Saturday, November 30, 2024

Implementing Cryptocurrency in Argentina - Challenges, Opportunities, and Strategies

Buenos Aires - ARGENTINA, Nov. 30th, 2024

Preface

Argentina is no stranger to economic innovation. Faced with ongoing inflation and fluctuating currency values, many Argentinians have shown interest in cryptocurrencies as an alternative financial solution. However, while cryptocurrency holds promise for improving financial access and stability, several significant hurdles remain.

Saturday, November 23, 2024

Mexican Automotive Industry Hits Historic Milestone: Over 4 Million Cars Assembled in 2024

Mexico City (MEX), Nov. 23, 2024

The Mexican automotive industry has reached an unprecedented milestone in 2024, assembling over 4 million vehicles for the first time in its history. This remarkable achievement underscores Mexico's growing prominence in the global automotive landscape and highlights the strategic advantages that have propelled the industry to new heights.

A Year of Record-Breaking Production

In 2024, Mexico's automotive sector experienced a significant surge in production, driven by increased demand and strategic investments from major global automakers. Companies like General Motors, Nissan, Volkswagen, and Stellantis played pivotal roles in this success, with General Motors alone producing over 503,000 vehicles in the first seven months of the year. This surge in production is a testament to the robust infrastructure and skilled workforce that Mexico offers.

Key Factors Behind the Success

Several factors have contributed to this record-breaking year:

  1. Strategic Location and Trade Agreements: Mexico's proximity to the United States, coupled with favorable trade agreements like the United States-Mexico-Canada Agreement (USMCA), has made it an attractive hub for automotive manufacturing. These agreements facilitate smoother trade relations and offer economic incentives that benefit the industry.
  2. Cost-Effective Manufacturing: Competitive labor costs in Mexico provide a significant advantage over other manufacturing hubs. This cost-effectiveness has attracted numerous automakers looking to optimize their production expenses without compromising on quality.
  3. Investment in Technology and Infrastructure: Continuous investment in advanced manufacturing technologies and infrastructure has enhanced Mexico's production capabilities. This includes the adoption of automation and innovative production techniques that increase efficiency and output.
  4. Diverse Manufacturing Ecosystem: Mexico's automotive industry is supported by a diverse ecosystem of suppliers and ancillary businesses. This comprehensive network ensures a steady supply of components and services essential for vehicle assembly.

Impact on the Economy

The automotive industry's growth has had a profound impact on Mexico's economy. It has created thousands of jobs, boosted exports, and attracted further foreign investment. In the first seven months of 2024 alone, light vehicle exports increased by 8.44%, reaching nearly 2 million units. This export growth not only strengthens Mexico's trade balance but also solidifies its position as a key player in the global automotive market.

Looking Ahead

As Mexico continues to build on this momentum, the future looks promising for its automotive industry. The ongoing shift towards electric vehicles (EVs) presents new opportunities for growth and innovation. With strategic policies and continued investment, Mexico is well-positioned to remain a dominant force in automotive manufacturing for years to come.

In conclusion, the assembly of over 4 million vehicles in 2024 marks a historic achievement for Mexico's automotive industry. It reflects the country's strategic advantages, robust infrastructure, and the unwavering commitment of its workforce. As the industry evolves, Mexico's role in the global automotive landscape is set to become even more significant.

>>>read also>>>

The Rise Of Automotive Manufacturing In Mexico - Forbes

Automotive Boom in Mexico: Production Soars in 2024

Saturday, November 16, 2024

Why Argentina Could Become the Ideal Laboratory for Cryptocurrency Implementation

Buenos Aires (ARG), Nov. 16th, 2024

Preface

Argentina, known for its rich culture and vibrant history, is fast emerging as a key player in cryptocurrency experimentation. In the face of economic challenges and with support from both government and private sectors, the country is uniquely positioned to lead the adoption of cryptocurrency as an alternative currency. Here’s a closer look at why Argentina could be the perfect testing ground for this digital currency revolution.

Economic Instability and Inflation: Fueling the Case for Crypto

Argentina has long grappled with economic instability, marked by soaring inflation rates that have eroded the value of the Argentine peso. In 2024, inflation surged past 270% year-over-year, pushing many Argentinians to explore alternatives to preserve their wealth. Cryptocurrencies, particularly stablecoins and Bitcoin, have become popular tools for hedging against inflation, offering a more reliable store of value than the national currency.

