Re:locate Global Latin America

FO R H R , G LO BA L MA N A GERS & RELOCATIO N PR OFESSIONALS

Re:locate October 2014

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PAY AND BENEFITS

Time to cash in on change?

EDUCATION Finding a school place in Brazil Sponsored by

BRAZIL bouncin g

back to business?

WERC LATIN AMERICA SUMMIT Thought leaders and key insights

Contents 20 42

40

NEWS, ANALYSIS & EVENTS 4 Re:editor’s letter

FEATURES 32 Re:serviced apartments

6

How the new concept of ‘bleisure’ can fit the global mobility context, plus insider advice on finding accommodation solutions in Brazil.

Fiona Murchie looks at what’s in store this issue.

Re:regional round-up

The latest relocation-related news and comment from around the region.

42 Re:culture

Destination services providers are well placed to enhance assignees’ cultural understanding.

HOT TOPIC 16 Re:Brazil

45 Re:finance

Can a new Bank of BRICS boost infrastructure development?

As it waves goodbye to the World Cup and takes a breather before the Olympics, this vibrant country is getting back to business.

GLOBAL MANAGEMENT 8 Re:conference update

LIVE WORLDWIDE With over 50,000 serviced apartments worldwide and offices in EMEA and LATAM regions, Skyline is well placed to provide all the support your assignees need wherever

WINNER Re:locate

Insights and highlights from WERC’s first-ever Latin America summit.

Key considerations for companies and investors looking to do business in Latin America.

Latin America is introducing a range of new measures to attract foreign investment.

REGISTER NOW @liveskyline

liveskyline.com

Change is in the air as Mexico and Cuba seek to attract overseas investors.

POLICY & PRACTICE 37 Re:mobility policy

EMPLOYEE SUPPORT 36 Re:property

Continuing price falls are affecting economies around the world.

LIVE YOUR WAY, LIVE SKYLINE /liveskyline

26 Re:regional focus

50 Re:immigration

EMEA +44 (0) 207 036 9434 reservations@liveskyline.com LATAM +55 (11) 3996 6266 reservas@liveskyline.com

What’s new, and how solutions from a decade ago can help overcome today’s mobility challenges.

How organisations are working to secure greater cost control, flexibility and competitiveness.

Book your Serviced Apartment with us!

52 Re:inward investment

25 Re:oil market

46 Re:compensation & benefits

their project may take them.

26

Top tips for obtaining the right rented accommodation for your employees.

40 Re:education

A step-by-step guide to finding a school place in Brazil.

at relocatemagazine.com to download your FREE Asia Pacific, Europe and Latin America digital magazines

Corporate Accommodation Solutions

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OUR DIGITAL MAGS AD?

to the launch “issueWelcome of Re:locate Global Latin America! ”

In this, the first full-length edition of our special Latin America-focused digital magazine, we share with you the best in global mobility thinking and practice from around the region, to help organisations of all sizes to manage and retain talent successfully.

At Re:locate, we blend the ‘hard’ topics, such as tax, immigration and policy, with the ‘soft’ employee support topics, such as schooling, accommodation and cultural awareness, which it is essential to get right if you are to grow a global business and support your talent.

As media partner for Worldwide ERC, we were delighted to support its first-ever Latin America conference, held in Sao Paulo, Brazil, in September. In these pages, I report on the sessions and bring you comments from delegates about their experiences of managing global teams, supporting international assignees and their families, and growing their businesses in this fast-paced region.

We also offer you a taste of economic background, policy issues, advice on supporting relocating employees and their families, tips on doing business in Brazil, and news and analysis from around Latin America.

We would value your input about the mix of content in future editions of this digital magazine and on the Brazil & Latin America section of our website, relocateglobal.com. Please share your news and your views on developing trends, challenges, and the rewards of operating in this vibrant region by emailing editorial@relocatemagazine.com Register now for free access to relocateglobal.com and all our digital magazines and newsletters, and look out for more Latin America coverage in the Winter 2014/15 issue of Re:locate magazine, published in December.

Fiona Murchie Managing Editor

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© 2014. Re:locate is published by Profile Locations, Spray Hill, Hastings Road, Lamberhurst, Kent TN3 8JB. All rights reserved. This publication (or any part thereof) may not be reproduced in any form without the prior written permission of Profile Locations. Profile Locations accepts no liability for the accuracy of the contents or any opinions expressed herein. ISSN 1743-9566.

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REGIONAL ROUND-UP

Despite Argentina’s current battles with ‘vulture funds’ over its sovereign debt, it seems that investors view the country as a sound bet for future prosperity.

Chile and Panama ‘most

competitive Latin and Central American economies’ According to the World Economic Forum’s (WEF) Global Competitiveness Report for 2014/15, Chile has the most strongly performing economy in Latin America, and Panama the most competitive in Central America.

Covering 144 economies, the report measures national competitiveness – defined as the set of institutions, policies and factors that determine the level of productivity.

Since 2005, the WEF has based its analysis on the Global Competitiveness Index (GCI), a comprehensive framework that measures the microeconomic and macroeconomic foundations of national

competitiveness, grouped into 12 categories: • Institutions • Infrastructure • Macroeconomic environment

George Soros has doubled the share of his investment in Argentina’s state-owned shale gas and oil company YPF SA, and may increase his stake further following the recent discovery of a second deposit in the vast Neuquén basin.

• Health and primary education • Higher education and training • Goods market efficiency • Labour market efficiency • Financial market development • Technological development • Market size • Business sophistication • Innovation The report’s overall analysis of the region includes, “Latin America needs to address its productivity challenge and boost competitiveness to keep the positive economic momentum of past years. The region must implement structural reforms to improve the functioning of its markets and invest in infrastructure, skills development

Overall, the report finds, the region continues to suffer from strong headwinds related to weak investments, a fall in exports and commodity prices, and tighter access to the finance that, to a large extent, fuelled Building the economic resilience of the region will depend on its capacity to strengthen the fundamentals of its economy by boosting its level of competitiveness.

However, regional productivity continues to be low, trailing behind that of other emerging

President Rafael Correa said that the digital currency was to be released in December and would be used alongside Ecuador’s existing currency, the US dollar. Few details of the scheme have been released, but the government has said that the new currency will be backed by liquid assets.

President Correa stated that the aim of the electronic currency was to make it easier

6 | Re:locate Latin America | October 2014

Following a bank crisis in 2000, Ecuador adopted the US dollar as its currency, but its public spending has since soared – and so have its debts. Ecuador owes China, its main creditor, $11 billion – equivalent to almost

Nations, too, are eyeing the country’s natural resources. China has been in talks

to invest in Argentina’s port infrastructure, and Shanghai Fisheries General Corporation acquired Argentina’s AltaMare SA in 2013.

The corporation, which already operates in more than 40 countries, intends to increase its catch off the coast of Argentina.

Venezuela’s inflation rate reaches 63 per cent

The Central Bank of Venezuela has revealed that the country’s annual inflation rate now stands at 63.4 per cent.

August’s official figures were the first to be published since May. The delay had prompted accusations that the Latin American country’s government had been withholding the information for political ends.

first ‘official’ digital currency Similar, privately run systems have proved to be successful in several African countries, but there are suspicions that Ecuador’s government has other reasons for adopting the new currency.

While fighting a legal battle over sovereign debt, Argentina’s government, led by Cristina

Chevron was one of the first oil giants to take up the initiative, entering into a joint venture with YPF. Analysts point out that larger companies’ involvement can also benefit smaller companies which own land where drilling could take place. It is, perhaps, significant that hedge funds are now buying up not debt but Argentine stocks, as they foresee a significant recovery.

or advanced economies.

and innovation.”

for the 48 per cent of Ecuadorians who did not hold bank accounts to make and receive payments using mobile phone technology.

It is estimated that Argentina is sitting on around 27 billion barrels of oil and 802 trillion cubic feet of shale gas, which experts think may be worth around $3 trillion.

Fernandez de Kirchner, has been at pains to woo the international markets and increase the country’s attractions for foreign investors by adjusting tax laws to benefit companies willing to invest more than $1 billion.

growth in recent years.

Ecuador to introduce The government of Ecuador has revealed plans to create what it claims is the world’s first digital currency to be issued by a central bank.

Investors drill for opportunities in Argentina

15 per cent of its economy. Analysts have speculated that the new electronic currency could be used to boost the supply of money and thus devalue the dollar, thereby lessening the weight of dollar debt.

The new currency was approved by Ecuador’s National Assembly in July. It does not yet have an official name, but it is not to be confused with Bitcoin, the controversial cryptocurrency which is in use in Brazil and Argentina. At the same time as authorising its own digital currency, Ecuador prohibited by law the use of Bitcoin.

Venezuela’s population is among the most urbanised in Latin America, and frequently suffers shortages of basic household goods. Earlier this year, the country saw mass demonstrations and anti-government protests, and it is, perhaps, significant that the central bank did not also publish the latest ‘scarcity index’, a report on the types of goods that are difficult for consumers to find.

Controls that set rates for buying and selling US dollars, introduced by the former socialist President, Hugo Chavez, in 2003, are blamed by many analysts for creating

a rampant black-market economy.

Those who have dollars have greater buying power than those who can only tender bolivars – the official currency in which most wages are paid.

Nicolas Maduro, who became President after Mr Chavez’s death in 2013, has continued with many of his predecessor’s policies. Last November, in what was seen as a populist move, he seized a chain of electronics stores that he claimed were overcharging consumers, and forced them to lower their prices.

Shortly afterwards, President Maduro was given special powers which meant that he could pass legislation without the approval of Venezuela’s National Assembly, and he moved swiftly to put further caps on profits and prices. Critics say that this will distort the country’s economy further.

Image: by Wilfredor (Own work) [CC0], via Wikimedia Commons

The government has a huge social spending bill and has raised the minimum wage, but these measures still cannot enable its citizens’ standard of living to keep up with inflation.

relocateglobal.com | 7

CONFERENCE UPDATE

CONFERENCE UPDATE

Latin America’s take on

Peggy Smith, Worldwide ERC’s president and CEO, led the Global Thought Leaders’ Dialogue at the Talent Mobility in Latin America Summit held in Sao Paulo in September.

Fiona Murchie was there.

GLOBAL MOBILITY

Peggy Smith, Worldwide ERC’s president and CEO, led the Global Thought Leaders’ Dialogue at the Talent Mobility in Latin America Summit held in Sao Paulo in early September. Fiona Murchie was there.

A

mong the panel were Almiro Neto, president of ABRH-SP, the Brazilian HR association, Laura Pastiva-Santos, head of global mobility at Bunge, the US-based agribusiness and food ingredient company, and Martin Murray, mobility coordinator of WorleyParsons, the global engineering service provider based in Sao Paulo.

Laura Pastiva-Santos spoke about Bunge’s diverse agribusiness, which had 80 assignees on long-term or short-term assignments, internships and rotations, who operated across a very decentralised platform, moving a range of disciplines, from technicians and agri specialists to commodity traders.

Ms Pastiva-Santos acknowledged the need for sending country and receiving company to speak more and the desire for a little more standardisation. Bunge’s focus on talent management, she said, was supported by a CEO who wanted employees to embrace international experience.

Trends in mobility over the last 12 months, and looking forward to the next three years, were perceived by panel members as follows.

Almiro Neto reflected that, following the election in Brazil, things might change, and that going global was inevitable for many locally based companies. The ABRHSP was looking to bring in more international knowledge, especially in the area of immigration, and the hope was that the next government would facilitate more business abroad.

Martin Murray echoed the familiar challenges of shortages in engineering and the problem of bringing talent from Venezuela, Bolivia and Australia. He wanted to see the movement of people happening more quickly and easily – the faster the better, not just now but in coming years.

8 | Re:locate Latin America | October 2014

Preparation times were getting shorter, visas were hard to obtain, and competition in the engineering field was getting ever tougher. The need not only to bring in talent but also to train Brazilians as global players and exploit their internal talent and fast track them as expats was already there, and a growing requirement.

However, Mr Murray admitted that WorleyParsons didn’t look at mobility as a talent tool and wasn’t sufficiently aware of the investment in a person’s career. Sometimes, an assignment would end without due attention to the next role, which, in such a skills-shortage sector, was something that needed to be rectified.

Laura Pastiva-Santos recounted how, two years ago, Bunge had formalised a head of talent. Now, there was greater interest in assignees, and the company was trying to ensure it didn’t lose talent and was sending the right people on assignment. She admitted that there was work to be done, and that it would take years to embed the new way of thinking.

Currently, mobility doesn’t report to talent, but that is on the agenda for the future, in two to three years time.

It seems that some mobility challenges are the same the world over!

For international assignments news and articles, visit relocatemagazine.com/

A

mong the panel were Almiro Neto, president of ABRH-SP, the Brazilian HR association, Laura Pastiva-Santos, head of global mobility at Bunge, the US-based agribusiness and food ingredient company, and Martin Murray, mobility coordinator of WorleyParsons, the global engineering service provider based in Sao Paulo.

Laura Pastiva-Santos spoke about Bunge’s diverse agribusiness, which had 80 assignees on long-term or short-term assignments, internships and rotations, who operated across a very decentralised platform, moving a range of disciplines, from technicians and agri specialists to commodity traders.

Ms Pastiva-Santos acknowledged the need for sending country and receiving company to speak more and the desire for a little more standardisation. Bunge’s focus on talent management, she said, was supported by a CEO who wanted employees to embrace international experience.

Talking trends Trends in mobility over the last 12 months, and looking forward to the next three years, were perceived by panel members as follows.

Almiro Neto reflected that, following the election in Brazil, things might change, and that going global was inevitable for many locally based companies. The ABRHSP was looking to bring in more international knowledge, especially in the area of immigration, and the hope was that the next government would facilitate more business abroad.

Martin Murray echoed the familiar challenges of shortages in engineering and the problem of bringing talent from Venezuela, Bolivia and Australia. He wanted to see the movement of people happening more quickly and easily – not just now but in coming years.

Preparation times were getting shorter, visas were hard to obtain, and competition in the engineering field was getting ever tougher. The need not only to bring in talent but also to train Brazilians as global players and exploit their internal talent and fast track them as expats was already there, and a growing requirement.

