ANDEAN PACT NATIONS, DOING
BUSINESS IN THE



The Andean Pact is one of the world's oldest free trade movements. It was founded in 1969 by the Cartagena Agreement to encourage cooperation among members, and to improve their position in the international context. The pact's integration quest has been a long-standing aspiration of the region. It began in the 1820s with South American soldier and statesman Simon Bolívar's (1783-1830) ideal of unifying New Granada (Colombia, Ecuador, and Venezuela), Peru, and Upper Peru (Bolivia) into one nation, the Gran Colombia.

For nearly 20 years, the pact's goal of economic growth and the creation of a regional common market floundered. Over the past several years, however, changes to democratic governance and developments in trade and investment liberalization have prompted renewed interest and actions among pact members. These actions have brought the Andean Pact to the forefront of the integration movement in Latin America. As a result, a free trade zone among Colombia, Venezuela, Ecuador, and Bolivia and a common external tariff was implemented in 1994.

By 1999 the Andean Pact consisted of more than 100 million inhabitants generating a gross domestic product (GDP) of around US$250 billion. The member countries—Venezuela, Colombia, Ecuador, Peru, and Bolivia—are highly diversified, mainly because of the significant topographical and climate differences within the individual nations and across the region as a whole. Unifying factors include rich mineral deposits, particularly in Peru and Colombia, and the existence of significant reserves of oil in Venezuela, Colombia, and Ecuador. All have, to varying degrees, taken part in the recent rush to economic adjustment, liberalization, and competition. Thus, the attractiveness of the region is based on the recent developments of its liberalized economy, the average stability of its democracies, and its unlimited resources such as low-cost energy and labor. Nevertheless, such issues as drug production and commercialization, terrorism, economic dependence on commodities, socioeconomic inequalities in the population, and marked regionalism are the main burdens the region is suffering in its quest for integration and development.

LANGUAGE

The main spoken language in the business setting is Spanish, which is also the official language in all the Andean Pact countries. Nevertheless, English bilinguals are not uncommon among businesspeople who are usually well-educated individuals. They have often received foreign higher education, or have attended local private schools that teach English, French, or German.

The Spanish varies in vocabulary, grammar, and pronunciation from one region to another. These variations, mainly caused by the rugged Andean topography, even exist among regions within individual countries. The language variations result in many dialects that go from the relatively pure Colombian Spanish to the colloquial Venezuelan Spanish. Colombia, where the Indian population constitutes less than 2 percent, has close ties with the Spanish Language Academy and is highly proud of its almost pure Spanish. Venezuelan Spanish, on the other hand, is full of local idioms, colloquial phrases, and simplified verb usage.

In addition, Quechuan and Aymara are still prevalent in the region and have official usage in regions where they are heavily spoken. Quechuan, the native language of most of the approximately 20 million Indians of the region, has contributed to Spanish with words such as cóndor, pampa, and vicuña. Quechuan is, together with Spanish, the official language of Peru and Bolivia. Aymara, another Indian language is also widely spoken by the Indian communities of these countries, constituting the third official language of Bolivia.

The formal and informal usage of the language is stressed as a way to show respect, social distance, power, and authority. It is also a regional issue. The inhabitants of the highlands, or Sierra, prefer to use usted (the formal form of the pronoun "you") versus the common use of (the informal form of the pronoun "you") of the inhabitants of the lowlands.

ENVIRONMENT AND TECHNOLOGY

The 1.8 million square miles of the Andean Region have a very rugged and varied topography, which impedes regional transportation. The Andes Mountains cross South America from north to south creating the highest continuous mountain barrier on Earth.

Several river systems drain into either the Atlantic or the Pacific Ocean, providing avenues of penetration into the heart of the countries, as well as rich agricultural valleys. The Magdalena, Cauca, Orinoco, and Amazon are among the main river systems of the region. In addition, many other river networks of both Bolivia and Peru drain into the Lake Titicaca, which is South America's largest inland lake.

