Global Rankings - Latin America - PR is booming south of the border, and industry big boys are taking notice - and moving in. But as Diego Dillenberger reports, some are having a smoother ride

When the Interpublic Group of Companies bought Nueva Comunicacion of Argentina early this year for an estimated dollars 23 million, the PR industry in Latin America took a step up. Never before had so much been paid for a PR agency here. Cesar Mansilla, who founded Nueva and continues as its CEO, says Interpublic had 'a clear idea of the strategic importance of Latin America in the development of its business.'

When the Interpublic Group of Companies bought Nueva Comunicacion of Argentina early this year for an estimated dollars 23 million, the PR industry in Latin America took a step up. Never before had so much been paid for a PR agency here. Cesar Mansilla, who founded Nueva and continues as its CEO, says Interpublic had 'a clear idea of the strategic importance of Latin America in the development of its business.'

When the Interpublic Group of Companies bought Nueva Comunicacion of Argentina early this year for an estimated dollars 23 million, the PR industry in Latin America took a step up. Never before had so much been paid for a PR agency here. Cesar Mansilla, who founded Nueva and continues as its CEO, says Interpublic had 'a clear idea of the strategic importance of Latin America in the development of its business.'

The region is arousing greater interest on the part of many of the world's largest PR firms. As investors and multinational corporations discover the region, and greater democracy ushers in both economic liberalization and a freer media, PR at last has something to hang its hat on.

Until now firms such as Burson-Marsteller, Hill & Knowlton, Porter Novelli, Ketchum and Fleishman-Hillard have obtained only 5-10% of their global earnings in Latin America. But things are changing, now that the region has stepped onto the fast track of growth.

'Four years ago we forecasted that the public relations business would become very important in Latin America in some ten years,' says David Drobis, chairman of Ketchum PR. 'Now I believe it will take barely two more years.'

In light of this, Ketchum has opened an office in Mexico and taken a minority position in a Costa Rican agency. Drobis says that in the coming months his firm will close purchase deals with affiliated agencies in Brazil and Argentina, which, along with Mexico, are the key Latin American markets.

But growing a local business is not the only reason for becoming established in this part of the world. There is also a broader strategic reason, explains Ruben Aguilar, who directs Ketchum's business in Latin America: 'It's not a question of the dollars 10 million we are earning in the region now. The key is to be here, because otherwise we could not retain many of our clients back home.' Translation: a global PR firm that purports to represent global-minded corporations can no longer afford to overlook Latin America and its more than 320 million people.

It was this philosophy that led Burson six years ago to create the region's biggest PR network, with offices in Brazil, Mexico, Chile, Argentina, Venezuela, Colombia, Guatemala, Panama and Puerto Rico. All of them are directed from Miami, where the regional president, Santiago Hinojosa, has his headquarters. As reported last week in PRWeek, Burson just won the Latin American account of Aventis Pharma, already the region's pharmaceutical market leader. Aventis credited Burson's extensive Latin American organization with helping seal the deal.

Miami is also regional headquarters for Fleishman, which has its own offices in Mexico and Puerto Rico and a network of affiliated agencies in almost every Latin American country. It's hit a rough patch with its affiliates in Argentina, though, who have begun negotiating their sale to H&K. Fleishman has switched Argentine affiliates three times in six years.

Investor relations giant Citigate Dewe Rogerson says it is considering opening a Miami office in order to launch a Latin American initiative.

The Weber Group, one of the leaders among US firms in technology practice, already works out of Miami, as does the only US PR agency that deals exclusively with Latin America, The Jeffrey Group. Led by Jeffrey Sharlach, who was formerly with Rowland, the seven-year-old firm had dollars 3.5 million in revenues in 1999 through its offices in Brazil, Argentina, Colombia, Venezuela, Peru, Mexico and Chile. Sharlach echoes other industry watchers that the three strongest markets in the region - Argentina, Brazil and Mexico - will continue to provide the bulk of Latin American PR business.

