ART MADSEN'S INT'L BUSINESS ASSN. LECTURE: "U.S. CORPORATE OPERATIONS..."

Main Site: Transnational Research Associates

Part I of Lecture: Return to Part I

P A R T T W O

THERE ARE, OF COURSE, MORE INSIGHTFUL ELEMENTS THAT COULD BE EXTRACTED FROM THE ENORMITY OF THE ZAIRIAN PROJECT AND ITS IMPLICATIONS FOR THE BANKING SECTOR, THE INVESTMENT HOUSES, THE LONDON CLUB, THE PARIS CLUB WITH WHICH YOU MUST BE FAMILIAR -- THESE ARE FINANCING MECHANISMS SET UP BY THE U.K. AND FRANCE TO RESOLVE THIRD WORLD INDEBTEDNESS PROBLEMS AND SPUR NEW INVESTMENT, INFUSION OF CAPITAL AND GROWTH AS PART OF THE NORTH-SOUTH DIALOGUE -- BUT IT IS IMPORTANT TO TURN, AS WELL, TO THE MEDIUM SIZE PROJECT AND TO THE MICRO-PROJECTS THROUGHOUT THE DEVELOPING WORLD WHERE YOU MAY BE HIRED TO MANAGE, DESIGN OR CONSTRUCT IN THE DECADES AHEAD.

IN ALGERIA, WHERE EVENTS HAVE SPIRALED SOMEWHAT OUT OF CONTROL RECENTLY (ALTHOUGH THERE MAY BE A TEMPORARY STABILIZING EFFECT RELATED TO ELECTIONS LAST WEEK), AMERICAN INVESTMENT HAS FLUCTUATED WITH POLITICAL AND ECONOMIC TRENDS IN BOTH THIS COUNTRY AND IN THE MAGHREB. WE RECALL THAT THE MAGHREB CONSISTS, BY GENERALLY ACCEPTED DEFINITIONS, OF THREE NORTH AFRICAN NATIONS: MOROCCO, ALGERIA AND TUNISIA.

THESE THREE COUNTRIES, HOWEVER, ARE VERY DIFFERENT, INDEED. MOROCCO IS A KINGDOM, RULED AUTOCRATICALLY, CAPITALISTICALLY ORIENTED AND DEPENDENT ON THE U.S., FRANCE AND SPAIN TO SOME DEGREE FOR ECONOMIC SUPPORT. MY EXPERIENCE WITH MOROCCO IS INDIRECT, DEALING ONLY WITH A WORLD COURT CASE IN WHICH THE KINGDOM OF MOROCCO SUED DRAVO CORPORATION OF PITTSBURGH, AND THE PEOPLE'S DEMOCRATIC GOVERNMENT OF ALGERIA, FOR EXTRACTING ZINC BY BURROWING UNDER THE INTERNATIONAL BORDER AT EL ABED, AND EXTENDING ORE GALLERIES INTO TERRITORIAL MOROCCO, PERHAPS INTENTIONALLY, PERHAPS BY ERROR.

THE WORLD COURT ULTIMATELY RULED THAT REPARATIONS HAD TO BE PAID BY ALGERIA TO MOROCCO FOR ORE ILLEGALLY EXTRACTED. WHETHER ALGERIA EVER PAID, SINCE THE TWO COUNTRIES WERE AT WAR OVER THE SPANISH SAHARA, IS QUITE ANOTHER STORY.

MY EXPERIENCE WITH ALGERIA, HOWEVER, IS FAIRLY EXTENSIVE. IN 1978, I WAS HIRED AS TRANSLATOR AND EDITOR FOR A MEDIUM SIZE PROJECT IN THE VICINITY OF BISKRA, ALGERIA, ON THE FRINGES OF THE SAHARA, A SIX HOUR DRIVE SOUTH OF THE CAPITAL, ALGIERS.

