CEO Roundtable

Bladex, Magaya, Global Crossing

By Rochelle Broder-Singer

Despite global economic woes, some companies are doing well, but they are bracing for difficulties in the first half of 2009, according to the participants in a December 2008 WorldCity CEO Roundtable: the regional manager for Banco Latinoamericano de Exportaciones (BLADEX), the vice president of sales for Global Crossing Latin America, and the co-founder of logistics software firm Magaya.

An Excellent 2008

Magaya, which sells software that connects shipping and logistics companies to each other and to their customers, saw revenue grow by 40 to 50 percent in 2008, said Gabriel T. Ruz Jr., the company’s co-founder and vice president of business development.

Earlier in the year, the falling dollar helped buoy business with rising exports from the U.S., home base of 80 percent of Magaya’s customers.

The company is also in a good position because Ruz and his partners decided to grow slowly rather than use financing to expand more quickly, “which was a smart move now, looking back on it. At the end of the day, it did pay off,” he said.

Managing finances and investment for careful growth was a lesson learned painfully by Global Crossing, a telecommunications carrier that is both a “carrier of carriers” and a provider of voice, data and video services to large corporations. Back in the late 1990s, the company laid high-capacity undersea fiber around the world.

But the tech crash of 2000 taught executives to be cautious about cash flow and spending, said Federico Lammel, the company’s vice president of sales for Latin America. Global Crossing’s third quarter of 2008 was its tenth consecutive quarter of revenue growth, driven largely by Global Crossing’s move into corporate services. Lammel expected a good fourth quarter, too.

“One of the advantages of Global Crossing in this type of a crisis is that we are a global company. In this global crisis, Latin America is not affected. In this case Latin America is one of the strongest businesses that we have,” he said.

Stability in Latin America — for Now

BLADEX’s Pierre Dulin agreed that Latin America had not yet felt the real affects of the global economic crisis. Having faced down its own series of financial catastrophes early in the decade, the region so far has been sheltered because of tighter regulation of its financial systems and more conservative investments by its major banks.

“Latin America is in a much stronger position in the financial system than the U.S. and Europe,” Dulin said.

BLADEX, a multinational bank controlled by 23 Latin American and Caribbean governments, specializes in trade financing, working with commercial banks, government entities and corporations. About five years ago, the bank switched from correspondent banking to corporate banking. Because the large multinational banks had largely abandoned corporate lending during the past several years in favor of consumer lending, BLADEX had a good year in 2008, Dulin said. It found itself the only large corporate lender in Latin America in 2008.

But Dulin said Latin America will feel the pinch of the global economy: “Everybody knows that it’s coming. When, we don’t know.” He added that in 2008, businesses still had working capital to spend and invest, but that capital is running out as the business cycle ends and banks hold onto their cash. “You’re going to have much more needs in one or two months in terms of working capital,” he said.

He expects the crisis to be mitigated by lending from the International Monetary Fund and InterAmerican Development Bank “” flush with liquidity after most countries paid off their loans in recent years. He also thinks producers in the region will benefit from commodity prices, which he said are stabilizing and in 2009 will start to slowly rise again. “If the countries are able to just keep their sound fiscal policies for six months to nine months and hang in there, it’s going to be fine,” he predicted.

Kept Awake by Uncertainty

All three participants said they worry about what this year will bring. While Magaya still predicts revenues will increase by 55 percent, Ruz worries about how to keep generating growth. The company is expanding from servicing mainly freight forwarders to shippers, and moving out geographically from Florida into New York, Brazil and California. It hopes to grow its customer base this year by 55 percent, on top of 40 percent growth last year.

But his customers are fearful about their businesses, as well as their families’ financial security, Ruz said. And he worries about how to sustain growth.

“Everyone in a business has an exit strategy, or you want one, but at the end of the day, if that growth tapers off, how do you exit?” he wondered aloud.

“How can we be more dynamic, how can we continue that, the creativity? How can we attract better talent that can take our company to the next level?”

Lammel, too, said uncertainty keeps him awake at night. He believes his customers will still need Global Crossing’s services, “in many cases because the services that we provide are the backbone of their business.” But he worries about pressure from customers as they look to reduce costs.

“I’m going to keep my cash in my banks and wait and see,” he said, adding that the company will need cash to continue growing through acquisitions.

On the other hand, Lammel added, “for Latin America at least, we have a huge experience dealing with this type of crisis and we are really prepared to manage those things.” He expects 15 to 20 percent revenue growth in 2009.

Dulin said BLADEX and other Latin American banks know that while everything seems fine right now, it won’t last “” and they don’t know when the bottom will fall out. “Expect that 2009 is going to be very painful,” he said.

The Participants:

Federico Lammel
Vice President of Sales, Global Crossing América Latina
A global IP (Internet Protocol)-based telecommunications carrier, Global Crossing provides bandwidth for some 700 telecommunications companies, mobile operators and Internet Service Providers (ISPs) “” the AT&Ts and Telefónicas of the world. Aiming to be more than just a “carriers’ carrier,” five years ago the company branched out into the enterprise market, and today provides voice, data and video services to some 40 percent of Fortune 500 firms.
Lammel is focused on that enterprise market, working to grow the company’s business in Florida, Mexico, Central America and the Caribbean.

Gabriel T. Ruz Jr.
Vice President of Business Development and Co-Founder, Magaya
Miami-based Magaya provides specialized logistics software solutions to small- and medium-sized companies, with clients in more than 40 countries and more than 1,100 software installations.
Its software aims to remove as much paper from cargo transactions as possible, and customers include international freight forwarders, consolidators, warehouse companies, cargo airlines, shipping lines, wholesalers and distributors. Magaya’s products include software that facilitates electronic communications between logistics companies and between those companies and their customers; international cargo accounting systems; inventory control programs that interact with handheld wireless devices; and supply chain solutions.
A serial entrepreneur on his fourth startup, Ruz has opened Magaya offices in Los Angeles, Houston, New York and Brazil, and oversees Magaya’s sales department.

Pierre Dulin
Senior Vice President-Regional Manager, Miami Representative Officer, Banco Latinoamericano de Exportaciones (BLADEX)
A multinational bank based in Panama, BLADEX helps finance trade flows to and from Latin America and the Caribbean, often functioning as a “bank of banks.” It is owned by 23 governments in the region who have “super-veto” power with their central banks controlling BLADEX. The bank was also, in 1992, the first Latin American institution listed on the NYSE, where 75 percent of its shares trade.
BLADEX’s 161 clients are largely commercial banks, although it also offers trade financing to government entities and certain companies. Dulin is responsible for BLADEX’s markets in the U.S., Caribbean, Mexico and Central America.