Archive for February, 2010


the value of living & working abroad

Sunday 28 February, 2010

It occurred to me after reading my post of a week ago on international internships that I must have been in a cranky mood, because it sounded like I didn’t endorse international internships, which I wholeheartedly do. My only point was that they simply don’t go far enough.

Foreign internships add immeasurably to an international career. It enables the intern to really learn a bit about the business culture, while hammering in business vocabulary on a regular basis. They get to learn how decisions are made elsewhere & learn the values that go into making those decisions. They learn the line where professional life stops & personal life begins.  In many places this point is very difficult to decipher.  This kind of experience beats the heck out of all the parachutists who drop in, do a deal, & think they know the local culture.

The University of South Carolina requires graduates of its Masters in International Business to complete an internship & when I was living/working in Germany, I learned more about them. The internships lasted no longer than a semester & all the participants were allowed to do was sit & watch workers do their work. Such was the status of internships at the time in Germany.  I don’t know how much this has changed since then.

On the other hand, my program took me to Germany for 2+ years.  When I arrived, I spoke fine book German, but the natives laughed at my academic vocabulary.  Over the next 1 1/2 years, unbeknownst to me, my German improved so much that friends I hadn’t seen in a long time complimented me on how much better I spoke the language.  It happened without my realizing it.  That’s how it is with many other things as well.  I had a chance to really dig in & get to know the people, language, & culture in a way few others have the opportunity to do.  I lived & worked pretty much as a local, & I could probably pass myself off to a lot of foreigners as a  local.  Natives would pick up that I’m not a native Germany relatively quickly, but I was only there for a couple of years.  It takes even longer to go local.  I had a great experience & would welcome the opportunity again.

Cultures generally & business cultures specifically are deep-seated, so you can’t learn them in a short internship.  It takes many months & years to learn get inside other people’s heads & learn what makes them tick.  You can read lots of books to get a head’s up to learn what to look for, but until you jump in & really interact with people on their own basis can you learn the lay of the land.  Internships are a great start in this process, but only that.

Unfortunately American companies see little value in sending Americans abroad for any length of time anymore.  These assignments are pretty much offered only to junior executives just starting off to get their feet wet & see how they react to a foreign culture.  The thought is set strategy globally & implement locally.  For assignments with real responsibility, these seem in many cases to go to Brits, who benefited from gaining experience world-wide as a result of working in their far-flung Commonwealth countries.  It appears as if they can’t believe Americans can actually have any credible foreign experience.  Governments patently create hurdles to hiring foreigners by requiring work & residence permits proving that a local employee can’t be found to do the work. It’s as if no one values this kind of experience.  I beg to differ.

So get international experience with an internship or any way you can.  Be prepared to put up with a lot of fights to make it happen.


international trade court vs. commission

Wednesday 24 February, 2010

I caught this article by Ameet Sachdev in the Chicago Tribune International Trade Commission a battleground for global disputes & I bring it up to compare/contrast it with an entry I made late last year us international trade court speech. These bring to mind the different ways to resolve international trade disputes.  The International Trade Court is one option.  The International Trade Commission is another.  I’m not a lawyer, so I won’t recommend which you use to press your case, but as an international businessperson, I am familiar with international trade issues, & especially global intellectual property issues since I work with technology companies.

An observation: that these organizations have jurisdiction here in the US, so they can help protect you against unfair international (i.e. foreign-based) competition here in the US.  For protection outside of the US, you have to go elsewhere for resolution.  That doesn’t help my clients who are looking to sell outside of the US.

To enforcement, (always a key issue in my mind for legal issues) :   if the commission cannot award monetary damages, how powerful can it be?  It appears as if they can make decisions with ramifications moving forward, but can do nothing to re-mediate past transgressions.  That means unfair foreign competitors can make a killing, & then if forced out of the market, can take their winnings & go home.  That seems unfair to local competitors.  In these cases, it looks like working through the court may be a better option.

Since the mission of the commission is to “protect US industries & jobs,” as a foreign company doing business here, (of which there are many & that number is growing), I would question how fairly my argument would be treated.  Any organization which has a political mandate raises the issue of fairness.  I understand that foreign-based companies with large operations here are using the commission to defend their rights here, but it still doesn’t deflect from the fairness issue.  In those cases, the commission is simply defending the US-based interest of the foreign company.  In my mind fairness should be the goal rather than protecting the home team.  That way, when the home team wins, it’s all the more impressive.


how do internships abroad help?

