Latin America is a region of the Americas where Romance languages, those derived from Latin particularly Spanish, Portuguese, and variably French are primarily spoken” [1]
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Historical background
To understand the history of International Business in Latin America it is necessary to begin with a look in the eighteenth century were all of the countries in the region were colonies of the European powers and the commerce were tightly tied to the home country.
But with the independence the IB had been taking a major role in Latin America because it is possible to consider that the first international business in the region was financing by the Latin American governments for the wars independence and since that moment these countries began to involved with IB, exchanging “raw materials, such as gold and silver exported for products from Europe like clothing, iron and manufactured goods” [2]
By the middle of the nineteenth century foreign direct investment began with projects in mining and infrastructure, also LA become one of the most trading partners for United States, providing natural resources and low cost assembly of manufactures (Clothing). The most attractive countries in LA for investment are Mexico, Argentina and Brazil.
The government-Business relationship
“Latin American governments imposed increasingly restrictive policies on foreign MNE’S, toward the end of import-substituting industrialization and promoting domestically owned business [3] ” but this didn’t last for so long because of the 1980s crisis, that forced the governments of the region to look for foreign financial resources and by 1990s most of the LA join the opening economy system.
Privatizations
Privatization of state-owned enterprises has been one important step of the economic opening process and for FDI, with these system LA governments attracted the world leaders to invest in airlines, telephone companies, electronic power companies and banks.
Regional Economic Integration
The first regional integration done in LA was by Simon Bolivar in 1820 with the goal to unite South America, but since the World War II there had been integration efforts beginning with the LAFTA or ALALC in 1960 (Latin America Free Trade Area), this agreement never achieved its free-trade goals.
It is possible to said that the first true agreement done in the region was the “Andean Community in 1976, these group promote FDI into the region and tariff elimination among the members country” [4]
Another Sub regional integration effort is Mercosur has served to open trade mostly between Argentina and Brazil.
The most successful agreement is NAFTA that produce economic growth in Mexico because many multinational firms of US locate its production there.
Barriers to trade and invest in Latin America
The most relevant barrier is the geographical one rather than the legal one because this zone has high mountains so the transportation cost is very expensive and this problem cannot be eliminated by tariff reductions or other government policies.
Latin America MNE?S
It can be considered that the Latin America NME?S emerged in the late 1960s and 1970s, as firms established operations in mostly neighboring countries to serve local markets.
The leading firms are located in the largest countries, Brazil, Mexico, Argentina, and Chile. Five of the top 25 MNE?S are steel companies from Brazil, Argentina, and Mexico. Many companies are leaders in their respective industries, such as the Brazilian Gerdau Group.
Most of MNE?S tend to expand regionally before going farther abroad. And thinking in the consumer, this can often be a benefit because of the cultural similarity of most Latin American countries that makes regional firms better to supply to regional taste.
At the same time, a firm that lacks international experience might want to acquire the skills needed to manage across borders by first learning in a country that is similar and nearby. This could explain CEMEX, the third-largest producer of cement in the world, captures many of this idea.
“Multinationals are often closer to their host countries geographically, culturally, economically, and politically, and with their know-how and technologies may be well matched for the other markets where they invest”. [5]
“Latin American firms are responding to global trends by restructuring, developing a variety of tangible and intangible assets- including advanced management capabilities” [6] After decades of protection and transition, Latin American firms are able to think and compete globally.
7
LATIN AMERICAN WORKING AND MANAGEMENT CULTURE.
Plenty of information has been written about the American, Japanese or German management styles. These have proved to be successful in the greatest multinationals around the world and as a consequence many organizations in developing countries try to implement them. Well known is, that most of the Latin American countries have economies in transition and this is true also for management models used in Latin American organizations. In 2005 Martha M. Elvira, then the academic director of the Lexington College, together with Anabella Davila, then the teacher of The theory of the Organization and business history at the School of Graduate in management and direction of business, had published in the Magazine Universia Business Review and article called “Cultura y administracion de Recursos Humanos en America Latina” in English “Human Resources’ culture and management in Latin America”. There the authors assumed that the Latin American management models have some cultural traits derived from an specific historic process with a social, political and economical structure. This unique process differentiates Latin American management styles from others and makes it worthy to examine the cultural background in order to better understand how the organizations in Latin America behave and how human resources practices in this region can be improved.
It is thus highly important to review what has been written about the work culture in Latin America in order to understand better the management practices in that region and perform well when interacting with Latin Americans.
For a better understanding of the subject of which is Latin-American cultural behavior and in some way decode the way Latin-Americans work and develop within an organization or during a business, we will divide these behavior into some themes or dimensions in which this culture will be analyzed.