UNLIKE THE INGA-SHABA PROJECT IN ZAIRE, CONSTRUCTION OF THE EL OUTAYA SALT REFINERY WAS A MORE ROUTINE MATTER. TECHNOLOGY FOR REFINING SALT WAS REASONABLY WELL ESTABLISHED, ALTHOUGH THE SPECIFIC METHOD OF RECRYSTALLIZATION USED BY DRAVO CORPORATION WAS PATENTED, AND FORMED THE BASIS, IN PART, FOR THE 70 MILLION DOLLAR PRICE TAG ON THIS REFINERY, TO BE PAID BY SONAREM, THE ALGERIAN STATE-OWNED MINERAL MONOPOLY.

DRAVO, HEADQUARTERED IN PITTSBURGH, IN THE 1970s, AND INTO THE 1980s, HAD AN EXTENSIVE HISTORY OF DEVELOPMENT PROJECTS IN ALGERIA, DRAWN BY NATURAL GAS RESERVES, MINERALS AND THE POTENTIAL FOR PROFIT. INCIDENTALLY, CORPORATE PROFITS ARE ONLY ON THE ORDER OF 4% ON MOST OF THESE PROJECTS, AND THE MARGIN OF FLEXIBILITY IN ESTIMATION OF COSTS IS VERY THIN.

DRAVO, A FIRM CONSIDERABLY MORE MODEST IN SIZE THAN BECHTEL, FLUOR-UTAH, M.W. KELLOGG, MORRISON-KNUDSEN, BROWN, OR ROOT & JONES, FOR EXAMPLE, SPECIALIZED, IN PENNSYLVANIA, IN SHIPBUILDING, STEEL FABRICATION AND RELATED INDUSTRIAL FIELDS. IT ALSO HAD A MINING & CHEMICAL DIVISION, BASED IN PITTSBURGH, WITH WORLDWIDE PROJECTS UNDER ITS JURISDICTION. THE ALGERIAN PROJECTS FELL INTO THIS CATEGORY. LATER, IN THE EARLY 1990s, DRAVO DOWN-SIZED ITS OPERATIONS BOTH FOREIGN AND DOMESTIC IN A MASSIVE REDUCTION OF STAFF, FACILITIES AND CAPABILITIES, DUE TO HEAVY LOSSES. ITS D&B RATINGS FELL, AS I RECALL, AND IT LITERALLY BECAME A COMPANY VERY MUCH IN ANOTHER CATEGORY.

THIS SEEMS TO BE AN UNFORTUNATE TREND, A TREND TOWARD AN INCREASE IN THE NUMBER OF FIRMS OVEREXTENDED IN FOREIGN MARKETS, WITH VAST ACCOUNTS RECEIVABLE PROBLEMS, AND NO INTERNATIONAL AGENCY CAPABLE OF FORCING DEBTOR NATIONS TO PAY. CLEVER COMPANIES PROTECT THEMSELVES BY MECHANISMS SUCH AS MKI USED IN ZAIRE, THAT IS THE U.S. GOVERNMENT.

IT IS AT THIS POINT, WE CAN HYPOTHESIZE, THAT CORPORATIONS BECOME IMMESHED WITH GOVERNMENT, WITH DIPLOMACY AND WITH A WIDE RANGE OF DOUBLE-DEALS, FAVORS AND ARRANGEMENTS VERGING ON IMPROPRIETY. ONE IS FORCED TO WONDER WHETHER THE INTERACTION OF THE FEDERAL GOVERNMENT, THROUGH ITS EMBASSIES OVERSEAS, WITH PRIVATE CORPORATIONS IS, ON BALANCE, A GOOD THING. IT IS CERTAIN, HOWEVER, THAT SUCH INTERACTION IS A DAILY REALITY, WITH INTELLIGENCE BEING EXCHANGED, RELATIONSHIPS BEING STRENGTHENED AND SUPPORT BEING GIVEN BY COMPANIES TO THE EMBASSY, AND VICE-VERSA. ON THE SURFACE, ALL SEEMS WELL; YET, DEEP DOWN, WHAT IS REALLY HAPPENING IS VERY INTERESTING: SECRET REPORTS TO WASHINGTON, DATA COMPILATION, INTELLIGENCE OPERATIONS, ALL OF THIS AND MORE CONSTITUTE THE INTRIGUE OF CORPORATE POWER WITHIN GOVERNMENT CIRCLES OVERSEAS.

