Global Business Trends
In this final edition of 2003, Knowledge at Wharton presents a round-up of business trends in different regions of the world. As the global economy heads into 2004, it is critical to understand issues such as the way in which credit agencies rate investment risk in countries such as Russia, Mexico and Argentina. We also take a look at business trends in India and the impact of China’s growth on its Asian neighbors. Our report ends with an examination of trends in Latin America, from efforts to build the telecom market in Chile to Brazil’s bid to covert its environmental agenda into a competitive strength.
Are sovereign credit ratings – those indicators that can encourage, or discourage, international investments in emerging markets – in danger of becoming cheapened? If so, what does this say about the state of credit rating agencies and what are the implications for investors at home who want to buy assets abroad? Knowledge at Wharton looks at how rating agencies have fared recently in such countries as Russia, Mexico, Argentina and Uruguay.
India is now recognized as a world leader in the IT services business and has become a popular ‑ if controversial ‑ destination for global back-office operations. But as India rockets ahead in the information age, what are the implications for those whom technology has yet to touch? Panelists at the recent Wharton India Economic Forum explored these and other topics.
With the world’s largest population and fastest growing economy, China has recently emerged as Asia’s rising star. But is China’s status as a world economic power hurting the rest of the countries in Asia? The answer, according to panelists at last month’s Wharton Asia Business Conference, is no. To be sure, they said, China’s neighbors will have to contend with its new economic muscle, but they won’t necessarily be injured by it, at least not in the long term. Growth isn’t a zero-sum game, one participant noted; as China’s economy expands, its neighbors’ economies can expand too.
While Asian entrepreneurs are eager for venture-capital investments from firms in the United States and Western Europe, and Western investors are ready to enter the booming Asian economies, for now the two sides often circle each other warily or, at best, proceed awkwardly. The reasons for that, according to members of a panel on venture capital and entrepreneurship at last month’s Wharton Asia Business Conference, range from cultural differences to lack of available deals to lack of trust.
In some commercial circles, “Asia” has become a holy incantation, as if merely announcing an intention to operate in that part of the world guarantees long-term success for enterprising companies. But two CEOs with roots in the region and long tenures doing business there – Masamoto Yashiro, chairman of Shinsei Bank in Tokyo, and Rajiv Gupta, chairman of Rohm & Haas in Philadelphia – say the same business fundamentals apply in Asia as in the United States and Western Europe.
Although Chile has the most advanced telecommunications infrastructure in Latin America, enjoys unequalled economic and political stability, and boasts the highest personal computer and Internet usage rates in the region, investment in technology and its use as a management tool do not show the same dynamism. As a result, Chile is trying to establish a public-private national agenda that seeks to bring investment levels closer to those of more developed countries. In spite of some barriers, analysts and academics are optimistic that the digital industry can represent 3.8% of Chile’s GDP in the near future.
Idealism is not the only factor that motivates companies to adopt environmental responsibility programs. Cost reductions as well as enhancement of a company’s image to consumers and society are other important incentives. This is certainly true in Brazil, where companies are becoming more and more active using environmental programs as a way to gain competitive advantage. By the end of this year, for example, companies will have spent approximately $500 million on pollution control equipment alone.
Over the past five years, the wine industry in Argentina has experienced the greatest growth in its history. Three factors account for this: a 106% increase in domestic Argentine consumption, an 800% rise in the volume of Argentine wine exports, and investments in the industry totaling $1.3 billion. Other contributing factors include the excellent conditions provided by the country’s climate and the entrepreneurial spirit of Argentines who developed professional wine cellars, deployed new technology, and worked together to promote the country’s exports. And while after-effects of the crisis of 2001 can still hurt the industry, business leaders have already taken measures to deal with that threat.