Our first dimension will be sympathy, personal dignity or classism, defining sympathy as the warmth of personal relationships, always respecting human dignity (Silvio de Franco, 1999). People in Latin American countries always take time to greet one another with a show of genuine pleasure, this culture is very familiar and always has close relationships with its workmates, if it is their decision they prefer working and negotiating with friends and family, rather than with strangers. Latin Americans are known for developing interpersonal relations with co-workers; this is why they are very predictable and expected by all.
Personal contact is very important to Latin American workers; face-to-face contact with superiors is common and valuable for both employee and superior. Personal relations are charged with a high emotional content and both superiors and employees expect to be treated politely and friendly. Loyalty and reliability are very important in the personal relations of Latin Americans in the workplace.
Other face of sympathy is the tendency to avoid open conflicts and unpleasantness, that is the reason why, people tend to be very polite and nice with others, and not to demonstrate disagreements in public. Latin Americans prefer a peaceful coexistence, and may be unwilling to confront others about negative behaviors that could be harmful to an organization; over the working environment what people want is to keep positive relationships among co-workers, taking aside the fact that their putting in risk the company’s welfare. From here we can say that criticism is the key tool for discharging all madness of employees, this tool goes underground and is expressed most of the time through rumors and gossip.
When talking about classism we refer to Latin Americans emphasizing in very rigid social divisions, so, sympathy is more likely to see in members of a same social class or level, you can also find sympathy from a high level class with a lower one, but it is less common in these countries. Hierarchy and social status is important, academic titles and other signs are mechanisms of social differentiation and help to establish the distance between employees and their superiors. Anabella Davila and Martha M. Elvira affirm nevertheless, that superiors try to get near to the employees enough to eliminate the barriers between them.
There is one exception to the rule, in terms of sympathy; some of Latin people are characterized because of their rudeness when talking, always taking advantage of the position power, when dealing with people that is less powerful, but this subject will be better explained when we arrive to hierarchical relationships and power dimensions.
The next dimension is very linked to the first one, personalism; a desire for personalized and individualized attention. For Latin Americans, it is a priority to do things for others as relatives and family. Being helpful is very important for Latinos. First thing to have in mind when working with this culture is trying to develop good relationships, create loyalty within the working group and connecting as much as possible with people. Us, as Latin Americans, prefer to give opportunities, do favors and accept things, from people we know, giving them an advantage over the others, who will become strangers for us. Foreign people need to develop relationships based on mutual help, improve their level of empathy in order to gain Latin Americans trust and personalize the way of dealing with co-workers; we choose approaching people directly in person, rather than delegating tasks, or just sending letters.
Personal relationships are needed and mandatory for Latin Americans, as an example, if a person wants to have a good position in the workplace, it is easier to success if they have palanca, term used by Latinos for the extra help they can get inside an organization by contacts and friends to be chosen over others.
Latinos want everything to be easy, and fast, this is why friendship and personal relationships as said before are key issues to survive in a Latin American organization or society.
Particularism dimension refers to the fact that Latin Americans are always choosing whom to help to, making exceptions to the rule based on individual circumstances level and obligations of friendships. “For friends, everything; for strangers, nothing, and for enemies, the law” (Rosenn, 1988, p.143)
In this culture, law exists, but is just an ideal, because Latin Americans, only pay attention to law, which they agree with, otherwise, it is just ignored.
In the personalism dimension, we talked about how influential friendships can become when getting a job, in other words Particularism appears as an answer to the personalism we’ve been talking about.
As explained, particularism is in easier words, to have a strong group of friends, who will obtain benefits from my owns, therefore, the person who is getting the benefit is the one analyzed through the personalism dimension.
Now, more than a group of friends or relatives, dealing with government is also part of the particularism, sometimes managers, can influence government to work on their side, giving benefits just to their companies.
Latin American culture generally have a fairly low level of trust in people who are not family or close friends, with this we arrived to our 4th dimension, trust, generally, Latin American managers do not trust all of their employees, so, they always have 1 o 2 persons who they trust 100% (friends or family), to leave in charge of important tasks.
Sometimes this lack of trust can affect the training and development for employees; Latinos always panic about teaching others the way they work, because we think, they could steel ideas and develop projects based on the stolen knowledge. This distrust issue is also an answer to our listening difficulties, and acceptance of others ideas. Latinos presume we know everything, and that there couldn’t be a person who knows more than what I know, so we become depth to others comments. In order to gain the trust desired by Latin Americans, persons from other cultures, should not expect to start negotiating without developing first a relationship with us.
Collectivism and in-group/out group behavior dimension, Latin American countries are generally described as collectivist cultures, which is characterized by individuals who give their loyalty to a group, and in return the group takes responsibility for the individual. [8] The collectivist unit for Latinos is family.
9
According to the chart, Latin American culture is located in the lower right quadrant, low trust/vertical relationships, finding pseudo-collectivism in the protective hierarchical structures very common in this part of the world.
