Business As Usual Won't Work Anymore For Latin America's Multinationals

With slower demand expected in the world's raw materials and consumer markets, big Latin American firms must find new strategies.

The Sao Paulo stock exchange
The Sao Paulo stock exchange
Rodrigo Lara Serrano


SANTIAGO — One might say of Latin American multinational firms what a zoologist said once about domesticated animals: The question is not why they exist, but why we do not tame more animals.

Taming those different animals, however, has always been easier said than done. Not many management teams have the right local partners, the ability to fine-tune operations on a cultural level, or the backing of strong capital flows (or shareholders willing to cover initial losses) to sustain them until they have that winning combination.

From that perspective, the growth of Latin American multinationalsmultilatinas — is the fruit of a remarkable process that for the most part has taken place within a framework of economic acceleration and a general drop in poverty levels. The region's governments did their part by promoting exports of goods and services, steering away from "economic nationalism" and establishing legal frameworks to protect foreign investments. The availability of cheap and abundant credit helped too, as did real increases in people's incomes in many countries and a boom in new communication technologies allowing firms to manage their operations cheaply and in real time.

When future economic historians look back at this period they will surely be surprised by how easily all of the aforementioned conditions came together, how widely accepted they became and how natural and permanent they came to be seen.

Except they aren't necessarily permanent. The current situation may not deteriorate entirely, but certain aspects of it are likely to weaken or change.

One thing Latin American firms would do well to consider is how their businesses will be impacted by the more "normal" growth rates (4-5% annually) forecasted for China. The slowdown may not happen next year, but it will eventually take place. It's simply unrealistic to think that the 9-10% growth we're accustomed to seeing in China will continue. If it does happen again, it'll be in the form of a rebound following a bout of recession.

That said, the current paralysis in Europe won't last forever either. When it does lift, demand will likely recover. Latin American mining companies may also have reason for optimism. Tecnological innovations are making exploration and exploitation easier and more cost effective. Scientific advances are also, in some cases, creating new minerals markets. The current race to develop a new generation of batteries to store solar-generated electricity, for example, could boost demand for materials such as lithium.

Food and retail multinationals will also have to adapt to changing conditions. They should confide less in the seemingly steady rise in real incomes and also be more cautious regarding the vast amounts of household debt families are accruing to pay for all their new consumer goods.

One thing owners, directors and managers can do to prepare for these changes is adopt a business model that is costly now, but fruitful later. On the demand side, that means starting to view consumers as co-creators of the goods and services provided them. Rather than the "pushing" strategies of the past, which tended to be copied from the U.S. and involve big budget marketing and publicity, companies could focus more on rapid response strategies in the supply chain by periodically "re-creating," for example, their various products.

Multilatinas would also do well to place more emphasis on research and development. Subjecting the services offered in a supermarket, mall or clinic to scientific research may sound excessive, but only to an accountant. As the experience of other regions has shown, this approach facilitates the rise of unexpected spin-offs, new projects, previously unconsidered niches, and secondary firms whose profits end up becoming essential to the mother group or firm.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!

Ecological Angst In India, A Mining Dumpsite As Neighbor

Local villagers in western India have been forced to live with a mining waste site on the edge of town. What happens when you wake up one day and the giant mound of industrial waste has imploded?

The mining dumpsite is situated just outside of the Badi village in the coastal state of Gujarat

Sukanya Shantha

BADI — Last week, when the men and women from the Bharwad community in this small village in western India stepped out for their daily work to herd livestock, they were greeted with a strange sight.

The 20-meter-high small hill that had formed at the open-cast mining dumpsite had suddenly sunk. Unsure of the reason behind the sudden caving-in, they immediately informed other villagers. In no time, word had traveled far, even drawing the attention of environment specialists and activists from outside town.

This mining dumpsite situated less than 500 meters outside of the Badi village in the coastal state of Gujarat has been a matter of serious concern ever since the Gujarat Power Corporation Limited began lignite mining work here in early 2017. The power plant is run by the Power Gujarat State Electricity Corporation Limited, which was previously known as the Bhavnagar Energy Company Ltd.

Vasudev Gohil, a 43-year-old resident of Badi village says that though the dumping site is technically situated outside the village, locals must pass the area on a daily basis.

"We are constantly on tenterhooks and looking for danger signs," he says. Indeed, their state of alert is how the sudden change in the shape of the dumpsite was noticed in the first place.

Can you trust environmental officials?

For someone visiting the place for the first time, the changes may not stand out. "But we have lived all our lives here, we know every little detail of this village. And when a 150-meter-long stretch cave-in by over 25-30 feet, the change can't be overlooked," Gohil adds.