AT TIMES, I WAS DRAWN INTO THE WHIRLWIND OF TURBULENCE BEING ASKED TO TRANSLATE AT PRIVATE MEETINGS BETWEEN GOVERNMENT AGENCIES AND THE PRIVATE SECTOR. THIS OCCURRED BOTH MOSTLY IN CONGO-BRAZZAVILLE AND IN ALGERIA, WHERE PROJECTS WERE LOCATED IN POLITICALLY HOSTILE LOCATIONS.

THE DYNAMICS OF THE ALGERIAN PROJECT WERE VERY DIFFERENT, BECAUSE ALGERIA WAS A SOCIALIST COUNTRY, ALIGNED WITH THE SOVIET UNION MILITARILY, WITH THE EASTERN BLOC NATIONS FOR PURPOSES OF TECHNICAL COOPERATION, WITH FRANCE COMMERCIALLY, AND ONLY PERIPHERALLY WITH THE UNITED STATES. WE WERE CLEARLY A DISTANT TENTH IN THIS RACE. EVEN THE BRITISH, THE SPANIARDS AND THE ITALIANS WERE WELL AHEAD OF U.S. INDUSTRIAL OR COMMERCIAL INVOLVEMENT IN ALGERIA IN THE LATE 1970s.

KEEPING ALL OF THESE FACTORS IN MIND, THE FINANCING ARRANGEMENTS FOR THE EL OUTAYA SALT REFINERY WERE QUITE DIFFERENT. THE GOVERNMENT OF ALGERIA, UNDER CONSTITUTIONAL LAW, WAS REQUIRED TO OWN 51% OF ALL COMPANIES. YET, ALGERIA WAS SHORT OF HARD CURRENCY RESERVES. HOW COULD ALGERIA POSSIBLY COME UP WITH FINANCING FOR A 70 MILLION DOLLAR PROJECT, WHEN THEIR CONSTITUTION REQUIRED THEM TO PROVIDE 35.7 MILLION IN GUARANTEES OR CASH, AND ULTIMATELY, OF COURSE, THE REST?

THE ANSWER INVOLVES A DOUBLE STANDARD USED IN ALL THIRD WORLD NATIONS WITH UNSTABLE OR NON-CONVERTIBLE CURRENCY. DRAVO CORPORATION PUT IN PLACE 95% OF THE FINANCING FROM WESTERN SOURCES AND THE GOVERNMENT OF ALGERIA PROVIDED 5%, WHILE RETAINING 51% CONTROL OF THE ENTIRE DESIGN, CONSTRUCTION AND OPERATION OF THE REFINERY. THIS SATISFIED CONSTITUTIONAL REQUIREMENTS; BUT PLACED DRAVO IN THE LUDICROUS POSITION OF SUBJECTING ITS MASSIVE CAPITAL BACKING TO THE DECISIONS OF ALGERIAN BUREAUCRATS WHO HAD NOTHING TO LOSE!

BASICALLY, WHAT HAPPENED INVOLVED "GENTLEMEN'S AGREEMENTS." THE AMERICAN FIRM PROVIDED ALGERIAN GOVERNMENT OFFICIALS WITH TRIPS TO EUROPE, WOMEN, LIQUOR, FOREIGN BANK ACCOUNTS, HOUSING AND SO FORTH, WHILE THE OFFICIALS, PLEASED WITH THIS ARRANGEMENT, USUALLY ALLOWED DRAVO TO PROCEED WITH ITS OWN DECISION-MAKING ON EXPENDITURES FOR THE PROJECT, PERSONNEL HIRING, AND OTHER VITAL PROJECT MATTERS.