Not everyone, though, shares his opinion that Miami is 'the business capital of Latin America.' Ketchum left Miami for Atlanta. H&K never quit New York. 'Our clients thought that as New York is the financial center of the world, we could give them the best service here,' says Juan Capello, president and managing partner of H&K for Latin America.

Last year H&K, which already had offices in Mexico, Argentina and Brazil, acquired agencies in Chile and Guatemala. This year the firm bought another Argentine agency, Del Castillo, and at press time was about to close the acquisition of a former Fleishman affiliate.

'In percentage terms, Hill & Knowlton's earnings grew more in Latin America in 1999 than anywhere,' says Capello. 'We have doubled our earnings from one year to the next, and although we remain the smallest region in the company, we're also the one with the most rapid growth.'

While some big firms manage Latin American business from the US, others have decided to open up shop in the thick of the action. Porter Novelli chose Buenos Aires for its regional headquarters, where Juan Carlos Lynch, the regional president, runs company offices in Argentina and Mexico.

PN's 10-office network in Latin America is about to buy In Press in Brazil.

Edelman moved its regional headquarters from Miami to Mexico City, where Gabriel Guerra Castellanos oversees Edelman offices in Argentina and Brazil, as well as affiliated agencies in Chile, Venezuela, Colombia, Costa Rica and Panama. Edelman's Latin American operations had dollars 8 million in revenue in 1999.

Guerra believes Latin America's economy will experience strong economic growth, but that PR companies will grow even more strongly. He sees his own country, Mexico, as among the most promising: 'If the Mexican economy can maintain a good growth rate,' says Guerra, 'companies will move ahead with their business projects, which will generate a positive climate for those who, like us, offer services.'

The campaign of Mexican president-elect Vicente Fox, Guerra says, demonstrated the effective use of PR. 'That will show the way to companies,' he says.

Guerra predicts an increase in the credibility of his country and of its communication media, which he believes will contribute to the growth of public relations.

Other Latin American countries from which much is expected are Brazil and Argentina. A year after currency devaluation and recession, Brazil has made a comeback, and American PR firms have taken notice: BSMG, Ogilvy PR and Cohn & Wolfe have all set out to buy Brazilian agencies. Argentina, whose sophisticated and mature economy is emerging only sluggishly from its recession, still expects a second wave of landings by foreign PR firms.

The development of Latin American economies is dovetailing with robust times on Wall Street, and both sides are making use of the Internet to be in contact. American PR agencies, which have taken the lead in the region over their European counterparts, first looked to Latin America to fulfill the needs of US clients, says Richard Edelman, president and CEO of Edelman PR.

'Then they discovered local corporations they could offer their services to,' Edelman adds. 'Now, thanks to the Internet boom, both Web companies and traditional companies in the region need PR services in the US.'

Sounds like the beginning of a beautiful friendship.



Argentina: a fertile ground

The PR industry has grown at a feverish pace of more than 40% over the past two years - surprising given Argentina's struggle to emerge from a long recession.

The secret is that corporations are coming to understand, as in few other places in South America, that their business needs PR, especially at a time of economic crisis. More and more businesses, especially in the hi-tech and Internet arenas, are retaining PR agencies.

Argentina has the highest per capita income in South America as well as an intricate, sophisticated media landscape, making it fertile ground for public relations. Over the last five years, all-star agencies including Burson, H&K, Edelman, Porter Novelli, Weber and Manning, Selvage & Lee have bought operations in Argentina; H&K, for one, probably isn't finished shopping. The Argentine PR market is now expecting a second wave of purchases, in which GCI, BSMG, Ketchum and Fleishman - all of whom are in negotiations - could become established here.

What's so attractive about faraway Argentina? 'It's the country which in the PR field has had its fastest development in Latin America, and it's growing both as a market and in professional standards,' says Nueva CEO Mansilla.

