................................ 30 Collectivism ....................................................................................................................................... 30 Language ........................................................................................................................................... 30 Corporate Culture .............................................................................................................................. 31 Negotiation Style ............................................................................................................................... 31 Political & Other Risks ........................................................................................................................ 31 Analysis ................................................................................................................................................. 32 Recommendations................................................................................................................................. 33

Objective of the Study
The basic objective of this research work is to study in detail about the business environment of any specific region & then compare it with the business environment of Pakistan. Latin America is the region which we have to study. We studied in detail about the business environment of Latin America. Latin America contains 20 countries, but we have to study the region as a whole. For this purpose we distributed the work among ourselves & the basic objective in our mind is to collect data about the business environment of Latin America. In business environment we have studied in detail about the region, its culture, corporate culture, political risk & legal factors, management practices, government policies, communication & negotiation styles & management theories. At the end we compared the business environments of Latin America & Pakistan. We have also used the tool of Hofstede cultural dimension to study deeply the culture of Latin America.

1

Introduction of Latin America

Latin America is a region of the Americas where Romance languages (i.e., those derived from Latin) particularly Spanish and Portuguese, and variably French are primarily spoken. Latin America has an area of approximately 21,069,500 km² (7,880,000 sq mi), almost 3.9% of the Earth's surface or 14.1% of its land surface area. As of 2010, its population was estimated at more than 580 million and it¶s combined GDP at 5.16 trillion United States dollars (6.27 trillion at PPP). The Latin American expected economic growth rate is at about 5.7% for 2010 and 4% in 2011.Spanish and Portuguese are the predominant languages of Latin America. Portuguese is spoken only in Brazil, the biggest and most populous country in the region. Spanish is the official language of most of the rest of the countries on the Latin American mainland, as well as in Puerto Rico (where it is co-official with English), Cuba and the Dominican Republic. The inhabitants of Latin America are of a variety of ancestries, ethnic groups, and races, making the region one of the most diverse in the world. The vast majority of Latin Americans are Christians, mostly Roman Catholics. About 71% of the Latin American population consider themselves Catholic. The major trade blocs (or agreements) in the region are the Union of South American

1

http://en.wikipedia.org/wiki/latin_america#cite_note-5

Nations, composed of the integrated Mercosur and Andean Community of Nations (CAN). Minor blocs or trade agreements are the G3 Free Trade Agreement, the Dominican Republic ± Central America Free Trade Agreement (DR-CAFTA) and the Caribbean Community (CARICOM).Income from tourism is key to the economy of several Latin American countries. Mexico receives the largest number of international tourists; with 21.4 million visitors in 2007.

2

Sub- division of Latin America

Latin America can be subdivided into several sub regions based on geography, politics, demographics and culture. The basic geographical sub regions are North America, Central America, the Caribbean, and South America (the latter contains further politico-geographical subdivisions such as the Southern Cone and the Andean states). It may be divided on linguistic grounds into Hispanic America and Portuguese America.

2

http://en.wikipedia.org/wiki/latin_america#cite_note-5

3

Map of Latin America

3

http://vivirlatino.com/2007/04/23/cancer-rates-soar-in-latin-america.php

4

Countries in Latin America

1. Argentina 2. Bolivia 3. Brazil 4. Belize 5. Cuba 6. Chile 7. Costa Rica 8. Colombia 9. Dominican Republic 10. Ecuador 11. El Salvador 12. Guatemala 13. Honduras 14. Mexico 15. Nicaragua 16. Panama 17. Paraguay 18. Peru 19. Trinidad and Tobago 20. Uruguay 21. Venezuela

4

http://www.globalministries.org/lac/countries/

Introduction of major countries of Latin America
5

Brazil

Is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population. It is the only Portuguese-speaking country in the Americas and the largest lusophone country in the world. The Brazilian economy is the world's eighth largest economy by nominal GDP and the ninth largest by purchasing power parity. Brazil is one of the world's fastest growing major economies. Economic reforms have given the country new international recognition. Brazil is a founding member of the United Nations, the G20, CPLP, Latin Union, the Organization of Ibero-American States, Mercosul and the Union of South American Nations, and is one of the BRIC Countries. Brazil is also home to a diversity of wildlife, natural environments, and extensive natural resources in a variety of protected habitats. The Brazilian Federation is the "indissoluble union" of three distinct political entities: the States, the Municipalities and the Federal District. The Union, the states and the Federal District, and the municipalities, are the "spheres of government´. Brazilian law is based on Roman-Germanic traditions and civil law concepts prevail over common law practice. Brazil is a political and economic leader in Latin America; however, social and economic problems prevent it from becoming an effective global power. Brazil is a federation composed of twenty-six States, one federal district (which contains the capital city, Brasília) and municipalities. The climate of Brazil comprises a wide range of weather conditions across a large area and varied topography, but most of the country is tropical. Brazil's large territory comprises different ecosystems, such as the Amazon Rainforest, recognized as having the greatest biological diversity in the world, with the Atlantic Forest and the Cerrado, sustaining the greatest biodiversity. The population of Brazil, as recorded by the 2008 PNAD, was approximately 190 million.

