All eyes around the globe focused on Brazil last month as soccer star Ronaldo put two in the back of the net against the German national team to give his country their fifth World Cup victory and a much-needed dose of national pride. "The economy is very bad, and football is all that is left for us, opined one Brazilian fan to a BBC reporter, as victory celebrations kicked off from Rio de Janeiro to Sao Paulo. Streets overflowed with parties surpassing the rowdiness of Carnival. Vendors sold sandwiches made on green and yellow bread in honor of Brazil's team colors, and churches cancelled Sunday mass so parishioners could watch the game without invoking celestial wrath.
"You just saw everyone from taxi drivers to the guys selling newspapers out celebrating, says Jeff Sharlach, CEO of The Jeffrey Group, who was in Brazil at the time. "There was a tremendous sense that everyone was in this together. People just forgot about their problems."
Aside from that dose of goal-induced amnesia, however, Brazil's troubles are not so easily dismissed. Growing political uncertainty and a looming economic crisis are daily concerns, leaving open the possibility of a crash that would certainly affect neighboring nations. So when the samba-lines of revelers return to daily life, many eyes will remain on the country as a bellwether for Latin America's economy.
Much of the turmoil stems from anxiety that, like Argentina did last December, Brazil will default on its $274 billion in debt. Late last month, the country's markets verged on panic, leaving the Sao Paulo Bovespa index (BVSP) 18% below its 2002 start, and the country's currency, the real, almost 20% weaker than it was in January. That fiscal frailty is closely tied to the upcoming presidential elections.
The current favorite in polls is Luiz Inacio Lula da Silva, a leftist from the Workers Party who in the past has said he would run a less pecuniary-minded government, possibly even "renegotiating the country's debt. While he recently backed away from such rhetoric, incumbent president Fernando Henrique Cardoso is using the specter of a ruined economy to push his own center-right candidate, Jose Serra, the favorite of business interests.
Until the contest is decided, Brazil's industrial outlook is dicey, and foreign investors are holding onto their dollars.
"There are a lot of companies that are just waiting for the election before they make any moves, both in terms of investment, and in terms of contracts, says Jack Leslie, chairman of Weber Shandwick Worldwide, which runs operations throughout Latin America.
For the PR industry, that is a mixed blessing. On the positive side, few multinational companies are spooked enough to withdraw business from the area, which has an active consumer market. Corporations such as Coca-Cola, Kodak, and Volkswagen have made long-term commitments to South America's largest economy, and remain dedicated to branding and marketing communications.
Pharmaceutical companies are also staying busy in the area, making healthcare a bright spot for PR with new products and clinical trials. Rissig Licha, EVP and managing director for Fleishman-Hillard Latin America, adds that multinational corporations often use Brazil as a test market for new merchandise, creating work with product launches.
But the instability has put a damper on new projects. "It's starting to scare off some foreign investment, concedes Santiago Hinojosa, Burson-Marsteller's president and CEO for Latin America. "Everybody is in a wait-and-see mode, which is not good for us."
For nearby Argentina, however, Brazil's economic troubles seem enviable.
The four-year recession that prompted the country to default on its debt and sparked economic chaos remains in effect. "The streets are still full of cars, and people are still having babies, and visiting the restaurants, says Leslie. "But business is off substantially in all sectors."
Despite bleak statistics, such as a 24% unemployment rate and an economy that shrunk 16% in the first quarter, Argentina recently gained a glimmer of hope when IMF managing director Horst Koehler announced the global lender had begun "an active negotiating relationship which could lead to a bailout.
In the meantime, Argentineans are in the midst of a nationalist focus induced both by economic need and by a sense that multinational companies are "selfish giants, according to a recent Ketchum survey.
"The country's staggering debt and plunging currency have drastically impacted the way companies and our clients here are doing business," explains Gustavo Averbuj, head of Ketchum Argentina. "Localized marketing is on the rise. Both international and local companies tapped into 'Argentinism' and incorporated the theme into their product marketing. He uses the example of Norte supermarkets, a chain owned by French supermarket Carrefour, to highlight the country's new internal focus. The popular grocer recently changed their logo to light blue and white to match the colors of the national flag. Other companies are following suit with PR tactics such as a campaign from a laundry detergent manufacturer that focused on the largest Argentinean flag ever sewn.
And while multinationals may be more cautious with their dollars for the time being, certain sectors such as healthcare and entertainment are holding steady. The Jeffrey Group's Sharlach points out that his company recently did a product launch in Buenos Aires for Nintendo. "They had the event, and then that night there were protests, he says, highlighting that business continues despite the upheaval.