THIS IS A CRUDE OVER-SIMPLIFICATION OF THE COMPLEX WORKINGS OF PROJECT FINANCE IN NOT ONLY A THIRD-WORLD NATION, BUT IN A SOCIALIST THIRD-WORLD NATION, WHICH STANDS THEORETICALLY FOR EVERYTHING THAT THE U.S. DEPLORES. YET, MIRACULOUSLY, DRAVO WAS ABLE TO REALIZE A PROFIT UNDER THESE CIRCUMSTANCES, BUT BY JUSTIFYING COST OVERRUNS AND RENEGING ON ITS INITIAL BID.

THE CITY OF ALGIERS, BUILT ON A HILLSIDE, FEATURING THE EL AURASSI HOTEL BUILT BY THE EGYPTIANS, AND THE ORNATE ALETTI HOTEL, LOCATED NEAR THE HARBOR WHERE SOVIET GRAIN SHIPS UNLOADED CARGO, WAS CONSIDERED 'THE PEARL OF THE MEDITERRANEAN'. ALL OF THE EXOTICISM AND CHARM OF THE BARBARY COAST WERE HERE; ALL OF MAN'S INSIDIOUS MACHINATIONS WERE ALSO TO BE FOUND.

ONCE, WHEN ALGERIA WAS UNABLE TO PAY ITS MONTHLY INSTALLMENT ON THE LOAN PACKAGE, OFFICIALS OFFERED AN ENTIRE CARGO SHIP FILLED WITH ORANGE JUICE CONCENTRATE, INSTEAD OF MONEY. THIS BARTER ARRANGEMENT IS BECOMING INCREASINGLY COMMON IN THIRD-WORLD FINANCE AND YOU SHOULD BE AWARE OF THE ADVANTAGES AND PITFALLS ASSOCIATED WITH IT.

IN THIS INSTANCE, AFTER HECTIC NEGOTIATIONS, IT WAS DECIDED TO ACCEPT THE GESTURE AND DISPATCH THE HEAVILY LOADED SHIP TO NEW YORK CITY WHERE THE ORANGE JUICE COULD BE SOLD ON THE COMMODITIES EXCHANGE, AND THE PROCEEDS CREDITED TO THE SALT REFINERY ACCOUNT. EVERYONE WAS PLEASED WITH THIS BARTER-DEAL, IN FRENCH "LE TROC", AND THE SHIP WAS SENT TO NEW YORK.

HOWEVER, SOMEONE FORGOT TO CONTACT THE COMMODITIES EXCHANGE, SOMEONE FORGOT THAT ALGERIAN ORANGE JUICE DIDN'T TASTE LIKE AMERICAN ORANGE JUICE, AND SOMEONE FORGOT THAT AMERICAN STANDARDS INVOLVE DATES OF EXPIRATION ON PERISHABLE PRODUCTS.

THE SHIP LANGUISHED IN NEW YORK HARBOR AND THE CARGO HAD TO BE DUMPED AT SEA.

THE CONSEQUENCES OF MANAGERIAL DECISIONS MADE OVERSEAS ARE FAR REACHING AND INVOLVE HUNDREDS OF THOUSANDS OF DOLLARS -- EVEN ON SMALL OR MEDIUM RANKED PROJECTS.

LET'S TURN MOMENTARILY TO THE SMALLEST OF PROJECTS YOU ARE LIKELY TO ENCOUNTER IN THE FOREIGN EMPLOYMENT MARKET. HOWEVER, WE WILL NOT DEVOTE SUBSTANTIAL TIME TO THIS TYPE OF OPERATION, SINCE, UNLESS YOU ARE PERSONALLY ACQUAINTED WITH THE EMPLOYER, IT IS NOT LIKELY THAT YOU'LL BE HIRED. STRATEGICALLY, IT'S FAR WISER, OF COURSE, TO SUBMIT RESUMES TO THE LARGEST OF EMPLOYERS WHOSE PROJECTS ARE BEING MOBILIZED, NOT TO THE MICRO-PROJECT WHERE NEEDS ARE LIMITED.