However, Mr Murray admitted that WorleyParsons didn’t look at mobility as a talent tool and wasn’t sufficiently aware of the investment in a person’s career. Sometimes, an assignment would end without due attention to the next role, which, in such a skills-shortage sector, was something that needed to be rectified.

Laura Pastiva-Santos recounted how, two years ago, Bunge had formalised a head of talent. Now, there was

greater interest in assignees, and the company was trying to ensure it didn’t lose talent and was sending the right people on assignment. She admitted that there was work to be done, and that it would take years to embed the new way of thinking.

Currently, mobility doesn’t report to talent, but that is on the agenda for the future, in two to three years’ time.

Internationalisation on the agenda Global professional services firm EY’s latest Your Talent in Motion: Global Mobility Effectiveness Survey highlights the fact that many leading companies emerging from the BRICS and other developing economies see developed countries as great growth opportunities.

For many of these companies, undeveloped mobility policies and processes are restricting their ability to manage talent and run effective programmes.

Quoted in the report, Tatiana Ponte, EY’s head of human capital for South America, said, “It is evident that many organisations struggle with new, unique and sometimes unforeseen challenges when entering growth markets.

Laws and practices are new, and cultural and linguistic differences create unforeseen exposures to risk.

“At the same time, many countries have enhanced their immigration requirements with a view to protecting home labour markets. They also are seeking new tax and social security revenue through increased scrutiny of individuals and companies.

Ms Ponte added, “Even though the growth of the Brazilian economy slowed last year, Brazilian companies continue their endeavour of internationalisation – moving people around the globe.

“As their global mobility programmes mature in terms of global structure, policies and compliance, they are moving their focus to a more strategic view of talent management.

“The key topics right now are how to manage a truly global pool of talent and how to compete for talent in the global employment arena.”

It seems that some mobility challenges are the same the world over!

For international assignments news and articles, visit relocatemagazine.com/

international-assignments

international-assignments

relocateglobal.com | 9

SECTION HEADING

CONFERENCE UPDATE

CULTURAL

PERSPECTIVES

in Latin America

At September’s Worldwide ERC Latin America conference, Vanessa Oliva, HR director of Colombian company Quala, based in Sao Paulo, and Maria Luiza Delavy, HR manager of Scania Latin America, explored the challenges companies faced in dealing with differences in culture between Brazil and wider Latin America. Fiona Murchie reports.

A

lively and engaging speaker, Vanessa Oliva spoke about her experiences as HR director for Quala in Brazil. Quala is based in Colombia and, as one of the ten best companies to work for in Latin America, has a hugely established brand and reputation there.

Quala is a large multinational food company with a range of consumer products across food and drink as well as homecare. Headquartered in Bogota, it is also in nine other countries, including Brazil, Mexico, the Dominican Republic, Ecuador, Peru, Venezuela and Guatemala.

With such a large consumer population, Brazil holds huge potential for market growth for Quala. Getting to grips with the cultural differences is essential to its plans.

One of her challenges, said Ms Oliva, was establishing the employer brand in a country where the company was not well known. In Colombia, everyone wanted to work for Quala, and there was employee loyalty and engagement with families and the local community. A company anthem and wearing company wristbands, for example, were popular in Colombia and other Latin American countries, but not in Brazil.

Loyalty in Brazil was also noticeably more to the manager than to the company, and this would obviously impact when someone left the organisation.

There were also significantly fewer women employees.

10 | Re:locate Latin America | October 2014

Promoting women in the workforce, and diversity issues in general, were at different stages across the Latin America region – something companies must be aware of.

Communication and engagement were all part of the process of establishing the Quala employer brand, and building trust took time, as multinational organisations discover wherever they are operating in the world.

Scandinavian twist Maria Luiza Delavy talked enthusiastically but pragmatically about her experience of working for a multinational and managing the objectives of the Swedish HQ within its Scandinavian guidelines in the Latin America context.

Many HR and global mobility specialists working globally will empathise with her situation.

Scania Latin America has its regional HQ in Brazil, with 2,000 employees throughout the region. Sites vary in size from 35 to 500 employees. The company’s trucks and services are well known in Brazil, with a strong brand, but there is a lot of competition overseas.

When Ms Delavy began work there in 2012, each region had its own HR. With the goal of standardisation to achieve, she needed to adopt a focused yet flexible approach, reporting to corporate

HQ, answering to a VP and HR bosses in Scandinavia and managing their expectations, while at the same time accommodating the requirements of her regional HR and business leaders.

As with all the best strategies, communication proved to be the key, and she saw it was essential to talk to her commercial colleagues as well as HR. Trying to understand what people thought about HR was crucial. Her first challenge was persuading the Scandinavian company of how its plans needed to be adapted for Latin America.

Setting up working groups that met three times a year over two or three days was instrumental in building the trust that was required to bring about the desired changes.

Working with the commercial managers proved to be key to a successful formula.

This was a fascinating case study which revealed the nuances of accommodating differing regional and business cultures as companies shape their global management solutions. There will undoubtedly be huge value in sharing similar experiences across the global mobility community in the Latin America region.

For culture & language news and articles, visit

relocatemagazine.com/ culture_language

relocateglobal.com | 11

CONFERENCE UPDATE

CONFERENCE UPDATE

SECRETS of SUCCESS LATAMmobility leaders An illuminating session at Worldwide ERC’s Latin America conference showed how global mobility practitioners at all levels could steer a course to success.

Fiona Murchie shares some highlights.

W

hat does it take to be an effective global mobility leader? This is a question that has been debated across the Worldwide ERC membership for many decades.

As the organisation celebrates its 50th anniversary, it is fitting that, at its newest summit, held in Brazil, two highly experienced Latin American global mobility professionals were able to share their experiences of aligning and customising global mobility operating models to the situations they faced in Latin America.

With insightful anecdotes, Laura Roque, LAR immigration manager of Intel Corporation, based in La Robera, Costa Rica, and Silvana Aurora Storel Brock, EY’s mobility associate director for the South America region, based in Sao Paulo, Brazil, helped to illuminate a pathway to success with tips on avoiding pitfalls and smoothing the way that were as relevant to those climbing the professional ladder in the region as to those steering a global path from a remote HQ in another region.

Moderator Gustavo Perez, Brookfield’s South America director, guided the conversation, drilling down to discover the key competencies required to be an effective leader in the region.

For Silvana Brock, it was all about flexibility and understanding that being adaptable was part of the job.

In the global mobility role, professionals work with different policies and different programmes, and they are dealing

12 | Re:locate Latin America | October 2014

with people at the beginning of their careers as well as very senior executives. Having an understanding of the different needs of assignees and their families at different periods of their lives, and trying to empathise with their reactions to different situations, was fundamental, she felt. Of course, there are global polices, and the principles must be remembered – but in reality you can’t say ‘I can’t help with that’.

Being flexible is very important to the success of the assignment and, of course, the business. For the experienced practitioner, this is easier to achieve, but there is nothing like hearing the flexibility message reinforced by an authority in your region.

Similarly, the value of cross-cultural awareness was reinforced by Laura Roque, who emphasised the importance of building good multicultural experiences. Expats often have vast experience and expertise, but sometimes find it hard to deal with cultural limitations. Global mobility professionals need to be alert to the difference between demands and needs, she pointed out. A basic need is language training, which can be put in place. Providing the tools to cope with cultural differences such as time, scheduling and meetings are, again, basic needs. Awareness of time represents a challenge, and the understanding of what is urgent can be a cultural nightmare.

In the field of mobility, everything is urgent – requiring an instant solution. Ms Roque pointed out that response

times are often different when we interact with other cultures. Working with Asia or a Western office may be a different experience. It is all about understanding the diversity in an organisation and developing an awareness of global interaction.

Silvana Brock reinforced the point from her experience at EY. Its offices are part of a global operation, and the firm’s reality and professional approach is international.

As mobility professionals, they work with scenarios where an assignee is born in Germany but comes from the US and is moving into Argentina, but will be working in a hub in Brasilia. How do you help an assignee to manage relationships in all these different cultures and deal effectively with the various transitions at a personal and professional level in the relocation process?

Each individual is different, and it is easy to assume that all assignees are equipped for their global role, but you also need to take on board their personal circumstances.

Choosing accommodation may be bewildering and unsettling for an expat from rural Japan with no experience of a large city such as Sao Paulo with its diversity of cultures and unfamiliar property market.

Laura Roque also raised the issue of sensitivity, particularly among North Americans, regarding police

background and security checks, which were required for public safety.

Turning to the question of how Latin American professionals could position themselves as global mobility leaders, Silvana Brock shared her experience of project managing her organisation’s global mobility transformation, which involved 17 countries. Mapping everything was the key, from developing the competencies required to synchronising mobility functions with other business units.

Laura Roque described Intel’s three mobility groups, now based in Costa Rica, Malaysia and Poland. The organisation had moved from operating in silos to an integrated approach.

All HR resources were centralised for companies and subsidiaries. This was achieved over a period of five years, and Intel is now able to deliver a ‘follow the sun’ 24/7 service open to all travellers.

Many organisations are faced with the challenge of moving from a transactional operational role to a more strategic role linked to talent management.

Concerning the impact of an integrated mobility approach to talent management, Silvana Brock reported that she could now choose assignees for development programmes, analyse the business case, and decide whether it was consistent with company objectives.

relocateglobal.com | 13

CONFERENCE UPDATE

SECTIONCONFERENCE HEADING UPDATE

BRAZIL SURVEY explores role of mobility in talent management

Global Line, a training and consulting firm based in Sao Paulo, took the opportunity to launch its Mobility Brasil 2014 survey, developed in partnership with Worldwide ERC, at the first WERC Latin America conference, held in the city on 8 and 9 September. Fiona Murchie reports.

T

he survey, which explored talent management and its implications for those managing international mobility, was conducted in May and June across 170 multinational companies with cross-border mobility into or out of Brazil.

Respondent companies were predominantly large – 53 per cent had more than 10,000 employees – and headquartered in Europe (41 per cent), North America (29 per cent) and Latin America (24 per cent). Of the Latin American companies, 90 per cent were headquartered in Brazil.

Most organisations (62 per cent) considered international assignments as part of a broader talent management programme. These companies showed superior performance in all stages of expatriation, from candidate selection to finding new positions for assignees at the end of the assignment.

The survey concluded that the main reason for expatriation was to fill technical or managerial gaps.

Business needs and technical competency were the main criteria used in the selection of candidates for an international assignment, and return on investment and the cost of bureaucracy in obtaining visas were the key challenges from the HR perspective.

Nearly a quarter of firms reported failure rates of 10 per cent or more in their international assignments. The main reasons for assignment failure were family or personal situation (82 per cent) and difficulties in adapting to the new environment (69 per cent). Job performance issues stood at 62 per cent, while security/environmental issues and language barriers were cited by 22 per cent and 21 per cent of respondents respectively.

Earning in the country of origin was the base for remuneration of expatriates, with adjustment for cost of living (COLA) in the destination.

On average, packages contained 12 benefits. The top ten were: 1

Assignment Objective (% of assignments)

2 3 4 5

0%

10%

20%

Fill technical gap

30% 28%

6 7 8

Fill managerial position

25%

9 10

Launch new initiatives

14%

Transfer of technology

7%

Lack of local labour

7%

Develop managers

7%

Propagate the corporate culture

14 | Re:locate Latin America | October 2014

6%

Develop relationships

3%

Improve reporting to headquarters

3%

Temporary housing.

Annual home visits.

Tax preparation/consulting.

Language course.

House rental.

Schooling for children.

Look-see trip.

Destination services.

Move-related services.

Tax equalisation.

Expatriate costs were, on average, 125 per cent more than for local employees in the same function.

The survey’s findings confirmed that 47 per cent of Brazilian companies did not have a dedicated mobility management department. This contrasted with foreign companies, only about 12 per cent of whose respondents said their organisations did not have such a department.

For Brazil and Latin America news and articles, visit relocatemagazine.com//Americas/

Brazil

relocateglobal.com | 15

SECTION HEADING

SECTION HOT TOPIC HEADING

DOING BUSINESS IN BRAZIL Employing foreign nationals

Companies operating in Brazil face a range of challenges, from dealing with red tape to finding suitable accommodation for their relocating employees and international assignees. UK Trade & Investment, the government body which works with UK-based businesses to ensure their success in international markets through exports, presents some useful advice for organisations employing foreigners in Brazil.

U

K Trade & Investment (UKTI) advises companies operating in Brazil that employers must obtain work cards from the local office of the Ministry of Labour and Employment (Ministério do Trabalho e Emprego) for all employees.

In a company employing more than three people, two-thirds of all employees must be Brazilian nationals, receiving twothirds of the total payroll. Foreign specialists not available locally are excluded from the calculations.

A permanent visa is required for anyone staying in Brazil for more than four years, or working in Brazil. Other types of visa include transit visas (valid for 30 days), tourist visas (each period must not exceed 90 days) and temporary visas (two years and possibly longer). Business visas, valid for 180 days, are easy to obtain at any Brazilian consulate.

International companies that wish to employ foreign nationals must present the following documentation to the immigration secretariat at the Ministry of Labour and Employment:

A formal request (requerimento) for entry into Brazil with a permanent or temporary visa, including the name and address of the company, the amount of its registered capital, and the number of Brazilian and expatriate workers it employs in Brazil

The reason for the transfer of the foreign national The name, address and passport number of the foreign national

The monthly salary to be received in Brazil All fringe benefits involved Companies must also file:

The foreign national’s curriculum vitae and university

diploma. The latter must be authenticated by a Brazilian consulate abroad and come complete with an official translation

A labour contract between the foreign national and the

employer, stating the type of work, the salary and the length of stay

A completed application form (obtainable from the ministry) Specific requirements may vary, depending on whether the company is a joint-stock corporation (sociedade anônima) or a limited-liability partnership (sociedade limitada) and whether the candidate is being contracted for a supervisory position or to render a technical service.

A legal permission (autorização) permitting a company to represent the foreign national in dealing with the ministry

For immigration news and articles, visit

relocatemagazine.com/immigration

16 | Re:locate Latin America | October 2014

relocateglobal.com | 17

REPLACE WITH NEW RAY FURLONG PIECE ON ELECTIONS, AS THIS IS NOW OLD NEWS

HOT TOPIC

BRAZIL ELECTION Battle stations!

