The Cultural Dimension of Doing Business in Latin America


The Cultural Dimension of Doing Business in Latin America!
There is no doubt that doing business with another country is a challenge, and when there are cultural differences as well, it can seem formidable. Although different Latin American countries have certain similarities, there are also some profound cultural differences, some of which are comforting to USA and UK exporters. Since all aspects of consumer behavior are culture bound, there is an increased need to identify and integrate this interaction and its’ impact on global advertising and marketing. Geert Hofstede’s work can be used to explain the differences between countries and act as a guide in increasing global efficiency in marketing. Geert Hofstede summarises cultural comparisons very elegantly and is quoted below (www.geert-hofstede.com).

Across all Latin American markets there are profound cultural similarities that in turn pertain to business operations with US and UK enterprises. High Uncertainty Avoidance and often Low Individualism prevail (see below for definitions of these terms). Based on studies and data, the large majority of predominantly Catholic countries (those with Uncertainty Avoidance as their highest ranking Dimension) have a low tolerance for ambiguity. The combination of Catholicism and the cultural dimensions shown in the Hofstede Graph on his website reinforce a philosophy predicated in the belief that there is an absolute “Truth.” As Geert Hofstede explains about peoples with a high Uncertainty Avoidance Index, their attitude is, “There can only be one Truth and we have it.” This creates a highly rule-oriented society that institutes laws, rules, regulations, and controls in order to reduce the amount of uncertainty within the population.

USA: There are only seven countries in the Geert Hofstede research that have Individualism (IDV) as their highest Dimension: USA (91), Australia (90), United Kingdom (89), Netherlands and Canada (80), and Italy (76).

The high IDV ranking for the United States indicates a society with a more individualistic attitude and relatively loose bonds with others. The populace is more self-reliant and looks out for themselves and their close family members. The next highest Hofstede Dimension is Masculinity (MAS) with a ranking of 62, compared with a world average of 50. This indicates the country experiences a higher degree of gender differentiation of roles. The male dominates a significant portion of the society and power structure. This situation generates a female population that becomes more assertive and competitive, with women shifting toward the male role model and away from their female role. (World averages shown above for comparative purposes with USA are: Power Distance Index [PDI] 55 – IDV 43 – MAS 50 – Uncertainty Avoidance Index [UAI] 64 – Long-Term Orientation [LTO] 45).

The United States was included in the group of countries that had the Long Term Orientation (LTO) Dimension added. The LTO is the lowest Dimension for the US at 29, compared to the world average of 45. This low LTO ranking is indicative of society’s belief in meeting its obligations and tends to reflect an appreciation for cultural traditions. The next lowest ranking Dimension for the United States is Power Distance Index (PDI) at 40, compared to the global average of 55. This is indicative of a greater equality between societal levels, including government, organizations, and even within families. This orientation reinforces a cooperative interaction across power levels and creates a more stable cultural environment. The last Geert Hofstede Dimension for the US is Uncertainty Avoidance (UAI), with a ranking of 46, compared to the world average of 64. A low ranking in the Uncertainty Avoidance Dimension is indicative of a society that has fewer rules and does not attempt to control all outcomes and results. It also has a greater level of tolerance for a variety of ideas, thoughts, and beliefs.

UK: Is virtually a carbon copy of USA!

We now take a look at a selected number of Latin American countries according to Geert Hofstede’s Dimensions : Argentina, Brazil, Chile, Colombia, El Salvador, Guatemala, Mexico, Peru, Uruguay.

One striking difference between the Latin American countries examined and the US and the UK is the high Uncertainty Avoidance Index (UAI) ranking:

Country UAI
Argentina 86
Brazil 76
Chile 86
Colombia 80
El Salvador 94
Guatemala 101
Mexico 82
Panama 86
Peru 87
Uruguay 100
Average Latin America 85

This high Hofstede Dimension of Uncertainty Avoidance (UAI) across Latin America indicates societies with a low level of tolerance for uncertainty. In an effort to minimize or reduce this level of uncertainty, strict rules, laws, policies, and regulations are adopted and implemented. The ultimate goal of this population is to control everything in order to eliminate or avoid the unexpected. As a result of this high UAI characteristic, the society does not readily accept change and is very risk adverse.

Another difference is the low Individualism (IDV) ranks for a number of the Latin American markets:

Country IDV
Chile 23
Colombia 13
El Salvador 19
Guatemala 6
Mexico 30
Panama 11
Uruguay 36
Average Latin America 21

The scores on this Dimension indicate that the societies are Collectivist as compared to Individualist. This is manifest in a close long-term commitment to the member ‘group,’ be that a family, extended family, or extended relationships. Loyalty in a collectivist culture is paramount, and over-rides most other societal rules and regulations. The society fosters strong relationships where everyone takes responsibility for fellow members of their group.

Other noteworthy points on the Hofstede Dimensions for Latin America include the following:

Brazil: Brazil has a slightly higher Individualism (IDV) rank of 38 compared to the average Latin population score of 21. However, virtually all the Latin countries are considered to be collectivist societies as compared to individualist cultures. This is manifest in a close long-term commitment to the member ‘group,’ be that a family, extended family, or extended relationships. Loyalty in a collectivist culture is paramount, and over-rides most other societal rules.