5

http://en.wikipedia.org/wiki/brazil

6

Argentina

Is the second largest country in South America, constituted as a federation of 23 provinces and an autonomous city, Buenos Aires. It is the eighth-largest country in the world by land area and the largest among Spanish-speaking nations, though Mexico, Colombia and Spain are more populous. Argentina is a founding member of the United Nations, Mercosur and the Union of South American Nations. Argentina is one of the G-20 major economies. The generally temperate climate ranges from subtropical in the north to sub polar in the far south. The Constitution guarantees freedom of religion but also requires the government to support Roman Catholicism economically. According to the World Christian Database, Argentines are 92.1% Christian, 3.1% agnostic, 1.9% Muslim, 1.3% Jewish, 0.9% atheist, and 0.9% Buddhist and other. Argentine Christians are mostly Roman Catholic. Argentina has the largest Jewish population in Latin America with about 300,000. The community numbered about 400,000 after World War II, but the appeal of Israel and economic and cultural pressures at home led many to leave. The official language of Argentina is Spanish, usually called castellano (Castilian) by Argentines. Argentina is the largest Spanish-speaking society. Argentina is highly urbanized, with the ten largest metropolitan areas accounting for half of the population, and fewer than one in ten living in rural areas. Argentina has a market-oriented economy with abundant natural resources, a well-educated population, an export-oriented agricultural sector and a relatively diversified industrial base. Argentina's transport infrastructure is relatively advanced. Argentina is a full member of the Mercosur block together with Brazil, Paraguay, Uruguay and Venezuela; and five associate members: Bolivia, Chile, Colombia, Ecuador and Peru. Argentine culture has significant European influences. Buenos Aires, its cultural capital, is largely characterized by both the prevalence of people of European descent, and of conscious imitation of European styles in architecture. The other big influence is the gauchos and their traditional country lifestyle of self-reliance. Finally, indigenous American traditions (like yerba mate infusions) have been absorbed into the general cultural milieu.

6

http://en.wikipedia.org/wiki/argentina

7

Mexico

Is a federal constitutional republic in North America. Covering almost 2 million square kilometers (over 760,000 sq mi), Mexico is the fifth-largest country in the Americas by total area and the 14th largest independent nation in the world. With an estimated population of 111 million, it is the 11th most populous country and the most populous Hispanophone country on Earth. Mexico is a federation comprising thirty-one states and a Federal District, the capital city. After rapid economic, social and technological growth beginning in the 1990s, Mexico is now both one of the world's largest economies and one of the fastest growing economies in the world, with a stable growth rate of 7.6%. As a regional power, and since 1994 the first Latin American member of the Organization for Economic Co-operation and Development (OECD), Mexico was firmly established as an upper middle-income country, and in 2009 Mexico surpassed the world bank's high income economic threshold to become a high income country. Mexico is considered a newly industrialized country and an emerging power. It has the 13th largest nominal GDP and the 11th largest by purchasing power parityThere is no constitutional official language at the federal level in Mexico. Spanish, spoken by 97% of the population, is considered a national language by The General Law of Linguistic Rights of the Indigenous Peoples, which also grants all indigenous minority languages spoken in Mexico, regardless of the number of speakers, the same validity as Spanish in all territories in which they are spoken, and indigenous peoples are entitled to receive public services and documents in their native languages. Mexico has no official religion, and the government does not provide any financial contributions to the church, and the church does not participate in public education.

7

http://en.wikipedia.org/wiki/mexico

8

Culture of Latin American

Latin American culture is the formal or informal expression of the peoples of Latin America, and includes high culture (literature, high art) and popular culture (music, folk art and dance) as well as religion and other customary practices. Latin America generally includes those parts of the Americas where Spanish, French, or Portuguese prevail: Mexico, most of Central America, South America. There is also an important Latin American cultural presence in the United States of America (e.g. California and the Southwest, and cities such as New York and Miami). There is also increasing attention to the relations between Latin America and the Caribbean as a whole. See further discussion of definitions at Latin America. Latin America is an amazing cultural melting pot of many different ethnic influences from around the world. In its variety lies its richness and its colorfulness. Latin American nations like Bolivia, Ecuador, Peru, Guatemala and Paraguay are heavily influenced by the ancient preColumbian cultures. Throughout Latin America one can notice a distinct influence of European culture as well, because of its history of remaining under the colonial rule of Spain, Portugal and France. The immigrants who came and settled from Germany, Italy and East European countries have also influenced the cultures of Latin American countries like Brazil, Argentina, Venezuela and Chile. The richness of Latin American culture is the product of many influences, including: y Pre-Columbian cultures, whose importance is today particularly notable in countries such as Mexico, Guatemala, Ecuador, Peru, Bolivia and Paraguay. y European colonial culture, owing to the region's history of colonization by Spain, Portugal, and France. European influence is particularly marked in so-called high culture, such as literature, painting, and Music. Moreover, this imperial history left an enduring mark of their influence in their languages, which are spoken throughout Central

8

http://en.wikipedia.org/wiki/Latin_American_culture

9

(including the Caribbean), South and North America (Mexico and many parts of the

United States). y Nineteenth- and twentieth-century immigration (e.g. from Italy, Germany, and Eastern Europe) also transformed especially countries such as Argentina, Uruguay, Brazil (particular the southeast and southern regions), Chile and Venezuela. y Chinese, Korean and Japanese immigration influenced the culture in Brazil, Cuba, Guatemala, Mexico, Panamá and Peru y The introduction of slaves from Africa, which has influenced for instance dance and religion, especially in countries such as Dominican Republic, Brazil, Panama, Peru, Venezuela, Colombia, and Cuba.

