By Rob Fernandez

For the satellite industry, the developing regions of the world offer a particularly fertile market for its unique telecommunications services. Latin America is one region that is top on the lists of many satellite players, both large and small. But beneath the convenient catch-all label, this region has a great degree of diversity.

Latin America encompasses extremes on both ends of the scale, with definite “hot spots,” where the level of economic and technical sophistication is every bit the equal of the “developed” world, and areas where the only viable option for communications remains the satellite sector. While some satellite companies espouse a global view of the market, transcending regional borders, many of the smaller service providers and hardware suppliers have found that successfully operating in Latin America requires an appreciation for the distinctive character of the local business process and the cultures which dictate this process.

Getting Down To Business

IDB Systems, a division of MCI Worldcomm, is in a particularly good position to comment on the region due to the nature of its business. As a systems integrator, IDB offers a product with an extended period of maturation, calling for the establishment of long-term relationships with its customers. “It’s not an everyday business,” says Eduardo Coquis, IDB’s director of international sales for Latin America. “It happens every five years, every seven years, every two years, depending on the customer, the country and the national economy.”

According to Coquis, IDB has been working to establish its business in Latin America for the past five years. “The policy that we have adopted to get into Latin America is: be there,” says Coquis. Local sales and support offices, or at the very least frequent business trips to the region, are pivotal to remain close to the customer and gain an appreciation of the way business is done in Latin America. This policy of local offices, in-country representation and frequent personal contact at all levels of management is not unique to IDB, but is endorsed by all the companies mentioned in this article as the cornerstone for serving the market.

“It’s important to be physically there; you cannot cover this region from Miami or New York,” affirms Robert E. Wold, president of Wold International. His company is particularly involved in the Mercosur countries of the Southern Cone. “It’s important to know people. It may be a large business, but it’s a small fraternity.”

“You have to work with local agents,” says Harvey Gersh, sales director for Tiernan’s Latin American efforts, “because they understand how to do business in their areas, and because they call on the local customers all the time. Customers in Latin America like to see who they’re buying from, and like to meet you face-to-face.” With business negotiations in any society, and certainly no less in Latin America, it is important to understand the culture. “It’s very important to know how and why they do business and understand the culture a little bit,” Gersh continues. “For example, if you are rude, your customers in Latin America may still be very polite to you, and you might leave thinking you did a real good, bang-up job, and that you’ve impressed them. They’ll let you think that, but they won’t return your calls, and you will never get another chance to see them or sell to them.”

In addition, most of the companies we interviewed agreed that the regulatory situation across Latin America is facilitating growth. “Changes in the local telecom regulations, all over, in almost every country in Latin America, have made it more flexible and more dynamic,” Coquis says. The popular consensus also reveals that the region as a whole is beginning to recover from the recent wave of recessions that struck many economies in Latin America. “Last year’s economic downturn slowed progress on a couple of projects, but overall our products help customers save money, make new business and be more productive so our market continues to grow,” says Diana Cantu, director of business development in Latin America for International Datacasting (IDC). IDC does about 15 percent of its business in Latin America.

“There is evidence of economic recovery in Latin America, and the market there for Tiernan products is improving,” says Gersh. Brazil, in particular, is an important market in Gersh’s eyes. “Because most of the small countries count on Brazil as their biggest trading partner, when Brazil prospers you’ll see a lot of the other countries starting to pick up. Not all of them, but a good percentage.”

“One of the realities of Latin America is that the economies are volatile,” says Ricardo Vega, Wegener’s international sales manager for Latin America. “When there are big economic downturns, it hits the papers in the United States. Typically, these fluctuations are things people in the region have to deal with all the time.” Wegener too is beginning to see an improvement in the market. “Projects that have been moving slowly or that have been on hold for the past fews months are just now coming back to life again,” Vega says.

Despite the improving economic indicators, Coquis cautions against viewing Latin America as an opportunity for making easy profits. “We tend to confuse two concepts: necessity and demand. There is a huge necessity in Latin America for telecommunications. That doesn’t mean there is demand. Demand is the union of a requirement and the availability of resources. That is not always true in Latin America. It requires a great deal of perseverance. It’s not a place to get rich, but to get business.” That said, Coquis does concede that the situation in Latin America is definitely looking up. “The demand is improving, growing because the economy is growing.”