The eyes of the world were on Brazil in early October, when its presidential election took place. Incumbent Dilma Rousseff failed to achieve outright victory, triggering a second round of voting. With the economy and public services topping the national agenda, Ray Furlong analyses her prospects and those of her opponents.

HOT TOPIC

B

razilian President Dilma Rousseff has fallen short of claiming election victory, and now faces a tense run-off later this month.

Turnout was an incredible 80 per cent of the 142 million eligible voters. The fight for the presidency has been full of twists and turns, but now one of the world’s greatest electoral battles enters a dramatic new phase.

Dilma Rousseff, successor to left-wing populist Lula da Silva, was chasing a second term in office. That would make a fourth presidential term for the Workers’ Party.

Her campaign had plenty to boast about. Over the last decade, the number of Brazilians living in poverty had more than halved. The minimum wage had risen by 84 per cent.

Unemployment was at a record low.

But the record was soured by this year’s World Cup: mass protests against a perceived waste of money brought attention to the lack of basic public services such as schools and hospitals that still blights many Brazilian cities.

Key sectors of the economy took turns to go on strike, and even on the pitch there was national humiliation at the hands of Germany. Brazil’s economy, after years of growth, slumped into recession.

Suddenly, Dilma Rousseff ’s chances of re-election dimmed.

And yet she managed to turn it round and fight back into the lead – only for the death of opposition candidate Eduardo Campos in an air crash to shuffle the cards once again.

Opinion polls showed his successor, environmental campaigner Marina Silva, surging in popularity. With a compelling self-made rags-to-riches personal story – at 16, she had been an illiterate slum girl, but she had subsequently risen to become environment minister – Ms Silva looked like a new political star in the making.

But Ms Rousseff destroyed her in the TV debates, mocking her career in four political parties as proof of indecisiveness.

Now, Marina Silva could be the kingmaker.

The poll figures put Dilma Rousseff on 42 per cent, centreright candidate Aecio Neves on 34 per cent, and Marina Silva on 21 per cent. Voters had barely had time to digest the results before Mr Neves appealed to Silva to endorse him, saying he was the candidate of “hope and change”.

But would Ms Silva, a socialist, back him? Her political background puts her closer to Ms Rousseff. Her response has been that she and her advisers will make an announcement in the coming days.

There could be a few more twists and turns yet before the second round of voting, which takes place on 26 October.

For Brazil and Latin America news and articles, visit relocatemagazine.com//Americas/

Brazil

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BRAZIL BUSINESS boun back ces to

B As Brazil waves goodbye to the World Cup cavalcade and takes a breather before the Rio Olympics, this vibrant South American country is getting back down to business. Visiting football teams have found Brazil a less challenging destination than they expected, thanks to the home team’s recent performance. Ruth Holmes asks if globally mobile workers’ views will undergo a similar transformation.

razil is a dichotomy. It conjures images of a rich, engaging, outgoing and vibrant national culture, ticking all the boxes as an emergent superpower worthy of its BRICS moniker. Yet it and its cities can also be shorthand for poverty, violence and, in mobility circles, challenge.

While respondents to Cartus’s Global Mobility Policy and Practices Survey 2014 place Brazil sixth on the list of the fastest-growing receiving destinations in the past two years, they also find it the third most challenging mobility-wise for assignees, and the second most challenging for companies.

Respondents to the Cartus survey also doubt that Brazil’s challenges can be overcome in the next two years, awarding it first place in the ranking for the destination most companies expect to present the biggest challenges during this time. ”I certainly agree that Brazil is a challenging destination,” says international immigration consultancy Pro-Link GLOBAL’s Brazilian senior specialist, Fabiano Bittencourt.

“In fact, Brazil is certainly within my top seven destinations

in terms of difficulty. The main factor is most definitely the bureaucracy.”

Language and culture also have a significant impact, observes Cinthya Caggiano, general manager for Latin America at serviced accommodation provider Skyline Worldwide. “Assignees relocating to Brazil may face cultural challenges, language barriers – the majority of local people do not speak English – slow internet connections, costly restaurant bills, poor transport infrastructure, and road traffic and security issues.”

Brazil’s well-documented social circumstances underpin these concerns. Ignited by a rise in bus fares, the widespread civil unrest during the country’s hosting of the FIFA Confederations Cup in June 2013 saw thousands (an estimated 65,000 in Sao Paulo, Brazil’s business capital, alone) take to the streets across the country to protest against corruption and for a more efficient government and greater investment in education, healthcare and transport.

As Brazil’s president and Workers’ Party leader Dilma Rousseff seeks a second term in October’s presidential

election, campaigning to continue her mandate of upgrading the country’s infrastructure and rationalising taxation and bureaucracy, could the unrest return?

Frances Nobes, global security analyst at crisis management assistance company red24, believes this to be a possibility. “The upcoming elections present an opportunity for further protests against economic, social and labour issues,” she comments. “The protests may be reinforced by recent protests surrounding Brazil’s hosting of the World Cup, which many felt took much-needed funds away from important infrastructure and social projects. These protests could be significant at times, but will most likely be confined to urban centres.

“The greatest risks to business travellers in Brazil’s urban centres are street crime and express kidnapping, although rates of violent crime are increasing across the country. An employer’s duty of care requires that travellers are well informed and insured to cover security incidents which may occur.” continues on p22

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Skyline Worldwide, São Paulo Apartments

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She advises that travellers should exercise situational awareness and take basic precautions, such as not wearing expensive jewellery, walking alone at night or using unlicensed taxis, to minimise their exposure.

Game of two halves The protests highlight Brazil’s predicament. It is already the world’s fifth-largest economy, thanks to its close on 200 million population and global reliance on its abundant commodities. Although Brazil is a founding BRIC and a beacon of hope for multinational companies that is fêted by international business ministers, its journey from growth to superpower status is not yet complete.

Brazil’s vital economic signs are as unflattering as the ill-fated football World Cup match they reflect, July’s historic 7–1 home defeat to Germany at the Estádio Mineirão, in Belo Horizonte, Dilma Rousseff ’s birthplace. In 2014, the Brazilian economy is set to post just 1 per cent growth, according to the Organisation for Economic Co-operation and Development (OECD). Meanwhile, a 7 per cent annual inflation rate means that Brazilians are struggling to maintain living standards.

Yet Brazil is still very much a place to be. Despite the challenges, the upsides – abundant natural resources, agriculture, the biotech sector, and, increasingly, its oil and gas, plus its young, upwardly mobile population – are hard to ignore.

Getting the right team The standard of education is one of the challenges employers in Brazil are facing; the country’s reputation for red tape is another. Brazil’s best higher education institutions compete internationally, but secondary-level education is only accessed by around 75 per cent of those eligible, according to United Nations Children’s Fund (UNICEF) data.

Tightly regulated labour laws, potential taxation of training costs, and high employment compound the issues of retention, attrition and return on training investment, necessitating Brazil’s reliance on overseas workers for roles in key disciplines, including medicine and science, technology and engineering.

This, in part, has led to the changing profile of expatriate workers. Soo Smit, knowledge management specialist at Pro-Link GLOBAL, observes that the top jobs for inbound workers are now highly specialised technical ones, including

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engineers, maintenance technicians, technical personnel, sales managers, country managers, auditors/consultants, event co-ordinators and marketing directors. “By far the majority of expats are US nationals inbound to Brazil. We also see South Koreans, Indians, and Mexican, Italian and German nationals,” she adds.

The familiar issue of proving that a local worker cannot fill the role also holds true in Brazil for companies hiring overseas workers. “While there are many restrictions placed on foreign employees, their work agreements, and their dependants, these criteria are not uncommon in many destination countries, and Brazil remains a major economic destination for multinational companies,” says Soo Smit.

But legislation can be onerous around, for example, salary, with a proportion paid in the local currency and commensurate with local rates, which can seem overly high for senior levels.

Tackling the red-tape challenges The World Bank’s Doing Business Index, which measures 189 economies worldwide on their comparative business regulation and property rights, ranks Brazil in 116th place overall, and 123rd for starting a business. Russia is 92nd, India 134th, and China 96th.

Setting up a company in Brazil, including the procedures required to register with the authorities for the purposes of hiring employees, takes, on average, 107.5 days and 13 procedures. This compares with 36.1 days and nine procedures for the wider Latin America region, and the OECD average of 11.1 days to register and five procedures.

When it comes to hiring and managing immigration and visa requirements, “every single step of the process is interdependent and linked to another step, and there isn’t a whole lot of clarity from the authorities as to when one should start the procedures”, explains Fabiano Bittencourt.

“This is valid from the outset of an application right to the latest post-arrival step in Brazil, and applicable to renewal of applications.”

By seeking good, local advice, employers sending people to Brazil can predict and handle many of the immigration obstacles. “Like many jurisdictions around the world, every location within Brazil has challenges and benefits,” says Soo Smit. “The key is understanding the unique obstacles and benefits of each location within Brazil and setting realistic expectations of difficulty/ease, processing times, document requirements and reliability of local officials.”

Raising the game for accommodation While the evidence about the quantitative economic benefits of global events is mixed, international consultancy PwC believes that Brazil could see some important intangible benefits from its hosting of the international sporting events triumvirate: the Confederations Cup (2013), the World Cup (2014) and the Rio Olympics (2016).

Undoubtedly these events boost tourism and lead to concerted efforts to improve infrastructure, which is a significant issue in this country of 3.3 million square miles.

According to Reuters, Brazil invested 25.8 billion real ($11.3 billion) in World Cup-related infrastructure improvements.

A third of this went to building or overhauling stadiums, with airport improvements deemed to be giving some of the most valuable return on investment, improving transit times between the 12 host cities, from Amazon-region Manaus in the north west to coastal Porto Alegro in the south east.

Business and leisure travellers in Brazil are also benefiting from the last decade’s take-off in air travel. The number of routes and connections has increased, with passenger numbers doubling during this period, mirroring significant growth in business and leisure travel, and global mobility.

To service these needs, a number of international hotel and serviced accommodation operators are investing in key cities.

Well-established in Brazil, international serviced apartment provider Skyline Worldwide has seen the changes initiated by these world sporting events at first hand, and is at the forefront of responding to them.

Says Cinthya Caggiano, “The impact of the World Cup was a very positive one in many ways, but particularly prompted new investment in corporate accommodation.

“Owners and operators enhanced their offering by including extra services such as wi-fi, cleaning, breakfast and other amenities, which is something they did not do previously.”

Employers, relocation and destination service providers, too, are responding to the opportunities by innovating to keep abreast of the changes and mitigate the complexities of bureaucracy.

With demand for suitable housing increasing, especially during the summer months of December to February, when tourism peaks, expats are finding themselves competing with the local market. Some employers are reportedly offering lump-sum cash advances during home-finding trips, so that expats have the same advantages as local tenants, rather than having to go through lengthy admin processes.

Skyline Worldwide is enhancing its services to respond to customers’ and market demand. “We have introduced billback facilities for our clients,” says Cinthya Caggiano.

“We pay all deposits, so they don’t have to. We allow them to pay in multiple currencies, and we ensure that the service levels and products we provide meet Skyline’s standards.

“However, accommodation costs are still generally very high, and there is more scope for our industry to work together to create better and more cost-effective solutions to overcome this particular challenge.”

At a time of tight cost control, as well as saving time on bureaucracy, companies can save a considerable amount of money by switching from hotels to apartments, says Cinthya Caggiano, particularly when looking at costs per head. She adds, “With hotels, there is also the on-spend to consider.

On average, apartments are up to 30 per cent cheaper than a hotel room of comparable standard and quality.”

While most Brazilians will have the choice in October to vote on whether the country’s multi-billion-dollar investment was made wisely, with these positive developments in mobility, it seems that businesses looking to invest in Brazil could be witnessing the country’s reputation as a challenging destination ebbing away – just like the Brazilian football team’s defence on that fateful July night.

Language specialists on call As with many parts of the world, one of the greatest challenges of a posting to Brazil can be communication.

Communication is not just about establishing a relationship with clients: it can mean the difference between profit and loss.

Today, business is such a global affair that no one can really be expected to be fluent in all the tongues they may encounter on their travels.

So how can companies get around the ‘language problem’?

One company that has come up with an innovative solution is Robertson Languages International, which provides language and cultural training programmes for relocating executives and their families. Its range of translation services has now been expanded to include a personal interpreter who is available by phone. Robertson’s translators and revisers – who must be native speakers of the target language, hold a translation degree, and have at least three years’ practical experience – are chosen for their specialist knowledge (for example, medical, legal or financial).

Says company founder Bob Robertson, “So much communication these days is instant – by telephone or email – and business people need to be able to respond straightaway.

We realised some time ago that telephone interpreting was a service that many business people would need in order to stay in control.

“We know, too, that we may be needed at any time, so we’re available 24/7.” www.robertsonlanguages.co.uk

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OIL MARKET

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LIVING IN RIO advice for expatriates

plummets Rio de Janeiro provides international assignees and relocating employees with a range of challenges, not least of which is choosing where to live. Ron Radnik, of Rio-based Focal Point Relocation Services, gives his expert advice on the most appropriate areas.

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hile Rio de Janeiro has the reputation of being a fun-loving, sun-drenched beach town whose time in the international spotlight started as host of this year’s World Cup Final and will continue as host of the 2016 Summer Olympics, it is, in reality, very much an oil town, with many of its expatriate workers transferring from other international oil hubs, such as Houston, Aberdeen, Stavanger, Calgary, Dubai and Singapore.

Transfers to Brazil in general and Rio in particular can try the patience of everyone involved, including companies’ HR departments, international relocation companies, local visa, moving and destination services providers, and, most of all, transferring families.

Ever-changing Brazilian legislation and local interpretation of that legislation add up to a fluid environment that makes it extremely important that your local providers are completely up to date with the latest changes and their consequences – intended and unintended.

Even local banks and utility companies sometimes get in on the fun of changing their procedures and standards for no apparent reason.