10

Culture of Pakistan

The society and culture of Pakistan comprises numerous diverse cultures and ethnic groups: the Punjabis, Kashmiri and Sindis in the east; the tribal cultures of the Baloch and Pashtun in the west; and the ancient Dardic and Tajik communities in the north. These Pakistani cultures have been greatly influenced by many of the surrounding countries' cultures, such as the Turkish, Persian, Afghan, and Indiansof South Asia, Central Asia and the Middle East. In ancient times, Pakistan was a major cultural hub. Many cultural practices and great monuments have been inherited from the time of the ancient rulers of the region. One of the greatest cultural influences was that of the Persian Empire, of which Pakistan was a part. In fact, the Pakistani satraps were at one time the richest and most productive of the massive Persian Empire. Other key influences include the Afghan Empire, Mughal Empire and later, the short lived but influential, the British Empire. Pakistan has a cultural and ethnic background going back to the Indus Valley Civilization, which existed from 2800±1800 B.C., and was remarkable for its ordered cities, advanced sanitation, excellent roads, and uniquely structured society. Pakistan has been invaded many times in the past, and has been occupied and settled by many different peoples, each of whom have left their imprint on the current inhabitants of the country. Some
9

of

the

largest

groups

were

the

'Aryans', Greeks, Scythians, Persians, White

10

http://en.wikipedia.org/wiki/Latin_American_culture http://en.wikipedia.org/wiki/Culture_of_Pakistan

Huns, Arabs, Turks, Mongols, Afghans, Buddhists and other Eurasian groups, up to and including the British, who left in the late 1940s.

11Corporate

culture in Latin America

Appearances
Dress is very important for making a good impression in Argentina; your entire wardrobe will be scrutinized. Business dress is conservative: dark suits and ties for men; white blouses and dark suits or skirts for women. Maintaining eye contact is very important. A pat on the shoulder is a sign of friendship in Letin America. A sweeping gesture beginning under the chin and continuing up over the top of the head is used to mean "I don¶t know" or "I don¶t care". With thumb and finger touching (as if holding a pinch of salt), one taps them with the index finger to indicate "hurry up" or "a lot". Make sure to cover your mouth when yawning or coughing. Don¶t put your feet up on any furniture and Eating in the street or on public transportation is considered rude.

Personal Space
Personal space in Latin America is much closer to the body that many people from the United States and other cultures are used to. You may find yourself conversing with someone who is closer to you than you are comfortable with. Be aware that moving back may be seen as a sign of aloofness or that you are uninterested in the conversation or speaker.

Punctuality
Personal interaction is more important than timelines to most Latinos. In many Hispanic cultures, not being on time is considered culturally acceptable, and it is the norm to be late to a meeting or appointment if one gets caught up talking to a friend. This is not a sign that you are not important or that they are not excited to be at your event, there is simply a much more flexible attitude towards punctuality prevalent in many Hispanic cultures. It is not considered polite to be early to a meeting or event, as your host may not be ready or prepared for you.

11

http://www.bellaonline.com/articles/art40307.asp

12Business

Dress Code

Latin American countries, especially those in South America, are very formal when it comes to business attire. When conducting business you would be best advised to wear a suit in conservative colors until you are aware of the specific culture of the business. Women should be sure to where appropriate length skirts to be taken seriously. Cut and color is very important and be sure to go for quality light weight fabrics do to the warm climate.

Conversation
When discussing business, keep conversations formal until invited to do otherwise. If you are speaking in Spanish, use the formal Usted and not the more casual Tu. Use Sr. or Sra. and last names, and make sure you say please and thank you (or gracias and de nada!). Be careful when using hand gestures as they may have different meaning in different regions. For example the ok gesture of a circle with the thumb and forefinger is offensive in many areas, and if you pat your elbow you are calling someone cheap.

Eating
Business is often conducted over lunch or dinner. Be prepared for a long meal ± usually one hour or more, beginning with small talk and easing into business matters as the meal progresses. This small talk is important to building trust, so treat it with respect. Table manners are much the same as in the United States, and should always be used in business or personal settings. Offer to pay (especially if you instigated the meeting), but do not insist or push the issue if the other person offers± this is offensive in most cultures. You will rarely split the bill. Graciousness will go a long way.

Holidays
Be sensitive to local holidays and be aware that business is not usually conducted on or around holidays. However, Latinos tend to be an open and family oriented people. If you are from out of town around the holidays do not be surprised if you are invited to join in a celebration or invited
12

http://www.bellaonline.com/articles/art40307.asp

to a family dinner! Be aware that you may cause offense if you refuse to go, or if you go to a celebration but do not eat or take part in the festivities. Many businesses are closed on religious days and during Carnival throughout Central and South America, and hotel rooms are hard to get if not impossible.

13Corporate

culture in Pakistan

Meeting and Greeting
Greetings are therefore often between members of the same sex; however, when dealing with people in the middle class, greetings may be across sex lines. Men shake hands with each other. Once a relationship is developed, they may hug as well as shake hands. Women generally hug and kiss. Pakistanis take their time during greetings and ask about the person's health, family, and business success. Pakistani names often include a name that denotes a person's class, tribe, occupation, or other status indicator. They may also include two names that have a specific meaning when used together, and the meaning is lost if the names are separated. It is best to ask a person how they wish to be addressed. In general, this is not a culture where first names are commonly used, except among close friends.

Gift Giving Etiquette
If invited to a Pakistani's home, bring the hostess a small gift such as flowers or good quality chocolates. Men should avoid giving flowers to women. Do not give white flowers as they are used at weddings. If a man must give a gift to a woman, he should say that it is from his wife, mother, sister, or some other female relative. y y y Do not give alcohol. Gifts are not opened when received. Gifts are given with two hands.