Government Endorsement and Regulatory Framework

The election of pro-Bitcoin advocate Javier Milei as Argentina’s president in 2023 has sparked a shift toward cryptocurrency adoption. Milei has consistently promoted Bitcoin as a counter to centralized financial inefficiencies and corruption. Under his administration, Argentina now permits the use of Bitcoin in legally binding contracts, signaling a strong governmental endorsement. This regulatory clarity provides fertile ground for the growth and integration of digital currencies within Argentina's financial ecosystem.

Thriving Tech Scene and Entrepreneurial Spirit

Argentina’s tech sector is thriving, with companies like Ripio, SatoshiTango, Decrypto, Lemon, and Koibanx at the forefront of integrating digital currencies into the mainstream. This entrepreneurial ecosystem, combined with a high level of technological expertise, positions Argentina as a hotspot for cryptocurrency innovation and experimentation. This vibrant startup culture supports both development and widespread adoption, creating a unique environment for testing and scaling cryptocurrency solutions.

Broad Public Adoption and Awareness

Cryptocurrency use is already widespread among the Argentine population, with one-third of Argentinians reportedly using digital currencies for daily transactions and wealth preservation. This widespread adoption lowers barriers to broader acceptance and encourages experimentation, as Argentinians are familiar with the advantages digital currencies offer. This public familiarity with cryptocurrency sets Argentina apart from countries where digital currency adoption remains niche or novel.

Potential Global Influence

Argentina’s pivot toward cryptocurrency has implications beyond its borders. As one of the largest economies in South America, Argentina’s success with digital currencies could inspire other economically challenged countries to explore similar alternatives. This global influence underscores Argentina’s potential to lead the way in cryptocurrency implementation, serving as a blueprint for other nations facing inflation and currency instability.

The Milei-Musk Alliance: Paving the Way for Argentina’s Crypto Future

In recent months, the alliance between President Javier Milei and Elon Musk has captured worldwide attention. This relationship, based on shared values and a mutual commitment to economic freedom, could play a pivotal role in establishing Argentina as a global crypto leader.

A Shared Vision for Economic Freedom

President Milei’s libertarian stance and dedication to economic reform resonate with Musk, who is known for his disruptive approach to innovation. Their partnership was formalized during a high-profile meeting at Tesla’s Austin headquarters, where they discussed technological and economic advancements. Their shared commitment to reducing bureaucracy and encouraging investment aligns perfectly with Milei’s pro-crypto platform.

Cryptocurrency as a Pathway to Economic Transformation

Both Milei and Musk are strong advocates for cryptocurrency, though each brings a unique perspective. Musk’s influence in the cryptocurrency world, from Bitcoin to Dogecoin, has already shown its ability to move markets. Milei, meanwhile, sees digital currencies as a tool to counter Argentina’s economic instability, offering a decentralized alternative to the peso. This combination of political backing and tech-driven vision positions Argentina for a crypto-fueled transformation.

Argentina’s Unique Appeal to Elon Musk

With a reputation for innovation and market disruption, Elon Musk could find Argentina to be an ideal “laboratory” for cryptocurrency experimentation. Here’s why Argentina might be the ideal testing ground for Musk’s crypto ambitions:

  • Economic Instability as a Catalyst for Innovation

Argentina’s persistent economic struggles make it a fertile environment for exploring stable currency alternatives. Musk, who embraces disruptive solutions, might see an opportunity to showcase cryptocurrency’s potential to offer real-world benefits in a volatile economy.

  • A Politically Supportive Environment

Milei’s administration is open to cryptocurrency reforms, with Milei himself a staunch advocate for economic freedom through decentralization. This alignment in vision between Musk and Milei provides a supportive political backdrop, essential for large-scale crypto implementation.

  • Lithium Wealth and Technological Opportunities

Argentina is home to vast lithium reserves—a critical element in battery production for Tesla. By establishing ties in Argentina, Musk could secure a reliable supply of lithium for Tesla’s EV production while fostering local cryptocurrency adoption for transactions tied to lithium mining and exports.

  • A Skilled Workforce and Technological Readiness

Argentina’s tech ecosystem is rich in talent, particularly in blockchain and cryptocurrency development. Musk’s investment could accelerate Argentina’s tech industry growth, driving further crypto innovation and drawing additional talent and investment to the country.

