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Negotiation in Latin America

by: Almiro dos Reis Neto, Associate partner of Hofstede Insights

 

Negotiation at Latin America may differ a lot from other countries practices. The process might be longer and less direct. Thus, several aspects must be taken into consideration to succeed on a negotiation with a Latin American partner.

 

Important

 

  1. Aim for dealing with high representatives of the company’s hierarchy;
  2. Do not expect Latin Americans to be direct or task-oriented in their first meeting. Be patient, Latin Americans enjoy talking and explaining a lot the context before getting to the point itself;
  3. Look for a third person (e.g.: embassy representative) who can introduce you to your business partner;
  4. Look for legal advisory before, during and after the negotiation;
  5. Offer low-risky and certain return conditions rather than high-risky innovative solutions.

 

Short Introduction

 

The following session presents some cornerstones on the guidance of a negotiation. Understanding these cultural key-aspects may provide you with significant advantage on addressing this winding process in Latin America.
 

 

 

Paradigms and Facts found in Latin America

 

  • Relationships underlies societal dynamics. Acquaintances are power assets and overcome individual features;
  • Building relationship means building trust and loyalty;
  • Societies are hierarchical, so both power and decision centralization are dominant;
  • Communication is predominantly indirect. As a result: 
  1. Body language is highly important, and 
  2. Conversations are not straight-forward;
  • It may seem rude or impolite to be extremely task-oriented. Direct feedback is seldom done in this region. You will more likely find phrases such as: “I will see”, “Let me think”, and “I will call you back”;
  • People like talking about their own family and hearing about others’ families; 
  • Meals are important occasions for talking, developing relationship and building trust;
  • It is usual to invite or be invited for a home dinner with the family;
  • Many countries present the culture of “machismo”. As a result, women are excluded from business topics and men must play a role of power and toughness. It is less common among the largest cities;
  • Spontaneity prevails over planning;
  • It is appreciated to have a valuable and joyful time instead of being punctual.

 

Practical Behaviour Advices

 

  • Since hierarchy is important, it is highly recommended aiming for top managers for negotiation and to send high hierarchical representatives from your business too;
  • It is important to understand people’s position inside the company and during the meetings the one who speaks more is usually the key negotiator, probably the leader;
  • Prefer face to face meeting always when possible: it is difficult to make a deal only through e-mails and conference calls, for example;
  • Start conversations with small talks on unrelated issues such as football, weather or family;
  • Do not expect to go straight to the point. Even when the conversation topic is business itself, be prepared for eventual changes on the topic and let it flow gradually and naturally;
  • Be transparent by showing some financial data about your business plan, but do not ask for confidential financial data from the other company, specially if it is a family run business;
  • Present ideas which clearly favour both sides;
  • Show a positive and optimistic attitude;
  • Latin Americans avoid saying “no” to the utmost. You must “read between the lines” and be aware of the context;
  • The negotiation process might take a long time due to the slow time for building the relationship and trust, and also due to regulatory issues. Include time buffers on your schedule;
  • In order to “accelerate” the building trust step, it is recommended to look for a third person to introduce you for your partner. Friends, embassy representatives and other acquaintances who may legitimate you may work well;
  • Social life and business life are very intimates. So, your Latin American business part may invite you for family events and consider you a close friend after a while. Gifts such as chocolate, flower, wine or something typical from your country are appreciated;

 

Caution Points

 

  • The first offer from the Latin American counterpart may seem to value short-term advantages over long-term ones and may seem disadvantageous for you. It is also possible that the negotiator mentions other supposed investors interested, sounding like a threat. Do not confront at first. Show comprehension and be transparent with your intentions and constraints. Thus, you reinforce trust and your relationship;
  • Remain professional, patient and flexible;
  • Avoid prejudices and be comprehensible, specially if you come from a direct and objective culture;
  • Do not show to be manipulating/controlling your counter part behaviour as if you “know his/her strategy”. He/she may feel offended or threatened and you may loose the business, while they were just behaving according their cultural patterns;
  • Be careful not to be arrogant on criticizing the country weakness of your business partner, since it may sound offensive. Let him/her talk first and then you are allowed to make a non-offensive comment;
  • Watch out for regulatory constraints, since their approval might be complex and take a long time to be done. Having a good legal advisory is mandatory.
     

 

 

Short case study

 

Jean Bertrand, founder and CEO of Maison da mode Française, received an encouraging message from his Brazilian representative with the news that he had a great potential client interested in the products of the French company.
The client, a large female retail chain, had already analyzed the products and their quality and remained to discuss and negotiate prices and payment terms.
Jean is set for a meeting with Pedro Silva, Supplier Manager of the company, via skype, in the early afternoon, morning time for his potential client, in Brazil.
"Good morning Mr. Smith."
"Good morning Mr. Bertrand. As you know, we want to buy a large quantity of your products, with deliveries every two months, for the next twelve months. We are expecting your product to be well received by our customers, but we are not sure. Therefore, we need flexibility in delivery and volume. "
"Okay, we can guarantee a minimum and a maximum volume, with proportional prices."
"Thank you, Mr. Bertrand. Our second consideration is that we are experiencing a period of great economic instability in our country, as you must be following the news. Our exchange rate has fluctuated a lot in recent months and we cannot close a contract based on Euros, we need a price already converted into local currency, Real (R$), valid for twelve months. "
"But in this case you seem to want to transfer the risk of this business from your company to mine."
"Actually, this is the situation in my country. What I offer you is the opportunity to expand your business. What happens is that doing business in this part of the world means eventually more risk and lower margins. However, if accepted, this will position your company as a global supplier. "
"I would like to remind you that our standard is for payment within 60 days of receiving the goods."
"Okay, I understand your considerations. I will need to think for a few days. Can I give you the answer by the end of this week? "
"I will be waiting. See you later".

 

Questions:

 

1. Negotiating prices and contracts in Latin America has similar aspects to any other place in the world, but also has its peculiarities, such as inflation, volatile exchange rate, customs strikes, political and economic instability. Are you prepared to consider these aspects in your business model?
2. Some global companies have been operating in Latin America for decades and know that in some years, they may lose money, and other years they earn. Just as there are fluctuations that hinder results, sometimes they also make it much easier. It takes persistence and a long-term vision to work in Latin America. Will / could you manage your business this way?
3. See that the composition of the final price is not just a sum of cost + expense + profit. Other variables need to be considered. Which are?

 

* The case described in this text is fictional. The names of the characters and organizations are merely illustrative. Any resemblance to real facts would have been mere coincidence.
 

 

References

 

 

Last updated: 03.07.2018 - 14:57
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