Nueva had dollars 10 million in revenues in 1999, and there are indications that other top 10 Argentine firms could pass the dollars 5 million barrier this year, among them Burson's Buenos Aires branch and ZC&M, an independent firm that has been the top winner of new accounts in 2000.

The only bad news appears to be that strong competition and the recession have depressed fees more than anywhere else on the continent, and, PR execs say, the situation will not improve until at least next year.



Brazil: a giant stirs

Brazil's economy is as large as Argentina's and Mexico's economy combined.

But Brazilian PR has not grown apace. Most estimates put total agency fees in Brazil at less than dollars 50 million a year. Among major outsiders, only H&K, Burson and Edelman are firmly established, having bought local firms. But now other major US firms have decided it's time to put Brazil on the map.

Enter Weber, Golin/Harris, Shandwick, Ogilvy, Cohn & Wolfe and BSMG, all of which are discussing the purchase of local firms. Ketchum will soon close a deal to buy its local partner, Estrategia, while Fleishman will reportedly acquire top-ranking Gaspar & Asociados. PN is represented by In Press, another top Brazilian agency. Companhia de Noticias appears to be negotiating a sale to Ogilvy. Suddenly Sao Paulo has the makings of a key market for multinational PR firms.

If professional PR is only just waking in Brazil, its adjunct institutions are bright-eyed and bushy-tailed. Brazilian colleges offer 70 degree courses in PR; national and regional councils represent PR pros and have created a professional body with which all those in PR must register.

But the love of regulation brings some problems. PR people are theoretically forbidden to issue press releases or handouts because in Brazil only accredited journalists may do this. Complex rules even forbid offering communication services to government - that's the prerogative of ad agencies. Not surprisingly, with so many rules, the market is weaker and less developed than it could be. Two 20-year-old PR advocacy groups recently merged to fight over-regulation.



Central America: PR breaks out

Until a few years ago, multinational corporations considered Central America a place with more problems than promise. It was raked by war and its pace of development was uncertain. But the decade-old peace process has made the region safer and more business-friendly, and contributed to the development of public relations.

The first outside agencies, among them PN and Ketchum, opened their doors in Costa Rica, the region's most prosperous country and strongest democracy.

Then Ketchum ventured into Panama and Guatemala, setting up affiliate relationships with area firms. By now, PN has affiliates throughout Central America.

Last year H&K surprised everyone by opening its own office in Guatemala, the first there for a major US firm. Juan Mauricio Wurmser was put in charge. Guatemala, which made peace with guerrilla insurgents only four years ago, is receiving big investments from foreign companies, who are bringing with them a thirst for PR. The public sector there, as in the rest of the region, is also a fertile market for PR firms.

But the leaders of the region's incipient PR industry are 'local heroes' such as Interimage Latinoamericana, in Guatemala City, which is affiliated with Spanish PR giant Hispacom Sanchis & Asociados. Interimage, directed by Julio Ligorria, a PR guru and expert in political campaigns, is regarded by many as a trendsetter and trailblazer for the young industry. With revenues of dollars 7.4 million in 1999, Interimage holds its own with the most profitable firms in Latin America.

Even tiny El Salvador has as many as 15 agencies. Forecasters predict that as Central American countries continue to increase trade with their neighbors, with Mexico and with the US, the region will become a greater magnet to internationally minded PR firms.



Chile: a fruit of democracy

While under military dictatorship for almost three decades, Chile developed the most open, internationalized economy in South America. But that didn't include PR: when democracy arrived in 1990 there were all of about three firms in the capital, Santiago.

In Chile, if anywhere, PR is clearly a fruit of democracy, because today a dozen firms offer a wide range of communication services to Chilean companies. They help clients cope with a free, critical press and a society of sophisticated, discriminating consumers.

But only two North American agencies have taken advantage of the recent PR expansion here: Burson set up in Santiago six years ago, and H&K, who last year bought local firm Captiva, forming Captiva Hill & Knowlton.

