Gustavo Cisneros, Cisneros Group
Venezuelan business magnate Gustavo Cisneros, chairman of the
Cisneros Group of Companies, is one of Latin America’s powerhouse
entrepreneurs. Perhaps best remembered for having dumped Pepsi Cola
to become a Coca-Cola bottler, the Cisneros Group has also made
headlines recently through a string of successful media
acquisitions. Aside from building his enterprises into one of the
region’s most powerful business groups, Cisneros is also widely
known as a major collector of Latin American art.

On significant transactions for the Cisneros Group…
Our recent commitments to the media and satellite communications
market in Latin America through DIRECTV, Galaxy Latin America and
the Ibero-American Media Partners Fund with the US private equity
firm Hicks, Muse, Tate and Furst, have been some of the most
significant transactions for my organization. These transactions
reflect our commitment to the new consumer market in the region-a
market that has more spending power and expects better services and
newer technologies than were previously available in Latin
America.But the biggest deal that opened up the door for these new
investments-the one that changed the way we did business in South
America and whose ramifications are still felt today-is by far the
switch we made from being a Pepsi Cola bottler to a Coca-Cola
bottler. The Coca-Cola deal was a ground-breaking achievement for
our company and for Latin America. It enabled the Cisneros Group of
Companies to further expand into a regional enterprise, and it
indicated a willingness on the part of a major western brand to pay
a premium for the Latin American consumer.

On switching over from Pepsi to Coke in a weekend…
I suppose, looking back, that changing over our entire
operation-which for over 40 years had been a Pepsi bottler, to a
Coca-Cola bottler-over one weekend may seem humorous. But at the
time, it certainly wasn’t. It involved an incredible amount of
elbow grease-and a lot of paint. The actual switch was a logistical
nightmare. We had to switch over a weekend to avoid losing money
from downtime and market momentum. It meant modifying plants and
changing the production system over to Coke, changing Pepsi logos
to Coke logos on over 2,500 distribution vehicles, and producing
new uniforms with the Coca-Cola emblem. And it meant doing all that
as quickly and inconspicuously as possible. It was quite an event.
We announced the deal on Friday and had Coca-Cola going out of the
plant on Monday. In terms of the effects on Latin American
business, I think the fact that Coca-Cola joined us in a
partnership, and invested $500 million in a market that is not the
largest on the continent, opened the door for more foreign
investment in the region. It signaled the importance of the Latin
American market to other foreign investors who may not have noticed
the emergence of the Latin American consumer.The fact that a strong
western brand would pay a premium and institute its anchor-bottling
concept was really groundbreaking at the time. And the fact that
Coca-Cola moved with a local partner-not to dictate the market, but
to understand the cultural differences of the market-initiated a
different strategy for investments in the region. Now you don’t see
western brands moving in without the guidance of a local or
regional partner. The global business environment requires
sensitivity towards local cultures.

On major events with lasting effects…
The development of global alliances like Nafta, and regional
alliances like Mercosur, the Andean Pact, the Central American and
Caribbean communities and the G-3 (Mexico, Venezuela and Colombia)
signaled irrevocable changes in the pace of economic integration
throughout Latin America. I don’t think there’s been one single
event that has had a lasting effect on the market, but rather
several events that have resulted in the transformation of Latin
America into a vast region of shared resources. It is this
transformation that has had the biggest effect on the market. Many
people now realize that this region offers entrepreneurs great
opportunities to build businesses, and this transformation to a
regional consumer market has had the biggest effect on the way
people do business in the region.Certainly, this change has had to
do with the treaties that I mentioned above, which were
systematically put together through a series of events such as the
end of military governments, democratic elections, and the adoption
of market-oriented reform agendas throughout the hemisphere. There
was no “Berlin Wall” in Latin America-no single defining moment
that changed everything literally overnight-but all of these events
have provided the impetus for a trend of regionalization. (Maybe
when Cuba finally opens up, that will be our “Berlin Wall?”)From
the point of view of bankers, during the 1980s and early 1990s,
Latin America emerged from a debt trading play to an asset play, in
terms of the investments in foreign capital. This could be directly
attributed to privatization, once we realized that we had to pay
back our deteriorating debts with the sale of the assets we owned.
As a result of privatization, there’s been greater economic
stability, and this has taken place on all levels-from the
government down to the people, who are enjoying higher levels of
domestic savings through investments in their own national

In the past, (other regional) markets wouldn’t be accessible to
us. Markets would be secured by high tariffs, protected by borders
and supported by government ownership. We now have a regional
hemisphere that’s closer to a free market economy than we have ever
had before. I don’t think there’s been one event that changed the
markets, but several-such as the spread of democracy, the end of
dictatorships, privatization, domestic savings, near collapses and
regional and global treaties.

On the Mexican peso crisis and Guillermo Ortiz…
The Mexican peso crisis may have provided Latin America with one of
its biggest hurdles to achieving a regional free market economy.
During that time, people were unsure of what the next step would be
to get out of that crisis.In that moment of crisis, Guillermo Ortiz
stepped forward with incredibly innovative ways to prevent
disaster. He should be seen as a clear example, not just in Latin
America but in other emerging markets, of how to manage foreign
liabilities. His ability to not just market ideas but to come
through with deals really stands out.The fact that he had a
background overseeing the privatization of the Mexican banks from
1991 to 1992 makes him the perfect candidate, from my point of
view, to be considered the person who has played the most important
role in shaping a market through privatization.

On how Latin America can continue to grow…
Two subjects that were discussed at the Summit of the Americas that
really stand out as important steps to take for future development
are safeguarding democracy and improving education. I read an
unusual but interesting article in April that said that 60% of all
Chileans are either “not very satisfied” or “not satisfied at all”
with their country’s democracy. This in a country that has been
growing at an annual rate of about 7% for the last decade, with
unemployment of about 6% and with 50% fewer people living below the
poverty line than a decade ago.The statistics in other Latin
American countries are not much better-57% of all Argentines are
dissatisfied with democracy, 53% of all Mexicans, 59% of all
Colombians and 63% of all Venezuelans are also dissatisfied with
democracy.From what I read, economies may be improving but people
are experiencing the growing pangs of free markets-namely,
instability.One of the few things that business can do to improve
that situation is to invest in educational initiatives. This will
assure that today’s Latin American children are ready to become the
generation of tomorrow. By investing in education and maintaining
the right direction towards democracy and free markets, we can
continue economic growth.