  • Global Market Impact

Musk’s influence on markets is profound, with even his social media posts moving crypto valuations. His involvement in Argentina’s crypto initiatives could inspire other countries to explore digital currencies, amplifying Argentina’s global influence in this arena.

Conclusion

With a unique blend of economic challenges, governmental support, technological infrastructure, and public adoption, Argentina is poised to become a testing ground for cryptocurrency implementation. As Argentina navigates economic recovery, digital currencies could offer a stable and efficient alternative to traditional financial systems, helping to stabilize the national economy and hedge against inflation.

The Milei-Musk alliance represents an intriguing fusion of political ambition and technological innovation. This partnership could catalyze a cryptocurrency-driven transformation, positioning Argentina as a leader in financial innovation. Should Musk and Milei succeed in their shared vision, Argentina’s economy could pave the way for a new era of financial stability and growth, inspiring other nations to consider the potential of cryptocurrency. The world will be watching closely as Argentina takes steps toward becoming a pioneering hub for digital currency innovation.

After the first phase of a project mission for a North American client in the crypto environment in Argentina in Q1 2024, the team is now getting ready to put the stakes on the ground again in Argentina for the second chapter. Stay on the ball! We will be reporting from this battlefield on various digital platforms.

On April 25, 2024, iMB.Solutions published a blog on the topic of cryptocurrency in Argentina. It is highly recommended to read this blog, chapter one, again:

Cryptocurrencies as Catalysts for Economic Renewal? A Comprehensive Analysis for Argentina

Saturday, November 9, 2024

Petrobras' Groundbreaking Gas Discovery in the Caribbean Sea

                     Rio de Janeiro (BRZ), Nov. 09, 2024

In a significant development for the energy sector, Petrobras, the Brazilian oil giant, has announced the discovery of a massive offshore gas field in the Caribbean Sea, off the coast of Colombia. This discovery, made in collaboration with Colombia's state-run oil and gas company Ecopetrol, marks a major milestone in the exploration and production of natural gas in the region.

The Discovery

The gas field, located in the Guajira Offshore Basin, is estimated to hold around 6 trillion cubic feet (tcf) of gas. The discovery was made at the Uchuva-1 and Uchuva-2 wells, now renamed Sirius-1 and Sirius-2. These wells are situated in deep waters, approximately 32 kilometers from the coast and 76 kilometers from the city of Santa Marta.

Strategic Importance

This discovery is not just a win for Petrobras and Ecopetrol but also for Colombia, which stands to significantly boost its natural gas reserves. The Sirius project is expected to be the largest offshore discovery in Colombia and could potentially double the nation's gas reserves. This is a crucial step towards energy security and sustainability for the country.

Future Prospects

Petrobras and Ecopetrol plan to continue the development of the area, adhering to the contractual agreements with the National Hydrocarbons Agency. The initial conception of the Sirius project foresees the first offshore gas production between 2029 and 2030, with an expected production of 13.3 million cubic meters per day for ten years. The total investment to develop the Sirius project is estimated to be around $5 billion, with $2 billion allocated for exploration and $3 billion for production development.

Environmental and Economic Impact

The discovery and subsequent development of this gas field are expected to have significant economic benefits for both Brazil and Colombia. It will create jobs, boost local economies, and contribute to the overall energy supply in the region. Moreover, natural gas is a cleaner alternative to other fossil fuels, aligning with global efforts to reduce carbon emissions and combat climate change.

Conclusion

Petrobras' discovery in the Caribbean Sea is a testament to the potential of offshore exploration and the importance of international collaboration in the energy sector. As the project progresses, it will be interesting to see how it shapes the future of energy production in Colombia and beyond.

This discovery not only highlights the capabilities of Petrobras and Ecopetrol but also underscores the importance of sustainable and strategic energy exploration. The world will be watching as these two giants work together to harness the potential of this significant natural gas reserve.

>>>read also>>>

Petrobras and Ecopetrol announce major gas finds in Colombia

Tuesday, November 5, 2024

US Election 2024 - Global Economy on the Line, No Matter Who Wins

As many of you know, I've been doing project missions in the USMCA region recently and finally, after so many years, I'm back operating in Mexico. Brazil and Mexico are already my favorites in Latin America. In these projects, I always had/have a lively exchange with the border states of the USA in particular - especially Arizona, New Mexico and Texas.