Rio offers two distinct lifestyle choices for expats deciding where they would prefer to live. Security, the number-one

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driver, pretty much limits the available neighbourhoods to Ipanema and Leblon in Zona Sul (although there are some others in which expatriates also live) and the more distant-from-downtown Barra de Tijuca, where the bulk of the Olympics will be held.

Ipanema and Leblon are a kind of mini-Manhattan in the tropics. Like Manhattan, they are both densely populated, lessening the necessity of having a car, as you can walk or take a quick taxi ride to dinner, to shop, or just to visit friends. The big difference is that you can also walk to some really nice tropical beaches. These locations are favoured by singles and couples with under-school-aged children, and by empty nesters looking to be closer to the downtown business district.

Barra de Tijuca, on the other hand, reminds many of South Florida; one needs a car to get around, but most expats will live in a gated community, with many recreational options, such as a pool, playground and athletic facilities, on their doorstep. This area is more like an American suburb, and families with school-aged children tend to want to live there, so that their children have freedom combined with security inside their gated community.

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he price of oil has fallen by more than 20 per cent since June. This sounds like good news for anyone who wants to be mobile, implying, as it does, cheaper petrol or airfares.

This could be great news for global growth, adding as much as 0.5 per cent to GDP growth according to some analysts. The big winners would be powerhouse economies such as the United States, China and India – although even the Eurozone might limp forward a bit faster.

If consumers in advanced economies can make huge savings on their fuel bills, there’s more money washing around to be spent on other goods and services.

Furthermore, the price of oil looks set to stay low for some time to come. In part, it’s driven by low growth (and therefore low demand) in major economies (Europe in particular, although Chinese growth is also tapering off).

But it’s also a result of increasing supply – not only via shale oil production in the United States (which is expected to keep growing), but also because Saudi Arabia has expanded production to protect market share.

The Saudis could make ends meet quite comfortably with oil at $90 or even $80 a barrel (Brent crude hit $88 a barrel on 13 October, a four-year low). Kuwait also seems content with current prices.

But some oil producers are deeply unhappy. Venezuela, apparently in recession (reliable stats are hard to come by), has called for OPEC to raise prices. The cartel meets in late November.

What do continuing falls in oil prices mean for economies around the world? Ray Furlong takes a look.

In the meantime, Russia is also hoping for a change of direction. Senior Russian officials have already said that planned military spending can’t happen unless oil prices rise again.

Iran is also worried – it has only just re-entered oil markets after an interim deal on restricting its nuclear programme resulted in a partial lifting of sanctions. It can currently only sell a limited amount of oil, pending a full and comprehensive agreement which would see sanctions on Teheran lifted entirely.

If a deal is reached, as much as a million barrels per day could be back on the world market. This would be vital for Iran, but would also put further downward pressure on global oil prices.

The deadline for those talks is 24 November– three days before the OPEC meeting. Watch this space.

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a mixed picture Despite recent disappointing rates of economic growth in some of its countries, Latin America, with its abundant natural resources, expanding middle class and strong foreign direct investment, is rising ever higher on the global mobility agenda. Mark E Johnson looks at the challenges facing HR managers and decision-makers moving employees to this international relocation destination, and those doing business in the region.

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atin America spent much of the last decade ploughing ahead with high rates of economic growth and increasing modernisation, propelled by structural reforms such as the privatisations and trade liberalisation enacted in the 1990s.

Growth has sputtered and slowed in 2014, however. In August, the United Nations Economic Commission for Latin America and the Caribbean revised down its estimates for growth in the region yet again, from 2.7 per cent to 2.2 per cent, and the outlook among domestic businesses is pessimistic. However, with a wealth of resources, a growing middle class and strong foreign direct investment, there are still opportunities in the region.

Economic overview In its 2012 Nutshell report, international banking and financial services organisation HSBC noted financials as the largest sector in the region, at 21 per cent, closely followed by commodities, at 20 per cent, and energy, at 13 per cent.

Consumer staples and telecommunications followed, at 16 per cent and 9 per cent respectively. Brazil was the largest market by far, with a 60 per cent weighting, followed by Mexico, Chile, Colombia and Peru.

Foreign direct investment (FDI) was very strong in 2013.

The FDI Report 2014, by FDI Intelligence, a division of

the Financial Times, noted Latin America and the Caribbean as the best-performing region for FDI globally, with the figure doubling to $139.81 billion last year. A $40 billion waterway in Nicaragua, backed by a Hong Kong consortium, accounted for half the growth, while Mexico also had strong greenfield investment. By sector, the top three performers were business and financial services ($48.19 billion), ICT ($17.04 billion) and renewable energy ($13.28 billion).

The domestic view looks less rosy, however. A recent McKinsey Global Survey showed that executives in Latin American firms were pessimistic about their territories’ economic outlook, with 53 per cent noting inflation as a risk, compared with a global average of 21 per cent. More said they expected their companies’ profits to decrease than in any other region.

Peter Hill, president of the Santiago Chamber of Commerce, says that a key factor in the region’s slowing growth is the weakening of local currencies against the dollar and the euro. Outlining the current status of some key nations, Mr Hill told Re:locate, “Brazil is probably growing at about 1 per cent maximum this year. Argentina is in a mess, as it has been for a long time. The same can be said of Bolivia, Venezuela and Ecuador. Columbia has been doing very well, but has been weakening this year. Peru has also been growing considerably. It’s looking at probably 5 per

cent growth this year, but it’s also weakening against the foreign currency.”

Chile, Mr Hill said, had been the worst hit by the weakening of its local currency, and tax reforms were also prompting many companies to take a ‘wait and see’ approach to the country.

Regional variations While a number of countries in the region are feeling the pinch thanks to weakening local currencies, conditions are far from uniform.

“Countries in Latin America are living vastly different economic realities. Argentina and Venezuela, for example, are suffering through an economic crisis. Their job markets are particularly challenging, with many layoffs occurring as a result of companies freezing investments or even choosing to leave those countries entirely,” Rodrigo F Donoso, board director of executive search alliance organisation InterSearch Worldwide and managing director of InterSearch Argentina, told Re:locate.

“The situation is less dire in Brazil, Chile, Ecuador, Mexico and Uruguay, but even here economic growth has been disappointing recently, with moderate job growth in only a few specific sectors, such as oil and gas, mining, tourism, retail and education.

“Yet other Latin American countries – including Colombia, Peru and Paraguay – are growing at remarkable rates. There is a good level of movement in their job markets.

In fact, they are experiencing a shortage of technical and engineering professionals.”

Looking forward, Mr Donoso said, “In most of Latin America, oil and gas is a true growth sector as new reserves are discovered and exploited to keep pace with the region’s needs for these important resources.” He went on to note that mining and pharmaceuticals were also expanding, and that other sectors poised for growth included tourism, medical services, road construction, energy and education.

The recent World Cup has shone a light on Latin America in general and Brazil in particular, with the Olympics set to follow in the football tournament’s tracks in just two years.

The Brazilian Ministry of Sports said that the country’s economy would grow by $70 billion as a result of the World Cup. Widespread protests told a less positive story on the ground, however.

Peter Hill thinks that, on balance, the World Cup has probably benefited Brazil, as, most likely, will the Olympics., but that the country has more pressing concerns. “The main thing for them is to get their economy going and open it up a bit more, because basically it’s a closed economy.” continues on p28

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Latin America’s largest economy is famed for what is known as the ‘Brazil cost’, the increased cost of operating in the country thanks to labyrinthine bureaucracy and regulatory hurdles. Brazil isn’t the only nation marked by difficult government policy, however.

“Foreign companies should appreciate that Latin America is a very diverse region, and that beyond cultural and linguistic similarities there are significant differences in business practices. There’s now a rough split between Mexico, Colombia, Peru and Chile on the Pacific side, which are aligning their markets through the reduction of obstacles and bureaucracy, and more protectionist economies with greater government intervention on the Atlantic side, such as Argentina, Brazil and Venezuela,” said Karl Royce, deputy director of UK Trade & Investment in Chile.

Highlighting the difference in ease of access between different countries, Mr Royce said, “Chile, for many foreign companies seeking to either export or invest, stands out as having clear rules, a stable environment, zero per cent tariffs and steady growth. A consequence of that is the scale and strength of the competition – many companies from many countries are already here. Some operators prefer to be in more problematic economies, where they feel confident of being able to handle the difficulties and relish having fewer competitors. Foreign companies should assess their own appetite for risk and competition, and choose target countries accordingly.”

The green agenda Environmental concerns can play a prominent role for businesses. Peter Hill said that a major hydroelectric project in Chile was recently stopped on environmental grounds, and that a number of mining projects had not gone ahead owing to the blocking of development of coalbased power plants. He added, however, that Chile probably placed the region’s strongest emphasis on the environment.

In its GEO-5 report on the outlook for the global environment, the United Nations Environment Programme noted Latin America’s chief environmental concerns as climate change, biodiversity loss, water and land management, coastal and marine issues, and urbanisation.

Poverty and inequity were also high priorities, it said.

Poor infrastructure and densely populated cites in certain areas fuel environmental issues. “With 79 per cent of its

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population living in towns and cities, the region is one of the most urbanised in the world. It faces challenges in providing its burgeoning towns and cities with safe water and sanitation, and in addressing air pollution and the contamination of its fresh water, oceans and seas,” the report stated.

Sourcing talent Rapid expansion in certain sectors has produced growing pains on the personnel front. “The flip side of growth in the oil and gas sector is a scarcity of talent at all levels. Companies in oil and gas, as well as mining, face huge challenges today to fill roles at all levels. In particular, there is a demonstrable scarcity of talent for engineers in many sectors,” said Rodrigo F Donoso.

He added that, while his own company regularly recommended cross-border candidates for executive roles, particularly in Bolivia’s oil and gas sector and Paraguay’s construction sector, this was not currently a widespread practice.

“In Latin America, it is not as common as in other parts of the world to have professionals expatriated from one country to another, although this trend seems to be on the rise.

This phenomenon is more common to specific sectors, like oil and gas, or to large engineering projects, for example.

“On the other hand, in some cases, multinationals expatriate top executives – usually those at the general manager level – out of their main Latin American offices to smaller peripheral countries, to keep better control of operations and market development, and also to develop their careers. This mainly occurs in the pharmaceuticals, consumer goods and automotive sectors.”

Outlining the challenges involved, Mr Donoso said, “The main challenge is the cost associated with relocations. Foreign candidates usually ask for comparatively large compensation, and their benefits packages need to be very robust in terms of housing, school fees, and so on.

“For some candidates, security and safety perception issues present a challenge. In other cases, despite speaking the same language, cultural differences can be a problem.”

Conditions in Latin America are challenging, but for those willing to commit to the region, the opportunities are significant.

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S-headquartered Weichert Workforce Mobility is a key player in the LATAM region, having opened its Latin America Centre of Excellence in 2013.

The centre provides relocation and assignment management services, plus local destination assistance, to inbound, outbound and intra-regional assignees, as well as enabling the company to manage on-the-ground suppliers and support the increasing number of employees who are being relocated to the region.

To help companies negotiate the potential hurdles of managing a mobile workforce in Latin America, a recent Weichert research project sought to identify the challenges associated with deploying talent in the region, and to shed light on best practices and emerging trends.

For the study, Weichert surveyed global HR managers across a range of industries, and interviewed key destination services providers covering the region, thus gaining on-theground perspectives to confirm the trends revealed by the survey. The company also reviewed client activity within the LATAM region over the past five years, to identify common concerns, exceptions and policy details.

Top challenges Cited by an overwhelming majority of survey respondents and interviewees, the top four challenges of managing a mobile workforce in LATAM were:

MANAGING WORKFORCE MOBILITY in Latin America

A new research study by Weichert Workforce Mobility highlights the diversity of Latin America’s 30+ countries, and sheds light on best practices and emerging mobility trends in the region.

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Compensation coordination Cost control Overall compliance Programme management

Despite these challenges, the research participants expected their volume of expatriate assignments throughout LATAM to increase or remain steady well into the future – especially in Brazil, which hosted the World Cup in 2014 and will host the Olympic Games in 2016. They also anticipated an influx of overseas investment from companies opening branches, sites and factories in the region.

Range of policies The use of a variety of policies in the LATAM region mirrors global practices, with 94 per cent of companies using longterm policies, nearly 80 per cent using short-term policies, and 71 per cent localising assignees after a period.

Managing multiple policy tiers creates more complexity, but can also make companies stronger by positioning them to respond better to the accelerated speed of business and wider talent demographics.

Almost 35 per cent of companies distinguish new hires from the rest of the relocating population, and use special policies for this group. This has proved an effective way of controlling costs in areas where expats comprise a significant percentage of the overall workforce.

“The report concludes that clear and comprehensive understanding of the diversity in economies, banking practices, and labour and immigration laws across the LATAM region is essential for successful workforce mobility,” Weichert’s Tim McCarney says. “Our findings indicate that professional service providers with seasoned insight and knowledge of best practices can be vital to navigating this often-difficult landscape.”

The following additional challenges were highlighted by respondents as having significant impact on the deployment of talent in the region: Extended visa and immigration processing times Fluctuating cost of living Inflation and currency volatility Personal security and political instability Availability of appropriate, affordable housing and adequate schools Some of the companies responding to the survey noted that, increasingly, policy and programme decisions for LATAM were being made at local level, reflecting the nuances and challenges of workforce mobility on a country-by-country – and even city-by-city – basis within the region.

In fact, the survey found that most of the mobility challenges in Latin America were rooted in the region’s being made up of more than 30 diverse countries with widely divergent histories, cultures, laws, business practices and customs, often adopted from those of other countries. Brazil, for example, adopted much of its dominant culture from Portugal. Mexico and Colombia adopted theirs from Spain. Caribbean islands such as Trinidad and Guyana trace theirs back to the UK.

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SERVICED APARTMENTS

BLEISURE MIXING BUSINESS WITH LEISURE

A heady cocktail too far for corporate HR? Re:locate’s managing editor, Fiona Murchie, shared a panel discussion with Miriam Rayman, cultural intelligence strategist with Flamingo London, and Kelly Murphy, VP of marketing for BridgeStreet Global Hospitality, at the Serviced Apartment Summit in London.