13

http://en.wikipedia.org/wiki/Etiquette_in_Pakistan

14Building

Relationships & Communication

y y

Third-party introductions are a necessity in this relationship-driven culture. Pakistanis prefer to work with people they know and trust and will spend a great deal of time on the getting-to-know-you part of relationship building.

y

You must not appear frustrated by what may appear to be purely social conversation. Pakistanis are hospitable and enjoy hosting foreign guests.

y y y y

Relationships take time to grow and must be nurtured. This may require several visits. Pakistanis often ask personal questions as a way to get to know you as a person. If possible, it is best to answer these questions. Pakistanis do not require as much personal space as most western cultures. As such, they will stand close to you while conversing and you may feel as if your personal space has been violated. Do not back away.

y y y

Pakistanis are generally indirect communicators. Always demonstrate deference to the most senior person in the group. In general, Pakistanis speak in a roundabout or circuitous fashion. Direct statements are made only to those with whom they have a long-standing personal relationship.

y

They also use a great deal of hyperbole and similes, and go out of their way to find something to praise.

y y

Be prepared to flatter and be flattered. Pakistanis prefer to converse in a non-controversial manner, so they will say they "will try" rather than admit that they cannot or will not be able to do something.

Business Meeting Etiquette in Pakistan
y Appointments are necessary and should be made, in writing, 3 to 4 weeks in advance, although meetings with private companies can often be arranged with less notice. y The best time to schedule meetings is in the late morning or early afternoon.

14

http://en.wikipedia.org/wiki/Etiquette_in_Pakistan

y

If at all possible, try not to schedule meetings during Ramadan. The workday is shortened, and since Muslims fast, they could not offer you tea, which is a sign of hospitality.

y y

You should arrive at meetings on time and be prepared to be kept waiting. Pakistanis in the private sector who are accustomed to working with international companies often strive for punctuality, but are not always successful.

y

It is not uncommon to have a meeting cancelled at the last minute or even once you have arrived.

y

In general, Pakistanis have an open-door policy, even when they are in a meeting. This means there may be frequent interruptions. Other people may wander into the room and start a different discussion.

y y y y

Meetings are formal. Business meetings start after prolonged inquiries about health, family, etc. Never inquire about a colleague's wife or daughters. During the first several meetings, business may not be discussed at all as the relationship is still being developed.

y

Maintain indirect eye contact while speaking.

15Negotiating

y y

Companies are hierarchical. Decisions are made by the highest-ranking person. Decisions are reached slowly. If you try to rush things, you will give offense and jeopardize your business relationship.

y y y

The society is extremely bureaucratic. Most decisions require several layers of approval. It often takes several visits to accomplish simple tasks. If you change negotiators, negotiations will have to start over since relationships are to the person and not the company that they represent.

y y y
15

Pakistanis are highly skilled negotiators. Price is often a determining factor in closing a deal. Pakistanis strive for win-win outcomes.

http://en.wikipedia.org/wiki/Etiquette_in_Pakistan

y y

Maintain indirect eye contact while speaking. Do not use high-pressure tactics.

16

Legal Issues in Latin America

Despite a wholesale move to democratic capitalism across the region, political crises in Venezuela, Bolivia, and Ecuador are creating untold hazards that may well lead to significant business losses. While Latin America has benefited from the spread of democracy, external perceptions of instability are exacerbated by anxieties about political volatility, corruption and an emerging wave of populism in some countries. There is a growing political divide between countries that want greater participation in the world economy and those that reject economic liberalization and free trade, threatening regional harmony and trade integration. Increased interdependence means the risk of contagion from pockets of regional political instability is high. Opinion polls in the region show a worryingly low approval rating for vital institutions ± while Chile, Brazil and Mexico have largely managed to differentiate themselves, many other countries in the region have failed to avoid the tar brush of poor governance (and thus suffer from very low levels of legitimacy).Achieving regional political stability, a necessary precursor for economic development, is difficult in such circumstances. Outside perceptions of geopolitical risk are high (e.g. a leading insurer ranks four Latin American countries in the ³top ten´ global political hotspots). Expropriation, foreign exchange moratoriums, and political violence the list goes on. According to the Multilateral Investment Guarantee Agency (MIGA), a foreign-investment insurance agency run by the World Bank, political risk concerns helped cut the flow of investments in the developing world by 23% to US$135 billion in 2003, compared with just two

16

http://www.weforum.org/pdf/grn/LatinAmericaRisk.pdf http://www.latinbusinesschronicle.com/app/article.aspx?id=3867 http://www.thealtagroup.com/files/Managing_the_risks_LAR.pdf

years earlier. While economies gained steam in 2004, political-risk premiums remained high, as companies stayed on the sidelines as opposed to investing abroad, according to MIGA. U.S. insurance giant Aon says the number of large-scale confiscations of private properties from governments has tapered off dramatically in the last 20 years, but instability still exists.
17

To mitigate potential losses, companies are turning to political risk insurance. In January