Transportation faces the challenge of the Andes and of the complex Amazon River systems. The rough terrain forces the use of airplanes, but it also complicates flights. The Pan-American Highway, the major means of communication in the region, runs about 16,000 miles (26,000 kilometers) from Mexico through Argentina, crossing the Andes.

The region has large population concentrations. On average 70 percent of the population lives in urban areas. The most important cities are located in the Andes, which constitutes the center of political power for Colombia, Ecuador, and Bolivia. The capital cities of these countries are located at the highest altitudes of the world. These are modern cities that contrast with traditional rural landscapes where farmers cultivate their small plots of land.

Although not located in the Andes, Lima and Caracas also represent uneven regional concentrations of population. Lima has become an urban giant more than ten times larger than the next largest city in Peru. More than one-fourth of the Peruvian population live within the greater Lima. Caracas is the major center of Venezuela's population. It constitutes the heart of a major urbanized corridor consolidated in a relatively restricted zone of the northern highlands.

The region is blessed with unlimited natural resources. The energy resources are outnumbered, the soils are rich, mining is a long-standing tradition, and the diverse marine species support fishing activities. Venezuela is the tenth-largest energy-producing country in the world. It has the fifth-largest-capacity hydro plant, Guri, and it is the largest crude oil producer in the Western Hemisphere. Colombia is the second-largest coffee exporter in the world, and Ecuador is among the world's leading banana exporters. The southern Andes is one of the world's richest sources of minerals: copper, zinc, and lead from Peru; and tin from Bolivia. Peru is also the world's second-leading country in the fishing industry, after only China. Although the region has an abundance of natural resources, these countries are not fully industrialized. The oil refineries and associated petrochemical plants in Venezuela and the Colombian textile industry are among the Andean Pact's emerging industries.

The weather is mostly humid and tropical without any real change of season. The high elevations in the Andes produce cooler weather than might be expected in the tropics. Still, one could find on a daily basis every variation of temperature from that of equatorial lowlands to arctic cold.

The El Niffo effect, the most severe variation in the Pacific Coast weather patterns, occurs at intervals of about a decade or so. Warm water replaces the cold water of the Peru Current, resulting in heavy rainfalls that cause ecological. disasters and great economic damage. In addition, the volcanic nature of the Andes disrupts the region with frequent earthquakes, volcanic eruptions, and landslides.

The continuous natural disasters caused by both the Andes volcanic activity and the El Niffo effect, together with the strong Indian heritage of the region, have led the Andean countries' population, particularly in the rural areas, to believe that forces of nature are the controllers of the environment. The rise of industrialization, however, is contending against this environmental perception. The Venezuelan Guri, the world's seventh-largest capacity reservoir, is an example of this emerging trend to control the region's beliefs in the environment.

SOCIAL ORGANIZATIONS

KINSHIP AND FAMILY STRUCTURE.

Family and kinship constitute the most enduring and esteemed institution in the Andean countries' social fabric. Families show a high degree of unity, purpose, and integration. The basic unit of society is the extended family, which not only includes a spouse and children, but also grandparents, uncles, aunts, cousins, nieces, nephews, and others.

Family life at all levels of society is nourished by an ample number of ceremonial events marking all rites of passage, such as birthdays and anniversaries. The godparent tradition is very strong in these countries. It is expected that the compadres formalize their friendship, allowing either party to ask favors. Thus, the compradazgo provides a way to concentrate power relations and wealth, as well as to assist in socioeconomic advancement.

Thus, these kinship and family ties are transferred into the business arena. Many of the Andean countries' private businesses are family-owned. Nepotism is common and even desirable. The family, kinship, and close friends come from a network of connections or influencias. These influencias help one reach people in power, access employment, come to favorable negotiation terms, and acquire other business privileges.

EDUCATIONAL SYSTEM AND TIES.

Education is highly valued in the Andean countries. It represents both a sine qua non of progress, and a source of life-lasting future connections and friendship ties. Higher education is greatly respected. The professional titles are prestigious and valued. They permanently identify one as an educated person to be rewarded with respect.