Friday 19 February, 2010

I caught with interest this article in the Chicago Tribune by Julie Wernau Americans chase internships abroad as a gateway to work.  I wholeheartedly agree that a foreign internship differentiates employee candidates in the job market, but employers should not expect to hire interns who are cultural experts in the countries where they did their internships.  They’re a great start in learning about the rest of the world, but only that.  Internships are for a limited term, usually on a few months, & it’s simply not possible to learn all of the nuances of a foreign culture in that short period of time.  There are a lot of business people I’ve gotten to know who fly around the world, do a lot of deals, & think they’re intercultural experts.  They’re not.  The article notes that even studying abroad is very different & much more sheltered than working abroad.  Even a 3 month internship is too short to pick up all the differences in the workplace.  You can’t develop any fluency in a language in a few months.  Work environments change from season to season.  I lived & worked in Germany for 2 years, & it wasn’t until the time I left that I felt that I “knew” the Germans.  I think one can learn to defer judgement, be non-judgemental, & learn/adapt to working in a foreign culture, but to expect a young person who doesn’t even know that much about his/her home country’s work environment to contrast/compare with a foreign one is just asking too much.

It’s great that the number of foreign internships has increased so much the last few years (6,950 in Y2K to 13,658 in 2008), but that # still should be much higher.  For example, according to the Institute of International Education, the US 2008 figure is not even as much as Germany sends to the Netherlands.  For a country with a population of 300 million, 13,658 is still very low.

I don’t like the fact that foreign internships are positioned as a last resort, i.e., “I couldn’t get a job, so I left the country.”  In my mind, foreign internships are worth pursuing in their own right, regardless of the current job situation.  The experience gained is immense & will help you in many work situations later in your career.  Quotes like, “I would love to go anywhere,” strike me as unfocused & unrealistic.  If that’s how you’re going about finding a global job, that’s what you’ll get-a job that anyone could get anywhere.

It’s a shame these kinds of opportunities are available only pretty much for younger workers.  I think there are many older workers who would appreciate the opportunity to gain some work experience abroad.  Combining deeper experience with the respect afforded to older workers in other countries, those workers can add even more to the workplace than younger workers.  Supposedly 1/3 of the Association for International Practical Training‘s placements were young professionals.  Since it doesn’t look like they serve any group other than younger workers, (other than lawyers), the other 2/3 must be simply non-professional young workers.  That’s a shame.

I can relate to the experiences of world-travelers who are having difficulties finding a job.  I find it somewhat hypocritical that supposedly american “employers are looking to hire people who understand the economies & cultures of the world.”  Frankly, I don’t see it.  I cross paths with many well-educated, experienced, & culturally-knowledgeable people who repeatedly tell me that their international experience means nothing to potential employers.  My impression is American employers continue, in their insular & parochial ways, to prefer hard skills over soft, which when approaching global markets is a mistake.  American firms miss the boat by not recognizing the skills necessary to compete in world markets.  Hopefully some day  they’ll wake up.


tax update on Mexico

Wednesday 17 February, 2010

The MidAmerica Chapter of the US Mexico Chamber of Commerce hosted the Mexico Tax Update seminar featuring John McLees of Baker & McKenzie.  John focused on:

  • structure of the Mexican tax system-VAT (16%, but different from Europe), income tax (30%) , single tax rate, etc.
  • unique features & pitfalls-17.5% single minimum corporate income rate tax (“IETU”) replaces former asset tax & may be a problem for employee services companies
  • recent developments-4.9% income withholding tax , r&d income tax credits, tax consolidation issues
  • special tax regime for export manufacturing-special tax regimes/treatment to promote maquiladoras (changes in materials & components importation are being put in place because tequila companies took advantage of earlier rules)
  • tax compliance & tax audits-changes in fiscal invoices & increasing scrutiny of economic substance of transactions (a trend in Latin America)
  • tax issues in corporate transactions, such as when acquiring a business in Mexico (plan transaction, acquire assets/stock), disposition of shares in a Mexican company(25% tax on foreign party), establishing new (corporate form & exit strategy) & restructuring (mergers & spinoffs) Mexican operations.