2002, Argentina decided to make an unexpected reversal of its economic policy, particularly in its attitude toward foreign investment. While the country had been suffering from rising unemployment and a persistent and pervasive loss of competitiveness, the path selected was to devalue its currency, completely eliminate the convertibility program, and convert to local currency all contractual obligations that were previously agreed upon. For those not familiar with such economic measures, this so-called ³pesification´ consisted of the mandatory conversion of all domestic obligations formerly denominated in foreign currencies (mainly United States dollars) into Argentine pesos at a mandated ratio of 1 to 1, while all costs in obligations payable abroad were maintained to be paid in such foreign currency. Because of the effect of the devaluation, these obligations were made more expensive to those creditors holding rights in domestic contracts denominated in foreign currency under prevailing statute law at the time when such obligations were contracted. This pesification of contractual obligations turned out to be both a breach of government contract and tantamount to expropriation. Many foreign investors, and in particular some large multinational leasing companies, suffered significant losses from Argentina¶s devaluation and pesification. Mining firms in Peru, for example, pay handsome royalties to the central government, which spends roughly half in the capital city and returns the other half to the respective provincial government. Unfortunately, only a small trickle of the royalty payments reaches the municipality

17

http://www.latinbusinesschronicle.com/app/article.aspx?id=3867 http://www.weforum.org/pdf/grn/LatinAmericaRisk.pdf http://www.thealtagroup.com/files/Managing_the_risks_LAR.pdf

where the mine is located. Local citizens see modern mining infrastructure being constructed and wonder out loud: What¶s in it for us? This sows the seeds of discontent that can manifest itself in labor disputes, corrupt local politicians armed with red tape and eager for bribes, the scrutiny of organized crime, the vitriol of NGOs looking to draw attention to their cause, and protests by other disgruntled groups.

18Political

& Other Risks in Latin America

y

Government officials and the general public often view foreign companies as outsiders even intruders and are suspicious of their impact on economic independence and political sovereignty.

y

The risk of expropriation is high in Latin American countries because of continuous political upheaval, violence, and change.

y y

Macropolitical risk is also very high. In particular areas of Latin America especially in Mexico, the kidnapping of business executives has become quite common.

y

In Mexico, business executives and tier families are a prime target for gangs of kidnappers many of which are reportedly led by state or local police.

y

Estimates are that big companies in Mexico typically spend between 5 to 15 percent of their annual budgets on security.

y

Corruption in Latin American countries is also a critical issue for MNC¶s.

19Political

& Legal Issues in Pakistan

The Country Risk Tier (CRT) reflects best assessment of three categories of risk: Economic Political
18

http://www.businessmanagementclassonline.com/businessmanagement-30-economic-political-risk.html http://www3.ambest.com/ratings/cr/reports/Pakistan.pdf

19

Financial System Risk. Pakistan is itself the site of military and terrorist activity. Its fundamental lack of political stability is a challenge to its economic and financial outlook. Regional instability and domestic bureaucratic inadequacies challenge this economy that, though recently liberalized by the government, supports a relatively low income population. Strategic in location as it is bordered by China, Central Asia and the Middle East, this region contains a cross section of cultures and histories and is prone to periods of regional instability,
20

particularly between Pakistan and India. Growth has continued to be positive despite global

economic slowdown, but not high enough to seriously challenge poverty levels in the country. There is a reliance on external aid from the international community, but underlying contingencies in that lending, which are connected with the government¶s stance towards militants, continually threaten expectations for future aid. Corruption is reportedly widespread among Pakistan¶s government officials. The legal system is also considered corrupt and inefficient. The government is majority owner of the largest commercial bank in Pakistan. Sovereign debt in Pakistan receives a vulnerable rating, which weighs on the private sector¶s access to capital. The insurance industry is regulated by the Insurance Department of the Securities and Exchange Commission of Pakistan (SCP).

20

http://telecomnewspk.com/2010/05/pakistan-risks-shooting-itself-in-foot-over-etisalat-business-deal/

21Hofstede

Cultural Dimensions of Latin America

Hofstede found that Latin American countries had higher power distance scores. The less powerful in these societies tend to look to those with power to make decisions, and inequalities within society are more acceptable. This is represented by a tendency for the centralization of power and the subordination of those with less power within businesses. In Latin America individualism is very low; it has a strong loyalty towards the group, which is strongly influenced by the importance of the role of the family and the relationships within the family. The individual has little autonomy and decisions are deliberated. High uncertainty avoidance scores mean that there is a fear of ambiguous situations, a preference for being busy and being precise and punctual. Relatively high scores on this dimension were found for Latin American. Venezuela has the highest Masculinity ranking among the Latin countries at 73, compared to an average of 48. This indicates the country experiences a higher degree of gender differentiation of roles. Otherwise average of Latin American countries is 48, which shows a moderate percentage. So that men & women have equal portion in the society.

21

Geert-hofstede.com

Latin American style of management
Nation
Latin American countries consist of nations like Mexico, Argentina, Brazil, Peru, Chile, Cuba, Bolivia, Ecuador, Honduras. Business style are often result of the values imbibed through various cultural values. These cultural values will determine the success and failure of a business organization.
22How

Culture Affects Work Practices in Latin America

Some global executives would be surprised to learn that many employees in Mexico like to do their jobs in the presence of such religious images as the Virgin of Guadalupe. Their religious devotion in one example of how local culture affects the styles and practices of work in Latin America. Anabella Dávila, professor of management theory and business history at the graduate business school (ITESM) in Monterrey (Mexico), and Marta M. Elvira, academic director of Lexington College in Chicago, have published a book on this phenomenon, entitled ³Managing Human Resources in Latin America.´ In the chapter titled ³Culture and Human Resource Management in Latin America´, the two scholars identify the cultural values that determine Human Resources in the region. They show how these factors can determine the success and failure of a business organization.
23The

Company Is Like a Family

The Latin American business model as a hybrid of globalization and the region¶s historic traditions. With the exception of Argentina and Costa Rica, those traditions are characterized by large social gaps and a widespread collectivism that has various manifestations. Dávila and Elvira explain that social differences are manifested locally through benevolent, paternalistic leadership. ³The senior executive has the personal obligation to protect subordinates, and even take care of the personal needs of workers and their families.´

22 23

³Managing Human Resources in Latin America.´ By Anabella Dávila
http://www.wharton.universia.net

Generally speaking, paternalism involves a ³father´ who cares for his sons by engaging in permissive practices and providing moral support, even if his ³sons´ wind up being too dependent in many respects throughout their working career. Latin American firms are managed like a family. Latin Americans prefer to depend on someone closer to the center of the organization, and to accept that this authority leads to behavior that avoids conflict and confrontation with one¶s superiors. Behaving any other way would be interpreted as an offense against one¶s superiors and colleagues. Doing so would have disciplinary consequences.

