Today in Latin America, as elsewhere, pipes and drums for product rollouts have long since given way to the more sophisticated bells and whistles of contemporary marketing. Macondo has been eclipsed by a proliferation of gleaming office towers and high-tech factories in some of the world's greatest cities. Yet Latin Americans will tell you that amid cell phones, e-commerce, and killer apps, something of Macondo's immutability remains. From Mexico in the north to Brazil and Argentina in the south, Latin America and its five hundred million people still provide astonishing contrasts in geography, culture, and lifestyle. According to HBS alumni and professors who work and conduct research in the region (see page 45 for a report on the HBS Latin America Research Center), Latin America is an evolving, untapped market of vast potential, formidable challenges, and many fascinations.

In the 1980s, democracy-oriented governments committed to social reforms and open markets and trade began to emerge across Latin America. In recent years, state-owned companies have been privatized, currencies stabilized, and inflation reduced. These changes have helped attract a fresh influx of foreign direct investment, and commerce and enterprise have been stimulated accordingly. But despite this favorable trend in the business climate, further improvements are urgently needed.

HBS professor Pankaj Ghemawat, whose research focuses on cross-border competition, notes, "It's hard to make generalizations about the region, but the high cost of capital is one of several common issues most Latin American countries are dealing with. It's a factor that constrains business strategy across the region." Latin America's equity markets are thin and capital is scarce, Ghemawat says, with the result that companies must avail themselves of foreign markets. Compared with other emerging markets where local stock exchange listings have grown, liquidity in many Latin American exchanges has diminished in recent years. The purchase of local, family-owned companies and state-owned enterprises by outside multinationals (Spain, with its linguistic and cultural affinities, has been particularly active) is a major factor in this phenomenon.

Gaston Azcarraga (MBA '83) is chairman and CEO of Mexico City-based Grupo Posadas (www.posadas.com), the leading hotel company in Mexico with operations in Brazil, Argentina, and the United States. Azcarraga says that foreign capital is still wary of Mexico in the wake of a series of economic crises. In addition, he notes, "We now must compete against Internet companies for capital as e-commerce firms attract investors seeking high returns. But I think as our country settles in with new political leadership and a pro-business outlook, investors will again turn to Mexico."

DeRemate.com, an Internet auction house founded in 1999 and headquartered in Buenos Aires, has operations in eight Latin countries and the United States. Its cofounders, CEO Alejandro C. Oxenford (MBA '97) and VP Guillermo R. Cepeda (MBA '98), have benefited from investor interest in the Internet in Latin America. Through two rounds of funding, they have secured $60 million from foreign investors. Says Oxenford, "In our sector, U.S. financial insti-tutions have been fairly active, but at this point venture capital has not." Another company, Quaxar.com, an e-commerce and Internet consulting firm based in Miami, took a different approach to the matter of start-up capital. Leonel Azuela (MBA '00), managing partner of Quaxar, explains that "we opted for a strategic partnership with an established U.S. industry leader, agency.com, that would not only give us the necessary financial support but also its knowledge and experience."

Carlos A. Sicupira (9th OPM) is a partner in São Paulo-based GP Investimentos, Ltda., an in-vestment firm with some $1.3 billion under management and important holdings in companies across a broad array of industries. From his vantage point, Sicupira confirms that even in Brazil, the world's ninth largest economy and the powerhouse of Latin America with its 170 million people, capital is not easy to find. "In Brazil," he states, "there is a shortage of equity and loan capital. The best companies can find funding, but most of that will come from outside the country. Essentially, there is no capital available to small or medium-sized companies here."

Beyond financing, additional regional problems cited by Ghemawat and others include, to varying degrees, lack of infrastructure and logistics, overregulation, inadequate and costly telecommunications, income and education disparities, and corruption. Add to that a history of political and economic volatility and one begins to understand that entrepreneurship is as much a required tool of survival in Latin America as an engine of growth. Juan Peirano (MBA '77) is chairman and CEO of Buenos Aires-based Velox Group, a privately held organization with a line of supermarkets, banks, and finance companies spanning five South American countries.

He notes, "You need to be prescient, nimble, and adaptable while maintaining long-term objectives. The intellectual agility one develops at HBS is very helpful in this part of the world." Observes HBS associate professor Robert E. Kennedy, who is conducting research on high-tech clusters in emerging markets, "Some of the institutions needed to promote an entrepreneurial culture — such as intellectual property laws and shareholder rights — are not well established. There's much less competition, but if you are a sharp Harvard MBA who wants to launch a start-up, many of the details will be more difficult in Latin America." Alec Oxenford of DeRemate puts it bluntly: "You must have infinite energy. Without it, you would quit once a week."

