Esteban Brenes

Financing Environmental Services: The Costa Rican Experience and its Implications

Costa Rica’s pioneering environmental services program seeks to maintain socially optimal forest cover by compensating landowners for the external benefits provided by their forests. The National Forestry Fund proposes to sell carbon sequestration services to the world market and hydrological services to the domestic market. Revenues from these sales, together with tax revenue, is used to finance environmental service provision through landholder incentives for forest maintenance. The mechanics of these programs are discussed, along with implications for the design and implementation of similar programs.

The Internationalization of Latin American Enterprises and Market Liberalization in the Americas: A Vital Linkage

Abstract This article points out the most salient characteristics of Latin Americas economy and the factors that have led to market liberalization. A rationale is given for case-based research. This is followed by a series of propositions delineating the manner in which internationally oriented private-sector firms are evolving and the role they are coming to play in the development of the region. The themes of the cases in this special issue are then summarized and linkages to the propositions are suggested.

Strategies for Globalizing Latin American Business

Economic and commercial changes taking place at the The reduction of trade barriers, the liberalization of economies, and the subsequent change in the structure of industries national and international levels have important implications for the Latin American enterprise. Economic have all affected the level of competition in Latin America. This in turn has substantially heightened pressure on both liberalization, real exchange rates, reduction of trade barriers, and vanishing protectionism allow for the penetration of interlocal companies and on multinationals located in the region that are interested in developing new strategies for competing national competitors in domestic markets with equal conditions, intensifying business rivalry. This is no doubt a basic in local, regional, and international markets. In recent years, we have observed different ways of competing in each of these reason for the greater interest that we have noted on the part of Latin American businesses in redefining their competitive markets, and although the individual company strategies vary widely, we may group them into four general categories for strategy, as we see in the cases selected for this special issue. The fundamental objective of formulating and implementanalysis: national defense; alliances between local competitors; creation of real competitive advantage at the local level; and ing a business strategy is to ensure higher return on investment in the long term. This competitive advantage should be unique going international, regional, or global. and depend upon a range of key elements whose objective is to make imitation difficult for the competition. Both high and National Defense Strategy low performing companies can be found in all industries, independent of how attractive these industries may be. This This strategy is used by Latin American companies to defend clearly demonstrates that the success of a business will depend their local market through the active promotion of protectionon the concrete actions it takes to compete, not on the average ist policies. They lobby for governmental and congressional profitability level of its industry. support in keep tariffs high and to impose nontariff barriers on The history of economic development in Latin America international trade, thus restricting the entrance of imported has been marked by policies of import substitution during goods and services into the country or at least making their much of the twentieth century, as a means of spurring industriprices prohibitive for local consumers. alization throughout the region. This translated into greater The arguments commonly used to support this strategy levels of protectionism, including high tariffs, nontariff barriare based upon the unfair advantage of large multinational ers, and licensing, which in the majority of cases promoted companies. These arguments include fears about the impossithe development of local businesses with low levels of internability of competing against multinational giants and about the tional competitiveness. Indeed, in the past, doing business threat that they will come in and buy up or destroy local successfully was relatively simple when compared with other businesses and the employment they generate. Such arguparts of the world or to the same region today. Almost anything ments are appealing to many political factions. They are useful was good business since both the competition and consumer for labor unions and may be convincing to the public at large options were totally limited. The case Turri S.A. (Paladino that has never had the opportunity to exercise choice in daily and Almaraz,1994) included in this special issue, describes consumption. Throughout the years, this strategy has been past and present economic development strategies in Latin common practice in the Latin American business environment America by using Argentina as an example and clearly traces under the import substitution model. Today, it is used by the implications of these policies for management at the combusinesspeople and managers who have not been able to pany level. anticipate the impact that free market forces and trade liberalization would have on their industrial sector. As a result they have no other recourse but to resist the change by fighting Address correspondence to E.R. Brenes, INCAE, P.O. Box 960, Alajeula, Costa Rica. to keep international competition from penetrating the local