Job titles and additional benefits also have a great significance because of the social status that they bring. In Chilean companies, for example, social discrimination exists on the basis of appearance, age and gender, all of which are associated with social status. ³Despite this sort of hierarchical status, Latin American companies try to eliminate the existing power distance between directors and subordinates by creating committees that symbolize the egalitarian spirit among all members of the organization,´. It is no easy task to play the role of supervisor, however, because a boss must assume that role without actually behaving as such.

The collective spirit of the workplace is manifested in several ways. First, there is the importance of personal relationships. Latin Americans expect to be treated with courtesy and kindness while at work. Second, there is a sense of loyalty to the primary group. In Mexican companies, ³executives know that the survival of their organizations depends more on social and governmental relationships than on any support they get from the country¶s financial system.´ Third, popular celebrations play a major role in the workplace, including religious behavior, as noted earlier. This illustrates the hybrid style of management.
24The

Importance of Social Status

This is the cultural framework that defines Human Resource practices within the Latin American company, especially recruitment and personnel management. For example, social relationships and physical appearance ³can explain the cultural content of the glass ceiling in Latin American

24

http://www.wharton.universia.net

companies.´ In Chilean companies, executive selection and promotion generally reflect physical appearance, age and sex, in addition to social contacts, birthplace and other factors.

Companies generally recruit new workers through their current employees and employees¶ family members and close relatives. This guarantees the trust, loyalty and sense of responsibility that are important to keeping the organization together. The family is equally important when promotion is involved. Employees generally put the well-being of their families ahead of their professional careers, especially Latin American women. However, the researchers said there is insufficient empirical research in that area.

On the other hand, Latin American corporate training and development divisions suffer significant internal conflict when it comes time to provide more advanced business training. They realize that new management techniques don¶t always fit in well with local tradition; some practices are rejected by employees. So managers feel obliged to provide formal basic education and technical training whenever they modernize work procedures. ³The shortage of technical knowledge, formal education, and skills for analysis and communication represent serious obstacles for Mexican workers,´ says the study. Moreover, Latin American companies usually devote only a small part of their budget to training.

When it comes to compensation and recognition, family also plays a central role. Not surprisingly, the quality of family life cushions workers from recurrent economic crises. In Mexico, work is considered an obligation and way to enjoy the important things in life, including family. If Mexicans had a choice, they would not work. However, the research should be viewed cautiously, the authors warn, because the culture of work varies significantly according to age, socio-economic level, and educational achievement. Some studies discovered that

³manufacturing plants in Mexico made major cuts in their expatriate staffs, and found young, bilingual talent with managerial skills and university degrees. Young managers accepted modern methods of management and production more readily than older managers did.´

Compensation usually comes in the form of fixed salary. Only multinational companies and large Latin American firms provide variable compensation based on corporate performance. Fixed

salaries are more appropriate in a hierarchical and individualistic system where more value is placed on the centralization of authority, not on factors that promote teamwork and organizational flexibility. That kind of approach does not reflect the preferences of Latin American culture.

25Teamwork,

Subcontracting and Geographical Mobility

According to the study, Latin American culture ³tends to favor the development of teamwork.´ Employees value social relationships based on personal communication and empathy, concepts that are essential to teamwork. Nevertheless, it is not easy to make this work, because power sharing and decentralization run against the grain of such Latin American cultural values as centralization and organizational hierarchy.

The hybrid model of management is clear when it comes to working arrangements. Although employees accept the idea of getting involved in modern managerial practices, they prefer a managerial style in which one senior executive makes the decisions. This frees each employee from taking responsibility. Executives who have higher education are the exception to this rule, however. Sharing responsibility for decision-making has other advantages. It allows companies to resolve conflicts and confrontations. Latin Americans traditionally accept the sort of manager who acts as a mediator between parties in a conflict. ³That style may well be necessary, given the dynamics involved when working in groups,´ says the study.

The authors warn that modern approaches to organizing work may wind up failing in Latin America because of historic rivalries between management and labor during the region¶s industrialization process. Sometimes, managers have been accused of exploiting workers. However, this situation changes radically when there is a threat coming from outside and, for example, foreign investment threatens local employment. Whenever that happens, Latin America¶s sense of nationalism surges, along with its sense of unity that provokes ³the desire to manufacture higher-quality products and use technology more efficiently,´. ³Both those goals force senior management to learn how to share information with employees.´

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http://scribd.com/management-in-LatinAmerica

The lack of geographical mobility is another challenge for both executives and employees. Some Latin American executives push for their companies to expand beyond borders, and they take responsible positions outside their homelands. However, most executives prefer to stay close to their nuclear families. In an interview, a senior executive of Coca Cola América Latina explained, ³Because of personality and culture, Latin Americans generally lack the flexibility they need. In the United States, families get together only once a year, at Thanksgiving. In Mexico and Brazil, families see each other every Sunday.´

Communication within a typical Latin American organization has a hierarchical and vertical structure in which ³information generally flows from above, down to the bottom,´ says the study. Managers impose those barriers. Add the fact that subordinates lack a spirit of confrontation, and it¶s no wonder that communications are less than adequate. There are fewer horizontal relationships, and authority is rarely delegated.