Colombia: The Power Distance (PDI) ranking of 67 indicates a level of inequality of power and wealth within the society. Colombia has one of the higher masculinity rankings in Latin America (64). This indicates the country experiences a higher degree of gender differentiation of roles. The male dominates a significant portion of the society and power structure.

Guatemala: Guatemala also is tied with Panama for the highest Power Distance (PDI) ranking among Latin countries with a 95, compared to an average of 70. This is indicative of a high level of inequality of power and wealth within the society. This condition is not necessarily subverted upon the population, but rather accepted by the culture as a whole.

Guatemala has the lowest Individualism (IDV) ranking at 6, compared to other Latin countries (average 21). Of special note is that Guatemala has the largest divergence of Power Distance (PDI) to Individualism (IDV) of any country surveyed in the world, with a difference of 89 (PDI-95 minus IDV-6 = 89). Panama is next with 84 and Malaysia third with 78.

Mexico: Mexico has the second highest Masculinity (MAS) ranking in Latin America (69). This indicates the country experiences a higher degree of gender differentiation of roles. The male dominates a significant portion of the society and power structure. This situation generates a female population that becomes more assertive and competitive, although not at the level of the male population. Another Dimension in which Mexico ranks higher than other Latin neighbors is Power Distance (PDI) with a rank of 81, compared to an average of 70. This is indicative of a high level of inequality of power and wealth within the society. This condition is not necessarily subverted upon the population, but rather accepted by the culture as a whole.

Panama: Panama has Power Distance (PDI) as the highest ranking Hofstede Dimension at 95. This score of 95 is tied with Guatemala as the highest Power Distance of all Latin American countries, where the average is 70. (see the Latin Graph below). This high Power Distance (PDI) ranking for Panama is indicative of a high level of inequality of power and wealth within the society. This condition is not necessarily forced upon the population, but rather accepted by the society as part of their cultural heritage.

Panama has a relatively low Individualism (IDV) ranking at 11, compared to other Latin countries average of 21. Of note is that Panama has the second largest divergence of Power Distance (PDI) to Individualism (IDV) of any country surveyed in the world, with a difference of 84 (PDI-95 minus IDV-11 = 84). Guatemala is first with 89 and Malaysia third with 78.

In many of the Latin American countries, including Panama, the population is predominantly Catholic. The combination of Catholicism and the cultural dimensions shown in the Hofstede Graphs above, reinforce a philosophy predicated in the belief that there is an absolute ‘Truth”. As Geert Hofstede explains about peoples with a high Uncertainty Avoidance Index, their attitude is, “There can only be one Truth and we have it.”

Peru: Peru is noticeably very close to the average of all other Latin American countries on each of the country’s Hofstede Dimensions (see Latin America Hofstede Graph below) whereas others have some noticeable variations.

Explanation of the Indexes:

Power Distance Index (PDI) that is the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. This represents inequality (more versus less), but defined from below, not from above. It suggests that a society’s level of inequality is endorsed by the followers as much as by the leaders. Power and inequality, of course, are extremely fundamental facts of any society and anybody with some international experience will be aware that all societies are unequal, but some are more unequal than others’.

Individualism (IDV) on the one side versus its opposite, collectivism, that is the degree to which individuals are integrated into groups. On the individualist side we find societies in which the ties between individuals are loose: everyone is expected to look after him/herself and his/her immediate family. On the collectivist side, we find societies in which people from birth onwards are integrated into strong, cohesive in-groups, often extended families (with uncles, aunts and grandparents) which continue protecting them in exchange for unquestioning loyalty. The word ‘collectivism’ in this sense has no political meaning: it refers to the group, not to the state. Again, the issue addressed by this dimension is an extremely fundamental one, regarding all societies in the world.

Masculinity (MAS) versus its opposite, femininity, refers to the distribution of roles between the genders which is another fundamental issue for any society to which a range of solutions are found. The IBM studies revealed that (a) women’s values differ less among societies than men’s values; (b) men’s values from one country to another contain a dimension from very assertive and competitive and maximally different from women’s values on the one side, to modest and caring and similar to women’s values on the other. The assertive pole has been called ‘masculine’ and the modest, caring pole ‘feminine’. The women in feminine countries have the same modest, caring values as the men; in the masculine countries they are somewhat assertive and competitive, but not as much as the men, so that these countries show a gap between men’s values and women’s values.

Uncertainty Avoidance Index (UAI) deals with a society’s tolerance for uncertainty and ambiguity; it ultimately refers to man’s search for Truth. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel, unknown, surprising, different from usual. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth; ‘there can only be one Truth and we have it’. People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy. The opposite type, uncertainty accepting cultures, are more tolerant of opinions different from what they are used to; they try to have as few rules as possible, and on the philosophical and religious level they are relativist and allow many currents to flow side by side. People within these cultures are more phlegmatic and contemplative, and not expected by their environment to express emotions.

Long-Term Orientation (LTO) versus short-term orientation: this fifth dimension was found in a study among students in 23 countries around the world, using a questionnaire designed by Chinese scholars It can be said to deal with Virtue regardless of Truth. Values associated with Long Term Orientation are thrift and perseverance; values associated with Short Term Orientation are respect for tradition, fulfilling social obligations, and protecting one’s ‘face’. Both the positively and the negatively rated values of this dimension are found in the teachings of Confucius, the most influential Chinese philosopher who lived around 500 B.C.; however, the dimension also applies to countries without a Confucian heritage.

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