Miami versus Atlanta: Those two American cities are competing to become the site of the future headquarters of the Free Trade Area of the Americas (FTAA). The rivalry involves an attractive economic payoff: The winner is expected to attract several multinational corporations, create 11,000 new jobs, and enjoy about $500 million in additional revenues each year. Above all, the winner will become the focal point for the Hispanic market, which has emerged as a significant factor in the business world.


Miami is the most Hispanic city in the United States; that is its major selling point in the competition. In contrast, Atlanta has the fastest-growing Latin American population of any major U.S. city. In Miami, most Hispanics are Cuban in origin; in Atlanta, most are Mexican. In Miami, the ‘Hispanification’ of society has been a reality for many years. In Atlanta, the stage is still being set for that transformation.


“The main reason for becoming capital of the FTAA is this: Every company that wants to enter the Latin American market will have to be there,” explains José Ignacio González, president of Hemisphere, Inc., which contracted with the state of Georgia to manage Atlanta’s bid. In early May, González took part in the three-day Sumaq Summit in Atlanta. Organized by seven business schools, the conference was a platform that Georgia hopes to use to achieve victory.


The conference brought together 300 managers, business leaders and professors to discuss new business opportunities that the FTAA will provide throughout Latin America. Participants came from such business schools as the Instituto de Empresa (Spain), the Getúlio Vargas Foundation (Brazil), EGADE-Tecnológico Monterrey (Mexico), IESA (Venezuela), INCAE (Costa Rica), the Pontifical Catholic University of Chile, the University of the Andes (Colombia), and the University of San Andrés (Argentina).


Most likely, the FTAA will be the most prominent manifestation of an important new reality. This emerging bloc of 34 countries will bring together a population of nearly 800 million people and an annual collective GDP of some $11.5 trillion. “The FTAA will have a positive impact – although obviously how much impact will depend on the terms [of the agreement],” says María Lucia Padua Lima, who coordinates the Center of International Studies at EAESP-FGV, a leading business school in São Paulo, Brazil. However, Limawarns, “There are conflicting interests [in the FTAA], and business is war.”

Already, that war is being waged on several fronts. On one front, there is the reluctance of Brazil, Argentina, Uruguay and Paraguay to sign the FTAA agreement. “Those countries comprise the MERCOSUR bloc, which offers them a series of tariff advantages with respect to other countries,” notes González. On another major front is the site-selection battle involving the FTAA’s headquarters. Miami and Atlanta are the [major] competitors. “In principle, the winner must be chosen in December, but it could be postponed because the United States is in an election year,” notes Michael Peck, founder and chief executive of Mapa, Inc. Peck’s company is helping several Spanish companies – including Iberdrola, La Caixa, Gamesa, and Mondragón Corp. – penetrate the U.S. market. “Business opportunities in Latin America pass through a triangle composed of the United States, Spain and Latin America,” Peck adds.


Miami, the Latin Power in the U.S.

Miami is the leading Hispanic city in the U.S., and that is its major selling point in this battle. For more than 30 years, Miami has welcomed an unending influx of Hispanics – largely Cubans. They have settled permanently in Miami and transformed it completely. According to the Spanish-language edition of Foreign Policy, a survey conducted in 2000 showed that two-thirds of Miami’s population is Hispanic. Moreover, 75.2% of all adults do not speak English at home. Of this group, 87.2% speak Spanish. Moreover, 59.5% of Miami’s population was born outside the U.S. Only 31.1% of all Miami adults speak English very well.


These figures reflect the impact of Hispanics in Miami, where they are a major political and economic force. Most of that power is in the hands of Cubans who fled the regime of Fidel Castro. Because it was impossible for them to remit funds to their country of origin, they reinvested the fruits of their labor in Miami starting in the 1960s. Their efforts generated a great deal of economic development, most notably in the international tourism sector.