This is not the first time that the dumpsite has worried local residents. Last November, a large part of the flattened part of the dumpsite had developed deep cracks and several flat areas had suddenly got elevated. While the officials had attributed this significant elevation to the high pressure of water in the upper strata of soil in the region, environment experts had pointed to seismic activities. The change is evident even today, nearly a year since it happened.

It could have sunk because of the rain.

After the recent incident, when the villagers raised an alarm and sent a written complaint to the regional Gujarat Pollution Control Board, an official visit to the site was arranged, along with the district administration and the mining department.

The regional pollution board officer Bhavnagar, A.G. Oza, insists the changes "aren't worrisome" and attributes it to the weather.

"The area received heavy rain this time. It is possible that the soil could have sunk in because of the rain," he tells The Wire. The Board, he says, along with the mining department, is now trying to assess if the caving-in had any impact on the ground surface.

"We visited the site as soon as a complaint was made. Samples have already been sent to the laboratory and we will have a clear idea only once the reports are made available," Oza adds.

Women from the Surkha village have to travel several kilometers to find potable water

Sukanya Shantha/The Wire

A questionable claim

That the dumpsite had sunk in was noticeable for at least three days between October 1 and 3, but Rohit Prajapati of an environmental watchdog group Paryavaran Suraksha Samiti, noted that it was not the first time.

"This is the third time in four years that something so strange is happening. It is a disaster in the making and the authorities ought to examine the root cause of the problem," Prajapati says, adding that the department has repeatedly failed to properly address the issue.

He also contests the GPCB's claim that excess rain could lead to something so drastic. "Then why was similar impact not seen on other dumping sites in the region? One cannot arrive at conclusions for geological changes without a deeper study of them," he says. "It can have deadly implications."

Living in pollution

The villagers have also accused the GPCB of overlooking their complaint of water pollution which has rendered a large part of the land, most importantly, the gauchar or grazing land, useless.

"In the absence of a wall or a barrier, the pollutant has freely mixed with the water bodies here and has slowly started polluting both our soil and water," complains 23- year-old Nikul Kantharia.

He says ever since the mining project took off in the region, he, like most other villagers has been forced to take his livestock farther away to graze. "Nothing grows on the grazing land anymore and the grass closer to the dumpsite makes our cattle ill," Kantharia claims.

The mining work should have been stopped long ago

Prajapati and Bharat Jambucha, a well-known environmental activist and proponent of organic farming from the region, both point to blatant violations of environmental laws in the execution of mining work, with at least 12 violations cited by local officials. "But nothing happened after that. Mining work has continued without any hassles," Jambucha says. Among some glaring violations include the absence of a boundary wall around the dumping site and proper disposal of mining effluents.

The mining work has also continued without a most basic requirement – effluent treatment plant and sewage treatment plant at the mining site, Prajapati points out. "The mining work should have been stopped long ago. And the company should have been levied a heavy fine. But no such thing happened," he adds.

In some villages, the groundwater level has depleted over the past few years and villagers attribute it to the mining project. Women from Surkha village travel several kilometers outside for potable water. "This is new. Until five years ago, we had some water in the village and did not have to lug water every day," says Shilaben Kantharia.

The mine has affected the landscape around the villages

Sukanya Shantha/The Wire

Resisting lignite mining

The lignite mining project has a long history of resistance. Agricultural land, along with grazing land were acquired from the cluster of 12 adjoining villages in the coastal Ghogha taluka between 1994 and 1997. The locals estimate that villagers here lost anything between 40-100% of their land to the project. "We were paid a standard Rs 40,000 per bigha," Narendra, a local photographer, says.

The money, Narendra says, felt decent in 1994 but for those who had been dependent on this land, the years to come proved very challenging. "Several villagers have now taken a small patch of land in the neighboring villages on lease and are cultivating cotton and groundnut there," Narendra says.

They were dependent on others' land for work.

Bharat Jambucha says things get further complicated for the communities which were historically landless. "Most families belonging to the Dalit or other marginalized populations in the region never owned any land. They were dependent on others' land for work. Once villagers lost their land to the project, the landless were pushed out of the village," he adds. His organization, Prakrutik Kheti Juth, has been at the forefront, fighting for the rights of the villages affected in the lignite mining project.

In 2017, when the mining project finally took off, villagers from across 12 villages protested. The demonstration was disrupted after police used force and beat many protesters. More than 350 of them were booked for rioting.

The villagers, however, did not give up. Protests and hunger strikes have continued from time to time. A few villagers even sent a letter to the President of India threatening that they would commit suicide if the government did not return their land.

"We let them have our land for over 20 years," says Gohil.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!