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his lively session, chaired by business travel expert Mark Harris, of the Travel Intelligence Network, left an engaged audience of industry professionals to ponder the potential and pitfalls.

Bleisure sounds such fun. Who wouldn’t want to extend their business trip by a few days and enjoy the delights of a European city or a far-flung exotic location in Asia Pacific? But what would corporate HR say to this blurring of business and pleasure? Is it seen as something that helps to aid retention, a reward for hard work, compensation for working away, a corporate gesture that helps to nurture – or will the drive for cost control and accountability put a stop to a potential trend that the serviced apartment industry may see as a golden opportunity for cross-marketing?

It is true that there is a trend towards more flexible benefits and lump-sum payments, but the majority of companies still offer a suite of relocation packages depending on seniority and destination. According to the latest Santa Fe global mobility report, global mobility and HR are the guardians of the relocation purse strings in about 50 per cent of businesses, with divisional management and business units accounting for 16 per cent, and corporate finance 17 per cent.

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Corporate attitude will also be influenced by corporate culture and the employee brand of an organisation, not to mention the industry sector. Media and creative industry organisations may well have a very different take on the blurring of parameters from the financial sector or government institutions.

Changing demographics mean that stretched middle managers may have family ties that make it essential to keep returning to their home country throughout an assignment, so tacking on a few days’ leisure to a business trip in the region can be very attractive and a way of exploring the wider new location. This is all part of the cultural experience, leading ultimately to doing better business for the organisation.

Kelly Murphy, of BridgeStreet Global Hospitality, explained that bleisure was definitely an area her organisation was exploring through its six distinct brands of accommodation designed to fit the budget and lifestyle needs of both those on assignment and the business traveller.

Indeed, BridgeStreet is about to publish the results of a recent survey, which will reveal how serviced apartment guests fall into the bleisure category.

The term ‘bleisure’ was first coined in 2009 by the Future Laboratory. Five years on, how has the mindset evolved, and what can we learn from that evolution? What socio-cultural forces are impacting on bleisurites, be they travellers or employees, and how do these influence their needs?

Flamingo London’s Miriam Rayman was involved in the original brainstorming that led to the birth of the bleisure concept. It is also about demographics. Back in 2008, she argues, “a whole generation of Millennials were entering the workforce and demanding the set-up be on their terms.

They didn’t want to stay in drab, grey business hotels when they travelled, for a start: they wanted boutique and design hotels. And thus the bleisure traveller was born.

“At that time, we were aspiring towards seamlessness, we longed for life on demand, where we could shop, eat, work whenever we wanted. The bleisure generation was a particularly entrepreneurial type who would turn an evening out over drinks into a networking opportunity, where Facebook could just as easily be a place to win clients.”

But five years on, she argues, things have changed.

She thinks people now want a more compartmentalised lifestyle because “the blurring of business and leisure left us feeling burnt out, and stressed that we weren’t doing either business or leisure particularly well.

“Gone are the days of the dichotomous work/life paradigm, but that doesn’t mean we don’t hunger for a bit of structure now, too. People are developing their own rituals to act as anchors in this increasingly fluid world.

We are putting some seams back into our seamless lives.

The thing is, after five years of being promised seamless

living, we’ve realised it is actually quite stressful and can leave us exhausted.

“So whilst the bleisure traveller will want to be able to access the ‘new utilities’ of high-speed connectivity and other business facilities, they will also require space to switch off, disconnect from work, and plug into their locale. Smart brands are those that can design products and services for our blurred lifestyles and also help us to compartmentalise when needed.”

If this is true, then the serviced apartment providers can certainly deliver at both ends of the spectrum. Whether it is the provision of extra services or simply making guests feel more comfortable, the industry is already doing a lot to help its business guests plug into the local scene, get to know the neighbourhood, and feel more like locals than travellers.

From restaurant and shopping advice to laying on special events and activities, those at the forefront are already wellversed in helping assignees to feel at home, extending their stay, and welcoming family members. This is one step away from booking the next business trip with the same provider under one of its other brands, which could be perfect for mixing business with pleasure.

With good tracking and management systems in place, who picks up the tab shouldn’t be an issue, and corporate HR can also tick the duty-of-care box if it is easy for the assignee to choose a trusted brand rather than going ‘off piste’ in what may be a challenging location.

What are your views? Let us know by emailing editorial@ relocatemagazine.com

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SERVICED APARTMENTS

SERVICED APARTMENTS

SERVICED

APARTMENTS

Popular destinations

IN BRAZIL all you need to know

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Skyline Worldwide, Sao Paulo Apartments

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The positive impact of the World Cup has seen new investment in corporate accommodation, with operators now offering wi-fi, cleaning, breakfast and other amenities.

“

34 | Re:locate Latin America | October 2014

STUDIO

R$ 4,000 – 6,000

R$ 6,000 – 8,000

1 BEDROOM

R$ 6,000 – 8,000

R$ 8,000 – 10,000

2 BEDROOMS

R$ 7,000 – 12,000

R$ 8,000 – 14,000

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“

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Top tips for finding the right serviced apartment solution

“

The inside track on Latin America’s serviced accommodation scene, from Cinthya Caggiano, general manager for Latin America at Skyline Worldwide.

1 Sao P aulo 2 Rio d

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POLICY

PROPERTY

NEGOTIATING BRAZIL’S RENTALS MARKET Finding rented properties for assignees to Brazil can be a complex business. Re:locate asked Andrea Massoud, director of operations at international destination services provider Living In Brazil, for her perspective.

What cities or regions of Brazil are most of your clients sending assignees to, and why?

Destination cities depend on the nature of the sector.

Banking, financial services, technology and related fields are based mainly in Sao Paulo and Rio de Janeiro. Manufacturing companies are sometimes located in the smaller cities, where companies originally received financial incentives from the local authorities to set up their operations.

How easy is it to find a property to rent in the major cities?

Nowadays, the difficulties have been reduced, thanks to the World Cup investment plan, which meant that a lot of construction work – mainly of hotels, temporary accommodation, high-rise condominiums, and houses in gated communities – was carried out between 2010 and 2012.

What sort of budget would an assignee typically need to secure a two-bedroomed apartment or a family property?

In Brazil, seeking an apartment with a particular number of bedrooms without considering the floor space is problematic, as a two-bedroomed apartment can be 50 square metres or 130 square metres. It is wise to specify not only the number of bedrooms required but also the floor space.

Location, amenities and views affect rents. A twobedroomed apartment of between 70 and 130 square metres will command an average monthly rent of R$5,000 to R$8,000. Property tax (IPTU) and, for a condominium, the monthly service charge are extra costs.

Are properties mostly furnished or unfurnished?

Both furnished and unfurnished properties are available, the average ratio being 90 per cent to 10 per cent. The downside of a furnished property is that the style of decoration and fittings is often not to an expat’s taste.

36 | Re:locate Latin America | October 2014

What length is a typical lease, and what deposit is needed? What are the things to look out for in lease negotiations?

The standard term of a lease is 30 months. There will be a pro rata penalty for early termination, unless it is due to transfer or repatriation.

Deposits are not usually accepted; landlords prefer the employer to co-sign the lease with the tenant. In some cases, however, company policy prevents the employer from cosigning.

We have designed special programmes to try to offset these difficulties via tenancy insurance plans through banks and insurance agencies. This is expensive, but at least it releases expats and employers when a property is vacated: they are insured against owners’ demands, and owners are insured against termination penalties, damage, repairs, and so on.

Global mobility: a changing landscape?

The more things change, the more they stay the same? As Re:locate celebrates its tenth anniversary, Dr Sue Shortland, in the first of two articles, examines the current state of play in international relocation, to see what is new and how issues faced by relocation professionals a decade ago can help those grappling with today’s mobility dilemmas and challenges.

Are there problems with shipping household goods, and how can these be avoided?

Shipping to Brazil, and clearing customs, is not easy, whether the shipment arrives by air or by sea. It requires a local guarantor (usually the employer).

The process is bureaucratic, costly and time-consuming.

Companies and expats usually rely on a despachante aduaneiro, a professional who represents the expat and the guarantor to the authorities.

As a guide, assignees should expect furniture to be delivered to their new home three to four weeks after it arrives in Brazil. We advise them to rent furniture in the meantime.

Generally speaking, used and personal items can be shipped to Brazil. Any brand new items should be for personal use only. Expats must keep records of the items they bring into the country, to avoid import taxes when they leave again. www.livinginbrazil.com.br

N

ot only is the volume of international mobility increasing: the very nature of the mobility landscape is changing.

One of the first issues to strike an international mobility professional today is the range of destinations in which global organisations operate. As this continues to grow, so the challenges facing the mobility function, assignees and their families appear incredibly complex, even insurmountable.

Changes in destination locations Emerging-market major players such as China are beginning to catch up with, and overtake, the more traditional expatriate destinations, such as the US and the UK. Global mobility is also resulting in a host of challenging and

previously unfamiliar destinations beginning to feature on the international assignment manager’s daily work list.

Such locations, previously off-radar, now include, for example, Argentina, Bangladesh, Chile, Egypt, Indonesia, Iran, Kazakhstan, Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey, Uzbekistan and Vietnam. Social customs and societal attitudes are very different in these locations, and these countries are likely to prove very challenging indeed for assignees, their accompanying families, and their employers.

Let’s look at some of the statistics. The UK and the USA have typically been the major assignment destinations, but we should be aware that this still remains so today. For example, the Santa Fe 2014 Global Mobility Survey report indicates that 12 per cent of the 1,269 survey respondents

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POLICY

SECTION HEADING

rank the USA in their top three assignment destinations over the next 12 months, while 7 per cent accord this status to the UK. However, mainland China is reported by 11 per cent, Singapore by 6 per cent, and Germany by 4 per cent.

There is no doubt that, culturally, China presents immense challenges to businesses, assignees and their families, but that is not to say that the other countries do not. Overall, though, as more organisations move into a country, so the pool of expertise in how to manage factors such as immigration, tax, reward, housing, family issues and so on grows, and shared knowledge aids the process of managing expatriates throughout the cycle, from selection through to repatriation.

Changes in sending locations What is changing besides the range of host destinations is the range of home-country sending locations. Increasing globalisation and geocentric talent resourcing result in the selection and deployment of the very best personnel globally to fill positions and provide staff development.

The focus is on generating the best return on investment.

As developed countries face declining birth rates, an ageing population and shortages of young talent, emerging markets are producing a wealth of graduate talent. Yet the pace of global expansion into emerging markets is resulting in the demand for talent outstripping local supply.

Nonetheless, we are beginning to see expatriate positions worldwide being staffed from emerging markets. Santa

38 | Re:locate Latin America | October 2014

Fe reports, for example, that 6 per cent of its responding employers foresee mainland China as one of their top five countries from which expatriate talent will be sourced over the coming year.

We should also assess the scale of the worldwide sourcing of talent, though, to consider how much change is really taking place. Once again, the USA and the UK remain key sources of expatriates; 14 per cent and 12 per cent respectively of the Santa Fe survey respondents note these two countries as being in their top five home-country sending locations.

Organisations have a long history of resourcing from these countries and expertise in managing outbound expatriates and their families – so there is a comfort blanket there, at least. Interestingly, however, the Santa Fe survey reports that France and Germany are noted by 7 per cent and 5 per cent of employers respectively as being in the top five expatriate home countries in the year ahead.

Certainly, to see France as a major exporter of expatriates is a change, and suggests that expertise might need to be developed, supported by specific research in that country, to aid outbound expatriate management.

Changes in assignment volumes A further issue briefly touched upon in the opening paragraph that requires further consideration is the volume of expatriation. Year on year, this is reported as increasing.

This seems at odds with the requirement to reduce costs,

given that the cost of an expatriate to an organisation is cited as being between three and five times that of a local employee (and this figure has not changed over the past decade).

Surveys consistently report increasing expatriation, but this is not the case for all employers. Indeed, Santa Fe notes that just under a fifth of its respondents experienced a slight or a significant decrease in assignment numbers last year, while just over a third (37 per cent) said their volume remained the same. We should not therefore ‘talk up’ the market, when less than half of employers (45 per cent) say that assignment volume increased slightly or significantly.

That said, whether assignment volumes are increasing or not, the key focus today is return on investment (ROI) for every assignee sent abroad. This represents a shift in emphasis. In the past, cost control has been king – although it is important to note that ROI and cost control are two sides of the same coin. Today, as in the past, international assignment managers view and pursue cost control in two ways – trimming back policy components (with awareness that too much trimming can have a negative effect on assignees’ willingness to relocate, engagement and motivation on assignment) and ensuring efficient and effective delivery of relocation policy elements.

Careful tax planning and cost projections can help here, and should be – and are – actively used. However, gaining high ROI is not just a matter of cost control of policy elements/expenses and vendor management. The quality of the individuals selected, and their contribution to meeting assignment objectives and strategic organisational goals, is critical. Finding the right person is identified as the most common assignment challenge.

is gathered and that there is on-the-ground support.

Current vendors may not have direct experience of such marketplaces, and it is important to check out, and even challenge, their ability to deliver a quality service, thus ensuring that they are able to meet assignees’ needs locally.

Such destinations are unlikely to have established expatriate support networks, and managers based in traditional sending HQ locations will be thousands of miles and several time zones away, and so unable to provide immediate support. It is therefore also important to ensure that back-up emergency evacuation plans and measures are in place if needed.

Once again, though, it is worth considering whether this is a new phenomenon. The answer is no. Organisations have operated in volatile places for decades: mining, oil and gas firms, for example, have done so in their quest to extract and distribute natural resources. The difference now

The importance of talent management This brings us to talent management, which has emerged as a major talking point over the past decade. Although talent is defined differently by different people, everyone agrees on the critical importance of getting assignee selection right.

Given the expanding range of home and host destinations and the increasing concern over ROI, the selection and deployment of ‘talent’ (however it is defined) has become the number-one priority.

This is not simply about an individual being able to do the job. High levels of performance in a home-country environment do not simply translate into similar (or higher) levels of performance abroad. This is where culture, language, security, healthcare, housing, children’s education, dual careers, family issues and a whole host of other matters impact on assignees’ ability to do their jobs efficiently and effectively. And this is where the biggest challenges come in managing assignees, particularly in unknown host-country environments.