Free zones in El Salvador

Abstract In this case study a recent graduate of a Central American MBA program is confronted with the design, formulation, and evaluation of an international investment project for establishing a private-sector free trade zone in El Salvador. The main objective of private and public free trade zones is to facilitate export-oriented industrial development. Most highly developed free trade zones around the world offer a variety of benefits to the companies that operate in them. These benefits include tax exemptions, duty-free imports, and personnel recruitment services. At the beginning of the case, there is a checklist of all the items that should be taken into account properly to design, prepare, and evaluate a project of this kind. The case provides information about world demand characteristics for public and private free trade zones that any company that is potentially interested in doing business in a free trade zone should take into account. In addition, it offers information about countries offering free trade zones and how each can compete to attract additional investors. The emphasis is placed on the Central American region, particularly El Salvador and Costa Rica. El Salvador is the site where the prospective investors are located, and Costa Rica is considered as an alternative site. When the case takes place, Costa Rica is considered to be the most advanced in terms of investments in and development of public and private free trade zones. The case provides detailed information on both macro and micro elements. It is therefore expected that the decision will be based not only on qualitative considerations, but also on quantitative ones. The macro elements include the potential impact of changes in incentives granted to foreign investors and the image of instability such changes might convey to investors. As for quantitative issues, information in the case is sufficient to develop a comprehensive financial analysis of the project. The basic purpose of the case study is to present the major factors to be considered in making decisions about international site location, including the importance of macro environmental elements, the site itself, costs, prices, and market characteristics. The discussion emphasizes the importance of this final element, the market for public and private free trade zones. The case may also be used to achieve other secondary objectives, such as: • • Understanding the role of the parties involved in the decision • • Calculating the cost of the preinvestment stage • • Understanding some of the typical problems arising from skipping stages without awaiting final results • • Mastering the use of financial analysis indicators such as the internal rate of return (IRR) when a political or country risk is involved.

Café Britt, S.A.

Abstract Mr. Steve Aronson, CEO and founder of Cafe Britt, is faced with the decision of how to promote his companys growth and development through international markets, particularly U.S. specialty coffee markets. This case study refers to a highly innovative and creative company. Cafe Britt has developed new market segments within Costa Rica. It leveraged its international marketing effort by turning its coffee roasting plant into a major tourist attraction for the rising number of international tourists who visit Costa Rica each year. Traditionally, developing countries have exported a wide variety of agricultural commodities with little or no value added. Costa Ricas coffee is no exception. For almost 200 years, this country has exported green coffee beans. The export product is later roasted by multinational companies and retailed in international markets under different brands. Domestically, Costa Ricas coffee consumption reflects the consequences of an export-oriented industry. Only the lowest quality coffee was destined for domestic consumption, that is, produce that is not of export quality. As a result, Costa Ricans had not been able to learn to appreciate good coffee. They considered coffee containing “fillers,” such as sugar or corn, to be good. Given local market characteristics, in 1983 Cafe Britt foresaw the opportunity to develop a new, high-quality roasted coffee market niche. Its brand quickly gained unquestioned recognition in the domestic market. In 1993 Mr. Aronson was considering what to do about the limited scope for growth afforded by the domestic markets size and potential. Mr. Aronson is also president of other companies that process and export green coffee beans. These other companies exported U.S.

Pollo Campero in the USA

22 million annually. Mr. Aronson felt that given his local success with Cafe Britt, the growth and development potential of his new company could be a key element for the groups growth. In particular, he realized that he could obtain higher prices and margins per ton if he could sell his own packaged brand of roasted coffee in international markets. This management case traces the companys local development since its inception. It also discusses its recent incursion into managing tourism within its facilities. In addition, the case provides information about the companys production and supply capacity, international markets for green coffee beans and roasted coffee, and the recent development of specialty coffees in the United States. Toward the end of the case study, Mr. Aronson considers three specific alternatives to market his product in the United States: sell direct by mail to tourists who visit his facilities in Costa Rica; sell to wholesalers; and contract with a large mail-order company to sell his coffee. The case contains sufficient information for a qualitative and quantitative analysis of all the alternatives, as well as an assessment of other options.

Case Studies on the New Global Strategies of International Business in Latin America

Purpose – This case illustrates the challenges that Pollo Campero, a Guatemalan fast food company, faces when expanding in the US market. The purpose of this paper is to stimulate a discussion about consumer segmentation, competitive strategy and the internationalization of emerging market multinationals. Design/methodology/approach – The case study is based on primary research conducted in conjunction with the company, including interviews with senior management and an ample review of documents. Secondary sources have been used to gather information about the industry, the US market and consumer segments. Findings – The case illustrates that Pollo Campero was initially very successful in the US market because it appealed to consumers of Central American origin. It found it harder to appeal to a broader range of US consumers, who had no emotional attachment to the brand. Originality/value – This is a complex, in-depth case study suitable for use with advanced MBA students and practitioners. Depending on t...