Gersh observes another possible misconception that sometimes arises out of differences in culture. “Even though there is a need for a service, and even though there are people willing to pay for that service, it seems to take quite some time for these services to become available. Even though they have the customers, business developers proceed very cautiously.” Gersh attributes his observation to a different business culture. “One of the first things I learned about Latin America is that ‘manana’ does not always mean tomorrow; sometimes it means ‘not today.'”

According to Coquis, customers in Latin America are also very well informed about the benefits of satellite technology. “In most countries in Latin America, the customers are well-educated, with technical resources that we don’t know. We have the technology in the industry, and they have the education to specify what they want. We really have to work closely with them to fit our technology to their requirements,” Coquis says. He maintains that the average Latin American customer is not intimidated by sophisticated solutions or easily awed by technological bells and whistles.

Earning A Place In The Market

Corporate Satellite Communications (CSC) is another company that has extensive experience in Latin America. According to Jim Faulkner, general manager, CSC does 90-95 percent of its teleport business for customers in Latin America. Faulkner can testify to the improvement in the market there, as his company has quadrupled its business volume in the region over the past year and a half.

“You have to learn the people, and learn the culture,” Faulkner says. Sometimes a customer’s concern over having their markets exploited by an outside player can impede the free flow of information necessary to constructing an appropriate satellite solution. “They have a tendency to be uneasy dealing with people from the outside. Customers do not like to reveal a lot of details. They are very protective of, and closely guard information relating to their customers, business strategies and specialized system configurations,” Faulkner says. “Customers have to become comfortable that they can trust you, and in this area, that trust must be earned. If a sincere trust relationship can be developed, progress will be made towards development that can be mutually beneficial. Many of our clients are extremely knowledgeable, but justifiably have a fear of sharing their knowledge.” Faulkner concedes that this attitude of reserve is not without cause. “They have reason, good reason through life experiences over many generations, for feeling the way they do,” he says.

Tom Sheddan, president and CEO of Atlanta International Teleport (AIT) is particularly interested in the less-developed regions of Latin America, countries with a low gross national product and little infrastructure in place, and agrees with Faulk-ner’s assessment of the attitude in some countries. “When we go into a country, what we’ve seen in the eyes of the people looking back at us is their exposure over the last 100 years to the large ogre of imperialism and imperialistic business operations, where they’re used to massive business organizations coming in and trying to usurp an industry, sort of the loot-and-pillage scenario,” Sheddan says. According to Sheddan, his company’s smaller profile and niche service orientation has helped to smooth the way with local government officials who have learned to be gun shy of bigger companies. AIT is also trying to win trust by providing a complete solution for a country’s needs, and not a “quick fix.”

“One of the principal things we go with, in each country, is a distance learning package,” Sheddan explains. “As we bring Internet services and these higher communications platforms and opportunities to people in this region, if we don’t present, at the same time, an opportunity to generate e-commerce–anything from call centers, hospitality training for the tourist industry, all the way up to creating platforms for masters and doctoral programs, medical training and medical services–you create an intellectual ‘brain drain.’ If you educate a person in a region where they cannot possibly find an opportunity to utilize that education, they must leave the country. You create basically a loop of misery in that region.”

Sheddan is a firm believer in the power of the Internet to not only bring in education, but also to create opportunities to utilize this education, profitably, in-country. “Then you can begin to highlight the positive nature of many regions: a high literacy rate, a low cost of labor and an infrastructure stable enough to support these cottage and e- commerce industries.” IDC’s Cantu agrees. “I’m seeing dizzying growth in the field of distance education and a great deal of interest in Internet via satellite solutions,” she says.

One of Sheddan’s current projects is in Trinidad and Tobago, where a 91 percent literacy rate and English-speaking population make it an ideal location for establishing call centers. “Then you can go to the Microsofts and Ciscos of the world, and say ‘Here’s a stable country, with a high literacy rate, where factors like churn and competition don’t exist.'” Sheddan stresses to his customers how a complete and well-planned satellite system can enrich the lives of every citizen in a country, not just a chosen few. “There a lot of marketing people out there trying to sell services. They say ‘Here, you need this, buy this.’ That’s not what the potential of Internet is all about. The potential is to change the quality of life of every human being on the planet.”