Relationships in Latin American organizations are vertical, people think top-down, with the prevailing lack of trust of out-group members. For Latin companies, it still exist the image of “feudo”, the boss who gives orders to employees, but beyond that it takes care of anything that could happen to them and their family and personal situations or problems, that could affect them.
The in-groups are the ones that always receives preferential treatment, with this we are looking back, to the trust, personalism and particularism dimensions; they are all linked, from bosses’ perspective, you find your partners, gives them preferences, trust in them and you create an in-group structure, which is the one that characterized collectivism.
As explained before, we still have the “feudo” image, the father who takes care for his children, continuing with the patron system, we now arrive to explain the paternalism and hierarchical relationships. Academics have identified a paternalistic behavior in management positions in many organizations across Latin American countries. In this sense managers care about the protection of the employees and their families. They might be seen as moral support by the employees to the extended that many organizations see themselves as a family. Strong solidarity and mutual understanding characterized Latin American workers whose intention is to work always in a harmonic and “warm” environment.
Latin American employees always feel that bosses should take an interest on their nonwork lives, moving forward and beyond the working barriers, employees think bosses as they are developing the father’s role within a company, should be aware of what if happening with the family, and also they should be part of special events as weddings, baptisms, etc.
For employers, their role must of the time is linked to the “pobrecito” attitude, always to excuse the employees for not doing things, or just when they need to be fired. With this, we conclude that paternalism has to aspects, the power of the father, government, or boss to make decisions for others, as well as the responsibility for those who are dependent on them.
Relating paternalism and the hierarchical relationships, within a company, the boss always has a trust man, who will do anything for him, and would burn on fire to cover him, most of the time is the assistant.
The disadvantage of this model of hierarchical relationships is that information from the bottom of the organization seldom floats to the top, allowing bosses to make poor decision, because of the lack of input from below that might help them avoid errors.
Upon this point all dimensions have been intrinsically related with power, our next dimension, which is the principal theme in the Latin American organizations (Hofstede, 1980).
Power is generally and more expressed in the top of the hierarchies. Bosses think that thanks to their position they are allow to do whatever they want, that they control the company and beyond, that employees should exceed in their attentions. And can delegate, tasks that they should act. People with power are accorded special privileges and often use their position to personal gain. It is said also that Latin Americas like to be dependent on someone else; they accept the authority and avoid confrontation with superiors. Conflict avoidance characterizes them and when there’s a discussion taking place in public both superior and employee feel uncomfortable and even insulted.
One of the most important Latin American cultural characteristics is the sense of humor and joy, which is also a dimension to analyze our culture.
Humor plays a major role in the work settings, the constant teasing and joking at work is a pleasure, besides it makes working hours to go faster, helps to create the perfect environment for working and develop more efficient all tasks.
But it is not always for having fun, humor has two other functions in the organizational life of Latin America; it is sometimes used to keep people in line, pointed jokes are an acceptable manner of conveying feedback to people. This, because concern for social approval is very strong in Latin America. And it also works as a safety tool in the form of black humor, as an example, employees that are not happy with their boss always make jokes about him but always behind his back or they make them to face just acting ironic.
The powerless the people, the more plentiful the jokes.
Lastly, we find fatalism, as one very important dimension where Latin American people could be analyzed. As we are evolving with all global changes, it still some “negative organizations” within the Latin culture. For some of us there is never a positive answer to things or in terms of the organization to projects, comments, etc. It is easier for as to say maybe or it could be rather than be 100% sure. The most common negative (in some way) word Latinos use is “si Dios quiere”. Even though people are sure things will happen, prefer to leave destiny to the religious part. [10] , but there are also some negative movements as always doubting, “what if?”” is it possible?” “I’m not sure it would work”.
Latin America has been always characterized as fatalistic and resistant to change, but there are some, however, individuals, companies, etc that are rapidly undergoing a transformation in response to changing circumstances as free markets and global economy. Companies with negative patterns find very difficult to compete with foreign companies because they are victims of their own selfishness, always having over all the negative view first.
It is important for people who will be working with Latin Americans to understand all cultural contingencies, to do not fall into mistakes or be part of an unexpected cultural shock.
Anabella Davila and Martha M. Elvira take some human resources? practices and explain cultural characteristics founded in them.
When referring to the recruitment, selection and promotion process, the authors affirm that in Latin America the appearance and personality are very important in the hiring or promotion of an employee. Relatives, friends or contacts are highly important as well as stated above.
Low budgets characterized the training and development process, and a lack of technical knowledge is faced by the firms when importing machinery from abroad. Nevertheless education level in Latin America is growing faster and expatriates in Latin America are being replaced by well-qualified Latin American youth.