Their Own Styles of Confrontation
Establishing solid, stable labor relations requires personal contacts as well as friendly, social interaction. According to the study, ³courtesy and diplomacy are highly valued in labor relations.´ Each Latin American country has its own confrontational style in times of conflict. ³For example, Argentines prefer a style that involves mediating between parties in a conflict. Dominicans prefer autocratic intermediaries. Mexicans like a style that involves concern for others.´ Beyond that, ³during times of conflict, Latin Americans tend to identify with their µingroup,¶ rather than the entire organization, because they prefer social networks based on friendship.´

Latin American Communication Styles
Communication tends to be predominantly oral rather than through the written word
In Latin America, many senior and middle ranking business executives speak excellent English and in fact many of them may have studied abroad in the USA or UK. However, English is by no

means universally spoken and when dealing with people outside the major commercial centres. (Try to avoid using Spanish as this can be seen as culturally insensitive. They are proud of their uniqueness in South America as non-Spanish speakers.) If doing business in Latin America for the first time, check out whether you will need a translator or not.

In Latin American countries, communication tends to be predominantly oral rather than through the written word. They tend to put the spoken before the written word. When sending something in a written format it is usually a good idea to follow it up with a phone call or a visit.

26Verbal

Communication

Verbal communication in Latin America can often be viewed as being over-emotional by those cultures which place a great significance on the maintenance of professional reserve in all situations. In a country like Brazil, if you feel something strongly, you show it. Over signs of emotion definitely do not imply lack of conviction and should be taken as the deeply felt belief of the speaker. The use of significant amounts of exaggerated body language (by the standards of less tactile cultures) plays a significant role in normal communication. They are very tactile even across

the sexes and work at very close proximity. They also exhibit strong levels of eye contact when speaking to people. This combination of tactility, proximity and a steady gaze can be intimidating for some culture (many Asian cultures for example), but it is important that you adapt to these issues as quickly as possible otherwise your own reserve could be misinterpreted as unfriendliness.

27Entry

Barriers for MNC s in Latin America

y

Imports Policies (e.g., tariffs and other import charges, quantitative restrictions, import licensing, customs barriers).

26

http://www.worldbusinessculture.com/Brazilian-Business-Communication-Style.html http://docs.google.com/viewer

27

y

Standards, testing, labeling and certification (e.g., unnecessarily restrictive application of phytosanitary standards).

y y y y y y y y y y

Consumer Protection measure enacted by Latin American countries. Economic Volatility Fluctuation of exchange rates Political Volatility Language barrier Corruption Bureaucracy Legal System Obtaining adequate representation/JV Partner Culture

Comparison between Latin America & Pakistan
By doing this study, we have found that there are many similarities & differences in the culture & business environment of Latin America & Pakistan. Geographically both the regions are far away from each other.

Hofstede Cultural Comparison

y

Most of the Latin American countries are in the developing phase just like Pakistan, so that is why we can see there is very much similarity in the cultural dimensions of both regions. Power distance, individualism, and Masculinity is very near but if we talk about the factor of Uncertainty Avoidance, we see that it is very high in Pakistan,

because in Pakistan people are not much ready to face the ambiguous situations & uncertainty in the society is also very high because of instability in the country.
y

So this point shows that there is much similarity in both cultures.

Time Orientation
If we talk from the perspective of time orientation we can find out that both Latin America & Pakistan come under the category of polychronic individuals. Polychronic individuals are

flexible about time schedules; they have no problem integrating task-oriented activities with socio-emotional ones. For them, maintaining relationships and socializing are more important than accomplishing tasks. These individuals usually see time in a more holistic manner; in other words, many events may happen at once. Trompenaars has defined the same thing as synchronous approach. It means to do more than one thing at a time.

Context of Communication
In high context cultures, information is either in the physical context or internalized in the person. Behavioral rules are implicit; in other words, the context is supposed to give you the cues you need to behave appropriately. In these cultures, members tend to use a more indirect style of communication. Latin America & Pakistan comes under the high context cultures.

Collectivism
Collectivism is high in both Latin America & Pakistan. The needs of the group are considered more important than those of the individual. In these societies, kinship ties are much stronger and may take precedence over expertise in matters of appointments and promotions.

Language
There is a strong language barrier between the two regions. In Pakistan national language is Urdu, other than urdu some other regional languages are also spoken in which famous are Pashto, Punjabi & Sindhi. English is also used as a medium of communication but only by the literate class of people.

In Latin America many languages have been spoken but the famous are Spanish, Mayan, Portuguese & Aymara. Both the region can use English language as a medium of communication, because it is an international language used for business & other communications globally.

Corporate Culture
The corporate culture is different in both regions. In Pakistan the greetings is mostly done within the same gender. Men can shake hand with men. In Latin America the situation is much different the Men can shake hand with the women, & there is nothing wrong considered in it, because they are influenced by the culture of America. In both the countries the meetings are very much formal, & being on time is not considered much important. In Pakistan the gift giving culture is very common, but before giving gift, it should be in the mind that you should not give them such a gift which is not acceptable in the society like alcohol etc. Latinos like to work in teams while Pakistanis like to do work individually or if they want to do work in team, they prefer the team in which they know the other members.

