Latin American Economic Development

Interim Report

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Applied Management Project(BSS000-6)

Introduction
As per the earlier times when the worlds most powerful economies like US and Europe used to suffer from financial crisis, the economies like Latin America used to trap deep down into the debt and the economic crisis. But subsequently the Global financial crisis the scenario has been changed totally for Latin America, since then the economy of Latin America has been growing immensely as at the rate of 4.7% last year NY Times 2011 which is comparatively higher even than the most powerful economies in the world. The reason behind this revolution is the strength of the Asian countries and their reliability on the commodity exporting countries (according to - Jrgen Weller at the U.N. Economic Commission for Latin America and the Caribbean.)This is because the Asian economies have used their capital wisely and in the development of the country and so as it has been standing strong against the Global recession. Similarly from the past experience the Latin American economies have learned to manage their budgets and revenues to save money. Also the reason behind the boom in the Latin American economies is the participation of more number of states as individual growth factors as every country in the South America is the big exporter of some or the other product. As the countries like Chile and Peru together are behind the export of the quarter of the total export of copper in the world. Similarly Brazil is the biggest producer and exporter of coffee in the world and mines thousand millions tons of iron ore each other which is either exported to other countries of the world or also used for the development and recreation of the strong economy of Brazil, and for creating more employment to the residents. But as the economy of the countries is growing the currency is even becoming powerful as the imports are going cheaper and the inflation low. Also countries like Brazil which is spending heavily in infrastructure and industrial plants for the FIFA world cup in 2014 and the Olympics in 2016 which will showcase the countrys wealth and ability to stand with the other economies of the world is responsible for the boom in the Latin American Economies.

Problem Statement
As the Latin Economies are growing very virtuous rate, there are more number of opportunities growing in the country for the business models and companies to either set up their business or expand their business in Latin America. Also because of the presence of the natural resources more than any other country in the world, Latin America is most popular for the most manufacturing and service industries in the world to expand their business here or to make a partnership with any company of the similar model. And during this time when the countries in the South America are growing faster than any other economies in the world including the most powerful economies like US and Europe it has made it difficult for the small scale companies to expand their business to here. Therefore in this artefact we will be discussing about the challenges faced by the companies wishing to expand their business to Latin American countries and most feasible option for the entry in the country. Along with the specific challenges in the chosen country for making the most out of the profit and the building the companies brand name and image along with the future of the company in respected country.

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Exploration of Latin American Market

Findings According to Brazils Central Bank, Brazil have been the rising power of the region and the most powerful economy of Latin America and has recovered most prominently among other economies of Latin America. Brazil has recovered with a percentage of 9% in the first half after the recession in 2009 and the growth rate has been increasing year per year with 7.9% the next consecutive year which is the fastest growth rate in the 25 years for the country ( Report - Brazil Central Bank). Also according to Prof. Abelardo Daza, Management Studies Institute, Venezuela the participation of the more number of economies as an individual factor for the growth of the region has been promising and the reason behind the success and the stability in the economies amongst which Brazil has come out to be the fastest growing and most promising as it has the most of the Natural resources, and thus It is responsible for the quarter of the revenue generation for Latin America alone. Brazil has the worlds largest iron ore production plants and some of worlds biggest oil refineries, and also is the largest producer of coffee in the world. Thus using its potential from the natural resources and the exchange of commodities, it has secured the top position in the growth of the Latin American Economies. Furthermore, Brazil is hosting the next FIFA world cup to be held in 2014 and the Summer Olympics which is to be held in 2016, therefore it is investing a huge sum of money in the development and construction plans in the country. Any business looking forward to move or expand its business to business will have a golden chance in future to harness the best possible output from any other economy in the South Americas as the government will be providing the financial aid in investing and starting of the new business in Brazil so as to reduce down the unemployment rate in the country, the government is also started the initiative to train its workforce by providing free training for the specific works to make it easier for the companies and industries setting up in the country to have skilled and educated workforce. Brazil in future will also be a well-developed nation with connected transportation from any part of the world via water and air ports. Moreover Brazil also has a number of sea ports which are used for exporting of commodities to the rest of the parts of the world. Also the technical workforce in Brazil is mostly of the Europeans because there are no more or very less educated or qualified to be doing the work, and comparatively Europeans are more qualified therefore most of the jobs in the country are been taken over by the people from EU. Other contributors like Chile which had a growth rate of 4.5% -(Guardian August, 2012). The budget director of Chile Mr Rosanna Costa has ensured the capitalists and the local residents that Chile is at the ease in facing the budget challenges the consecutive year, as they have become stable from the past experience in expenditure and savings of the nation. The country has also agreed to invest 16bn $ in the infrastructure, public works and the development projects to harness the growth rate of the country. Also the infrastructure development has been made recently which can be stated from a recent article in the Guardian which states that the new skyscrapers are being built in Santiago, many new 2|Page

