Latin American ultra-high net worth (UHNW) business executives are on the lookout for merger and acquisition (M&A) targets despite the challenging economic environment. With commodity prices, 30 percent lower than their peak two years ago, driving cutbacks in mining, petroleum, and agriculture, and Latin American is hurting.
In Latin America, there is a massive shift of wealth and power that family offices are leading post-credit crisis. Latin America family offices are witnessing the new age of transparency and rejection of cronyism.
Latin American business leaders are looking to expand despite a muted economic outlook for the region and the perception of significant risks. Heads of family businesses are actively seeking to improve their ability to manage the risks they can control.
Risks perceived as extremely or very important include personal/business reputation (93%), political/country risk (89%), capital risk (84%), inflation rate risk (81%), and family succession (81%).
Latin America for the most part taking “left” turn, as witnessed by the recent re-election of Bolivian President Evo Morales, South America’s longest-serving leader. Morales counts among his close friends and supports the late Fidel Castro, Brazil’s former President Luiz Inacio da Silva and the late Presidents Huge Chavez of Venezuela, and Nestor Kirchner of Argentina. Bolivia with its abundant resources and captive markets for natural gas exports to Brazil and Argentina is poised to become more of a regional economic player in Latin America.
Billionaire Chronicle asked Carlos Arbesu Ph.D. Professor, Governance Consultant and Family Business Expert, who has worked with over 100 family-owned businesses in Europe and Latin America, to share his thoughts about the Latin American Family Office Landscape from first-hand experience.
BC: Could you tell the readers some about your background, and what led you to be acquainted with family offices?
CA: I started working in the family business field with Prof. Gallo, which held the first Chair in Europe, in the family business field at IESE Business School. Simultaneously, I helped the promotion of family businesses associations in Spain, Chile, and Perú, so it facilitated me the occasion to see how family offices got started in those countries.
BC: You have authored the book, “El Consejo de Familia y su función de gobierno en la Empresa Familiar.” What prompted the idea behind the message the book delivers to readers? What do you see as the main message? What conflicts/crisis does this book identify and what solutions does it offer?
CA: The idea of researching about family councils was triggered around 2003 when I read a survey among family businesses in Spain which said the family council was the structure that families valued most. The main message of the book is that family councils are not only “communication forums” but effective “governance bodies.” It is fascinating to observe how family offices enhance the implementation of family councils, and how family councils or owner councils are better developed when there is a family office or other wealth management structure in place.
BC: Where do you see the main difference of family office landscape regarding Latin America and the rest of the world?
CA: In Latin America, family offices are thriving because of the accelerated rate of growth in the region in recent years, but there are vast differences among countries in this field of wealth management. For example, Chile is a very sophisticated country in wealth management, and last data showed there are around 230 family offices at the time. I think Mexico is another country with a good environment for wealth management, but Perú, Colombia, Argentina, even Brazil are countries that have a lot of ways to go relating to the expansion of the family office culture.
BC: What should be the main focus elements in developing strategies for a family office?
CA: When developing strategies for a family office I think it is critical to harmonize the financial aspects of the plan and the risk profile of the family, with other elements as the vision for the future or the “shared dream,” and the values and culture of the family. In my experience, families care to give a specific family purpose to their wealth management structures. Philanthropy channeled through the family foundation is an excellent way to link both worlds adding meaning to wealth management.
BC: Elaborate on your extensive research work in Washington, Boston, London, Santiago de Chile, and Lima, please.
CA: In the family business field my focus has been “governance,” so I have been studying the most common governance structures as family protocols or family constitutions, boards of directors, and family councils and owner councils. Especially when it comes to family offices, there are quite original mixed governance structures: “owner councils,” which develop agendas that have to do with wealth management and businesses as well as with family purpose, education, etc.
BC: You helped to established family business specialism at the University of Oviedo in Spain, the Pontificia Universidad Catolica de Chile. Tell the readers about the process, and the main initiative about this movement, please.
CA: Well, in every country in which I have worked, I felt the need to develop or promote the research on the family business field, so I started linking family business associations and universities or business schools to set up Centers for Family Businesses or Family Business Chairs. There is evidence that the link between family businesses and universities or business schools generates great knowledge about family structures and family offices. Recently I have been nominated as Family Business Chair at PAD Escuela de Dirección in Lima, Perú, so I will be working to develop the field in this country.
BC: You are an active philanthropist. To you, what is philanthropy and what are the specific steps to take this movement forward?
CA: To me, philanthropy is something related to the person, it is not something that we “do” but something that we “are,” so since I was young I have always been involved in all sorts of philanthropic initiatives. I am always surprised about the many ways in which family businesses channel their “giving,” and to me, an essential step to take this movement forward is to show to families how deeply rooted is the culture of giving in the family nature.
BC: Where do you see the future of Family Office, primarily relating to Latin America?
CA: I see a wonderful future for family offices in Latin America because they have great opportunities and scenarios to grow their wealth and a culture that facilitates the involvement of the family in all kind of wealth activities. Chile and Mexico will play a leading role in the development of family offices in Latam. This summer I had a meeting at Campden Wealth in London, and they –as an expert organization in family offices around the world- are giving careful attention to the region and will be starting activities soon. Furthermore, Miami (Florida), will play a geographically strategic role in facilitating gatherings of family offices from around Latam.
BC: If you had one advice to readers from family offices, what would it be?
CA: Invest in your family education as hard as you invest in the business.
Carlos Arbesú Riera Ph.D. has worked with over 100 family-owned businesses in Europe and Latin America, helping to develop long-term family strategies and protocols. He also serves as an independent Director on several Boards and Family Councils.
He holds a Law degree from the University of Navarre, a PDG and Corporate Finance programs from IESE Business School and a Ph.D. from the “Business & Humanities Institute” (Best dissertation Award 2016). He has been a Visiting Researcher in Boston, Washington, London and Atlanta (Cox Family Enterprise Center).
He founded and is a consultant to various Family Business Chapters or Associations in Spain, Chile, and Peru, which are linked to the Family Business Network. Besides, he helped to establish Family Business chairs at the University of Oviedo (Spain), Pontificia Universidad Catolica de Chile (Chile) and PAD Business School (Perú).
He has delivered his projects at several family business conferences throughout Europe and America and lectured in Advance Executive Family Business programmes at IE (Instituto de Empresa), San Telmo, EAE (Escuela de Alta Gestión Empresarial), ESE (Universidad de los Andes), PUC Escuela de Negocios (Pontificia Universidad Católica de Chile), PAD (Universidad de Piura), AEF Chile, AEF Perú & AATT (Instituto de Empresa familiar, España), among many others.
Carlos Arbesú is the author of the book “The Family Council as a governing body,” “La Familia y Otros Negocios,” “Best practices in Boards of Directors” and “Family councils,” and has published many articles and case studies on family business topics.
He also serves on the Board of philanthropic initiatives such as “Mas Familia Foundation” and “Codefam” (Cooperation for the Development of Families). Carlos lives in Madrid.