Now, the world waits with bated breath as the United States heads toward the Nov. 05, 2024 presidential election. With frontrunners Donald Trump and Kamala Harris presenting opposing strategies for America’s future, the outcome will ripple across global markets, impacting everything from inflation to climate policy. Whether it’s a second Trump administration or a first term under Harris, the policies of the next US president will have far-reaching economic consequences.

The State of the US Economy: Resilient but Unstable

The US economy has shown resilience, weathering higher interest rates and persistent global uncertainties. However, inflation remains a significant challenge. The Federal Reserve’s policy responses—already impacting the domestic economy—are increasingly reactive to an environment of supply shocks and structural labor shortages. A new administration, regardless of political orientation, will need to navigate a more unpredictable inflation landscape.

Policies aimed at stimulating demand, like tax cuts, or those that target supply issues, such as tariff increases, could bring renewed inflationary pressure. This would leave the Federal Reserve with little choice but to raise interest rates further, potentially reaching an uncomfortable level that could strain the economy.

The question remains: how will US policies impact not only the domestic economy but global trade?

Global Trade in the Balance

Global trade, already recalibrated during Trump’s first term, hangs in the balance. Trump’s administration took a hard stance on tariffs, especially against China, marking a departure from prior US trade policy. His 2024 campaign continues this theme, emphasizing tariffs as a tool for economic leverage. Should Trump win, tariffs on Chinese imports could climb modestly from 2.5% to about 4.5%, short of his campaign’s 10% goal but still potent enough to erode US growth. Higher tariffs would likely stoke inflationary pressures, adding another layer of complexity to the Federal Reserve’s already delicate balancing act.

In contrast, a Harris presidency would bring different trade priorities. The Biden administration has championed industrial subsidies as a way to protect and foster domestic industries. These subsidies represent a subtler form of protectionism, one that is likely to continue if Harris prevails. While tariffs may not increase under Harris, her administration’s approach could still disrupt trade dynamics, as US subsidies could disadvantage foreign competitors.

Energy and Climate: A Divisive Path

Both candidates share a broad ambition for energy independence and economic self-sufficiency. However, their approaches to achieving these goals differ sharply, especially in terms of climate policy. For Kamala Harris, climate regulations would tighten, bolstering the clean energy sector and accelerating the shift away from fossil fuels. Her administration would likely emphasize reducing emissions, supporting renewable infrastructure, and aiming for aggressive climate targets.

In contrast, Donald Trump’s energy policy seeks to sustain the fossil fuel industry, at least in the short term. Although market trends suggest an eventual shift to renewables, a Trump administration could slow this progress by rolling back environmental regulations and promoting fossil fuel production. This divergence could fracture the global response to climate change, leading to economic costs that go beyond national borders and stalling the worldwide green transition.

What Lies Ahead?

Ultimately, the outcome of the 2024 election could set the tone for the global economy in the coming years. A Trump victory signals renewed trade tensions, potential inflation surges, and a delay in climate progress, while a Harris administration would continue a protectionist stance through subsidies and champion more climate-focused policies.For global markets and economies intertwined with the US, the aftershocks of November’s vote will likely be felt for years.

No matter the victor, the world must prepare for an era of economic policies driven by national priorities—and the wide-reaching global impact that accompanies them.

A Closer Look on Mexico

USMCA Faces New Scrutiny Amid Election Threats and Geopolitical Tensions

In the evolving landscape of North American trade, the United States-Mexico-Canada Agreement (USMCA) faces increasing scrutiny as geopolitical and economic dynamics shift. A surge in Chinese imports flowing into Mexico has raised questions about the resilience and long-term objectives of the trade deal. As the 2026 review of the USMCA approaches, experts speculate on the impact of upcoming elections and policy shifts on the future of North American trade.

Mexico’s Role in the Supply Chain Reconfiguration

Talking with C-level managers of Freightos, highlights that Mexico has become an attractive destination for foreign companies, including American firms, to mitigate costs in response to global supply chain disruptions. During our project missions 2023/24 in Mexico It’s clear that foreign and American companies are turning to Mexico to lower costs amid ongoing supply chain reconfigurations. This trend, which began during the pandemic, has gained momentum as businesses seek to build resilience and adapt to economic shifts.