Prologue to this special issue: Strategic choices in the new international enterprise in Latin America

Business leaders in Latin America have for years accepted school in the Universidad de Valparaíso in Chile; and the wellthe reality of globalization. There is now evidence, preknown agribusiness program, PENSA, in the Universidade de sented in the case studies compiled for this Special Sao Paulo, Brazil. Issue, that the most innovative companies have moved beyond The industrial settings and issues addressed in the cases the stage of recognition. Indeed they have begun to pursue are widely varied, but they may be placed along a spectrum strategies of international expansion, through exports and that begins with initial export attempts, proceeds through foreign direct investment, competing successfully for world more ambitious strategies of direct investment and strategic markets. alliances abroad, and finally to issues of strategy implementaThe case studies in this issue were gathered from the foretion. Each case is preceded by a briefing that describes the case most business schools throughout Latin America in response setting and summarizes the key issues, and each is followed by to a challenge that began in 1993, when Arch Woodside, a teaching note that provides not the “answer” but a structured Editor of the Journal of Business Research, first visited the guide for case discussion. international business school, INCAE, in Costa Rica. Founded The first two cases involve the initial responses to small, in 1964 by Central American business leaders with the assisfamily-owned firms to the globalization trends. Consorcio tance of the Harvard Business School, INCAE has used the HBS Ferrex is a group of small Chilean hardware manufacturing case method to educate leaders in business and government firms that band together for export of their products under a throughout the region over the past 30 years. Dr. Woodside common brand to the United States. Turri, S.A. is a familyoffered the opportunity to publish the best of the INCAE cases owned Argentine machine tool company that responds to in a Special Issue of the JBR in January 1997. globalization by acquiring new technology and seeking export The cases in the first Special Issue dealt with the strategic markets. The third case describes a Chilean manufacturer of choices faced by forward-thinking international enterprises in kitchen utensils and bakeware that has already exported to Latin America. After the success of this first issue, plans were the developed markets of North America and Europe and is immediately made for a second one but with some modificanow looking to compete in the growing markets of Latin tions. Cases were sought on companies that not only recogAmerica. Similarly, the fourth case describes an Argentine nized the challenges of globalization but also were shaping company that already has begun to export its water heaters strategies to address these challenges. The cases were drawn to such distant markets as Australia and must now confront not only from the INCAE collection but also from other topthe competitive reaction. rated Latin American business schools: IAE (Instituto de AdminThe next three cases describe problem situations in compaistracion de Empresas) in Argentina; the Adolfo Ibañez business nies that have gone beyond exporting. Agroceres is a Brazilian multinational seed producer that forms a global strategic alliance with PIC, the British pork producer, to exploit new Address correspondence to J. Olsen, 7089 Boone Avenue, Baton Rouge, LA 70808. genetic technologies. Bancrecen is a new Central American

The future of entrepreneurship in Latin America

Abstract Latin American countries have taken bold measures to open their domestic markets to international investment and competition, to encourage private initiative and reduce government intervention, and to promote trade within the region. These measures have encouraged the emergence of a new breed of internationally oriented enterprise in the region. This special issue brings together one article and nine cases that discuss strategic choices that such enterprises have had to face. These contributions invite an examination of the factors that stimulate the emergence of such enterprises, what determines their performance, and how they are affecting the development of Latin America. We hope that the article and the cases will stimulate classroom discussion and research about a region that is of vital importance to peace, progress, and stability in the world.

Grupo Britt N.V.: should it seek to expand business in the USA?

Introduction: the Emergence of an Entrepreneurial World J.Haar & E.R.Brenes Entrepreneurship in Argentina M.Pradilla Entrepreneurship in Brazil: the Role of Strategy and the Institutional Environment A.da Rocha , J.Ferreira da Silva & J.Carneiro Entrepreneurship in Chile G.Jimenez & K.Usach The Emergence of an Entrepreneurial World. Country Case: Colombia R.Vesga & A.C.Gonzalez Costa Rica: IT Entrepreneurs Leapfrogging for Innovations L.J.Sanz & R.Porras Entrepreneurship in Mexico V.Jones The Emergence of an Entrepreneurial World: Peru K.Nakamatsu , O.Morales & J.Serida Entrepreneurship in Venezuela: Case Study R.Vainrub & A.Rodriguez Conclusion E.R.Brenes & J.Haar