CARMA, the media analysis company, also has its Latin American headquarters in Santiago.

Although a smaller office than others in the region, Burson's operation in Chile earned an estimated dollars 1 million last year, and is shooting for dollars 1.5 million in 2000. Its local CEO, Roy Caple, who is from Mexico, says, 'Though many local companies don't use communication as a business tool, things have changed of late. I believe Chile understands the need for communication.'

Edelman is also represented in Chile, through an affiliation agreement with Tironi Asociados. Other North American firms are entering the Chilean marketplace via the same method.



Colombia: more than potential

Probably no South American government knows better than Colombia's the value of good PR. Possibly because it doesn't get very much of it. Along with fighting two different bands of guerrillas and roving paramilitary thugs, Colombia has a perhaps unrivaled image as a drug trafficker's paradise.



For all of its current ills, however, many believe the country has great potential. Its strategic location, oil reserves, renowned coffee crop and resilient economy point to a bright future if political wrinkles can be ironed out. BSMG, for one, knows this well, having for some time managed the substantial account of the Colombian government.

For the most part, the big American PR firms prefer working at one remove, through a local affiliate, to full immersion in the Colombian marketplace.

Weber, Ketchum and Fleishman all have local representatives - McCann Comunicacion Corporativa, Conexiones & Comunicaciones and Publicis-CB, respectively - as do Burson and PN. In fact, among all large foreign firms, only Spain's Llorente & Cuenca has hung out its own shingle, in Bogota.

Most PR agencies in Colombia do not discuss earnings, for both tax and security reasons. Of those who do, Ketchum ranks number one in revenues, with Burson a close second. Official figures aren't available, but Burson executives forecast earnings of dollars 500,000 in 2000.

Bogota's roster of scrappy local players includes Fabiola Morea Comunicaciones, which has won large clients like Ford and IBM away from agencies affiliated with foreign firms, and Guiomar Jaramillo Comunicaciones, whose clients include Philip Morris, British Airways and Xerox.



Mexico: soaring into the century

If any Latin American politician understands the need for PR, it's Vicente Fox, president-elect of Mexico. A former Coca-Cola executive with an instinctive understanding of what PR can do for a brand, his presumably pro-business administration will probably spark investment in Mexico by North American companies, all of whom will need PR.

Magdalena Carral, head of Edelman Mexico, believes another opportunity for PR firms will arise from the Fox government's plans to recharge Mexican industry.

Along with Brazil and Argentina, Mexico is one of the three great markets in the region, and has the added attraction of being appraised as investment grade by US credit rating agencies.

After 70 years of PRI government, the arrival of Fox points to a maturing of democracy - more liberty, freer and higher quality media - and a greater need for PR by companies.

As governing party without a parliamentary majority, Fox's administration will demand more professionalism in lobbying and public affairs, to the benefit of PR agencies.

Until the 1990s PR was a relatively misunderstood concept in Mexico.

'Companies equated public relations with having an advertising agency,' says Sergio Vera, finance director at Burson, who adds that new trading agreements like NAFTA made it easier for pure PR agencies to open their doors in his country. The top echelons of PR in Mexico are dominated by the US as nowhere else in the region, led by Burson, Edelman, Fleishman and PN. Business has churned along at an annual growth rate of 25-35%, and no one thinks it'll go anywhere but up after Fox takes office.

'In the last year Edelman Mexico earned dollars 3.5 million, and we expect it to maintain its pace in coming years - to keep on growing,' says Carral.

But, in what could be a sign of turf tiffs between young firms and their entrenched elders, she says PR agencies should become more open and professional.

'Many new companies have given the business a negative image,' says Carral.



Peru: the reign of Spain

Peru has lagged behind some of its South American neighbors in developing a public relations industry: its economy is not as strong, its consumers are somewhat less sophisticated than in Chile or Argentina and its political instability in recent times has frightened away some investors. In addition, fees are generally lower in Lima - only about dollars 2,000 to dollars 3,000 per month per account, on average - which serves to discourage major players. There are currently only about half a dozen strong PR firms operating in a market estimated to be about dollars 15 million annually.