According to Foreign Policy, Miami-based international trade amounted to $25.6 billion in 1993. Five years later, Miami’s Spanish-language television stations achieved the city’s highest ratings. By 1999, native-born Cubans – or Americans of Cuban-origin – were at the helm of Miami’s largest bank, its largest real-estate firm, and its largest law firm. Other prominent Cuban-Americans have included the mayor, the police chief, the attorney general of Miami-Dade County, and two-thirds of Miami’s representatives in the state legislature and the U.S. congress.


Given the prominence of Hispanics, it is easy to see why Miami wants to host the FTAA’s headquarters. Beyond the wealth Hispanics generate for the U.S., they also contribute a great deal to their countries of origin. “Hispanics who live in the United States constitute the main source of wealth [for Latin America] within the United States. The $42 billion in financial remittances they sent in 2003 to their countries of origin were the equivalent of the entire GDP of Central America. If you add the $6 billion from Hispanics who immigrated [to Latin America] from Spain, you can see that this is a new way to create wealth in the region. The United States must be very aware of that fact,” says Jaime Alonso, dean of the EGADE-Tecnológico [business school] in Monterrey, Mexico.


Atlantaand the New Latin Boom

In Atlanta, the role of Hispanics is a much more recent phenomenon. Now Atlanta has the advantage of being at the center of the region (Georgia and its neighboring states) that has the fastest-growing Hispanic population in the U.S. A recent study by the U.S. Census Bureau found ten areas where the Hispanic population grew fastest during the last decade. Eight of those ten cities were near Atlanta, and/or in Georgia, South Carolina, North Carolina, Tennessee and Alabama. In metropolitan Atlanta, the Hispanic population shot up by 350% over the past decade. There are now one million Hispanics in the region; almost one-quarter of Metropolitan Atlanta’s entire population. Just behind Atlanta is Chattanooga, Tennessee.


“Unlike Miami, Atlanta’s Hispanic population is not primarily Cuban. There is a greater representation of all the countries [of Latin America],” Peck says. “Cubans represent only 8% of the entire Hispanic population in the United States, but Mexicans amount to 67%.” Peck supports Atlanta’s candidacy. In his view, when it comes time to select a headquarters, the FTAA “must look for the best formula for integrating commerce and improving social conditions in all of Latin America. Our approach must focus on commerce, not on politics. We must locate the capital [of the FTAA] in a commercial center where there are many corporate headquarters. Atlanta is the third-ranking city in the United States, after New York and Chicago, when it comes to headquarters of major corporations. That includes Coca-Cola, CNN and Delta. You have to look where the industry is, because the city that becomes the capital of the FTAA will attract money and work.”


Peck also emphasizes the network of connections that link Atlanta’s airport with the rest of the United States and Latin America. “Atlanta’s airport is used by 80 million passengers [a year], compared with only 30 million in Miami. The difference is equivalent to the entire population of Italy, for example.” In this traffic of people and goods, experts focus [again] on the triangle of Spain, the U.S., and Latin America. Most American companies have yet to master Latin America’s diversity and the cultural idiosyncrasies of its peoples. In contrast, Spanish companies have learned how to adapt themselves to the unique characteristics of each country.”


Notes Alonso: “The typical U.S. executive is a white, Protestant male. The classic Anglo-Saxon has little to do with Hispanics. Latin America managers have a very different way of looking at things. For example, [in Latin America] you have to know how to live with risk, rather than get frightened whenever there is a crisis. Spanish companies understood this challenge because of the cultural similarities [between Spain and Latin America.] For that reason, success [for Americans] will take place through networks and alliances that fill in missing points in the triangle.”


The Advantages of Being Chosen

Ultimately, the city that hosts FTAA headquarters will experience the same explosion of jobs, wealth and political power that Brussels enjoyed when it was chosen capital of the European Union. Ignacio González says, “We have analyzed the significant economic impact for the city that becomes the capital [of the FTAA]. All sorts of law firms, corporations, organizations, pressure groups and institutions will be attracted. About 11,000 new jobs will be created. Every company that wants to do business in the Americas will have to pass through that city. That’s why it is so important to be the winner.”