Social distinction has always existed between private and public schools, particularly at the secondary level. The quality of the education received in the public schools is relatively poor. As a result, most middle- and upper-class parents send their children to private schools, which carry far more prestige and potential for future connections and help one to move still further up the social ladder. Some private institutions feature bilingual instruction, emphasizing English, French, or German, as many students seek higher education abroad.

Higher education is an old tradition in the region. The National Autonomous University of San Marcos in Peru is the first university founded in the Americas, in 1551. It has had a long and varied history of elitism, reform, populism, controversy, respect, and prestige. It follows the European-based generalist education, stressing humanistic and science careers. As with many other public universities in the region, however, it has lost much of the respect accorded it to new, smaller private universities that follow the U.S. business and technological education model. The alumni tradition at the universities is similar, although at a lower level, as the one occurring at the high school level.

CLASS SYSTEM AND ECONOMIC STRATIFICATION.

Class consciousness is part of everyday life in the Andean countries. Thus, when doing business in these countries, one should appear to be of the same class as one's local counterpart. The class system varies from the very closed class system of Lima and many of the Andean metropolitan areas, to the more open and relaxed class system of the coastal regions, especially featured in Caracas.

In those regions where the Spanish Empire settled its main administrative institutions, and/or where the Indian population is still numerous, the Spanish colonial hierarchical model is still applied. Thus, the basis of class lies in the control of land, labor, and production factors. A small group of white people holds the main power in government and industry. The Spanish-speaking mestizos (persons of combined Indian and Spanish ancestry), the salaried working-class families, the persons in business and commercial occupations, and the professionals constitute the middle class. The Indians compose the lower class, which lives in extreme poverty and is the target of the negative attitudes of many whites and mestizos.

In other areas of the Andean countries with less influence of the Spanish colonial system and where the population is ethnically more diverse—with combinations of whites, Indians, and blacks—the class mobility is based on the wealth resulting from the economic expansion of the region. The elite is not a closed and static group. Prominent politicians, even those from humble backgrounds, could easily have married into the elite. Furthermore, the transformation into industrialized economies allows the emergence of a more educated and politically aware middle class. The lower class consists of those in low-status occupations (usually manual), the illiterate, and recent immigrants from the countryside.

Nevertheless, despite the vast social and economic changes the elite remains a small group separated both economically and socially from the rest of society by an enormous income gap and by a more European or more purely Spanish ethnic makeup. The presumption of status is a powerful but unwritten code of entitlement. It permits one to expect to have obedient servants, to be deferred to by those of lesser station, and to be the first to enjoy opportunity, services of state, and whatever resources might be available. The upper class tends to disdain manual work, as it represents a lower status, and to patronize, in both senses of the word, members of the lower classes.

GENDER ROLES.

As Geert Hofstede (1928-) demonstrated, the Andean countries have markedly differentiated genders. Men usually perform the roles of power and authority. In the family setting, for instance, the father is still the authority administering discipline, controlling the budget, and representing the group's interests. The economic expansion of the region, however, has contributed to an ongoing process of value modification. Currently, women enter universities and the labor force. Many of them are entrepreneurs, and/or occupy executive positions in organizations. Others participate in the liberalized political system representing their communities.

INDIVIDUALISM AND COLLECTIVISM.

Hofstede's study also addressed the high degree of collectivistic work behavior of these countries. The Andean countries are highly collectivist communities that distinguish in-groups and out-groups. They tend to form highly cohesive groups, which are difficult for an outsider to access. This collectivistic approach to life is evident in the business settings where decisions tend to stress the maintenance of surface harmony, censure by the group, and face-saving.

RELIGION.

Although Pentecostal Evangelism has won several converts in recent years, Roman Catholicism remains the predominant religion throughout the Andean countries. Catholicism, as practiced in the Andean countries, is amalgamated with native folk beliefs (Quechua). Catholic, Incan, and tribal beliefs are mixed. On religious feast days pagan rites are still practiced, and the Indians express themselves through dances and songs that blend the two cultures.