Local Flavor

On a country by country basis, IDB’s Coquis identifies Brazil and Mexico as the early adopters of the Latin American market. “For the Brazilians and Mexicans, they don’t say it, but they try to match what we have in the United States. Whatever is being done here, very likely it has to be done there. They stay aware of what’s being done and bring it over there. If you offer what’s being done in the United States, offer it over there. Don’t impose it, offer it. They will very likely adopt it.”

Tiernan’s Gersh agrees. “If you’re going to be selling them equipment, they like to know which American companies are using that equipment. Sports are also very important in Latin America, and for things that are important to them, like world soccer games, they will do whatever it takes to get the transmission, no matter what the cost. For example, during the World Cup back in 1998, TV Globo in Brazil bought HDTV equipment in France and was the first to really transmit HDTV from France to Latin America, in particular to Brazil and Argentina.”

“I would put the technical expertise of Brazil up against that of any other nation, including the United States,” says Robert Behar, president of Globecast America, and former operator of Globecast’s Miami teleport. According to Behar, there is no compromise on quality for World Cup events in Brazil, and the country’s biggest broadcaster, Globo, has world-class, standalone facilities for covering such events and broadcasting them via satellite. Unfortunately, this technical sophistication also comes paired with a more restrictive tax and import duty structure, which limits external involvement, according to Globecast’s Julien Seligmann, CEO of Globecast Brasil.

Brazil, according to Wegener’s Vega, is very independent from the influence of the rest of Latin America. This translates into a need for extra effort when taking a product or service into this country as opposed to the rest of the region. “As far as marketing is concerned, whatever you’ve done, you need to do it again in Brazil,” Vega explains. “In Brazil, the local language is Portugese. If you don’t speak Portugese, many Brazilians prefer to speak English rather than Spanish. My customers prefer data sheets in English. They don’t want to see things that are targeted towards a Spanish-speaking community.”

“Mexico is, by far, leading Latin America in an economic recovery,” says Wegener’s Vega. “Mexico is the focal point, technologically, for the rest of Central and northern South America, sort of a technological proving ground. If it works in Mexico, then a product is going to flow into the rest of the regions. Less so Brazil; Brazil doesn’t necessarily focus on Mexico, and Argentina has a more European focus. Outside of the Southern Cone, the rest of South America has an eye on Mexico, and what works there is going to be much more readily accepted in other markets.”

Chile was a significant customer to the satellite industry seven to nine years ago, but is now in the process of digesting a large buildout in satellite infrastructure, according to Coquis. “Chile, with their privatization in the early ’90s, invested a lot in infrastructure. With the free market, there emerged a lot of competitors. What that did is bring prices to the floor. Now, they are engaged in a rationalization process.” There are still occasional opportunities in Chile, Coquis says, but now customers are more conservative and concerned with “addressing the market rationally. Today, they have more capacity than they need.”

“Colombia has the resources, and despite a limiting regulatory regime, things are happening in Colombia.” According to Coquis, Colombia’s regulatory situation is more severe than in other areas of the region, but the geography supports a satellite solution. “The population is concentrated in five or six cities, but they have obligations to serve the entire country.” The same situation exists in Peru, Coquis says.

“In Argentina, one would think that this is an ideal country, with a large population,” says Coquis. “But 50 percent of this population is in Buenos Aires, and there they are well covered by two terrestrial operators: Telefonica and Telecom Internacional.” Wold also agrees with this statement, pointing out that although Argentina was one of the earlier adopters of regulatory reform, 70 percent of the homes are passed by cable, which is an advantage for some satellite service providers, but a barrier to others.

“The Latin American market is very challenging,” Coquis concludes. “It is not rewarding immediately, but by being perseverant it can be. You must be ready for ups and downs. Be ready to establish long-term relationships in several countries, that way when one tumbles, another is up.”

Robustiano Fernandez is the Senior Editor of Via Satellite.