Summary: Innovation in Latin America

Speakers:

• Nell Cady-Kruse, Global Strategy Chair, Johnson Alumni Advisory Committee and Executive, Global Risk Management, Standard Chartered Bank
• Roberto Canizares, Former President and CEO, MSA International
• Lourdes Casanova, Sr. Lecturer, Emerging Markets Institute, Johnson Graduate School of Management, Cornell University (View Casanova's presentation.)
• Richard Coyle, Executive Director, Emerging Markets Institute, Johnson Graduate School of Management, Cornell University
• Tim DeVoogd, Ph.D., Director, Latin American Studies Program, Cornell University
• Greg Featherman, Managing Director, KPMG (View Featherman's presentation.)
• Sandra Fuentes-Berain, Consul General of Mexico in New York (View Fuentes-Berain's presentation.)
• Daniel Levites, Partner, EY Terco, Brazil (View Levites' presentation.)
• Francisco Manrique, President of the Executive Council, CONNECT Bogota (Read an AS/COA interview with Manrique on innovation in Colombia and view Manrique's presentation.)
• Mauricio Mesquita Moreira, Sector Economic Advisor and Research Coordinator, Integration and Trade Sector, Inter-American Development Bank (View Moreira's presentation.)
• Richard Piña, Technical Advisor, Citigroup Integrated Account Team, IBM Corporation
• Alberto Ramos, Head of Latin American Research, Goldman Sachs (View Ramos' presentation.)
• Virun Rampersad, Managing Director and Head of Global Innovation, BNY Mellon
• Christopher Sabatini, Editor-in-Chief, Americas Quarterly and Senior Director of Policy, Americas Society/Council of the Americas
• Mike Todaro, Executive Director, Americas Apparel Producers Network

Summary

On October 16, AS/COA partnered with Cornell University’s Emerging Market Institute to host an all-day conference in New York about new approaches to fostering innovation in Latin America. Bringing together a variety of leaders and innovators, the panelists explored topics such as innovation in the financial services, IT, and manufacturing sectors.

The Building Blocks for Innovation

Lourdes Casanova of the Johnson Graduate School of Management at Cornell discussed the paradox of how countries in Latin America can change their image and foster innovation beyond research and development and patents. In her research, Casanova assesses Latin America’s capacity to innovate in terms of economic development and the well-being of its citizens. She defined innovation as “the adoption of new ideas, products, production processes, marketing methods, and business models to enhance sustainable growth and social well-being.” 

Casanova noted that in Brazil, partnerships are key in the private sector. For example, since ethanol is profitable when oil prices are higher, Volkswagen developed two different types of engines: one that runs on ethanol and one that runs on gasoline. She also commented that Peru has made significant efforts to effectively brand and market its cuisine, helping boost the tourism industry. Casanova concluded by highlighting five ways in which countries can innovate: having a national vision, focusing on specific sectors, balancing economic innovation with social inclusion and sustainability, increasing the private sector’s investment in innovation, and by providing citizens with education, training, and leadership skills.

Innovation in the Public and Private Sectors

Mexican Consul General Sandra Fuentes-Berain spoke about the role Mexico has played to innovate through trade and development. Mexico has signed a multitude of free-trade agreements with 44 countries in Asia, the Americas, and Europe, in addition to 23 bilateral investment agreements that provide preferential access. President Enrique Peña Nieto’s government has pushed structural reforms in education, telecommunications, energy, and taxes, she explained, in order for Mexico to unlock its potential. 

Virun Rampersad of BNY Mellon talked about changes is driven by global companies. Businesses must analyze their major assets—client relations and employees. Innovation, argued Rampersad, is “a new application that has commercial value and can make a difference to the company.” He added that “diversity is the engine that can fire up innovation.”

Innovation in the Financial Services Sector

Daniel Levite of EY Terco discussed innovation in financial services using Brazil as an example. At the end of the 1990s, Brazil was experiencing higher levels of fraud than in other markets. “The business model in place and the lack of the judiciary system robustness constrained effective remediation processes against fraud,” he explained. In order to overcome these challenges, the Brazilian financial services market renovated pin-pad terminals, substituted cards with chip cards, and implemented biometrics to authenticate ATM transactions. As a result, fraud levels on transactions with biometric validations fell to close to zero, and the velocity for approving transactions improved.

Greg Featherman of KPMG also commented on how the São Paulo Stock Exchange (BOVESPA) sought to identify innovative solutions. Rather than waiting for the government to implement regulatory reforms, BOVESPA designed new listing requirements to improve the governance of listed companies and increase investor interest and confidence. The new system was composed of three related tiers of listings that each had different requirements for corporate reporting and governance. As a result, 156 companies were listed on these tiers by the end of 2007, totaling 57 percent of BOVESPA’s overall market capitalization.

Innovation in the IT Sector

Ricardo Piña of IBM looked at the digital divide in Latin America and opportunities for IT innovation such as communications, content, and computing. Piña referenced the One Laptop per Child initiative, which provides low-cost laptops to children for roughly $100 each. These laptops are able to survive in adverse environments and do not require a battery.

Francisco Manrique of Connect Bogota discussed Colombia’s transformation and its advancements in innovation. He noted that in the late 1990s, Colombia faced problems with violence and a weak economy—but that changed. Security became a top priority, the country welcomed private investment, and the government implemented sound macroeconomic policies. Today, Colombia ranks in spot 60 among 142 countries in terms of innovation and ease of doing business. The government also took an important step to promote innovation by allotting 10 percent of mining and oil royalties for innovation. As a result, over 372 projects and 23,000 companies were funded. To date, over 2 million laptops and tablets have been distributed to people across Colombia, 1,157 municipalities are now connected to the internet, and approximately 8,000 internet kiosks have been installed in poor areas.

Innovation in Manufacturing

Mauricio Mesquita Moreira of the Inter-American Development Bank (IDB) spoke about the IDB’s report on domestic transport costs and regional export disparities in Latin American and the Caribbean. The report estimated the factory-to-port transport costs of exports and assessed the impact of these costs on exports overall. In Brazil, for example, only 19 percent of municipalities exported, while the top 10 exporters accounted for 55 percent of all exports. In Mexico, 39 percent of districts exported, and the top 10 exporters accounted for 68 percent of all exports. The results suggested that trade policy must incorporate lowering transport costs to ports to help boost manufacturing in regions with lagging development.

Mike Todaro of American Apparel spoke of the world of manufacturing as “China and non-China.” He advocated the need for industrial integration and partnerships between companies. Todaro referenced one case study in which a Brazilian company invested in El Salvador by importing fabrics. The decision saved 10,000 jobs, created 10,000 new ones, and lowered transportation costs.

Roberto Canizares of MSA International focused on demand flow technology (DFT), in which customer demand—rather than forecasting— drives factory activity. He noted that DFT represents a total transformation of the manufacturing industry because it takes a holistic approach with process innovation instead of product innovation. Brazil was the first to lead the DFT manufacturing transformation followed by Australia, China, France, and eventually North America. DFT allows for higher productivity, lower costs, and superior customer service. By lowering costs, companies are able to lower their margins and make higher profits.