When international assignment managers are sending assignees and, potentially, their families into emerging economies, it is critical to ensure that up-to-date intelligence

is that manufacturing and service firms are increasingly entering such domains as they pursue global distribution networks and tap into huge local markets and sources of cost-effective labour supply.

Sharing knowledge with those who have ‘been there and done it’ before and operated successfully will help all those in the mobility industry. Those new to particular markets have everything to learn. Those with experience can always learn more through questioning, evaluation and rethinking the issues.

Sharing good practice and adapting it to fit company culture and expatriate profile will help the mobility professionals of today to move forward successfully, just as it did those facing relocation dilemmas and challenges ten or more years ago.

For more policy guidance, see the International Assignments section of relocateglobal.com

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EDUCATION

COMPETING FOR A

SCHOOL PLACE IN BRAZIL

Following World Cup fever and with the Rio Olympics just two years away, Brazil has established itself as a top relocation destination. However, although the country may now have overtaken the UK as the sixth-largest world economy, not every sector is booming – and certainly not from the perspective of the relocating family in search of a place at a good international school.

Rebecca Marriage reports.

E

very day, expat families are moving to Brazil, which continues to feature in the lists of emerging new countries for international assignments. In the 2014 Global Mobility Trends Survey from Brookfield Global Relocation Services, for example, it was reported that Brazil had overtaken China as the top emerging relocation hotspot.

However, many families relocating there are faced with a surprising challenge. After the provision of housing for new expats, international schools are next on the list of services under tremendous strain. They are struggling to offer places to an increasing number of incoming families, and, consequently, waiting lists can be alarmingly long.

40 | Re:locate Latin America | October 2014

In the Brookfield survey, Brazil was ranked fifth in the league table of countries with the highest rate of international assignment failure, family adjustment, education and local infrastructure being cited again and again as major reasons for this.

Speaking at a recent event, Managing Globally Mobile Talent for Competitive Gain, held in Rio de Janeiro to assess the challenges in the region, Samar Jeradi, of LARM (Latin American Relocation Management) Brazil explained that the most critical area of concern for those placing assignees was housing, but schooling came a close second.

According to Stuart Young, headmaster of the British College of Brazil, Sao Paulo, “Many families have been surprised by the challenges of finding quality school places in Brazil. One of the main difficulties is for families with more than one child, as we may have a space for one of the children but not for the other, and this is also the case at other international schools here.”

In Brazil’s main relocation destination cities, such as Sao Paulo, Rio de Janeiro, Brasilia and Macae, there are some great international schools for families opting for a curriculum or learning programme which follows the one that they are used to in their country of origin, if they are lucky enough to secure a place.

Most expats opt for international schools offering the English National Curriculum, the American programme, or the International Baccalaureate (IB) Programme. Sao Paulo, for example, has the largest variety of international schools, with three American and three British schools.

But it is not just internationally relocating students who are placing pressure on the most popular international schools, as Stuart Young has discovered. “Because of the economic boom, many local Brazilian families now have the money to be able to send their children to private international schools, therefore making spaces for relocating families fewer, and creating longer waiting lists.”

ISC Research (part of the International School Consultancy Group), which researches the international school market, confirms this. “The demand for places in international schools in non-English-speaking countries [such as Brazil] continues to be driven not only by expatriates but also by wealthy local families looking for a quality education for their children,” says ISC chairman Nicholas Brummitt. “Although the number of expat children attending international schools continues to increase, the largest number enrolled are local children.”

While new schools are being established in the region to meet demand, and existing schools are expanding and opening new campuses, there is still an enormous amount of pressure on schools to offer places to expats. “There is still a real lack of spaces in quality schools,” says Stuart Young. “We have expanded rapidly to respond to this, but still have waiting lists in key age groups.”

However, Karen Fraser Colby de Mattos, director of studies at Pueri Domus School, in Sao Paulo, would like to reassure relocating families that there may be a little flexibility for the international student. “We have a policy that we have a limit of 20 students from pre-school to first grade; however, we do allow an extra student in the class if he or she is international. In elementary, middle and high school, we have a limit of 25 students, and the extra place is always for an international student.”

Families moving to the region are unlikely to consider a local state school, because of issues relating to language requirements, integration and standard of education, so a fee-paying English-language international school is often

the first choice. However, schools like Pueri Domus can offer an alternative, says Karen Fraser Colby de Mattos.

“Our school is for families that want to have a Brazilian experience while in Brazil and also have their children study in English, following an American curriculum up to middle school and the IB Diploma in our Verbo Divino Campus for high school. We have the Brazilian curriculum following the Brazilian calendar and the American curriculum following the American calendar.”

Distance from home to school should be another practical consideration for families; traffic can be an issue in the big cities, and can be quite unpredictable. A journey that takes 20 minutes one day could take an hour the next. Many schools provide a bus service to take children to and fro, but, to ensure that children arrive on time, school runs may begin quite early in the morning.

How relocation professionals can help While the schools are very well set up to help and advise families on cultural and practical differences, Karen Fraser Colby de Mattos suggests that relocation professionals could offer more support for families on their move into the region. “Relocation agents come to the school with the families,” she says, “but do not follow up on them. Some of the multinationals will keep in close contact with us to ensure that the children are well adjusted, but some do not really get involved.”

The big international schools in the region have recognised the need to help families settle in. “We have realised that relocating families need support in different ways,” says Stuart Young. “We have created a parent group that liaises with new families and organises social events for them to attend, to help them settle into their new life and begin making contact with others in a similar situation.”

While it is certainly not impossible for families to secure a place at a good school, it does remain a challenge for parents, and issues of timing and communication with schools will be crucial for assignees relocating with school-age children.

Not only will families need plenty of time to research their education options carefully, they will also need time to make the necessary alternative applications should their chosen school be closed to new students.

It is a good idea to keep the channels of communication open with the schools in the region. They are more than likely to be willing to help in any way they can, and often have personal experience of the difficulties of making the move – as is summed up in these final words from Stuart Young: “As an expat myself, I feel a certain sense of duty to visiting families to help them as much as possible, even if we cannot offer them a place for their child right away.”

For education news and articles, visit

relocatemagazine.com/education

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SECTION HEADING

SECTION HEADING CULTURE

CULTURE IN THE SPOTLIGHT An understanding of culture is key to a successful relocation or international assignment, enabling individuals to settle more quickly and do better business for their organisations.

Dominic Tidey, chief operating officer of the European Relocation Association (EuRA), explains the valuable contribution that providers of destination services can make.

D

estination service providers (DSPs) across the globe are knowledge specialists. It is their expertise in a multitude of fields that helps corporations, their staff and families to settle into a new life in a new place.

Central to this is their ability to mitigate the likely impact on transferees of the shock inherent in moving from their culture to the new one. Of assignments that end before their planned time, 80 per cent are attributable to a failure to settle into the host culture, and with less than 40 per cent of transferees being given specialised cross-cultural training, DSPs must be the on-the-ground experts.

The traditional approach to training DSPs and their consultants has centred on the research-led dimensionsbased models, but is this traditional approach to training still relevant 40 years on from the first global research project?

In a remarkable 1973 study by Geert Hofstede, data was collected from more than 110,000 people in 70 countries, and it is still an important benchmark. However, other researchers, such as Edward T Hall and Fons Trompenaars, have also contributed significantly, adding dimensions that are particularly useful in the sphere of global mobility.

However, one reason why new pioneers of intercultural theory are looking for different ways of promoting intercultural understanding is that the methodology of the studies doesn’t reflect the true makeup of the societies they examine. Predominantly undertaken with the focus firmly on international business, they fail to take account of wider societal issues such as gender, class, and regionality.

Nevertheless, they form an excellent place to start learning about how to work successfully with people in transition.

Dealing with difference Four dimensions are particularly relevant to both transferees and relocation professionals. The first of these is how we use time.

There are significant differences in the way in which cultures use time and structure activities. For example, one of the most polarised cultures in terms of chronology is Germany. In the business world, this is exhibited in meetings that are highly structured and agenda-driven. The purpose of the meeting is to get the job done, complete all the action points on the agenda, and move forward with the business in hand. This means that interruptions or disruptions are not tolerated.

However, looking at a culture at the opposite end of the chronology scale, such as Italy, a very different dynamic emerges. The agenda is flexible; in fact, the most important item on it is lunch. This is not just because of the Italian love of great food, but more because lunchtime is when relationships are built, or built upon. The business will flow from the trust between the people involved in the meeting.

Without this trust, there will be no business.

How we use time is not just about how we approach a business meeting, but also how we see past, present and future events. Anita Meyer, CEO of am&pm Relocation

Belgium, is keen that her relocation consultants understand the wider impact of this dynamic.

“During conversations with a French executive director,” she says, “one might become gradually aware of his achievements in the past, his excellent marks from a highly respected Parisian university; to him, where you come from impacts on where you are going. This person will be inclined to choose the traditional school for his children, a discreet but classy house for his family.

“A Russian sales manager, however, is more present and future-oriented. His choices are based on getting the most out of today, which explains why a very ostentatiously luxurious house, at the top of his budget, will make him very happy. One individual thrives on the past; the other has eyes for the achievements of his present and his future.”

There are many more ways in which the dimension of time will impact upon the transferee. Anita Meyer again: “In a chronological culture such as the UK, people will wait in line for the bus. If it starts raining, they will not disrupt the queue by leaving this line to stay dry in a bus shelter on the other side of the street.

“To illustrate a synchronic way of acting, there’s the Italian butcher who’s slicing off half a pound of salami, who asks the other customers in the shop whether anybody else needs salami. It makes sense to continue to cut the slices of the same salami, rather than wrapping it up, putting it back in the fridge, and unwrapping it again for the next customer.

Yet the butcher’s question would never be answered with ‘yes, please’ by a Dutch customer, as it is not yet his turn.”

Not knowing the cultural norms of the society you are moving into can cause immediate confusion, isolation and fear. An Italian moving to London will feel very ostracised if he or she is not made aware of the importance placed on queuing. A German in Mexico will feel his colleagues are deliberately disrespecting him if he has not been made aware of the more relaxed attitude to business meetings.

However, we are all individuals and not just examples of our culture, so an understanding of how we use time is useful, but there are still Germans who will be late, and Italians who will follow an agenda! Understanding these intercultural nuances, and acting accordingly, is one of the differences between a great relocation service and a standard one. continues on p44

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FINANCE

SECTION HEADING CULTURE IMMIGRATION

Ambiguity and risk

Competition or collaboration The second intercultural dimension critical to the global mobility process is whether we interact in a competitive or a collaborative way. Highly collaborative cultures can be identified by how similar the gender roles are, both at home and in the workplace. A strongly collaborative culture such as Denmark’s has an extremely high glass ceiling, with women able and encouraged to achieve great success in business. In socio-political terms, this manifests itself in government support in the realms of childcare, generous maternity and paternity leave, and enshrined laws protecting the roles and rights of women in the workplace.

Highly competitive cultures like Japan’s exhibit much more traditional male and female roles. Women tend to work only until they have children, and generally speaking in less senior roles than their male counterparts. Women transferring from a collaborative to a competitive culture as the transferee or the partner of the transferee will find a tension in the adoption of their new role as a different type of citizen within the new country.

Views of hierarchy How we view hierarchy as a culture is a third important aspect in successful assimilation. Individuals from cultures that place great importance on seniority and hierarchy can, at first contact, be difficult to work with from the point of view of the relocation consultant. Their status is clearly higher than yours, and therefore they may regard what you are trying to do with them as trivial.

In societies which place a low level of importance on hierarchy, managers are informal and on a first-name basis with staff, and value highly the experience of their team members. Therefore, they are more likely to get the most from the knowledge capital of the DSP. The Brazilian CEO moving to Vienna will expect a level of deference which is not within the cultural makeup of the Austrian. It’s easy to see how moving from one end of this spectrum to the other would cause conflict and uncertainty.

But again, working with the person as a distinct individual has to go alongside the knowledge of the wider cultural dimensions, and it is here that coaching and leadership skills will come into play.

How a culture deals with risk is the fourth fundamental indicator of how well a transfer may go. As Hofstede puts it, “The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these is reflected in how they deal with risk.”

With the rise of the BRIC countries, this dimension becomes especially interesting. Russians feel very much threatened by ambiguity, and as a result, they have one of the most complex bureaucracies in the world. Detailed planning and briefing in any project is very common.

The Chinese chief financial officer moving into the regional Russian office may find this need for certainty and clarity very difficult to cope with, as China scores very low on this scale. The Russian colleagues will find the Chinese way of working to be very alien and not structured enough.

Understanding cultural theory For DSPs and relocation professionals, an understanding of intercultural theory and the transfer process is crucial. But it’s also critical in the wider corporate sphere.

One huge growth area in corporate services over the last decade has been leadership and intercultural coaching.

With corporate teams increasingly being made up from diverse cultural backgrounds, fast team assimilation is of critical importance to businesses. DSPs who have successfully diversified into this field have found a whole new revenue stream.

The traditional approach of looking at intercultural dimensions still has great validity, but it’s only a starting point. Innovations, such as developing cultural intelligence, or cultural quotient (CQ), take the traditional approach as a launch pad for looking further into how we can learn to work with the knowledge of the theory, but on a one-to-one basis, respecting the individuality of the person.

At EuRA, we have spent three years developing an online Relocation Coaching Programme, which uses the intercultural knowledge of all participants to build a picture of how best we can work with each other as individuals. In collaboration with the School for Leadership Development at Oxford Brookes University, the programme is truly global, and those DSPs who have so far undertaken the 12 modules have found that they are better able to communicate with, and assist, transferees.

Knowledge of a culture is a way of truly enhancing a visit to a new country, but ultimately it’s knowledge of the individual that builds a strong working relationship.

For culture & language news and articles, visit relocatemagazine.com/

culture_language

THE BANK OF Brazil’s President, Dilma Rousseff, brushed off the post-World Cup hangover with a big announcement at a high-profile summit.

Ray Furlong reports.

T

wo days after the final World Cup match at the Maracana Stadium, the leaders of Brazil, Russia, India, China and South Africa gathered in the city of Fortaleza for their latest statement of intent as rising powers.