Family plays a primary role in the lives of Latin American workers. To provide the family with the best living standard is the meaning of work of the Latin American worker. This is why social benefits given by the firms are valuable for them. Rewards for managers take the form of luxury cars, school enrollment for the kids or memberships in clubs. This enhances the living standard of the family and their social status. Acknowledgment is important for the workers; seniority recognition and social benefits are valuable for them.
Given the importance of family it is hard for Latin American workers to be transferred from one place to another (far).
Working groups are commonly to find in Latin American organizations, authority or coordination within them is also common. Latin American workers don’t like to face all the responsibility and thus prefer to share it.
The communication in the organizations flows from top-down; the avoidance of conflict generates many times misunderstandings and obstacles in communication processes.
When conflicts take place, identification with primary groups more than with the organization itself is common.
But, is really Latin America homogeneous as many states?
In the year 2003, T. Lenartowicz and James Patrick Johnson wrote an article called “A Cross-national assessment of the values of Latin America managers: contrasting hues or shades of gray?” which was published in the “Journal of international business studies”. There the authors through a research concluded, “Common perceptions of Latin America as a culturally homogeneous region are stereotypical and incorrectaˆ¦” Based on Rokeach?s study of values, T. Lenartowicz and James Patrick Johnson proved that “divergence in the importance of values can explain differences in business phenomena across the region.”
Values form part of culture, and they influence well the behavior of the people. Managers and workers grew within a culture filled with values, and thus the studying of values in Latin America can contribute to the understanding of management styles in the region.
Diversity characterizes Latin America; and this diversity is reflected in the behavior of the people across the continent. Despite the common historical background shared by Latin American countries, each one of them has different features, geographic conditions, ethnic groups, and historical development.
To develop the research, T. Lenartowicz and James Patrick Johnson divided the region in 6 representative parts. Colombia and Venezuela; Peru, Ecuador and Bolivia; Argentina, Uruguay, Paraguay and Chile; Brazil, Mexico; and Puerto Rico. The study didn’t cover any of the Central American countries.
According to the results, Brazil showed to have the major number of differences in importance of values (as expected) and Puerto Rico the lower.
According to the authors, “The values that differ significantly across the 12 countries include: ambitious, clean, intellectual, logical, open-minded, pleasure, world at peace. Three of these – intellectual, logical, open-minded – relate directly to decision-making and negotiation processes, suggesting that there may be considerable variation in these processes from one country to another. Variation in values is also likely to affect workplace issues such as delegating authority and responsibility, motivating employees, and compensation and reward systems.”
The study shows that even if there are similarities among Latin American countries, it would be an error to treat the whole region and homogeneous.
CONCLUSIONS
The Latin American environment could diverge since the colonization moment, because not all of Latin American countries were colonized by the same European countries, so in this order, we can find a French business culture, as well as Spanish and Portuguese, this situation has influenced the management style of Latin American MNE’s.
Some reason why this environment diverge are the economic and political policies implemented by the government before 1980’s, with the ideology of a close economy that ends with each country developing its own business culture.
In terms of geography, most of Latin American countries have high mountains, which generates difficulties in transportation of merchandise, this makes that almost all of Latin American companies develop same strategies in order to reduce transportation costs.
Each Latin American country has develop its own business culture, but at the same time, thanks to the colonization characteristic and its location it is possible to gather them into groups, to facilitate studies in this continent. Geographical and historical factors served to divide the region into five aggregates which showed to be consistent within them and different among them. These are: the northern South America (Colombia and Venezuela); Peru, Ecuador and Bolivia, the Southern cone (Chile, Argentina, Uruguay and Paraguay); Brazil; and Mexico.
When doing business, Latin Americans are recognized for being a friendly and informal bargainer, who prefers negotiating with already known people as family and friends; we do not sacrifice thing at a short term to obtain benefits at a long term. It is impossible for Latin Americans to arrive on time to meetings or things related to it, but this is why we cannot ask for punctuality and we became very flexible with time, and it uses. Latinos are very manipulative with emotions, and we count with a strong convincement power.
In conclusion, all Latin American enterprises have their own ways of doing business, but there are some similar characteristic among them, such as friendship, loyalty, humor, collectivism and power.
Friendship and humor are Latinos key tools for interacting and performing within a working and managerial environment. Being surrounded of trust people; the best way of ascending inside an organizational hierarchy and gaining the best positions is trough a Latin term “palanca”, which is the extra help they can get by contacts and friends to be chosen over others. Communication in Latin American organizations is top-down, with a lack of feedback from information given from bottom positions. Latinos are very preferential; we have preferences for in-group members over out-group members.
Although Latin America has been treated as an homogeneous region, he results of a research contradicts prior studies that have tended to group Latin American countries together, and this finding validates the view that Latin America should not be regarded as a culturally homogeneous region.
