The Latin Trade Group inaugurated the 2011 series of its LT CFO Events on March 11 at the Four Seasons Hotel in Miami. More than 30 corporate finance professionals participated in the invitation-only seminar that offers executives from various industries in Latin America the opportunity to participate in high-level peer group discussions.
Featured speakers addressed the economic outlook for the year, sustainable working-capital strategies and the metrics that matter the most when measuring performance. Latin Trade Contributing Editor Mark Ludwig, who is president of customs and trade consultancy Variant Advisors and is also the contributing editor of LT CFO events, moderated the presentations and discussions.
The March seminar began with an overview of the regional economic outlook. The recovery underway in Latin America and the United States is strong now but could be hurt should oil prices continue to rise, says Kathryn Rooney Vera, director of macroeconomic research at Bulltick Capital Markets.
Oil exporters Venezuela, Colombia and Mexico are “net winners” in the current environment, Vera says. In Chile and Peru, the impact of higher petroleum prices has been offset by the large amounts of mineral ores, like copper and gold.
With oil at $100 a barrel, Brazil’s economy will continue to grow, Rooney Vera says. She cautions that while Brazil “is facing some intense inflationary pressures, not only from imported inflation from high commodity prices like iron ore. But also because of internal pressures such as wage inflation.”
She sees $140 a barrel for West Texas Crude as the make-or-break level for many economies. “In 2008, that was the trigger point,” Rooney Vera says. “In my view, that would be a huge tax on consumption. You’d see companies having to pass along costs in some way.”
The second part of the event showcased sustainable working-capital strategies.
Latin Americans are spending more on consumer goods, says Raul Lamus, vice president of finance and administration, South & Central America, for Amcor, a manufacturer and distributor of a broad range of packaging, supplying the beverage, food, healthcare and other industires. “Sales volume is growing organically. So working capital, unless it’s very controlled and minimized, becomes an obstacle for growth,” Lamus says.
Amcor actively manages its receivables, payables, and inventory levels, along with a foreign-exchange hedging program to keep working capital at optimum levels, Lamus says.
Paolo Giacomini, J.P. Morgan’s executive director — Treasury Services Advisory LATAM, highlighted efforts by his firm to help clients reduce their days sales and days payable outstanding levels. “If you are more efficient at releasing information from customers, for instance, or releasing it from your factory and getting it to your customer more quickly, you can improve your cash conversion cycle,” he says.
The last panel focused on peformance measurements. Cheryl McDowell, vice president of finance & operations, Americas, at Oracle, says the software company created a “CFO dashboard” that allows executives to constantly monitor cash-flow positions.
“We went through and centralized everything, with one big massive computer, and a central location where we have all our data, instead of in a bunch of different countries,” she says. “We went through a major transformation that was all about cost savings.”
Global process “owners” facilitate automating Oracle’s payables and receivables management, McDowell says. These employees “try to improve the processes of everything we do. When a tax law change occurs in a country, it goes through this group,” she says. “They look at how we’re going to adjust.”
Frank Martien, partner at First Annapolis Consulting, says purchasing cards are a key element to automating payments. Martien said the “p-card” usage is relatively low in Latin America compared to other regions, which he attributes to local tax laws and a lack of awareness at the banks and among suppliers of goods.
Organizations like BASF and Intuit are looking to globalize their p-card programs, which will increase their use, Martien says: “They’ll have to educate their suppliers.”
Photo Courtesy of Alex Gort
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