The influx of Chinese goods into Mexico is driven not only by lower production costs but also by strategic advantages. Mexico’s proximity to the U.S. makes it an attractive alternative for companies looking to move goods efficiently into the North American market. However, the question remains whether the next U.S. administration will closely examine the USMCA’s role in facilitating these trade flows, potentially reconsidering provisions that enable Asian goods to enter the U.S. market via Mexico.

USMCA Review - A Period of Uncertainty

The USMCA, which replaced the North American Free Trade Agreement (NAFTA) in 2020, includes a six-year review clause, with the first review scheduled for July 2026. This provision allows any of the three countries to propose changes or withdraw from the agreement, triggering a prolonged period of uncertainty should any party opt to negotiate different terms.

During all project missions executed, specially in 2024, I emphasized that this review will likely include a close examination of how Chinese goods enter North America through Mexico. It seems that China is using Mexico as a strategic platform to move materials and parts into North America, I would remarked, adding that the question of how to handle duties—tariffs imposed on Chinese goods—could become a major topic in the 2026 review discussions.

Potential Policy Changes Under a New Administration

The U.S. political landscape will play a critical role in shaping the future of the USMCA. The potential return of former President Donald Trump, who was instrumental in renegotiating NAFTA into the USMCA, has raised concerns among logistics managers and companies. Some fear that a renewed Trump administration could lead to additional tariffs on Chinese goods entering the U.S., possibly as high as 60% to 100%. Businesses are already strategizing to front-load imports to mitigate the risk of sudden policy shifts that could impact costs and trade flows.

During our iMB.Solutions project missions with a European client of mobility industry in the first semester of 2024, we analyst a huge bundge of information sources, among national press secretary for Trump’s 2024 campaign, emphasized that Trump would continue his approach of prioritizing American workers and farmers in trade negotiations. They argued that the current administration’s policies have allowed China to gain undue advantages, particularly with regard to electric vehicle mandates, and warned that these issues could worsen if the current administration remains in office.

While the Harris-Biden administration has yet to comment on these developments, the impact of a potential policy shift could have significant implications for trade relations, particularly if stricter regulations are placed on Chinese imports routed through Mexico.

Mexico’s Growing Role in North American Trade

Despite potential challenges, we (iMB.Solutions) believe that Mexico’s role in North American supply chains will continue to expand. If all three countries agree to renew the USMCA, we (iMB.Solutions) don’t expect the flow of goods from China into Mexico to slow down.

As global trade evolves in an increasingly complex geopolitical environment, Mexico’s strategic importance within North America is set to grow, further strengthening its role in regional supply chains.

In the lead-up to the USMCA’s 2026 review, companies are closely monitoring political and economic developments. For businesses navigating this complex trade environment, Mexico remains a critical hub, but the road ahead is clouded with uncertainty. The outcome of the todays U.S. elections and the subsequent USMCA review will play a decisive role in determining whether Mexico can sustain its current position as a key node in North American supply chains.

If you want to dive a little deeper into scenario generation, here is my absolute blog recommendation. Without question, it's also a highlight if you're looking for a rapidly new approach to strategic planning. In any case, I am very focused on USMCA - no matter how it turns out, you should be prepared for tactical adjustments with a view to value creation in USMCA. But remember: strategic scenario generation comes before tactics.

>>> READ BLOG: Unlocking Strategic Business Scenarios with Generative AI as a Project Assistant - Scenario Generation USMCA

https://www.imb.solutions/blog-newsletter/unlocking-strategic-business-scenarios-with-generative-ai-as-a-project-assistant-scenario-generation-usmca

Saturday, November 2, 2024

Chinese XCMG to Showcase 747-Horsepower Electric Truck at Fenatran 2024

The Brazilian transportation industry is set to witness a groundbreaking innovation at the upcoming Fenatran exhibition, as Chinese company XCMG prepares to unveil its 747-horsepower electric truck. This event, scheduled to take place from November 4 to 8, 2024, in São Paulo, will be a significant platform for showcasing the latest advancements in heavy-duty electric vehicles.

The XCMG E7-80T: A Game-Changer in the Industry

The XCMG E7-80T is an impressive feat of engineering, boasting a motor with 747 horsepower and a torque of 285.7 mkgf. With a maximum towing capacity of 80 tons, this electric truck is designed to meet the demanding needs of the transportation sector while promoting sustainability and reducing carbon emissions.

