The Latin American business landscape is changing rapidly as it enters the 21st century. To compete in the new global marketplace, traditionally large, family-run firms have become leaner and more focused. But these changes have not been accompanied by parallel economic growth. Fiscal imbalances, low domestic savings and lack of adequate education have been stumbling blocks to rapid expansion in several Latin American countries. At the Ninth Annual Wharton Latin America Conference, held January 28, speakers and panelists evaluated the region’s pace of change and discussed emerging opportunities for e-business models. While some advocated country-specific strategies, others supported pan-Latin American initiatives as a way to counter rising worldwide competition.

Streamlining conglomerates

In a panel titled “Globalization and the Future of Conglomerates in Latin America,” Alonso Martinez, senior vice president at Booz Allen & Hamilton, explained why large Latin American conglomerates, historically owned by one family, were being forced to reinvent themselves. “The sources of value that they used to have are fading,” said Martinez. “The bigger companies tended to have better access to capital and management as well as regulatory influence. Most of this is no longer true.”

“Today, it is very difficult for one conglomerate to have the best consumer products company, the best banking company and so forth, in a country, while simultaneously competing with a Philip Morris and an AT&T,” Martinez added. “Unfortunately, conglomerates often have a really tough time selling businesses; they hold on to them as if they were kids.”

What’s needed now, he noted, is a formula to add value — keeping only related businesses, for instance, or perfecting operations management techniques that can cross industry lines. As competition from multinationals heats up, a strategy of forming alliances with other Latin American companies may make the most sense: “You will see pan-Latin American consortia who come together to buy companies,” said Martinez.

Emerging e-businesses

Perhaps the most anticipated panel of the conference was “Prospects for e-business in Latin America.” Leaders of several dot-com companies debated the optimal strategies for e-commerce initiatives in the region. David Croson, assistant professor of operations and information management at Wharton, who has conducted case studies of e-commerce in Latin America, moderated this panel.

José Marín, founder and director of, a Latin American auction site, asserted that a successful Latin American e-business would operate in the entire region and take advantage of economies of scale. “Size is important, and it is logical to replicate one country’s success story in others,” he said. CEO Juan Carlos Garcia disagreed. “The war is going to be won country by country,” he said. “The major reason that panregional models are preferred [by outside analysts] is that they look for huge market capitalizations. Otherwise, true scalability is not so tangible. Having warehouses in Mexico is not an advantage if I want to enter the Brazilian market, for instance.” was the first web-based department store in Mexico and pioneered the business-to-consumer segment in that country.

Wenceslao Casares, CEO of, took the middle ground. “To get capital and talent, we did have to be panregional,” he said. “We promoted ourselves as the best financial site in Latin America, not in one country. So far, having that panregional approach has helped us. Now when we turn around and use the resources we get, it’s a different story. Each country’s product, schedule and marketing budget are all different. So in that sense we become very localized.”’s goal is to be a total financial destination site for the entire region.

Asked about the roadblocks to e-commerce explosion in Latin America, Harry Neuhaus, director of sales for Yahoo! en Español, reminded the audience that the middle class really needs access to the Internet before shopping online takes off. “Now, with the increasing availability of free access from several banks, that’s starting to happen. It’s also a question of education, and proof that the logistics and delivery process actually work,” he said.

Jack London, CEO of auction site, pointed out that there is no catalog shopping culture in Latin America as there is in the United States. “We have to create a new mentality and a sense of trust, as well as put in place adequate back-office and delivery services,” he said. Garcia agreed, but thought that the problem was more on the server side; users are eager to buy, he noted, but sites in Latin America do not yet offer a wide variety of products.

Competition from established global Internet players is also beginning to shake things up in Latin America. But the panelists were optimistic about the ability of localized strategies to win. “The first round of the Internet war was fought in the United States,” said Casares. “ vs. Barnes and Noble. And people like ourselves were watching the fight, although we were not involved yet. Now it’s the second round, and regional incumbents have a much better understanding of what the fight is like. Local talent makes the difference. The best businesses here are going to be those that have not already happened in the States.”