None of the Andean Pact countries have an official state church; the Roman Catholic Church, however, enjoys close ties to the government and could be viewed as a national church. The institutional role of the church was established with the Spanish conquest. Traditionally, one of the most significant and important areas of church involvement in society is in education. It is usually expected that the church will publicly express its position in regard to national issues. The voice and opinion of the church is still respected and perceived as a guiding force for the majority of the population. Thus, having a priest bless a new business and the displaying of religious imagery in the workplace is well accepted.

MOBILITY AND GEOGRAPHIC ATTACHMENT.

The Andean countries, as many others in Latin America, experience extensive migratory movements. The population moves within the country, between countries within the Andean region, and outside the Andean region. The lack of opportunity in rural regions has motivated a large number of highlanders to move into the urban areas looking for employment. This has led to an unprecedented growth, which is evident in the increasing slums that surround the main metropolitan areas.

Previous periods of economic expansion in the Andean countries have generated foreign immigration. The Venezuelan oil boom between 1948 and 1958, as well as the country's ten-year, open-immigration period, attracted million of immigrants. As a result, one-fourth of the Venezuelan population are immigrants; many of them entered the country illegally, especially those coming from neighboring Andean countries in weaker economic or political positions. As a result, the high number of foreign immigrants competing with the Venezuelans for jobs has resulted in a xenophobic outcry that has caused considerable political debate and concern.

On the other hand, the stagnant economies and the social unrest experienced in recent years are influencing many to leave the region looking for a better future. The emigration is a matter of concern since the loss represents a high proportion of skilled workers and because these often illegal immigrants experience human-rights problems in the countries to which they move.

REGIONALISM.

The immense communication difficulties provided by the region's topography have impeded national unity within the Andean countries. The unbalanced economic and social development has resulted in resentment from the interior regions. Thus, regionalism is spread out in all Andean countries. Peruvians speak of their differences with certainty, referring to lo criollo (of the Creole) belonging to Lima, and lo serrano (of the highlander). There are also other special traits by which social groups and regions are stereotyped. As a result, regional ties are strong, representing points of connection for business purposes.

CONTEXTING

The Andean countries are high context cultures, that is, they place a strong emphasis on how a message is said rather than on what is said. Messages are understood as the sum of all the circumstances surrounding the communication; thus, social etiquette and formality in business settings are very important. Blunt, frank speech is not valued. Politeness demands a less direct approach. When spoken to aggressively, the locals will tell the speaker what they think the speaker wants to hear.

The population emphasizes face-saving and building personal relations. They stress prestige and dignity over honesty. White lies used to save face are acceptable. To avoid the risk of losing face, argumentation is not favored in business discussions. Written contracts have less value than the spoken word. All interpersonal relations, including business ones, tend to improve if the individuals develop personal ties. Generally, doing business is regarded as a relationship between individuals and not between organizations. Thus, any change in the foreign organization's executives could affect the business relations with the locals.

AUTHORITY CONCEPTION

Power and authority are a natural part of the social order in the Andean countries. Traditionally, power has not only come from money, but also from the authority to exercise control over others.

Throughout their history, these countries have always been under the dominion of small segments of the society. During the Incan Empire, the emperor and his family owned the empire and all of the important government positions. Later, during the Spanish colonialism, encomenderos, corregidores, and numerous other bureaucrats dominated segments of the native population and other castes. After independence, the rise of the latifundio agrarian system gave the landowners absolute power within their domain. A latifundio was an agricultural estate that used a large number of peasants, Indians, or slave laborers; it was a semifeudal institution introduced by Iberian settlers and was widely perpetuated in the hacienda. Landowners settled land disputes among their resident peons, arranged marriages, and dispensed favors. Furthermore, in recent times, numerous military coups have instituted totalitarian systems, disturbing the region's republican life.

Thus, common life and business relations are influenced by this long-standing tradition of exercising centralized power and authority. In business settings, superiors usually give clear orders to their subordinates. Upward communication is scarce, as feedback is rarely demanded. Thus, the subordinates do not communicate freely and tend to adhere strictly to the organization's rules.