Why This Matters

The introduction of such a powerful electric truck is a major step towards greener and more efficient transportation solutions. As the world increasingly focuses on reducing greenhouse gas emissions, the adoption of electric vehicles in the heavy-duty sector is crucial. XCMG's E7-80T represents a significant advancement in this direction, offering a viable alternative to traditional diesel-powered trucks.

Fenatran 2024: A Hub for Innovation

Fenatran, Latin America's largest road freight transportation exhibition, provides an ideal platform for companies like XCMG to showcase their latest innovations. The event attracts industry professionals, policymakers, and investors from around the world, making it an excellent opportunity for XCMG to demonstrate the capabilities of its electric truck and attract potential customers and partners.

The Future of Electric Trucks in Brazil

The introduction of the XCMG E7-80T at Fenatran 2024 is a promising sign for the future of electric trucks in Brazil. As the country continues to invest in sustainable infrastructure and renewable energy, the demand for electric vehicles is expected to grow. XCMG's presence at the exhibition highlights the company's commitment to innovation and its role in shaping the future of the transportation industry.

Conclusion

XCMG's unveiling of the 747-horsepower electric truck at Fenatran 2024 is a significant milestone for the Brazilian transportation industry. This powerful and sustainable vehicle represents a major step towards greener logistics and highlights the potential for electric trucks to transform the sector. As Brazil continues to embrace sustainable solutions, the future looks bright for electric vehicles and the companies leading the charge.

Observation

If you look for a meeting with me or consultants and interim managers from iMB.Solutions, please get in contact! We´ll be present on the show.

Contact Hub iMB.Solutions: e-mail us or give us a call!

FENATRAN 2024

Sunday, October 27, 2024

Contextual Intel - Using Brazil as an Example

What is Brazil's profiling and thus the implications for your business in the country?

Soft Power


Brazil maintains the largest global number of neutral relations with other nations, one could also say conflict-free relations. This correlation of Brazil with the world is repeatedly confirmed by the periodically published report of the Harvard Business School on the so-called soft powers in the world. There are two ways to interpret this relationship pattern.


It is easy to do business in Brazil because the local partners are very open to the opinions, business models, values and behavior of outsiders.


But ... .


Brazilians like to learn from the outside world, but it doesn't matter if a business model works in another part of the world. They have to show that it works in the Brazilian reality.


This is a basic understanding to do business in Brazil, to initiate a reorganization, a restructuring process, a business transformation or even a new start of the company or brand in the national Brazilian market. It is crucial to accept this reality and build the contextual intelligence for your operation in Brazil.


Where do we come from?


Over the past four decades, many managers have been convinced that management know-how could be easily transferred to other cultures (...), including Brazil. Gradually it became clear that the differences were greater and that only the company that was able to adapt to local challenges would be able to operate abroad with a strong comparative advantage in the specific market.


It no longer makes sense to apply the same management practice around the globe, although we like to believe that it does. There is no doubt that management goals such as value creation and development of local management personnel are accepted and make sense worldwide.


But only one step further, by looking beyond the general description of management, we see the cultural differences and meanings of these words. The local Brazilian culture, the history of the nation, the institutional structure, the geographical environment, education and social development of the society define different views on how to motivate Brazilians and which values are really important.


Change mindset - avoid risk!


This is by far the best approach to localize the risks and integrate them into the scenario compass. It is not the study of country risks or exchange rate movements alone.


The one-to-one transfer of technology and management know-how to Brazil harbors a hidden risk: being convinced that the know-how implemented at headquarters will naturally bring success in Brazil. It rarely works out one-to-one.


The analytical tools available today are excellent, but adapting to the Brazilian reality on site and using them defines one of the success factors. We at iMB.Solutions defined this requirement as contextual intelligence.


Contextual intelligence is essential for success in Brazil, even when entering a new market or restructuring local operations. It defines the ability to know and accept the limits of knowledge in the head office and to adapt the requirement and knowledge to new environments.


The media is full of sensational failed companies that wanted to gain a foothold in Brazil. This situation is especially true for medium and small companies. As long as the contextual intelligence is not acquired and ready for application in the Brazilian management environment, the risk of failure is more than increased.