While Argentina may be garnering the most headlines, it is Columbia that faces the greatest crisis in Latin America. After 38 years of war, the leftist Revolutionary Armed Forces of Columbia, or FARC, has issued a proclamation vowing to kill municipal officials who refuse to resign from their government posts. The result is political chaos, with many towns left without mayors, city councils, judges, or even police. FARC leader Juan Pablo told the LA Times that "the idea is to break the normal rhythm of the economy, and the tactic seems to be working. Domestic industry remains dominated by FARC's cocaine and heroin operations. On the legitimate side, Columbia exports flowers, and has an established printing niche.
But those industries have few dollars for PR. Fearful foreign investors have largely lost interest in the area, or are at least holding off until Columbia's president-elect, Alvaro Uribe Velez, takes office in August.
Uribe won on a promise to crack down on the guerillas, but many believe the situation will get worse before it gets better.
"While there has been a medium grade war going on there for some time, everyone now believes it will be ratcheted up in some way, says Leslie.
And until stability can be achieved, Columbia is "not a priority for business interests, maintains Sharlach.
Nearby Chile, however, is South America's brightest spot for PR. "They're the shining example of a thriving democracy with capitalism working very well, says Jeff Hunt, president of GCI Latin America. With only 15 million people, Chile ranks as a second tier economic power and a small consumer market, although the US is their largest supplier of imported goods. But a well-run government coupled with a global strategy on trade makes the country one of the most stable and active regions for PR. A plethora of desirable exports - including wine, seafood, and fruits - combines with a huge mining industry to give the area diversity. And the maturity of these industries is rubbing off to make Chile's PR some of the most sophisticated and strategic in Latin America. "In terms of its own economic strategy, it looks as much to the Pacific as it does north, so they are doing a lot to develop ties with China, Japan, and other trading countries, says Leslie.
But Chile hasn't remained unscathed by Latin American troubles. Late last month, their currency dipped slightly when investors became nervous over developments in Brazil.
The Mexican PR industry provides another growing market. Like Chile, the discipline there has matured to include a more strategic outlook, and corporations are more concerned than ever about building positive reputations, according to Marta Mejia, co-managing director of Mexico's largest agency, Zimat Golin/Harris.
But despite being one of Latin America's strongest consumer markets, the country is still recovering from the recession that plagued the US last year. Eighty-five percent of Mexican exports wind up in the States, closely linking the health of the two economies.
"Mexico's joined at the hip with the US, says Hinojosa. "Right now, the recession is not over as far as we're concerned."
That economic lethargy has prompted many clients to stop annual contracts in favor of project work. Others are negotiating for reduced budgets or shorter terms. While some firms, such as Zimat, are holding steady to their rates, other PR agencies are slashing prices like a warehouse sale to draw in new business. Bruno Newman, co-managing director of Zimat, says a competitor recently beat them in a pitch by offering to cut their fees by 50%. "We're hoping that's not common practice, he laments, "or it's going to affect the whole industry."
Those cutbacks also mean PR activities are more closely scrutinized, leading to campaigns that have value for the consumer, rather than traditional media relations or promotions.
"We are trying to make sure that when we organize an event, it is not just an event, but people learn something or get something, says Mejia.
Despite smaller budgets, Mexico remains a favorite of multinationals both for its proximity to the US and its growing middle class. Healthcare and consumer goods are strong markets for PR, and large tech companies such as IBM and AT&T are increasingly interested in helping Mexico build the kind of hi-tech infrastructure that the US created a few years ago.
TOP GLOBAL AGENCIES OPERATING IN LATIN AMERICA
Rank Agency Name Income (dollars) %
2001 2001 2000 chnge
1 Burson-Marsteller 10,885,000 12,287,000 -11
2 Golin/Harris International 8,221,263 6,115,000 34
3 Edelman 7,482,440 8,308,415 -10
4 Fleishman-Hillard 6,945,000 2,070,000 236
5 Weber Shandwick Worldwide 6,025,000 8,317,184 -28
6 Porter Novelli 3,216,000 3,841,000 -16
7 Hill & Knowlton 1,827,000 1,626,000 12
8 GCI Group/APCO Worldwide 1,562,898 1,786,600 -13
9 MS&L 599,000 695,382 -14
Source: Council of PR Firms
KEY MARKETS IN LATIN AMERICA
Rank Argentina Income (dollars) %
2001 2001 2000 chnge
1 Nueva Comunicacion 8,192,901 NA NA
2 Weber Shandwick Worldwide 6,025,000 8,317,184 -28
3 MP&M Comunicacion 3,865,000 4,728,895 -18
4 Burson-Marsteller 3,205,893 4,942,895 -35
5 Grupo ZCM 3,070,456 4,367,706 -30
Rank Mexico Income (dollars) %
2001 2001 2000 chnge
1 Golin/Harris International 8,221,263 6,115,000 34
2 Edelman 3,149,693 3,455,984 -9
3 Porter Novelli 2,269,000 2,012,000 13
4 Hill & Knowlton 1,827,000 1,626,000 12
5 GCI Group/APCO Worldwide 935,077 932,000 0.3
Source: Imagen; Council of PR Firms