Companies Struggle to Fill Executive Positions in Latin America
By Paulo Trevisani – WSJ.COM
Reprinted from the Wall Street Journal
Manuel Corsino and John Byrne, Boyden recruiters for Latin America, comment on Latin America’s fast-growing economy and how wealth-management professionals can now expect a higher salary to fill key management positions.
Mar. 15, 2011 -- Companies trying to set up shop or expand in fast-growing economies of Latin America are finding it hard and increasingly expensive to fill key management positions, despite the attraction of strong local currencies and solid economic growth.
The exchange rate increase and the economic boom are attracting executives to work in the region, but the numbers are not enough to quench the thirst for directors.
Some corporations have had to postpone projects and step up in-house training programs for executives, not to mention spending more on salaries and retention bonuses, according to human resources and other professionals.
Senior analysts and portfolio managers, for example, have been hard to find in Brazil, said Paulo Silvestri, a partner of Rio Bravo Investimentos, a Sao Paulo-based private-equity firm with business in infrastructure, logistics and other sectors.
Silvestri was in New York in late February, where among other things he met with two Brazilians fresh from Master of Business Administration programs in U.S. schools who were considering a career back home. Such professionals would typically go for an international career right after graduating, but the trend has reversed, said Silvestri.
According to him, people, like those he interviewed – whose hiring still had not been confirmed – are highly sought after but supply is insufficient.
Even so, managers in Latin America are still in short supply, despite the draws of robust economic growth and muscular local currencies.
Compensation in local currency is now more attractive when converted to dollars or euros. In the last four years, in comparison to the dollar, the value of the Brazilian real has increased 25%, while the Chilean peso rose 11%, the Peruvian sol 18%, and the Colombian peso 19% - citing only a few examples of a trend that is spreading in Latin America.
The Brazilian real is now worth 46% more in dollar terms than it was two years ago, and most other Latin American currencies have also appreciated--a trend many see continuing despite measures by some governments to cool the currencies and keep exports competitive.
Luciano Siani, head of global human resources for Brazil's Vale SA (VALE, VALE5.BR), one of the world's largest mining companies, said the revaluation of the local currency made it more affordable to offer an annual salary of $100,000 to $120,000 to professionals just out of a world-class M.B.A. program.
Vale, which recruits on campuses of top-notch colleges in the U.S. and elsewhere, has been able to attract talent to work in Brazil and other Latin American countries where it operates, thanks, also, to the positive economic times in the region, he says, but "there is a lack of readiness for senior project directors" to keep up with the company's expansion plans, Siani said.
"To lead a $3 billion project, you would look for a 40-to-45-year-old executive who had already led two or three big projects," he said. Now Vale has increasingly promoted people in their mid-30s, and is intensifying its in-house training so those employees can qualify for the higher positions sooner.
Vale, which reported net income of $17.26 billion in 2010, is spending around $100 million with its global training programs in 2011, around "30% to 50%" more than last year, said Siani.
As part of this effort, Siani said, Vale is taking in 40 management trainees this year, each for up to three years after obtaining their M.B.A. or equivalent degree. They will go through an 18-month program as their first step on Vale's path to possibly be assigned a multi-billion-dollar project, said Siani, adding that this year's group is double the size of last year's and includes 29 Brazilians and 11 foreigners, all of whom are being placed in Vale's operations around the world.
One of those trainees, Emil Ivanov, moved from the Netherlands to Rio de Janeiro in 2008 willing, he said, to work in a "very aggressive, fast-paced environment" that he thought harder to find in Europe. A 26-year-old human-resources professional born and educated in Bulgaria, Ivanov is now moving to Switzerland where, as a human resources senior analyst, he will help Vale promote its brand among potential hires. Ivanov said he found in Rio a working environment where "people are open to new ideas." As a trainee, "I could speak directly to the CEO, Roger Agnelli, which I don't see happening in, say, Germany or the U.K."
Vale, which disclosed profits of US$ 17.26 billion in 2010, is investing close to US$ 100 million in their global training programs in 2011, approximately "30-50%" more than last year, says Siani.
It may be worthwhile, since in the mining sector project directors are in high demand e filling in openings is difficult, specifically for lesser known companies, says John Byrne, Boyden Global Executive Search's executive headhunter for Chile.
Usually, says Byrne, a project director is a position earning US$ 350,000 to US$ 400,000 a year in Latin America, compared to US$ 300,000 to US$ 350,000 just a year ago. From this estimate, 30% represents bonuses, but stock options are not included, he says. This variation, according to Byrne, more than compensates for the region’s high cost of living.
Byrne adds that banks are also facing difficulties to fulfill high level positions. Boyden Chile has been looking for a vice president of planning and comptroller for a local bank for the past six months, he stated. “We have identified a few possible candidates,” he said, but other banks have also made offers and the candidates did not go with Byrne’s client.
The banking industry is also in an upswing in the region, and both local and foreign-based banks are on the prowl for professionals who could handle the increasing reaches of Latin America's wealthiest clients.
Wealth-management professionals now could expect a 40% higher salary offer to leave one employer for another of equivalent size or reputation in markets such as Mexico, Chile, Brazil and Colombia, said Manuel Corsino, a Boyden recruiter for Latin America who specializes on the financial sector. That compares to a 10% to 20% increase in the U.S., he said.
In Mexico, for example, banks are willing to pay handsomely to hire qualified advisers to help bring home new accounts among "a good number" of wealthy individuals who want to diversify their portfolios and invest outside of the country, Corsino said. The cost associated with keeping these professionals is increasing with retention bonuses – given to recent-hires for their commitment to stay on the job for a specific number of years - 300% higher, informs Corsino.
But not everybody is complaining. In an email response to a written question, Citigroup Inc.'s senior human resources officer for Latin America, Jose Marti, said Citi hasn't experienced any difficulty filling high-profile positions in Latin America.
Marti acknowledged, however, that in Brazil "a limited pool of high-profile talent" is pushing compensation levels up. At the top of the corporate ladder, the average salary for a chief executive or equivalent position in Brazil has risen nearly 20% in the past two years, and is around $30,000 a month at current exchange rates, according to data gathered by local job placement group Catho Online.
In reality, the stronger economies in the region are absorbing almost all available workers -and not only those who are qualified- and Brazil’s unemployment level in January was recorded at 6.1%, though higher than December’s, it was the lowest level for that month since 2003, according to Instituto Brasileiro de Geografia e Estatística-IBGE, Brazil’s official polling entity. The country’s average income reached R$ 1,538.30 – 5.3% higher than a year ago. The lack of qualified workforce has been noted in many industries in the whole country.
On the top of the corporate pyramid, the average salary for an Executive Director, or its equivalent in Brazil, has increased 19% between January 2009 and January 2011, reaching R$ 50,266 a month, according to Catho Online’s quarterly data, which it says was collected from 140,000 individuals.
Silvestri of Rio Bravo Investimentos said the impact of a shortage of managers goes beyond the labor costs, and that some projects have been delayed for lack of managers.
Now, Silvestri’s company is investing in personnel training, hiring young professionals and trying to teach them new skills. "I am spending more of my working hours talking to our trainees," he said.