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restaurants have already been built or would be getting built in future. Also because in the development in the transportation infrastructure there is a massive sales in the numbers of cars a recent publication states that the sales of the car did became so high that the government had ran out of the licence plates. While Peru at this stage is fighting strongly against the challenges to come out to be the super leader in the Latin America as expected. But at the moment Peru is facing the crisis in recovering. Mr. Pedro Pablo Kuczynski who is the former finance minister in Peru notified the nation in which mining is the main source for the revenue generation. Chile and Peru together are the worlds largest producer of copper. Mining in Chile accounts for 8% of the economic revenue generation. The position of Argentina is at halt as in the countrys potential to use the natural resources and to make the people together for the protest against the Spanish oil company YPF. As per the Eurozone report in august the GDP of the EU economy has fall below by 0.2% In the latest quarter. Also as per the EU zone report Spain, Portugal and Italy were the worst resultant countries. While Columbia has also swanked its economy by showing the annual growth rate or the GDP as 4.5% for a time of ten years. Columbia has been in a good condition to prevent itself from the downfall of the Europe and the state finances of the country are measured up to be in a better position. The recent development in Columbia constructing its tallest skyscraper which will satisfy the needs of all the business owners like from International trading centres to shopping malls office spaces. A Spanish media analyst Venerando Lamelas addressed that their economy and business is moving with time. Latin America is growing at a very seamless rate and under the Latin Americas; the best of the market which is growing is of the Columbia as said by a Spanish property tycoon.

Company Brief
Marconi Telecommunications a subsidiary of Marconi Corporation plc is a London based company, the company initiated in 2000 with the business model of creating fast and reliable optical networks, routing and switching broadband services to make the data sessions fast that ever before, also the company deals in the fixed wireless and multimedia voice and switching on the layer two and three switches or the light switches. The main goal that the company was operated was to help the fixed and mobile network operators to provide the customers the best of the speeds and at the reduced rate as through the fast and reliable optical network which could increase the revenues for the network operators and improved services for the customers. The main activities can be classified into three categories, they are: Network equipment: these include the design and implementation of the network devices that deals in the transmission of data over voice, text, video,etc with broadband, wireless and the user interactive interfaces, optical networks, and the ipv6 switching. 3|Page

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Network services: architecture designing and implementation of the network and services to aid the telecommunication providers along with the services like installation, auditiond and maintainence, consulting, VAS.

The future plans of the company is to expand its operations in Brazil as to fulfill the need to the high speed Internet and large range of computer networks to be used in the FIFA world cup and the Olympic Games.

Challenges in Business Expansion

There are several challenges for any company looking forward to move its business or expanding the model to Latin American countries. Some of the challenges which have been found are:

Financial Turbulence: The most of the countries in the region of Latin America are still recovering from the financial crisis and the debt, and are planning for their next budget plan to eliminate the financial crisis from their country but unlike only few countries like Brazil, Chile, Argentina, and Portugal. Fast Growing Economy: As in this era when the super power powers of the world are trying to recover from the financial crisis, the economies of Latin America who have remained stabled or very less disturbed during the recession and have shown the growth rate even more than that of the most powerful economies of the world like EU and US. Therefore there is a threat to the companys expanding their business to Latin American companies to be inhabited by the local residents of the country because the currency compared to the dollar is becoming powerful, therefore the export commodities cost and the inflation is becoming low giving a threat and a chance for the local business models in the country to compete and in a resultant can even finish the jobs in manufacturing and service industries. Lack of Qualified workforce:Latin American countries has the massive number of labour workforce available which is neither skilled or educated up to at least the minimum understanding as the majority of the workforce in these countries are uneducated therefore they do not have any knowledge about the functioning on the industrial bodies, therefore the companies have to spend the extra money on the trainings of these local workers to make them skilled for work. Electricity: Power is the basic requirement for any industry Latin American countries have enough resources to meet the requirements of power for their living population, but as far as the question is to supply the power to the industries is concerned, the 4|Page