Here are a few important points I pulled out:

  • Mexico has a 3% cash deposits tax (the “IDE”) which applies to deposits of bills & coins @ the bank.
  • Mexico imposes a special tax on production & services (“IEPS”) on cigarettes ($.10/per), 3% on telecom, 26.5% on beer, 30% on gaming/raffles.
  • for awhile anyone who was granted a foreign tax credit in Mexico would be investigated for fraud, but no more
  • Mexico & the US exchange the most tax information in the world.
  • if restructuring, companies can be taxed on the sale of assets, & the Mexican Foreign Investment Commission picks up changes in ownership
  • transfer pricing issues are the biggest tax issue in Mexico & everywhere.
  • Tax assessment penalties can be very expensive, 50-100%.

Along with the other promotional information, the information packet contained the following articles:


Asian investment in the US

Friday 12 February, 2010

David Laverty’s International Counsel group sponsored this presentation on Asian investment in the United States.  Colleagues of his made presentations on inbound investment from China, India, & perspective on the same from Europe.  Here are the highlights:

China-Mark Williams of DLA Piper spent 4 years in China as well as time in Thailand, Korea, & Europe.  He listed some things that impact upon inbound investment

Mark noted that investment in China is approaching $100B, & investment from China is almost $60B.  M&A is up in China too, & the country has evolved from being a net seller to a net buyer.  Government policy dictates that their targets are natural resources.  Their objectives are simply to secure manufacturing inputs & diversify their resources. Private enterprises are targeting technologies, brands, distribution, & R&D.  Their objectives are to grow & add value to their shareholders.

India-David talked about India.  In contrast to 20 years ago, the Indian government now encourages outbound investment.  They do smaller deals:  75% were <$25M on US targets.  Outbound M&A from India is on par with China in 2007, but has fallen from $32.8B that year to $13.2B in 2008, & $1.4B in 2009.  A few of the reasons for these declines are  rising Indian labor costs, growth, & buy vs. build decisions.    In evaluating legal risks, stipulate getting recourse here & using arbitration to increase certainty in complex transactions & legal systems.  Stock transactions inherit liabilities while asset transactions limit liabilities.  Use these key steps:

  • confidentiality & acquisition agreements, & letters of intent
  • in deciding whether to keep or fire employees, Indian firms usually decide to keep management, at least temporarily
  • do your due diligence, especially on high risk issues
  • coordinate counsels as a team-US legal costs can be too high (foreign law firms can’t practice in India)

perspective from Europe-David’s colleague Jan Kooi from the Netherlands offered a European perspective.  Europe can be a base for foreign investment & is a good base for joint ventures into Asia, especially Japan.  Europe can be a springboard for Asian companies into the US & a springboard for American companies into Asia.  Emerging companies can move up from the Euronext market to the New York stock exchange, especially since the latter acquired the former.  Holland is a particularly good home base & offers these advantages:

  • the country has 90 (soon to be 110) investment protection agreements.
  • favorable tax treaty network
  • flexible corporate legal system
  • a stable economy with virtually no strikes
  • they speak English very well
  • there are legal/tax benefits for firms investing in Asia

the future of global journalism

Wednesday 10 February, 2010

I attended this luncheon presentation COVERING THE GLOBE: THE FUTURE OF INTERNATIONAL JOURNALISM organized by the Chicago Council on Global Affairs.  It featured Christine Spolar, a former foreign correspondent for the Chicago Tribune (all of whom have left those positions with the ‘Trib) & now a Senior Editor @ the Huffington Post Investigative Fund.  After a short presentation/talk, most of our time was spent in Q&A.  Here’s what I pulled from the conversation:

  • Foreign news is still relevant-many readers don’t know basic facts, geographies, etc.
  • The Huffington Post is effective-they were actively reading Twitter feeds during the elections in Iran
  • Tom Hundley, formerly of the Tribune, & Thomas Mucha, formerly of Crain’s Chicago Business, have landed @ Globalpost, a start-up news organization which asks writers to contribute 4 stories per month for $1000, on which most cannot survive, so they freelance.  Its alliance with CBS is a big help, although CBS then fired 100 people.  Mark Scheffler from globalpost attended & admitted they are utilizing a superstringer model.  They are still struggling to find the right business model.  Christine said all news media are start-ups today.
  • The ProPublica model with foundation support is a possibility.  Partnerships are key.
  • The Chicago Tribune had a commitment to covering the Balkans because so many immigrants moved to Chicago from there.  The Trib required 1 story every 6 days, but later gave writers only 3 days, so many details were missed.
  • Young inexperienced writers write good stories, but don’t have the experience to contribute meaningful analysis.  Opportunities to gather that experience is lacking.
  • Italy has lots of stories that need to be uncovered, even beyond what’s covered in local papers.  What was originally written as “Women not allowed as gondoliers in Venice,” turned into a story about the families which own those licenses & those for water taxis, ultimately controlling all transportation there.  The mafia was involved as well.  There was much below the surface.
  • In Latin America, journalists need to speak the local language or all they can write about is fluff.
  • American newspapers are hiring foreign journalists in-country.
  • It’s dangerous to cover war zones & really can’t be covered by stringers. What happens if they get hurt?
  • Competition among foreign journalists is a good thing.  The Chicago Tribune wanted to cover the same geographies as the New York Times so they could prove the Times wrong. It’s important to have a variety of voices.  Everyone was in South Africa when Mandela was released.  Now there are few posts with staff.  Foreign news becomes homogenized.
  • The Milwaukee Journal Sentinel does a good job of covering what local companies are doing internationally.
  • Rupert Murdoch is expanding his empire & could be a model for the future.

Learning about the rest of the world is vitally important to me & that local media are increasingly turning their focus to exclusively local topics ticks me off.  There is no place where I can go to find out what local companies are doing internationally anymore.  If I seek it out, I can find (“pull”) it, but I can no longer read a local paper or magazine & have that info “pushed” to me.  There is a risk in being informed only about what’s going on in your immediate neighborhood.  That’s what creates such insular & parochial points of view.  I realize there are other sources for international news & information, but the local angle on international news is missing.  The context for local firms is lacking & that’s dangerous.


constructive criticism of Friedman’s The World is Flat

Wednesday 3 February, 2010

Over the holidays I took some downtime to catch up on reading a book I should have read a long time ago, Thomas Friedman’s The World is Flat. Far be it for me to criticize a guy as smart as him, but I do think he missed a few things.  The book is essentially a treatise on the threat to supply chains world-wide, with which I wholeheartedly agree.  Where I diverge is the way he presents his findings & how he positions some of the changes on which he reports.

Friedman stirs up a hornet’s nest by couching his observations as a supply side threat while the flattening of the world is just as much a demand side marketing opportunity.  The way Tom presents it, the only 1’s who are leveraging the opportunities of the flat world are the Indian offshoring companies which are growing like gangbusters.  If the world is flat for them, it’s just as flat for us.  The difference is they’re taking advantage of it & we’re not.  That has to change.

Friedman describes a lot of big American companies which outsource more & more critical functions to India, China, & eastern Europe & talks about some of the big companies in those countries which are taking advantage of the flattening world as well.  He mentions a few small companies which are being threatened by the new environment, but very few which are leveraging flatness.  Again, the opportunities in a flat world are even more available for small companies these days, but he mentions only the threats & not the opportunities.  They’re there.  I think he simply spoke with his circle of contacts who are primarily from big companies & used them as a proxy for everyone else.  Small companies are becoming more & more important today, so we need to recognize the  world is not just flat for the big guys.

Finally, I think Friedman understated the global price effect of the proliferation of the internet, coinciding with China, India, & eastern Europe all coming on line at the same time.  Whether we realize it or not, it’s created a paradigm shift downward in prices for all products & services because of the recent cheap production/service capacity dumped on the world market.  Whatever can be done more cheaply abroad will be done, which can now be done simply & easily because technology enables it.  I’ve had numerous conversations with potential partners from these countries & the dilemma I keep running into is:  I have bills to pay @ developed economy levels in $US.  They earn @ developing economy levels & have to pay me many of their billable hours for 1 of mine.  They have huge price advantages & are leveraging them as much as they can.  Their cost advantages are showing up everywhere & it’s not going to stop anytime soon.  We need to think about how to adapt to it.  The Germans & Italians continue to focus on adding value to manufacturing with increased specialization, skills, etc.  We’d be wise to consider doing the same.