A CONNECTICUT LAWYER, WITH A FLAIR FOR LANGUAGES AND EXOTIC SITES, BORROWED ONE MILLION DOLLARS IN 1984 AND, HAVING CONSULTED CONGOLESE GOVERNMENT OFFICIALS, COURAGEOUSLY INVESTED IT IN A SMALL COMPANY IN POINTE-NOIRE, THE ECONOMIC CAPITAL OF CONGO-BRAZZAVILLE. HIS PLAN WAS TO PRE-SOAK TIMBER IN CHEMICALS WHICH PREVENTED ROT UNDER TROPICAL CONDITIONS, CUT THE TIMBER INTO TELEPHONE POLES AND SELL THESE TREATED POLES TO THE CONGOLESE GOVERNMENT WHICH HAD BEEN BUYING METAL TELEPHONE POLES FROM FRANCE FOR A TREMENDOUS AMOUNT PER POLE. BECAUSE CONGO-BRAZZAVILLE, UNLIKE ZAIRE ACROSS THE RIVER, WAS A MEMBER OF THE FRANC-ZONE, ITS CURRENCY WAS CONVERTIBLE ON WORLD MARKETS. WHEN THE CONGOLESE GOVERNMENT PAID HIM, HE COULD CONVERT THE CURRENCY AND BANK IT IN CONNECTICUT, AT A TREMENDOUS PROFIT, STILL UNDERCUTTING BY FAR THE FRENCH PRICE FOR METALLIC POLES, SHIPPED ALL THE WAY FROM FRANCE. THE FRENCH WERE FURIOUS, OF COURSE, BUT, WHEN THE CONGOLESE GOVERNMENT REALIZED THAT THE CHEMICALS WERE PREVENTING ROT, AND LOOKED AT THE FIGURES, THEY PURCHASED THOUSANDS OF POLES FROM THE LAWYER.

LA SOCIETE CONGOLAISE DES BOIS IMPREGNES WAS WRITTEN UP IN SMALL BUSINESS MAGAZINES AS A SUCCESS STORY OF CONSIDERABLE PROPORTIONS. INCIDENTALLY, INGA-SHABA PERSONNEL IN ZAIRE ACTUALLY ASSISTED THIS LAWYER IN MAKING HIS ORIGINAL CONGOLESE CONTACTS IN BRAZZAVILLE, AND I WAS FORTUNATE ENOUGH TO LUNCH WITH THIS DYNAMIC BUSINESSMAN AND ENTREPRENEUR.

WE HAVE EXAMINED THREE TYPES OF OVERSEAS ENDEAVORS:

(1) THE MEGA-PROJECT WITH ITS LONG DURATION, THOUSANDS OF EMPLOYEES, FINANCING COMPLEXITIES AND HIGH DEMANDS FOR TRAINED, EDUCATED PERSONNEL IN ADMINISTRATIVE, TECHNICAL AND INDUSTRIAL FIELDS;

(2) THE MEDIUM SIZED PROJECT, IN THE 70 MILLION DOLLAR RANGE, ALTHOUGH THESE CAN EXTEND UPWARDS TO 400 MILLION AND STILL BE CONSIDERED MODERATELY FUNDED PROJECTS, FEATURING A HIGH NUMBER OF JOBS ON A SHORT-TERM BASIS, A REASONABLE VARIETY OF POSITIONS AND A MORE PLEASANT ENVIRONMENT, GENERALLY SPEAKING, SINCE THE SCALE OF OPERATIONS IS MANAGEABLE AND CONDITIONS CLOSE TO IDEAL, DEPENDING ON CORPORATE POLICIES, PROJECT SITE AND ORGANIZATIONAL PHILOSOPHY; AND

(3) THE MICRO-PROJECT, A SETTING IN WHICH MANY OF YOU MAY FEEL QUITE COMFORTABLE, WHERE RELATIONSHIPS ARE STABLE, AND MORE PERSONAL, ALTHOUGH YOU MAY WISH TO VERIFY SOCIAL CONDITIONS IN COUNTRY, BECAUSE NO FUNDS ARE LIKELY TO BE AVAILABLE FOR SECURITY PERSONNEL. IN THIS SETTING, AS WELL, PROFESSIONAL AUTONOMY IS BROAD-BASED, AND UNFETTERED.

