Managing Change in an Emerging Market

 

Carlos Lewit, CEO of Ki Teknology, was nice enough to take the time answer some questions for me the other day on his perspective regarding some of the unique challenges a growing company in an emerging market faces in today’s economic environment. -Interview follows:

1)      What international markets does the company have experience in so far?

KI Teknology was created by the merger of two companies: InterMedia and KEPLER Technology. The founders of KEPLER Technology have been working throughout Latin America and the Caribbean since 1987. Today we are primarily selling in Chile but last year we did projects in USA and Mexico.

2)      What are some of the international companies you’ve been working with?

Some of the international companies we’ve been working with lately are Principal (Chile and Mexico), ING, Bankboston, Budget, LAN, and D&S which was just recently taken over by Walmart.

3)      How do you feel about the current economic fallout? Do you think the company is prepared to weather the storm?

At the start of this period of planning we are in the midst of a turbulent economic, political and social situation that we can define as the most important we have experienced in decades and in which it is not clear where it is or how deep this will go... 

Focusing on our situation, the merger of both companies and the adjustments we have made have been successful over the past year showing substantial progress, and the synergies are clear and concrete. The image of the new company has been consolidated and there have been several instances of new projects that we would have not won on an individual basis, activities that we could not face…. In short, today leaves little doubt that the combination of communication and technology has benefited both companies and has allowed us to neutralize the weaknesses of each and build on and enhance respective strengths…

Last year we said that having adequate financial resources following the merger would be essential to achieve our objectives. -Finish the year with a strong liquidity position and hope that it will help us through the economic crisis, coupled with a significant increase in maintenance contracts. This was probably the most important part of the year, because even though obviously we are not exempt from the problems of the crisis, we can enter it in a better position and even think about opportunities that may arise.

 

4)      In terms of working internationally, are you focused on providing services in one particular area? What’s your approach to this?

Primarily right now we are committed to serving the Boston market because we have a good network there after more than two years working with Babson consulting and incubator programs. Even today we have the support of Babson consultants to guide our business plan and consult on finances and strategy to help support our growth.

5)      Things have been changing pretty quickly around here over the past couple years, what has been the toughest challenge for you managing the growth?

The merger created an enormous challenge in terms of doubling our size, so outside support has been needed with professional management in certain areas as well as focus on a strong system of corporate governance.  The merger was intended to accelerate growth and better prepare us to expand geographically, and through 2008 we were still growing at 26%, so I think this shows that we have handled this particular challenge properly. Finishing 2008 with financial resources and a high liquidity situation was critical to achieve these goals and we did. 

Prudent Chile Thrives Amid Downturn

Wall Street Journal gave another nod yesterday to Chile's fiscal management throughout the economic crisis. The article does a great job of describing the optimisim that continues to exist down here amongst the general populace through the downturn. I've posted relevant sections below as well as link to the article in its entirety. Slds.

By MATT MOFFETT

SANTIAGO, Chile -- During the emerging economies' commodities boom a few years back, Chilean Finance Minister Andrés Velasco was a wet blanket at the fiesta. Chile, the world's largest copper producer, was reaping a bonanza from the quadrupling in the metal's price. Mr. Velasco insisted on squirreling away a large chunk in a rainy-day fund.

As the savings swelled above $20 billion -- more than 15% of Chile's economic output -- Mr. Velasco faced growing pressure to break open the piggy bank. In September, protesters barged into a presentation by Mr. Velasco, carrying an effigy of him and shouting, "The copper money is for the poor people."

The 48-year-old Mr. Velasco, wary that a flood of copper income could generate lending and consumption bubbles, stood his ground, even as the popularity of the center-left government withered. Latin American history, he cautioned, was full of "booms that had been mismanaged and ended badly."

Associated Press

Finance Minister Andrés Velasco built Chile's rainy-day fund.

Today Mr. Velasco looks like a prophet. Since the onset of the global economic crisis, copper prices have fallen by 50%, in line with the sharp decline in other commodities. Emerging economies that got too giddy in the good years are now coping with nasty hangovers. Soybean-dependent Argentina is facing a possible debt default while oil-rich Russia has been stuck bailing out banks and companies that got in over their heads in debt.

Thanks to Mr. Velasco's caution, Chile is now in a position to try to bootstrap its own recovery from the global recession. Mr. Velasco's preemptive moves have kept Chile's government from having to spend a single peso on bank bailouts. Having paid down foreign debt during the fat years, Chile is now a net creditor nation, with a debt rating that was upgraded by Moody's Investors Service in March.

And now Chile is pouring some of its copper savings into a massive stimulus plan, consisting of job-creating public-works projects, tax breaks for business, investments to keep mines operating and other goodies. Chile's plan is one of the largest stimulus packages in the world relative to the size of its economy. The Chilean program is the equivalent of 2.8% of gross domestic product, versus 2% in the U.S.

As a result, economists expect the nation's annual economic output to decline a very slight 0.5% this year, compared with much steeper declines elsewhere.

Juan Carlos Huaiquimil, who sells soft drinks from a pushcart, is the head of one of 1.7 million Chilean families, the poorest 40% of the population, which received cash stipends from the government in March. He says the money, equivalent to $70, was a godsend, helping pay for school supplies and uniforms for his three children. Last week, Chile announced another stipend will be paid in August.

"How many countries are in a position to give away money today?" he asks."........

...."Maligned for being passive during the boom, Mr. Velasco suddenly seemed to be everywhere all at once amid the bust. He flew to the U.S. in September to assess the financial damage first-hand. Then he began a series of meetings at home with leaders of big businesses and residents of small towns. And the tightfisted finance minister started singing a new tune about the copper savings. "The savings aren't to keep behind a window but to spend if necessary," he said.

Mr. Velasco, who had problems in Congress in the past, was able to get the $4 billion stimulus package through both houses of Congress, with unanimous approval, in just nine days in January. Chile will endure a mild recession this year, economists say. But the effects will be eased by a stimulus representing two to three times the amount most other Latin American governments are enacting, relative to GDP.

The package offers subsidies for businesses that hire younger workers, the group most hard-hit by unemployment.

To prod Chilean banks to lend money, Mr. Velasco pumped $500 million into state-owned BancoEstado, Chile's third-largest bank. Bulked up financially, BancoEstado nearly halved its consumer-lending rates and then broke with standard practice and stayed open for business one Saturday in March. The bank got so many customers that day its computer system was temporarily overwhelmed.

Chile is putting $700 million into a huge infrastructure program designed to create at least 60,000 jobs in road paving, airport upgrades and housing construction. The home-building plan, which features subsidies for middle- and low-income buyers, has prompted developers to start clearing land for a 400-unit development called Western Gardens not far from Santiago's airport.

One of the workers on the site is Roberto Urrutia. He had been unemployed since December, and had been so strapped for cash he'd had to cancel his telephone lines and borrow money for his children's schooling. "Putting my hard hat on is the greatest feeling in the world right now," he says.

Read the full article