If the gypsies were to bring their road show to Macondo again, surely the Internet is the latest wonder they would be trumpeting. The conventional wisdom is that Internet development in the region is four or five years behind the United States, although "it's not clear that the business models that succeed in the Internet sector and e-commerce in emerging markets such as Latin America will resemble those in the United States," says Kennedy. Despite this lag time, the Net is nonetheless causing excitement and optimism in the region, with studies predicting that total Internet e-commerce activity will range from $5 billion to $8 billion by 2003.

The purpose of Leonel Azuela's Quaxar e-consulting service is to bring comprehensive Internet and interactive solutions to Latin American and U.S. Hispanic companies. "Many CEOs are still unfamiliar with the basic functions of the Web and wireless protocols," says Azuela. "That gives you an idea of how far we have to go in educating the market. Further affecting the growth of the Internet are problems of regulation, inadequate infrastructure, and simple economics — lack of personal income means lack of access to PCs and hence to the Net." Thus, Azuela expects the bulk of Internet growth will occur in the B2B sector and wireless applications.

Auction house DeRemate.com, currently a leader in the region's consumer Internet sector, has a growth rate of 10 to 20 percent per month, with Brazil accounting for roughly 35 percent of its more than one million users and its $45 million in gross merchandise sales. "The biggest challenge for us is increasing market penetration from 4 percent to 15 percent, where the Internet reaches a critical mass," says CEO Oxenford. A positive sign, he adds, is that "Latin America's 50 to 100 percent Internet growth rate is the highest for any region in the world."

Carlos Sicupira of GP Investimentos sees Latin America enjoying a kind of leapfrog advantage in terms of technology. "Because we are latecomers, as we build a technological infrastructure, it will be the newest and most advanced," Sicupira explains. "That has happened in Brazil with our digital cable installation, which surpasses the analog cable that is the core of the U.S. system and has a high replacement cost."

Whatever the pace of development of e-commerce, most agree that the Internet will continue to make steady progress throughout the region. As much as for its commercial potential, the Internet's Latin American proponents are excited by the revolutionary impact it could have on the region's business and social structure. DeRemate.com has founded an industry-wide nonprofit to advocate for the Internet. The company is also involved in supporting a government program that places computers in schools, with a goal of reaching eleven million young people by 2003. Evoking images of magical inventions and Macondo, Alec Oxenford says, "Picture a schoolboy in Pata-gonia, in a tiny town with no library. With the Internet, he can get information that fifteen years ago, only a Nobel Prize researcher could access."

Education is also an essential part of Carlos Sicupira's vision of business and regional development. He and two partners established Fundação Estudar ("Study Foundation"), which is currently helping some sixty needy, high-potential students engage in business studies at the university and postgraduate levels. Sicupira also works with Endeavor, an international development organization that assists entrepreneurs in emerging markets. "To succeed, we must build our human capital," he says.

Although problems persist, alumni in the region generally agree that change is coming to Latin America, perhaps with unprecedented speed and impact. Observes Leonel Azuela, "The new economy challenges everyone to be more competitive, which is beneficial to society as a whole." The younger generation of alumni sees a new attitude among its peers. "We are more willing to take risks," notes DeRemate's Cepeda. "We see the synergies of globalization and technology as creating a special opportunity for Latin America." Adds Azuela, "Technology, macroeconomic changes, and new leadership are definitely creating a new climate in the region."

But many in this generation of business school graduates are also stymied by the lack of opportunities in the region in fields such as consulting, investment banking, and entrepreneurship. Added to that is the issue of high crime rates and political volatility in some countries. Says Azuela, "In our hearts, we want to go back, but in our minds and in reality, sometimes it's not so easy." For Gaston Azcarraga, the decision to return to Mexico to work for his father at Grupo Posadas was "my number one choice," despite the region's difficulties. "Because of the financial crisis in 1982, we had the 'lost' decade — and the '90s were probably as lost as the '80s. It's been an uphill battle for most businesses in Mexico." In Argentina, where currency values are pegged to the U.S. dollar, Juan Peirano of Velox Group explains, "The system is very rigid. The price we pay is higher unemployment and a slower rate of economic growth, but I think we will start to move again by the end of 2000."

HBS professor Pankaj Ghemawat expresses guarded optimism about the region's future. On the plus side, he sees Mercosur, the common market of southern South American countries, as a trade success story and a possible model for regional expansion that few emerging markets can equal. Competition and the global economy have elevated the caliber of business, he says, but at the same time he is concerned that those same forces could create tensions within and between the region's countries. "Latin America is a lot better off than it was ten years ago," he concludes, "but there are still many things that need to be worked out." Ghemawat's HBS colleague, Assistant Professor Laura Alfaro, is more sanguine. She notes, "The Latin American population is young and optimistic. Despite the problem of income inequality, the potential is there. If the economies and the infrastructure continue to improve, and access to education broadens, it's a gold mine waiting to happen." Azcarraga concurs. "I truly believe this first decade of the 21st century is going to be the decade of Latin America," he declares. "We have the growth, the energy, and the enthusiasm. It's about time."