THE MECHANICS OF OBTAINING OVERSEAS EMPLOYMENT REVOLVE AROUND ONLY A FEW CRUCIAL FACTORS:

1. IF YOU SPEAK A FOREIGN LANGUAGE YOU WILL HAVE A TREMENDOUS ADVANTAGE OVER OTHER APPLICANTS, ALL OTHER FACTORS BEING EQUAL.

PARA USTEDES, LOS QUE DESEAN TRABAJAR EN EL MUNDO LATINO, EL ESPANOL ES UN INSTRUMENTO UTIL, DANDOLES A USTEDES UNA VENTAJA VERDADERA.

POUR CEUX ET CELLES D'ENTRE VOUS QUI RECHERCHENT UN EMPLOI D'OUTREMER DANS UN MILIEU FRANCOPHONE, LA LANGUE DE VOLTAIRE SERVIRA D'OUTIL INDISPENSABLE, DANS LE COMMERCE, L'INFORMATIQUE, LA TECHNOLOGIE OU BIEN DANS LA DIPLOMATIE.

2. TIMING, IN ADDITION TO LINGUISTIC EXPERTISE, IS

A VITAL FACTOR IN THE APPLICATION PROCESS. A PROJECT HIRES IN THE MOBILIZATION PHASE, NOT MONTHS LATER.

3. SOURCE AND RELIABILITY OF INFORMATION ARE EQUALLY CRITICAL. I AM ABLE HERE TO POINT OUT TWO OR THREE MAJOR PERIODICALS WHICH SPECIALIZE, EITHER IN THEIR LISTINGS OR IN THEIR ARTICLES, IN PROVIDING UP-TO-DATE PROJECT INPUT FOR THE MOST SIGNIFICANT OVERSEAS PROJECTS OF THE 1990s: ENR AND E&MJ, ENGINEERING NEWS RECORD AND ENGINEERING & MINING JOURNAL.

4. A SENSIBLE JOB CAMPAIGN CONSISTS OF ABOUT 150 RESUMES TARGETING PROJECTS LISTED IN ENR OR E&MJ, PERHAPS WITH REFERENCE TO THEIR SPECIAL QUARTERLY ISSUES, FEATURING HUNDREDS OF OPENINGS.

IF YOU ARE AN ADMINISTRATOR, AN ACCOUNTANT, A PUBLIC RELATIONS SPECIALIST, THESE TECHNICAL MAGAZINES ARE STILL APPLICABLE IN YOUR CASE. REMEMBER, YOU ARE SEEKING ACTIVELY MOBILIZING PROJECTS WHICH CLEARLY REQUIRE ALL TYPES OF EMPLOYEES.

IN FORTY MINUTES, OF COURSE, I COULD NOT ADDRESS ALL MAJOR ISSUES INVOLVED IN THE OVERSEAS SECTOR.

WE HAVE NOT TALKED ABOUT THE WORLD BANK, THE AFRICAN DEVELOPMENT BANK, THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, THE IMF, THE LONDON CLUB OR MAJOR FRENCH SOURCES OF OVERSEAS FUNDING, FOR EXAMPLE, WHICH IMPACT AMERICAN PROJECTS WORLDWIDE; YET, WE HAVE EXAMINED THE CHARACTERISTICS OF THREE CATEGORIES OF PROJECTS IN THE THIRD WORLD, AND GLANCED AT PRIMORDIAL SOCIOLOGICAL ISSUES, FINANCIAL DILEMMAS, PLANNING AND DECISION-MAKING STRATEGIES...IN THE HOPE OF INSPIRING SOME OF YOU, MEN OR WOMEN, TO FORGE NEW PATHS, ON NEW HORIZONS, IN THE NAME OF HUMAN PROGRESS AND PERSONAL ENRICHMENT. THANK YOU.