NONVERBAL COMMUNICATION

Each of the Andean countries has distinctive uses of emblems—signals used in place of a verbal message or accompanied by a verbal equivalent. But some of the other means of nonverbal communication, such as greetings, appearance, and proxemics, are similar in all the countries. Greetings are very important. One should take the time to greet everyone formally, giving each individual undivided attention. Men shake hands with each other and with women. Women choose whether or not to shake hands with other women. Friends are expected to hug and exchange kisses on the cheeks. When men hug each other, they often add a back slap or two. As in most high context countries, appearance is a key communication source. Thus, one should always dress in business attire when conducting business. Appearance must be kept up, which includes wearing fashionable clothes, shining shoes, and having well-groomed hair. Finally, the businessperson should be aware that people in this region stand closer than most people in the United States when speaking to one another. They also tend to touch each other more.

TEMPORAL CONCEPTION

There is a sense of timelessness in the Andean region. Punctuality has never been emphasized in the culture. Nevertheless, foreign people are expected to be prompt. Arriving 10 or 20 minutes after the scheduled time is considered punctual. For social events, arriving one hour late is considered proper. Deadlines are similarly flexible. Something that is "essentially completed" may not actually be ready for pickup. Business appointments guarantee only that one will see an individual; they do not necessarily guarantee when one will meet with him or her. Business, although sometimes regulated by a schedule, is frequently diverted by any event or "emergency," especially by those that relate to personal issues.

SEE ALSO : Cross-Cultural/International Communication

[ Cynthia Bajana ]

FURTHER READING:

"Bolivia: Datos Basicos Socioecon6micos—Unidad de Estadistica y Analisis Cuantitativo." Inter-American Development Bank. 16 March 1998.

"Colombia: Datos Basicos Socioecon6micos—Unidad de Estadistica y AnAlisis Cuantitativo." Inter-American Development Bank. 16 March 1998.

"Ecuador: Datos Basicos Socioecon6micos—Unidad de Estadlstica y Analisis Cuantitativo." Inter-American Development Bank. 16 March 1998.

Ferrero, Emilio. "Trade Mark Law in the Andean Group." Managing Intellectual Property, Trade Mark Yearbook, 1994, 43-45.

Hofstede, Geert. Cultures and Organizations. Revised ed. New York: McGraw-Hill, 1997.

Inter-American Development Bank. "Tratados de Integracion." Inter-American Development Bank. Available from www.iadb.org/intal/tratados/comunidadandina5.htm .

Latin Synergy. "Latin America History." Latin Synergy. Available from www.latinsynergy.orgflatinamericahistory.htm .

Library of Congress. Federal Research Division. Ecuador: A Country Study. 3rd ed. Edited by Dennis M. Hanratty. Washington: GPO, 1991.

——. Peru: A Country Study. 4th ed. Edited by Rex A. Hudson. Washington: GPO, 1993.

——. Venezuela: A Country Study. 4th ed. Edited by Richard Haggerty. Washington: GPO, 1993.

Mann, Joseph, and Craig Leon. "The Andean Region." Institutional Investor, September 1994, SSI-SS24.

Moore, Paul, and Rebecca Hunt. "The Andean Pact: In the Forefront of the Integration Movement." Business America, May 1994, 10-11.

'Peru: Datos Basicos Socioecon6micos—Unidad de Estadlstica y Analisis Cuantitativo." Inter-American Development Bank. 16 March 1998.

Sissell, Kara. "Mixed Blend for the Andean Pact." Chemical Week, 15 November 1995, S10-S12.

Tenenbaum, Barbara, ed. Encyclopedia of Latin American History and Culture. 5 vols. New York: Scribner, 1996.

Terence, Brake, and others. Doing Business Internationally: The Guide to Cross-Cultural Success. Burr Ridge, IL: Irwin, 1995.

Tuller, Lawrence W. Doing Business in Latin America and the Caribbean. New York: AMACOM, 1993.

"Venezuela: Datos Bdsicos Socioecon6micos—Unidad de Estadistica y Analisis Cuantitativo." Inter-American Development Bank. 16 March 1998.

Victor, David A. International Business Communication. New York: HarperCollins, 1992.

"World Economic Analysis: Colombia, Ecuador, Peru, and Venezuela." Euromoney, September 1997, 66.



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