The Andean Region: How to Create Value

1
The Andean Region How to Create Value?

• Key skills and
• attitudes to develop
• Atlanta, May 2005

2
Population of 123 million is 22 of Latin
America (561 Million)
Source United Nations World Population Prospects
2004 Revision
3
High population growth rates are falling
Growth of Economically Active Population
Source CEPAL, CONAPRI
4
GDP of 301 bn is 16 of Latin America
Source CEPAL, CONAPRI
5
Venezuela and Colombia are leaders in GDP and
trade
Source CEPAL Statistical Report 2005, CONAPRI
6
Exports and Imports
Source CEPAL Statistical Report 2005, CONAPRI
7
Export growth is below LA, despite oil price rise
Source CEPAL y BBC CAF
8
Like Latin America, GDP growth is bouncing back,
but is still insufficient for poverty reduction
Source IMF (WEO, April 2004), Concensus
Forecasts (June 2004), Latin America Business
Monitor (Caribbean Report, June 04)
9
Unemployment is also higher than LA
Source CEPAL, 2004, CAF
10
Inflation is tipically two to three points higher
than LA
Source Official Sources, Concesus Forecasts
(June 2004), Latin American Business Monitor
(Caribbean Report, June 04)
11
Basic facts and trends

• Population of 123 million represents about 22 of
  LA
• Aggregate GDP of 301 bn is 16 of total LA
• Per Capita GDP is 3.217 (-30 of LA average)
• Inflation (10) and Unemployment (11) are each
  3 compared with LA average
• Misery index 6

Source United Nations World Population Prospects
2004 Revision, Cepal, CAF Economic Indicators
1999-2003, Human Development Report
12
Basic facts and trends (cont)

• Exports are 18 of total, Imports 16 (CAF)
• Classified as Medium in Human Development
• Life expectancy 70 yrs.
• Literacy 90
• School enrollment 70

Source United Nations World Population Prospects
2004 Revision, Cepal, CAF Economic Indicators
1999-2003, Human Development Report
13
Similarities in Andean Countries

• Spanish-Indian cultural/religious fusion in high
  tropical valley capitals
• Bolivars feat and frustrated dream
• Four band (mountain, plains and jungle, coast)
  topography makes integration difficult
• Small flood plains to the East Amazon and
  Orinoco basins
• The US is the main market and investor, but
  further away than Mexico
• Oil accelerates modernization but corrodes
  institutions and accentuates volatility and
  polarization

14
Bolivars epitaph Plowing in the Sea

• From Bolivar to today, it has been difficult to
  sow sustainable value
• Uncompetitive behavior patterns across the five
  countries
• These patterns are grounded in deep seated
  beliefs and attitudes
• Decision making structures are often dysfunctional

Paso de los Andes, Tito Salas
Source Fairbanks, Michael and Lindsay, Stace.
Plowing the Sea Nurturing the Hidden Sources of
Growth in the Developing World. Harvard Business
School Press, 1997
15
The seven deadly patterns

• 1) Relying on inherited advantages
• 2) Failing to respond to the clients needs
• 3) Not understanding competitive position
• 4) Not knowing how to forward integrate
• 5) Not knowing how to cooperate
• 6) Being on the defensive
• 7) Paternalism

Source Fairbanks, Michael and Lindsay, Stace.
Plowing the Sea Nurturing the Hidden Sources of
Growth in the Developing World. Harvard Business
School Press, 1997
16
Can we overcome the deadly patterns?

• Does the colonial culture make change too
  difficult?
• Has the climate and topography determined the
  caudillo (strongman) culture where
• External locus of control (my destiny is
  determined by things external to me)?
• Power motivates more than achievement?
• Is it difficult to create a lasting organization
  beyond a certain size?
• Succession and renewal are difficult
• Trust is limited to the extended family
  (Fukuyama)

17
The deadly patterns defeated

• Geographical and historical barriers are melting
  away
• Adversity builds entrepreneurship, often by
  necessity
• Volatility and institutional weakness generate
  self-reliance, agility, creative genius
• Spain has shown an extraordinary capacity to
  learn and change

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Keys for developing opportunity

• Complex advantages TEACH ME TO MAKE FISHING
  RODS
• Understand clients and competitors CHOOSE the
  best strategic combination
• Compete AND cooperate strategically
• Develop AWARENESS self and others (social)

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Encouraging signs

• High presence of Andean managers in multinational
  corporations in TOP JOBS
• New initiatives in social enterprise
• Ron Santa Teresa
• Indupalma
• Growing intraregional trade

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More keys

• Beware of success and self-congratulation in a
  rapidly changing environmentColombian flower
  boom
• Advantages are difficult to maintain
• Continuous learning
• Engage, engage dont rely on government dont
  ignore it
• Show leadership and commitment (Indupalma)

21
Growing intraregion exports
Source CAN Exportaciones intra-extra Comunidad
Andina 2004
22
Ahead in growth for 2004!
Source IMF (WEO, Aoril 2004), Concensus Forecast
(Jun. 04), Latin America Business Monitor
(Caribbean Report, Jun. 04), CAF
23
Conclusions

• Past and present difficulties
• disintegration
• polarization
• inequality
• volatility
• hide opportunities for creating value
• and generate valuable skills and attitudes for
  exploiting them
• Success depends on
• seeing underlying trends and needs
• creativity
• responsible engagement
• Learning is THE KEY
• The role of the business schools