Most of the new jobs will be in the private sector. “The future [FTAA] secretariat will attract a maximum of [only] 200 bureaucratic positions,” warns González. “The other major economic impact will come from declining tariffs and duties, which will add up to an additional 16,000 jobs. In economic terms, the global impact of being the headquarters of FTAA will reach $500 million a year.”


The political impact could be even more significant than the economic impact. For example, Brussels is considered the European lobbying capital. Pressure groups in that city have been growing at a dizzying pace. Currently, some 3,000 pressure groups are involved with the EU’s institutions, according to Expansión, the Spanish business daily. Law firms are one of the most important lobbies; they try to influence the Commission’s decisions regarding competitiveness and mergers and acquisitions. When it comes to representing the major multinationals, the dominant law firms include Clifford Chance, Baker & McKenzie, Freshfields, Stanbrook & Hooper; Cleary, Gottlieb; and Linklaters.


Christopher Gorman, a consultant with Tendencias, a consulting firm, says that before we learn which city is the ‘Brussels of the Americas,’ the countries involved in the FTAA will have to overcome their differences and make progress forging an agreement. The process requires signatures from 30% of the governments. “What worries me is, Brazil is not placing all its bets (on negotiating the agreement).”


In early February, an important meeting took place in Puebla, Mexico, to launch the rules and regulations for an agreement reached earlier in Miami. At the 17th meeting of the Committee for FTAA Commercial Negotiations, participants expressed divergent views. The ‘G-3’ countries — comprising Canada, Chile and Mexico — were not satisfied. They wanted to deepen the foundations of the FTAA. Nevertheless, they supported the essence of the agreement, which was signed by the U.S. and Mercosur, and called ‘FTAA Light.’


Obstacles to the FTAA

Brazil’s reluctance is based fundamentally on its enormous fear of competing against the highly developed U.S. economy on an equal playing field. Brazil wants to obtain the highest possible level of concessions in those sectors where it is very competitive, such as agriculture. Tovar Nunes, who heads the FTAA division at Brazil’s foreign ministry, notes that the Miami meeting broadened perspectives and made further negotiations viable. “Mercosur provoked, in a positive sense, a crisis that led to this awareness: ‘Things cannot continue as they are, so what do we have to do?’ The crisis was a tough one, and it was managed diplomatically, through lots of discussions. Finally, the agreement they reached in Miami established a common basis for every country that participated. In areas where an agreement wasn’t possible, those countries that choose to, can sign multilateral or bilateral agreements among themselves,” says Tovar. 


Although some countries opposed the minimal FTAA agreement, Tovar is optimistic that participants will comply with the timetable established for creating the Pan-American common market. “We are now very close to the U.S., for example,” he says. “Both we and the Americans are aware that we must be more sensitive [to others]. The more we take differing views into account, the greater our chances of creating an FTAA. We are also proposing agreements that go deeper, and are more generous regarding the final text of the FTAA. These agreements are for all members of the FTAA – especially members of CARICOM (the Caribbean community of countries) and South American countries. We are going to try to make them see that we are ready to adopt asymmetric rules.”


Despite this greater sense of harmony, detractors of Brazil and MERCOSUR argue that the battle with the U.S. is already practically lost. “To go into effect, the FTAA must be signed by 30% of potential participants. Currently, the U.S. has agreements with the members of NAFTA (Canada and Mexico); members of CAFTA (Guatemala, El Salvador, Nicaragua, Honduras, Costa Rica, Dominican Republic); the Andes nations; the Caribbean countries; and Chile. That’s enough for the U.S. to go ahead with the [FTAA] agreement,” says González.


“The United States is heading toward a strategy that will oblige it to sign a trade pact, independently of what happens during the next general elections,” he adds. However, he notes, “this is an election year in the U.S., so everything can wind up being delayed.”