To this day, I still encounter many companies from industrialized countries that are convinced that similar industrial sectors around the world have similar structures and similar profitability profiles, including Brazil.


They came to the conclusion that similar industries should generate almost the same profits with the same management tools. The so-called industry analysis and unreflected so-called benchmark analysis was one of the most powerful working tools for the management of the headquarters.


What do we see?


The analyses carried out in our projects objectively and without prejudice came to a different conclusion in about 4/5 of the cases:


We were not able to confirm the management's decades-long assumption that branches in emerging markets could achieve the same results with the same management tools. Over the past almost 20 years, we have been able to do so with companies from a wide range of industries, including the automotive industry, oil and gas, packaging, general mechanical and plant engineering, engineering, mining and real estate.


No solid profiles have been confirmed, and the profitability of the same industry sectors in different countries showed enormous and incredible variation. Very often the parent companies in the reorganizations tried to establish benchmarks to other branches of other emerging markets again and again.


Functions and roles change


The holistic understanding of Brazil, the individual behavior of professionals in the subsidiaries and in the parent company, culture and history, combined with the knowledge of the industrial sector and the ability to adapt management tools to the individual situation had some fundamental effects on the local Brazilian operations and the interpretation in the responsible headquarters:


The position and selection of expatriates was re-defined and companies started to be much more sensitive when sending expatriates to Brazil. And in many cases even to refrain from doing so.


The role of a globally uniform effect of a specific technology or management tool used in a specific industry sector was no longer as relevant. This then also placed higher demands on controlling in the parent company and forced controlling to take a more differentiated look at individual regions and markets.


Example: India vs. Brazil


I vividly remember a project where we had an intensive exchange with the Indian branch office as part of a reorganization. At the European parent company, India was regarded as the successful model for emerging markets.


But the result was quite different. India had such low personnel costs that we were never able to reach from Brazil. We could never compensate for this comparative factor of India.


But did we really want to?


No!


People as the only certain cost factor and commodity in the value chain could not be the goal!


Through targeted supplier development and the uncompromising nationalization of some product lines in Brazil, the products manufactured in the country became cheaper than the Indian product due to a higher quality of the end product, a significantly lower complaint rate and a much more concentrated production integration.


Brazil's higher personnel costs no longer played a role in the full-cost calculation and the post-calculation.


The Brazilian subsidiary has developed a solid export business in recent years, which helps to keep budget figures on track, especially in the Covid19 pandemic.


Sensitive homework must be done


One of the most difficult tasks is the sensitive coordination of the solid management models used in the head office. It is crucial to understand how important it is to distinguish between general principles that are taught at headquarters and have been rooted for decades, and specific manifestations about the Brazilian market or the behavior of a local manager in an existing subsidiary in Brazil.


The management concepts must be adapted to the respective country and culture. Best practices from other regions of the world cannot be transferred without a sensitive analysis and robust on-site assessment. If this transfer is not elaborated and implemented by a strong local partner in Brazil with the necessary context intelligence, the local operation may be doomed to failure and the investment may be lost.


In addition, the necessary brand awareness in the relevant customer group to be established in the Brazilian market during or after a reorganization could be jeopardized and the product launch could be impaired.


We have seen time and again that companies with great success have clearly defined processes in certain geographical markets. In contrast, these companies have operational difficulties in redesigning and re-adjusting processes in another location, such as Brazil.


Top management rarely has the time to devote to these tasks, and expatriates often do not have the contextual intelligence to act accordingly. The reverse engineering of process adaptation, often cited by successful medium-sized companies, is negatively influenced by this.


Managers have to find new channels to operate in Brazil and face the unknown institutional market environment. Prejudices and very rigid business models are big obstacles and very costly. It is necessary to accept new local experiments and adjustments to find the way that really works.


The next step


This view has implications for your company. What does contextual intelligence mean for your local organization, your team, your management team in Brazil? Under which premises should the team be built and managed?


If you sometimes ask yourself questions like this, if you look at the performance of your Brazilian subsidiary, if you have the feeling that the whole thing is possibly more complex than expressed in brief conversations at the coffee machine - then we could have a chat about your topic.


I have very deep experience in working with a wide variety of corporate cultures from a wide variety of continents. We are also experienced in transferring and implementing successfully proven concepts from a Brazilian project mission to other branches of your company. 


E-mail me or give me a call!