Top of the agenda was a $100-billion development bank – a direct challenge to the primacy of the Western-led World Bank and International Monetary Fund (IMF) – with a remit to boost infrastructure development.

Ms Rousseff had already presided over huge investments in infrastructure in the run-up to the World Cup. But there’s more needed ahead of the 2016 Olympics.

India’s Prime Minister, Narendra Modi, attending his first major summit since his landslide election victory in May, voiced deep satisfaction at the deal – and his views have been echoed in his country’s media.

“India’s status in the world order could get elevated by the success of the proposed bank,” said the Business Line website. The new bank will be headquartered in Shanghai, and its first chief will be an Indian – something hailed as a “diplomatic victory” by the Deccan Chronicle.

The Moscow Times also sees the new bank as a challenge to Western institutions and a “political coup” for the Kremlin.

“Just as the West freezes Russia out of its own economic system as punishment for its politics in Ukraine, Russia is tying itself into the financial superstructure of the next generation of economic heavyweights: India, Brazil, China and South Africa,” it wrote ahead of the summit.

But there are also grounds for scepticism. The five BRICS countries actually have very little in common. China is by

Dilma Rousseff

far the dominant power – its economy is bigger than that of the other four combined. India is the only country with a comparable population.

Beijing’s relations with Moscow and New Delhi are held back by suspicion and rivalry. It fought conflicts with both countries in the 1960s, and India regards China’s current naval expansion warily.

Also, the new bank still needs to be ratified by the five countries – although this is likely to be more a formality than a hurdle. The big question will be what follows.

This may be a new chapter in the history of globalisation, that of the post-war Breton Woods settlement being chipped away by a new, insurgent order. But if the bank fails to make an impact, it may merely underline how limited the BRICS concept really is.

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Image: Dilma Rousseff by Renato Araújo/ABr [CC-BY-3.0-br (http:// creativecommons.org/licenses/by/3.0/br/deed.en)], via Wikimedia Commons

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COMPENSATION & BENEFITS

SECTION HEADING COMPENSATION & BENEFITS

REWARDING RETURNS on global compensation & benefits?

With changes in assignment types and a shifting compliance landscape, Re:locate’s Winter 2013/14 issue asked if it was time to cash in on change and revisit compensation and benefits.

Ruth Holmes finds out how organisations are approaching the challenges to secure greater cost control, flexibility and competitiveness.

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ontinuing the trend set in motion post- 2006 and the global financial crisis, cost control and compliance remain key focuses for global mobility and HR practitioners.

Cartus’s newly released 2014 Global Policy & Practices Survey reports that cost control is the top future mobility challenge (cited by 75 per cent of respondents), followed by compliance (62 per cent, up 12 percentage points on last year) and immigration (57 per cent, up 13 percentage points) – findings echoed across similar sector data sets.

The impact of budget constraints is also making employers seek greater flexibility (67 per cent), suggests the study. Regional need (up 15 percentage points to 36 per cent), changing employee needs (44 per cent, up eight percentage points) and expectations (29 per cent, up seven percentage points), as well as the changing profile of assignment types, are combining to create a demand for more flexible and cost-effective mobility programmes.

The top two mobility challenges for hiring overseas talent, according to the compensation and benefits, global mobility and HR practitioners responding to the latest Global Mobility Survey carried out by employee relocation and workplace service provider Santa Fe, were family/ accompanying partner complications (55 per cent) and agreeing compensation packages with candidates (48 per cent).

For around half (49 per cent) of the Cartus survey respondents, the solution is to develop more clearly defined policies and processes. A similar number (46 per cent) are interested in containing the costs of their mobility programmes – the second most popular way of improving it after more upfront assignment planning, at 55 per cent.

Mobility policy, compensation and benefits – at the juncture of key challenges around talent management, compliance and overall business strategy – are therefore on the front line of how global mobility can address the key strategic issues of the day. According to professional services firm Towers Watson’s 2014 Current and Emerging Global Benefit Themes study, Employee Benefits: A Headquarters Perspective, multinationals can drive more value from employee benefits, and have “significant opportunities to raise their global game” as a result.

Building core-flex strength Employers are responding to the need for continued cost control, further flexibility and compliance focus by adopting global policies with regional variations, according to the Cartus survey, continuing a trend prevalent in the company’s previous two surveys.

Fewer organisations report using a single global policy (28 per cent, down 14 percentage points from 2012), while an increasing number are adopting a global approach to mobility programme administration (up ten percentage points from 2012, to 73 per cent), which covers tiered or

core-flex approaches. Nevertheless, around four in ten still rely on ad hoc solutions to maintain the required levels of flexibility.

Employee benefits specialist Michelle Bishop, client development manager at Willis Employee Benefits, has also witnessed these changes. She comments, “The main challenges often relate to compliance and the ability to manage this within a centralised approach, especially as businesses expand further into a larger number of territories.

“For instance, we work with many clients with a large US presence but with a scattering of employees in a number of European countries. These numbers alone do not warrant internal investment in managing policies for these employees, but to manage on a per country basis creates a huge administrative burden for their HR function.

“We’re therefore seeing a greater focus on pan-regional solutions for local nationals and centralised ‘global policies’ for expatriates, to manage multiple populations and locations more efficiently.”

These approaches can combine to “ensure the equitable application of the policy and eliminate individual negotiation”, advises independent global mobility consultant Laraine Nee.

Compliance However, keeping pace with not only the diversity of assignment types but also taxation and immigration rules around the world adds an extra layer of challenge. “The global benefits world is complex, and trends can be benefit-, country- and industry-specific,” explains Michelle Bishop.

Rounding up the main current issues by region, she says, “In Europe, there are many countries implementing regulatory changes to pensions, which will impact all employers operating in these locations.

“For medical insurance, again, there are regulatory changes in the Middle East and US, which impact both nationals and expatriates. The US at the moment is generally focused on the impact of healthcare reform. With regulation still being ‘grey’, a very cautious and measured approach to the application of benefits under regulation is being adopted.

“In the Middle East, there is a keen focus on compliance with regulatory changes being implemented. Africa also represents a large growth target for many, and a growing demand for benefits to meet Western norms for both expats and locals.

“Latin America, too, is an emerging market and growth area. It is a difficult territory to manage due to the limited regulation locally, and poses issues for the acquisition of cover limits for those adopting a host-country benefits structure for expatriates.

“Asia Pacific generally operates in a highly competitive environment, with a keen focus on benefits cost management,” concludes Ms Bishop. continues on p48

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COMPENSATION & BENEFITS

COMPENSATION & BENEFITS

The benefit of audits With so much flux, Michelle Bishop advocates the advantages of regular benefits audits. “There are many benefits to regularly auditing benefits and reward packages,” she explains. “Depending on the industry, we commonly advise that a full review be conducted every three to five years. However, small, focused audits might also be appropriate, dependent upon any organic and acquisitive growth strategies. New locations, risk and compliance regulation present regular challenges and can create a long-term need to effect a change in policy structure.

“As well as providing companies with a full understanding of their benefits structure, the process can highlight risk gaps and exposures, but also duplications in cover.

In addition, it provides businesses with an updated understanding of how they compare to the rest of their market sector, which can be invaluable to those operating in highly competitive, talent-driven environments.”

The Towers Watson study agrees. “Our research and experience show that organisations willing to continuously improve their global benefit strategy and management practices – and adopt or adapt what works for others – are better able to manage risks and create opportunities that lead to improved competitive position against their peers.”

Costs: pooling assets and liabilities One approach geared to controlling costs emerging out of mature Western economies, particularly those facing significant company pension liabilities, is pensions derisking, under either a buy-in or a buyout approach.

Broadly speaking, through buy-ins the responsibility for paying the pension of a scheme member who lives longer than expected falls to an insurer or a bank. The employer has effectively purchased indemnity against longevity.

In buyouts, employers transfer their pension liabilities to a regulated insurer, enabling sponsoring employers and trustees to be fully discharged of pension scheme liabilities.

Reporting on the trend, Frank Oldham, global head of the defined benefit (DB) risk team at Mercer, the human resources, health, talent and financial services consultant, said, “Globally, in 2013, we saw an increase in asset activity, with active or dynamic derisking coming to the fore. We anticipate that the risk transfer market will thrive in 2014.

In the UK, the volume of buy-ins, buyouts and longevity protection transactions steadily increased in 2013, and we also saw more interest from pension schemes in the United States and Canada.”

In line with the increasing flexibility required to match diverse employees’ needs, auto-enrolment and further newly introduced UK legislation to give people aged 55 and over greater control over how they access their pension pots, Mr Oldham notes, “Liability management tactics, such as provision of flexible options for individuals in DB plans at retirement, are becoming more common in the

48 | Re:locate Latin America | October 2014

UK. The picture is the same as in the US. There are now ways and means to offer cash-outs to deferred pensioners, pensioners and even active members. In Ireland, and to a limited extent in Germany, there are also instances of cash-out activity taking place.”

A similar trend for consolidating employee health and life insurance liabilities is also underway through global insurance schemes. Here companies can achieve greater co-ordination and cost savings through multinational pooling and exploiting scale: 80 per cent of those surveyed at 2014’s IGP pooling network seminar in Berlin reported that cost control was their primary driver for pooling. This applied to European firms in particular.

However, other studies, such as the research carried out by Employee Benefits and Cigna Healthcare in 2012, suggests significant potential scope for uptake and savings, as 76 per cent of multinationals do not yet use multinational pooling.

Monitoring human capital investment and returns Of course, in addition to facilitating new financial approaches to cost control and compliance, global mobility and HR teams are well placed to ensure that return on investment (ROI) in assignments is maximised through people and their effective management.

“The only way to control costs and measure ROI is by a rigorous upfront talent management programme linked to managing the number of assignees,” says Laraine Nee. “Each assignment should be part of a clear talent management strategy and succession plan set by a top management group, with the goals for each assignment assessed annually.

“Each stream or business should also ensure agreed business justification definitions, such as critical skills – that is, those unavailable at the host destination – integration for leadership positions, professional development of highpotential candidates, or technology transfer.

“The respective parties should also be able to report on and provide key management and financial data – such as total employment costs over domestic home and host, total number of assignees, length of assignments, locations, and diversity (in terms of gender or nationality, for example), – and update management every quarter on whether the business is meeting assignment deadlines and costs.

“For each new assignment, management should be clear on the business reasons for it and its proposed length, together with the goals to be met on assignment and the career plan for the end of the assignment.

“For their part, HR and mobility teams should provide management and financial controllers with a full estimate of the costs, updated annually, of the appropriate policy options, including total tax grossed up, which must be signed off by the financial controller and line manager.”

However, according to Towers Watson’s report, “seven out of ten global or regional benefit managers at multinational companies have limited or no access to timely financial information related to current employee benefit spending”.

Mark O’Brien, a senior consultant at Towers Watson, comments, “It is striking that global and regional benefit managers at many multinationals – which often spend hundreds of millions of dollars on employee benefits annually – do not have this vital piece of information.

“Nowhere else within their businesses would such a lack of management information or oversight be acceptable. The underlying information exists, but needs to be extracted in a structured manner from finance systems, which is often the difficult part.

“From our experience, continuous review and refinement of the global benefit management organisation and its processes, programmes and strategies leads to better outcomes for both employees and their organisations.

“Multinationals that ask themselves the most challenging and strategic questions, and address them, are typically the companies that achieve the greatest value from their employee benefit programmes and spending.”

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IMMIGRATION

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Latin America

Benefits

OPEN FOR BUSINESS

Post-arrival change of status

As its major economies seek to attract increased foreign investment, Latin America is introducing a range of immigration measures – including new short-term assignment routes, post-arrival change of status, and regional integration – to welcome overseas investors into the region. Peregrine Immigration Management analyses the new initiatives.

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raditionally, Latin America, rich in oil, gas and minerals, has received investment mainly from the United States and from European countries with a historical connection to the region. Spain, the Netherlands and Portugal all had colonies in Latin America in the 16th to 19th centuries.

Nowadays, however, Latin America – which, according to the World Bank (www.worldbank.org/en/region/lac/ overview), is showing signs of strong and steady economic growth – is becoming a desirable and attractive region for investment from countries all over the world.

Many countries in the region have developed policies to attract overseas investment, simplifying paperwork and increasing financial benefits for foreign companies wishing to establish a presence. However, immigration procedures can be complicated and document-intensive. To avoid unnecessary hold-ups and frustrating delays, there are some key points for businesses intending to step up activities in Latin America to consider.

Challenges

Document preparation Legalisation and official translation of supporting documentation, such as birth certificates, marriage certificates, degree certificates, and police clearance certificates, is a must for immigration applications in all Latin American countries, and this will typically add several weeks to processing times.

50 | Re:locate Latin America | October 2014

Legalisations should therefore be started at the very beginning of an immigration process, in order not to hold up permit applications. It is important for businesses to understand how legalisations work and some of the common pitfalls.

Quotas Despite strong economic growth, Latin America, like anywhere else, has local unemployment to deal with.

Several Latin American countries have introduced quotas to protect the local workforce.

For example, in many Central American countries, only 10 per cent of the staff can be foreign employees, and Mexico is soon also expected to apply a quota for foreign employees. Businesses should take these quotas into account and liaise with local HR or counsel to check the situation in the local offices before making project or assignment plans.

Local employment contracts In some Central American countries, a local employment contract is required in order to secure immigration approval for work in the country, which causes challenges for companies sending employees on assignment and wishing them to remain on home contract. That said, many countries (including Brazil, Argentina, Mexico, Chile, Paraguay, Uruguay, Peru and Bolivia) do have immigration routes for assignees, and some of them have created specific routes to facilitate short-term assignments (see below).

It is commonly permitted for foreign nationals (although sometimes only if visa-exempt) to enter the country on a tourist/business status and apply for residence and/or work permission post-arrival. This applies in Argentina, Chile, Paraguay, Uruguay, Bolivia, Peru, Colombia, Nicaragua, Guatemala, Honduras and El Salvador, and allows companies to send expatriates to the destination country quickly.

