“I remember about 10 years ago I was on a trip with two
or three couples in the south of France, and we met a
couple from Colombia who told us about the kidnappings and the insecurity there,” Fastlicht recalls. “We
all said, the day that happens in Mexico I will leave the
next weekend…it got worse.”
Fastlicht didn’t leave. And he is paying a steep price
for staying. The 26th-floor suite of offices that serve as
the headquarters for Fastlicht’s company, Grupo K, is
enclosed behind a wall of glass and remote-control doors
that he installed five years ago. Fastlicht himself rides
around Mexico City in a bullet-proof car that cost him
more than $35,000. And a hefty chunk of his budget goes
to pay for security guards and theft insurance.
Fastlicht isn’t alone. Across Latin America, steep
security budgets are now part of the cost of doing business. Estimates provided by private security advisors in
Mexico alone range from 3 to 6 percent of a company’s
total spending. But specific figures are rarely available.
Computer-maker Hewlett-Packard, whose 10,000 Latin
American workers are scattered around plants and
stores in Brazil, Argentina, Chile, Venezuela, Costa Rica,
Mexico, and Puerto Rico, now integrates security “into
our business planning and decision-making,” concedes
Haroldo Level, Vice President and Managing Director in
Latin America. But in a written response to questions,
he adds, “Due to company policies we do not disclose
investments of this kind.”
That probably makes good business sense. Companies operating in high-risk areas “don’t want to
make it appear they have a Fort Knox mentality, or
that they are intimidated,” says Jon French, director
of Problem Solvers, a consulting firm in Mexico that
charges $800 for a basic audit of home security and as
much as $10,000 for an extensive background check
on potential partners for its corporate clients. Perhaps
as a result, the escalating security costs have had no
marked impact on business investment. “As big as the
Lorraine Orlandi is a freelance journalist based
in Mexico City. She was a Reuters correspondent in
Mexico, Nicaragua and Guatemala and has taught
at the University of Missouri School of Journalism.
problem is, I personally don’t see a major setback in
cost,” says Fastlicht. “Yes, of course it’s money, but it’s
nothing that would hurt a business.”
This could change. As other regions around the
world become competitive, Latin America’s soaring
crime rates could become a decisive factor in future
investment.
Delicate Balancing Act
The growth in foreign direct investment in Latin
America and the Caribbean over the past several
years explains the delicate balancing act on security played by companies in the region. Direct foreign
investment in Latin America rose 1. 5 percent in 2006
over the previous year to $72 billion, and has climbed
9. 8 percent since 2004, according to the United Nations
Economic Commission for Latin America and the Caribbean. At least for the moment, the high cost of security
seems offset by the region’s primary advantages: stable
economies, large untapped domestic markets, cheap
labor, and proximity to the United States.
However, the investment data also signal a new,
cautious approach. Latin America’s share of worldwide
foreign direct investment decreased for the second consecutive year in 2006. Other factors have contributed
to the downward trend, but security considerations
are starting to emerge as a factor in corporate decision
making. Michael Mortimore, chief of the UN economic
commission’s investment and corporate strategies unit,
says the issue never fails to come up in his discussions
with corporate managers. “Compared with some of
the hassles they face in Latin America, some say, ‘well
maybe, it’s better in China or India or Turkey or Vietnam,’ Mortimore reports. “Insecurity and uncertainty
kill investment. Governments tend to forget that foreign
investors have a choice.”
The extra costs of security are manifested in a variety of ways, including recruiting and retaining good
senior executives. Transnational companies must offer
top employees security bonuses amounting to thousands of dollars each year, in addition to paying for
insurance, 24-hour protection and security equipment,
says Jorge Tello, Vice President for Development at
