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Mercer Latin America & Caribbean Human Resource Forum

April 30, 2007
Related Topics: Unions, Payroll, Pension Reform, Growth, Career Development, Labor Law, Featured Article, Benefits

Mercer Latin America & Caribbean Human Resource Forum

When: April 25-27, 2007

Where: InterContinental Miami Hotel

What: This is the 10th Latin America & Caribbean Human Resource forum that Mercer has put on in Miami. The forum examines critical human resources issues—compensation, compliance, benefits and development—that the region faces. Consultants and corporate leaders from all corners of Latin America gathered to exchange their best practices.

Day 1—Wednesday, April 25, 2007

Mercer’s Latin America & Caribbean Human Resource Forum was staged in Miami amid sunny skies, exotic Cuban cuisine and Latino pop stars. The InterContinental Hotel, located in the heart of downtown Miami, was simultaneously hosting the annual Billboard Latin Music Awards conference. Mercer attendees not only got a chance to learn about strategic HR practices used throughout Latin America but also to bump into some of the biggest names in Latin music.

Some conference participants shared an elevator with curvy Colombian singer Shakira. Others were excited to see Puerto Rican heartthrob Ricky Martin in the lobby. Who says it’s not la vida loca at an HR conference?

"I’m carrying my camera with me just in case I see somebody famous," one attendee said.

• The outlook for Brazil and Mexico, Latin America’s two largest economic powers, is positive. Both countries have inflation under control and promise to post economic growth in 2007, which is good news for multinational corporations planning to enter those markets. Companies looking to make a quick buck in those countries could be in for a surprise, particularly those interested in the Brazilian market, where the strengthening of the local currency, the real, relative to the U.S. dollar is driving up costs. Payrolls have about doubled in recent years.

Companies also must take into consideration other expenses that are ubiquitous in Brazil and Mexico but uncommon in the United States. These include mandatory profit-sharing, monthly meal vouchers and cars for executives. There is also a mandatory bonus at the end of the year, known as the aguinaldo. The good news is that in spite of the added expenses, the cost to do business in these countries is still cheaper than in the United States. Also, the tremendous growth that these markets offer to multinational corporations more than offset the added expenses. Revenue rates have almost tripled in Brazil.

• The big news on the minds of the Mexican professionals attending the conference was that the courts had legalized abortion in the nation’s capital.

"This may not be a big deal for other countries, but it is for Mexico," said Hugo Valberde, a Mercer consultant. "This topic was simply off limits throughout most of our history."

The change in legal status is reflective of the dramatic cultural shift Mexican society is undergoing—a transformation also being felt on the economic and HR landscapes. Companies entering the local market should be aware that flexible benefits, better working conditions as well as career development and training are increasingly becoming important to Mexican workers.

Another sign that times are changing in Mexico is the fact that the country wasn’t hammered by the economic meltdown that historically ensues after the presidential elections—in which Felipe Calderon Hinojosa won by a paper-thin margin in 2006.

"There are definite social and political changes under way in Mexico," Valberde said.

Day 2—Thursday, April 26, 2007

Stephen Rhinesmith, senior partner at Mercer Delta, delivered the forum’s welcoming speech. He told that audience that the world is divided into two types of societies—those that are relationship-oriented and those that are action-oriented.

The United States is emblematic of a culture that is action-oriented—checking off to-do lists, getting things accomplished and measuring efficiency are very important. The bulk of anthropological studies, however, indicate that roughly 90 percent of the world’s societies are relationship-driven, where family and friends play a central role in an individual’s life.

Not surprisingly, Rhinesmith emphatically believes that all global leaders must have a blend of three ingredients to be successful: head, heart and guts. Lacking one of these elements or leaning too heavily in one direction could prove troublesome to a leader.

Being too analytical could make an individual appear to be cold and dispassionate, while having too much heart can make somebody popular in the short term but weak and unsure in the long run. Eventually, leaders with too much heart fall out of favor because it is impossible to please all groups all the time. Overly gutsy leaders, meanwhile, become too enveloped in the drama of shaking things up, which is also unhealthy.

Rhinesmith points to Avon CEO Andrea Young as somebody embodying the three characteristics. Using her head, Young took a critical look at the metrics and performance of the company that she later used to formulate a solid turnaround strategy. Young’s guts helped carry out her vision, slashing inefficiencies, thinning corporate layers and lowering costs where necessary. Heart came into the equation at every step of the journey. Under Young, women were given the opportunity to grow and rise into high-ranking roles within the company. Other leaders with the three key characteristics are former New York Mayor Rudolph Giuliani and Nissan Motors CEO Carlos Ghosn.

• There is little doubt that Argentina is one of Latin America’s most dynamic economies. Changes can happen literally in the blink of an eye. It took Argentina two months to approve expansive pension reform—breakneck speed, considering that its neighbor to the north, Chile, took five years to roll out its highly successful pension plan.

Just as quickly came a move that could significantly drive up costs of doing business there. Six Argentine unions, which represent some 1.2 million workers, have begun negotiating a 15 percent salary increase. Banking, trucking, biochemistry and hospitality could be affected.

Day 3—Friday, April 27, 2007

There are many challenges in human capital acquisition across Latin America’s emerging markets. Although the countries are close in proximity, multinational corporations need to understand that they have unique cultural sensibilities and are governed by vastly different labor laws. The rules of subcontracting, compensation and pensions are particular to each country, according to Daniel Nadborny, a Mercer consultant in Argentina. Other factors, such as free-trade agreements, union relations and an uncertain political landscape in countries like Venezuela and Bolivia should also be taken into consideration before entering the region.

"There is a lot of homework and preparation that needs to take place before a company can enter a country without the risk of breaking the labor laws," Nadborny says.

—Gina Ruiz


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