Negotiation Style
Pakistanis are very good negotiators & companies are more hierarchal so the negotiators are the higher level managers & mostly they do not involve the employees in negotiations. Latin Americans have their own style of negotiations. They mostly prefer mediating between the parties. While negotiations they also keep in mind the concern for others.

Political & Other Risks
Both the regions are under macropolitical risk. Corruption index is high in both Latin America & Pakistan, but the difference is that in Latin American countries they have a good system of accountability, because of which these countries & specially Brazil is going towards the developing stage.

Both the regions are suffering from the civil wars but Pakistan also have another major problem, it is the front line alliance of USA in the war against terrorism which is affecting the economic condition of Pakistan. In Latin American countries they see the foreign investors as intruders but in Pakistan they welcome the foreign investment, however because of the security conditions of Pakistan, the investors hesitate to invest in this country.

Analysis
On the basis of the data we have collected, we can analyze the business environment of Latin America.

Latin America is an amazing cultural melting pot of many different ethnic influences from around the world. The people are collectivistic & they like to work in teams & their concerns are attached with the concerns of group they belong to. People in Latin American countries feel uneasy with the uncertain & ambiguous situations, so that¶s why the uncertainty avoidance is low. Their business culture is very much formal, but still they involve their religious values within their business culture. Masculinity is high in their culture, so the basic values within the society are achievement, rewards & earning money. There are a lot of barriers in entering the Latin market, & the reason is that Latin people see the foreign investors as intruders. The power distance is high according to the Hofstede cultural dimension, Latin American companies are hierarchal but not much. They work as a family, in which there is a leader, who not just command but also take care of the members of organization. Communication within a typical Latin American organization has a hierarchical and vertical structure in which information generally flows from above, down to the bottom. There are a lot of languages spoken in that region but still English is the language used for business communications. Their executives are very good in speaking English language because most of them have completed their education in USA & UK. According to Trompenaar cultural Diagram the Latin American region fits in the first quadrant i.e. Family Culture. There is a hierarchy but on the other

hand there emphasis is on the person. Latin American firms are managed like a family. Latin Americans prefer to depend on someone closer to the center of the organization, and to accept that this authority leads to behavior that avoids conflict and confrontation with one¶s superiors. Behaving any other way would be interpreted as an offense against one¶s superiors and colleagues.
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Latin American economies have been relatively less affected by the global economic meltdown

compared to their developed counterparts.
29

Since the start of the structural reforms in the late 1980s, the region has suffered many

economic, financial, and political crises. The most important crises were the Tequila Crisis in Mexico in 1994, the debt and currency crisis in Brazil at the beginning of 1999, and the debt, currency, and political crisis in Argentina at the end of 2001. The crises led to the kind of situations that companies usually try to avoid. For example, in political terms, the crises involved fallen governments, unemployment, poverty, riots, looting, violence, loss of property rights, etc.; in economic terms, they entailed considerable rate of interest increases, substantial currency devaluations, taxation policy changes, higher inflation rates, circulation of currency (foreign and domestic) restrictions, etc.; in business terms, the crises caused demand decreases, debtor in arrears increases, demographic variations, circulation of goods (mainly foreign) restrictions, etc. In addition, there was a contagious effect in terms of instability, for example, Chile and Costa Rica, generally considered the more stable countries in the region, suffered some of the economic and business effects described above too.

Recommendations
y The security risk is high in Latin American countries, so the MCN should have taken the proper security measures for their offices & their employees. y Any MNC who is going to operate in Latin America, they should give proper language training to their staff because of the language barrier. It will be easy for employees to work in their environment.
http://www.articlesbase.com/health-articles/the-top-10-pharmaceutical-companies-in-latin-america-growthperformance-strategies-and-swot-analysis-2869075.html 29 http://www.managers.org.cn/mag/doc/ucman200901/ucman20090106.pdf
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y

Although Latin culture tends to be relatively informal, people are quite fashion conscious. It is important therefore to dress smartly and conservatively. So the MNC should adopt the same culture to make their employees feel comfortable while working.

y

The upper management of MNC should create good relations with the political parties & bureaucrats so to remain stable in the continuous political upheaval in Latin American countries.

y

The MNC should read thoroughly about the laws & policies of entering into the Latin American market.

Work Assigned

Actual Work Done

Remarks

Ibrahim Sohail Dar

Detail introduction of region with a map.

Uzair Bin Zafar

Culture of Latin America & Pakistan. Corporate culture of LA & Pakistan.

Rao Sabir Vaquar

Management Practices of Latin America in detail.

Introduction of Latin Good America, map, detail about major countries of region, analysis, recommendations. Culture of Latin Good America & Pakistan. Corporate culture of LA & Pakistan, analysis, recommendations. Management Good Practices of Latin America in detail, analysis, recommendations. Hofstede cultural Good dimensions of LA, Entry Barriers, Comparison, analysis, recommendations, compilation & formatting, made outline for the project. Communication & Styles of Latin America, Analysis, Recommendations. Good

Muhammad Furqan Zeb

Hofstede cultural dimensions of LA, Entry Barriers, Comparison.

Muhammad Abdullah

Communication & Styles of Latin America

Hussain Ashraf (Group Leader)

Political, legal & Political, legal & Good other risks in LA & other risks in LA & Pakistan. Pakistan, Analysis, Recommendations.

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