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economies fails to provide the best of the power supply to all the industrial areas at the same time, through the countries have the resources available to meet the requirement for the power generation, but there is a lack of technology available to utilize the means for other purposes as well as for power generation. For instance Brazil has the abundant supply of Fresh water every day and is also the largest producer of Fresh water which can be compared as the amount of fresh water produced in a single day by Brazil can supply the water to the New York City for ten years. Therefore the companys expanding to move their business to Latin American small developed countries are at the verge of power cut anytime. Discrimination: The communities living in the Latin American countries are composed of Blacks and Whites in the majority and the number of backs are more than the whites as the migrants from the other parts of the world have settled down here therefore there is always a discrimination factor or an activity running on through between the two communities, which is not good for any company moving its business internationally.

Feasible Entry Options

The companys expanding their business to Latin America have a number of options available into the market but to harness the most out of the South American market and to make the most out of it, it is necessary to choose the option to choose the option keeping in mind the factors such as the budget of expansion, the model of business, the size of the company, the local competitors and the needs of the resources required for the business development and sound functioning. Some of the options that have been explored yet in the initiation of the project are: Franchising: Franchising is the easiest option for entry into any country, although every country has norms and protocols of their own to be followed to do the business into their country, but comparatively the economies of Latin America being drawing outbreak from the set back and amongst the fastest growing economies in the world are very loyal and provide ease in doing business in the country because this helps in the growth and development of the country as well for instance when any company enters into the market of other company it involves the utilization of its local residents as the workforce in the company thus making the options for employment. The rules and regulations by the government of the Latin American countries are very easy to follow and could be start instantaneously with the project after approval, also the government and the NGOs organisation help the international company in settling its roots into the country and leading it forward for their own and companys profit as well. The rules of franchising varies from the country to country in Latin America but the general rules my include of making the deposit of a margin money into any of the local bank of the nation, and taking any local permanent resident of the respected 5|Page

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country as a partner in franchise, and then the company can do the business as normal, but although the agreement has to be verified and deposited in the local organisations to avoid frauds with the local residents and then any company can buy land in the country at most of the 50% at from its side.

Joint Ventures: Latin American economies are mostly chosen for the joint ventures in the world because of negligible laws and prohibitions in doing business in the country, and also because of the presence of the natural resources in the country which makes it a golden deal for any company this attracts loads of business owners and capitalists to invest in the Latin American companies. For starting up of the joint venture in the Latin American country there is a agreement which needs to be made and notarized from the local court which may either a standard government contract or the customized contract made on the mutual agreement of both of the parties. The joint venture agreement is also registered in the court of the host companys country as well because the initiation of the joint venture involves the amendments in technology of the country, tax errands, financial decisions, etc. therefore the agreement is also registered in other country than the host so as to avoid any future complications and issues.

Conclusion
Therefore after the exploration of the market situation in the Latin America and the condition of the resultant country found to expand the business and the company Marconi Telecommunications is Brazil and the feasible entry option for starting the business into the country will be through Joint venture between the UK based Marconi Telecommunications and a Brazilian telecommunication company. The recommendations and the resultant of the expansion of the business model in to the country will be highlighted in the main part of the project.

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References
Latin America Economy status, OECD(2011), Latin American Economic Outlook 2011, Oced publications. Javier A Reyes, W Charles Sawyer(2011), Latin American Economic Development, Routledge publicatons.

Economic Crisis, available on page21 Michael Cohen(2012), The Global Economic Crisis in Latin America: Impacts and Responses , Routledge publicatons Challenges, Available online athttp://www.pri.org/stories/business/global-development/whysouth-american-economies-are-booming5316.html, accessed on 16th Oct, 2012. Latin Americas booming economy, available online at http://www.guardian.co.uk/business/2012/aug/15/brazil-latin-america-economic-growth, accessed on 17th Oct, 2012. Feasible entry options, http://www.nytimes.com/2010/07/01/world/americas/01peru.html, accessed on 20th Oct, 2012.

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