Four are Peruvian, and the other two Spanish. Much like the Spanish language conquered South America except in Brazil, US PR firms largely have led foreign agencies onto the continent - except in Peru, where Spanish firms have made a beachhead. The major Spanish agency Llorente & Cuenca opened an office in Lima in 1999, charged with directing expansion throughout Latin America.

Another leader in Spain, Hispacom, Sanchis & Asociados, has an office in Lima under the name Hispacom. The firm was harshly criticized by press in Spain and Peru this year for its involvement in Peruvian president Alberto Fujimori's controversial re-election campaign, in which there were allegations of voter fraud.

But the US hasn't stayed away entirely: Ketchum and Fleishman are affiliated with Peruvian agencies Corporacion Pro and Imagen & Noticias, respectively.



Venezuela: waiting on Chavez

Public relations was essentially unknown in Venezuela until the 1980s, but it got a real jump start after the 1995 election of former president Rafael Caldera. He began opening the economy to foreign investment, especially in oil, Venezuela's main export, and that served as PR's entree. But there is a waiting game now in Venezuela, as people look to see whether the new and somewhat controversial president, Hugo Chavez, will continue what his predecessor began.

President Chavez shook more than a few people when he visited Iraq and embraced Saddam Hussein, and Venezuelans don't know yet if this - and other uncertainties - will affect investment in their country. The president himself might require a little image counsel.

Among major PR firms, only Burson has opened its own office here. Edelman is represented by a Caracas firm, Pizzolante Comunicacion Estrategica, which is among the oldest and biggest local agencies. One of the few to talk hard financial numbers - in part because the president's position on new taxes isn't known yet - is Newstar Corporate Communications, owned by advertising agency Leo Burnett Venezuela, which earned dollars 2.3 million last year, a substantial sum in the Latin American market.

Some, including Rafael Pedraza, managing director of Burson-Marsteller Venezuela, are upbeat about PR's future. 'The economy will emerge from the recession because the government itself will begin to invest,' he says. 'Burson grew 25% last year and we expect to advance at the same pace in 2000.'



Edited by Diego Dillenberger with country reports by:

Nara Damante, Sao Paulo (Brazil)

Alfred Kaltenschmitt, Guatemala City (Central America)

Francisca Araya, Santiago (Chile)

Nohra Ramirez de Canete, Bogota (Colombia)

Arantzatzu Rizo, Mexico City (Mexico)

Perla Crespo Izaguirve, Caracas (Venezuela)

Vidal Silva, Lima (Peru)

Diego Dillenberger, Buenos Aires (Argentina)

LATIN AMERICAN RANKINGS: A NATION-BY-NATION BREAKDOWN

ARGENTINA

Rnk Agency Name 99 Income Foreign affiliates

dollars US

1 Nueva Comunicacion 9,896,619

2 Burson-Marsteller 4,300,000

3 MP & M Comunicacion 3,567,000

4 Identidad e Imagen Institucional 3,228,600 Corporate Research

Institute (Luxembourg

& UK)

5 ZC&M Consultores 3,109,979

6 X Comunicacion 2,103,764 IMS (USA)

7 Muchnik, Alurralde, Jasper

y Asociados 2,020,838 Manning, Selvage

& Lee

8 Gustavo Martinez Comunicaciones 1,580,000

9 Silvia Mercado y Asociados 1,400,000

10 Open Group 1,350,000

TOTALS 32,556,800

Source: Revista Imagen

BRAZIL

Rnk Agency Name 99 Income Foreign affiliates

dollars US

1 Gasper & Asociados 4,375,000

2 FSB Comunicacoes 4,344,000

3 Cia de Noticias 4,206,000

4 Burson Marsteller 2,007,000

5 Maquina da Noticia 1,770,000







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