Another Look at Latin America — Warts and All

Another Look at Latin America – Warts and All

Latin America is beginning to look more attractive to US direct marketers, especially in the wake of the Asian meltdown.

The DMA's International Council is staging an emerging markets conference in New York later this month (see page 3 for details) that will focus on Latin American markets and their opportunities, a first, and one that is expected to draw a respectable number of attendees (which would be another first for Latin America).

Unhappily, the fact remains that in many ways Latin America is an also ran both for the direct marketing industry and for the American economy as a whole. It is so close and yet so far. American hegemony was long taken for granted up north and deeply resented south of the border.

Periodically US governments roused themselves to doing “something” about Latin America, beginning with FDR's “good neighbor policy” in the thirties and JFK's “Alliance for Progress” in the sixties. Most attempts were good-hearted but by and large Americans were easily distracted.

Multinationals have long done business in the hemisphere and many have become as much part of the economic scene there as they are here, i.e. household names and brands. Investments waxed and waned depending on economic tides and the discovery and exploitation of natural resources from Chilean copper to Venezuelan and Mexican oil.

Direct marketing has a shorter and more fragile history in Latin America. More than most economic disciplines successful direct marketing outside the US depends on political and economic stability.

The eighties in Latin America showed little of either. Inflation was endemic and hyperinflation simply a fact of life. The military went in and out of Latin politics – and more often in than out.

Catalogers especially cannot do business in a climate of extreme currency fluctuations. By the time catalogs are printed and mailed their pricing is out of date, and dollar denominated catalogs have limited markets.

The nineties began to change all that. The dictators went. Democracy came in. Inflation was tamed. Government ownership of major industries such as transportation, utilities and communications began to dwindle. People began to talk up Latin America.

Then the peso crashed in late 1994 and the tequila effect swept through major Latin markets, all but cleaning out Argentina's hard currency reserves. A lot of Americans pulled back then, especially with Asia beckoning. The Japan of an 80-yen dollar loomed as an Eldorado.

Yet interestingly by 1996 flagging US interest began to revive. Brazil's president Cardoso was making good on reform promises. The Real was stable. Incomes rose. The middle class began to buy from catalogers in Miami and increasingly through DRTV. Cardoso is poised for a second term.

Chile became the showcase of the Americas with telephone service to rival that of the US and at lower prices – a textbook example of how technology can leapfrog turtles ahead of hares.

Direct marketing began to make real headway. National direct marketing associations were formed, enough at any rate for four nations – Mexico, Argentina, Brazil and Venezuela — to form a Latin American DM Federation at last year's DMA convention in Chicago. Chile and Peru are likely to join soon.

Bob Wientzen of our own DMA continues to act as cheerleader for greater Latin involvement. “I'm very bullish on Latin America as a direct marketing opportunity across the board,” he told “Business Marketing” magazine. “But I'm especially encouraged by the b-to-b opportunity there, especially in Brazil.”

It is always dangerous to predict Brazil's imminent takeoff into 21st century superpower status. It has been the country of the future for too long, but it does seem as if it is rapidly becoming the country of the present as well, certainly as far as direct marketing is concerned.

The Readers Digest has staged a remarkable comeback in mid-decade after abandoning the market years earlier. Circulation is now close to 700,000 and helping to sell the magazine's other publishing, music and video products.

Abril, the country's largest publisher, hired Peter Rosenwald, an expatriate pioneer who plied his trade in the UK for decades, to help reinvigorate the country's DM culture.

Good numbers are hard to come by but Alejandro Di Paolo, who owns an agency in Buenos Aires and was a past president of the Argentine DMA, guesses that hemisphere wide direct marketing is growing at a 40 to 50 percent clip annually, and he credits privatization for its growth.

But – and there are always several of them – direct marketing, like any other business, does not exist in a political and economic vacuum. Latin America has not caught the Asian flu yet, indeed it is beginning to look that even in Asia it will only be the flu and not pneumonia.

That doesn't mean, however, that Latin Americans aren't sneezing or hoping that heavy doses of economic vitamin C will ward off the disease. Brazil has already cut its growth rate estimates to 2 percent this year – whereas the rest of the hemisphere is projecting 5 percent.

Argentina's wealth has grown substantially in the nineties but has not been spread widely enough, a factor reflected in last year's congressional election that saw President Carlo Menem's party lose its hold on Congress.

Menem is ending his second term next year and is constitutionally barred from a third successive one. But some reports from Buenos Aires suggest he may be maneuvering to change the constitution yet again or at least make sure that his Peronist rival loses the election. The idea: that paves the way for Menem to come back in the early 2000s.

Cardoso isn't assured of re-election in Brazil, and if he does win he will be beholden to special interests eager to slow his reform program. He has already made deep fiscal cuts and other efforts to preserve foreign exchange stability. And he is being criticized for failure to make Brazil the engine of hemisphere economic progress.

And it doesn't help that Chile's still fragile democracy must continue to deal with a caudillo in grumpy retirement. Augusto Pinochet is 81 and still head of the armed forces. Now he wants to remain a senator for life so nobody could ever prosecute him for murder and other crimes committed during his dictatorship.

That's destabilizing and the kind of event every direct marketer should factor into his Latin American calculation.

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