In some countries, including Uruguay, Honduras, Paraguay, Bolivia and Chile, it may be possible to work before the work/residence permit applied for has been granted, although a provisional visa or permit may need to be obtained to allow working activities, under certain conditions, until final work/residence permit approval is obtained.

However, it is important to mention that in some other countries – for example, El Salvador, Nicaragua and Peru – work is not permitted before the work/residence has been granted, potentially meaning a wait of several months before work may legally be commenced, although the applicant may be in the country.

Short-term assignments In various South American countries, short-term assignments have been facilitated with very simple and straightforward processes. In Brazil, where a post-arrival application process is not possible, a technical visa for stays of under 90 days is available for technical employees.

In Argentina, the residencia transitoria opens the door to short-term assignments for the provision of professional services. In Mexico, short-term visas of up to 180 days have been introduced.

Regional integration processes Latin America has looked to the European Union as an example of a strong economic and political integration system. Similar regional political, economic and social integration groups have been created, which impacts immigration procedures.

The

biggest economic bloc in South America, MERCOSUR, consists of Brazil, Argentina, Uruguay, Paraguay and Venezuela*, and also includes Bolivia, Chile, Colombia, Ecuador, Peru, Guyana and Suriname as associate members. MERCOSUR nationals can travel freely within each other’s countries, and also benefit from facilitated immigration processes to reside and work in other MERCOSUR countries. Legal residents

in MERCOSUR can travel freely for business or tourism within the territory on valid ID resident cards. (*Note that Venezuela is not yet fully applying the terms of MERCOSUR)

CAN (Andean Community) consists of Bolivia, Colombia, Ecuador and Peru. Nationals of CAN may travel freely within the Andean countries using their national ID cards and without need of a visa or a passport. These countries have also developed migratory policies, simplifying work permits for Andean workers within the area

In the same way, CARICOM (Caribbean Community),

formed by the Caribbean Islands (Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Lucia, St Kitts and Nevis, St Vincent and the Grenadines, Suriname, Trinidad and Tobago) grants free travel to CARICOM nationals within the Community on a valid ID national card. The free movement of CARICOM skilled workers has also been implemented by most of CARICOM’s member states in this region

The CA4 (Central America Border Control Agreement) is formed of Nicaragua, El Salvador, Guatemala and Honduras. Much like the Schengen area in Europe, the CA4 allows free access across borders between these countries for Central Americans and also for thirdcountry nationals who have legally entered one of these countries. Central Americans still need to obtain permission to take up work in another Central American country, but, for example, in the case of El Salvador, they are exempted from quotas, and the immigration processes for them are simpler than for third-country nationals coming into the region

In conclusion, although Latin America presents some challenges from an immigration point of view, owing to long processing times and onerous document requirements, as well as quotas in some cases, these challenges can generally be overcome with good planning.

It is clear that the major economies of the region are making great efforts to attract more foreign investment.

New short-term assignment routes, the establishment of agreements and trading blocs between countries, and the possibility of post-arrival change-of-status applications are all aimed at welcoming foreign investment into the region.

So far, they seem to be working!

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INWARD INVESTMENT

INWARD INVESTMENT

CUBA change in the air

As Cuba’s government seeks to boost the economy by attracting overseas investment, there are signs of a thaw in the hitherto frosty relationship between the communist island and its superpower neighbour, the US. Claire Tennant-Scull considers what this may mean for foreign companies looking to do business with Cuba.

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n May, a delegation from the American Chamber of Commerce made its first visit to Cuba for 15 years and was welcomed in Havana by Foreign Minister Bruno Rodriguez and Trade Minister Rodrigo Malmierca.

American Chamber of Commerce president Thomas Donohue said he was in Cuba to assess the economic changes taking place under President Raul Castro.

Just over 50 years ago, when the communists triumphed, the US imposed an embargo on the island. However, since President Raul Castro took over from his brother Fidel in 2006, Cuba’s communist government has introduced a number of economic reforms. In December, the President called for “civilised relations” with the United States, saying that he thought the two countries should respect their differences.

The island was opened to foreign capital in 1995, but, in recent years, there has been a drop in foreign investment and only moderate economic growth. In 2013, the economy grew by 2.7 per cent, falling far short of the government’s 7 per cent target. Cuba’s economy is still highly centralised, but nearly 500,000 Cubans now have licences to operate private (though small) businesses.

In March, Cuba’s National Assembly unanimously approved a bill aimed at making the communist island more attractive to foreign investors, with taxes on profits cut from 30 to 15 per cent and new investors being offered eight years’ exemption from paying taxes.

The government in Havana may now be looking for foreign investment as it nervously eyes developments in nearby Venezuela, where there has been unexpectedly strong public opposition to Nicolas Maduro’s socialist government.

If the Venezuelan government were to be overthrown, there would be serious implications for both the politicians and the people of Cuba, as the island’s economy is heavily dependent on Venezuelan oil, which is currently supplied at the

rate of about 80,000 barrels a day. Cuba has an arrangement with Venezuela whereby the oil is paid for not in cash but by the supply of thousands of Cuban doctors and nurses.

When the Soviet Union fell apart in 1991, and the Eastern Bloc subsequently collapsed, Cuba’s dependence on these countries was such that its GDP dropped by around a third and there were reported (though officially denied) food shortages.

The dual-currency system of Cuban pesos (used in the official economy) and their convertible equivalent, pegged to the dollar (and used in the quasi-capitalist economy), makes things more complicated for foreign companies looking to invest in the country, and foreigners are not officially allowed to spend the convertible peso in the country.

The Associated Press reports that Hillary Clinton, former US Secretary of State, says in her forthcoming book, Hard Choices, “Since 1960, the United States had maintained an embargo against the island in hopes of squeezing Castro from power, but it only succeeded in giving him a foil to blame for Cuba’s economic woes.”

Mrs Clinton says that, despite opposition from some members of Congress and members of the Cuban community in the US, she urged President Obama to lift or ease the US embargo because it was no longer useful to either country.

The recent Cuban law on foreign investments will seek to reduce the constraints on potential investors, and may encourage further dialogue with the US. All sectors of the Cuban economy, apart from the military, healthcare and education, will soon be open to foreign capital, but, though overseas companies may find doing business in Cuba a little easier and will pay less tax, they will not yet be able to choose their workforce, which will continue to be supplied by the state.

MEXICO opens up its ENERGY INDUSTRY

After 76 years of state monopoly, Mexico’s Congress has approved changes to the country’s energy industry that will open it up to private investors and overseas companies.

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een as a political victory for President Enrique Peña Nieto, the new law is part of his drive to improve Mexico’s competitiveness and stimulate economic growth. Mr Peña Nieto says he expects the changes to boost production back to 2004 levels by 2025.

Pemex, known officially as Petroleos Mexicanos, has held the monopoly since it was established in 1938, and has made Mexico the world’s ninth-largest oil producer. However, ageing infrastructure, stifling bureaucracy and accusations of corruption have caused production to fall from 3.6 million barrels a day in 2004 to just 2.5 million today.

Under the new law, foreign and private energy companies will be allowed to explore and drill for oil and gas, so Pemex is likely to have to compete with energy giants such as BP, Chevron and Exxon.

The new laws will also authorise private production of electricity and are expected to attract billions of dollars of investment into Mexico. This follows more legislation in July, which forced the break-up of America Movil, Latin America’s biggest telecoms company, owned by billionaire Carlos Slim.

The President has made bold promises: that electricity tariffs for consumers will drop within two years as a result of competition and new investment, and that oil output will climb by 20 per cent.

But there has been considerable opposition to the changes, particularly because around a third of the state oil company’s pension debts may be transferred to the federal government’s balance sheet. The leftist party, the Party of the Democratic Revolution, is

pushing for a referendum that would allow it to undo the changes if the result were against the reforms.

Many Mexicans appear to be divided over the changes: Reforma, a Mexican newspaper, recently conducted a poll which revealed that 40 per cent of Mexicans thought that the reforms would be bad for the country.

However, Mexico’s President remains positive, saying, “This is the beginning of a new history for our country. We have opened the doors for a better future for all.”

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Image: Christopher Michel [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

52 | Re:locate Latin America | October 2014

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INWARD INVESTMENT

INWARD INVESTMENT

ENERGYREFORM A trigger for competition in the Mexican energy sector The opening of Mexico’s energy market to private investors and overseas companies is set to have far-reaching consequences for the country, investors and consumers.

Antonio Massieu, senior associate lawyer at Mexican law firm Santamarina y Steta, explains how the reforms will work.

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he energy industry in Mexico is experiencing the biggest paradigm shift since the oil expropriation of the late 1930s. The reform that was recently enacted will dramatically change the way in which the country’s energy sector is developed, making it the most significant economic happening since the execution of the North American Free Trade Agreement (NAFTA) in 1994.

This reform will shake the Mexican energy industry vigorously, transforming a monopolistic sector (operated by two state companies) that performs the vast majority of the productive sector activities into an open-market industry where players can freely participate through clear and transparent rules, under the regulation of operators and agencies endowed with broad powers.

The changes brought by the reform have occurred both in the substantive areas of the industry and in the institutional structures that shape the energy sector. On the one hand, the new legal framework has redefined the way in which the activities that constitute the productive chains of the hydrocarbons and electricity sectors are carried out; on the other, the institutions responsible for supervising and regulating market performance have been strengthened.

Naturally, as a new market emerges, market problems also emerge. Therefore, it will be essential that the new Mexican energy market is wrapped by rules and institutions that seek to correct any eventual market failures that arise, and that, through their actions, establish an appropriate competitive process that yields benefits to competitors, to final consumers, and, of course, to the Mexican state.

Oil and gas Modifications made to the Mexican oil and gas sector undoubtedly meant the most important change in the whole energy industry, as a result of the energy reform. The sector becomes an open market, in which Petroleos Mexicanos (Pemex) – formerly the state-owned company that carried out all oil and gas exploration and exploration (E&E) activities – will compete against other players from the private sector.

This competitive process is implemented through tenders conducted by the federal government, where both the private sector and Pemex will freely participate, in order to be granted contracts for substantive E&E activities.

Transparency will be of the utmost importance during the bidding rounds, since it will ensure that Pemex and the private

sector compete on equal grounds; in other words, a fair and clean competition process will only be possible as long as the federal government does not favour Pemex – which, despite its participation in the open market, will remain a state-owned company – or any other bidder in the development and further resolution of the bidding rounds, or allow any anti-competitive practices, such as collusive behaviours among bidders.

As for midstream activities, the energy reform introduced a new market dynamic that will foster a more effective and fair competition process. The activities of transport, storage and distribution that are developed through the pipeline grid will be operated and managed by a new government agency, the National Center for Control of Natural Gas (CENAGAS).

This entity will assume control and ownership of all pipeline infrastructure that today belongs to Pemex (that is, more than 75 per cent of Mexico’s pipelines), which, owing to its economic features, constitutes a natural monopoly, and administer the activities carried out there.

CENAGAS will operate as a figure internationally known as an ISO (independent system operator), and will be obliged to fulfil important mandates, such as granting open and nondiscriminatory access to the grid to all participants (including Pemex) and avoiding problems of vertical integration in regulated activities, among others.

Electricity The electricity sector in Mexico will also be transformed by the energy reform. It will stop being a vertically integrated industry in which a state-owned company, the Federal Electricity Commission (CFE), conducts all activities of the productive chain industry, and become a liberalised sector in which enterprises, both public and private, will compete against each other in an open market, aiming to satisfy the needs of consumers.

For this purpose, a wholesale spot market will be put in place.

This will seek to replicate international models in order to foster competition among different companies that will be able to generate, trade and supply energy to final users. Domestic supply will be carried out by the CFE, at a regulated tariff, acquiring energy through tender processes, while industrial supply will happen through a free competition process, whereby generators, suppliers and consumers will complete transactions at market, non-regulated prices.

In order to regulate the new market structure, the government has created the National Center of Energy Control (CENACE), which will serve as an ISO, aiming to operate and control the electricity grid.

CENACE will be in charge of different tasks, such as the granting of open access to enterprises participating in the electricity industry, controlling the allocation of power into the grid (both demand and supply), surveilling the continuous bids posed by market participants into the spot market (in order to avoid coordinated anti-competitive effects), and coordinating the transactions executed by the market players, as well as the configuration of the market, in terms of possible vertical integration in the performance of activities by companies.

This market will be particularly interesting in terms of competition policy, since CENACE will be in charge of regulating the operation of a natural monopoly – the electricity grid – which is owned by one of the participants of the market, the CFE, which will compete against other enterprises in the activities of generation and supply of power.

This represents a unique case in the world, and will be one of the main challenges that Mexican authorities will face with the implementation of the energy reform.

Regulators and entities of the energy sector One of the great challenges of the reform is to establish an institutional framework capable of operating the new emerging energy markets in Mexico, in which various companies (public and private) will interact in a competitive environment, hitherto unknown for the country.

Of course, in order to accomplish this goal, it is imperative to create strong institutions with high degrees of independence, able to issue clear regulations and impose heavy penalties to regulated enterprise.

Both regulatory agencies and ISOs will need to follow closely the development of the energy markets, and make sure that competition is achieved. Unlike what happened with the IFETEL (the independent body responsible for regulating the telecommunications market in Mexico), regulators and ISOs in the energy sector have not been endowed with broad powers in competition policy matters.

In this sense, and despite some of its powers seeking to create conditions of competition, these institutions will have to interact closely with the Federal Competition Commission, in order to detect and punish anti-competitive practices in the industry, aiming to correct market failures and benefit consumers.

Conclusions Energy reform is a great opportunity for Mexico to join global trailblazers in the sector. At first glance, the work has been done satisfactorily, as sufficient legal and institutional conditions for implementing competitive markets have been generated, through which agents will interact correctly, generating consumer welfare.

However, the appropriate development of the industry will depend not only on the rules and the institutions themselves, but also on the correct behaviour of both authorities and enterprises.

Possibly the only advantage that Mexico has in being the second-to-last country in the world to undertake a marketopening process of this nature is that it has had the opportunity to study similar processes and learn from positive and negative experiences in other countries.

Now the challenge is to test that knowledge and build a successful energy sector that can boost growth in the country.

Image: by PresidenciaMX 2012-2018 (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

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