The 2008 recession, of which we are now slowly emerging out of, accentuated the structural problems facing the media and advertising industries. These structural problems are mostly elated to the economic challenges that the emergence of digital media present to off-line companies. 0ff-line companies are still, by far, the largest employers in the Latin advertising and media sector. During the recession, the workforce of many of these companies was reduced by more than 40%. Many positions were made redundant and others have been outsourced to Latin American countries.
Latin American media and advertising professionals provide a high quality of labor at a reasonable cost. In fact, we at Portada have a part of our team in Argentina. Major media properties and advertising agencies have outsourced part of their back office work to Mexico. Ther advertising and media companies active in the U.S. have substantial operations in Colombia, Mexico, Brazil and Central America. Most of the online ad –networks operating in the Hispanic and Latin American markets have the bulk of their staffs in Latin America. However, job losses are not only due to macroeconomic, structural and cost (outsourcing) factors that are mostly beyond our control.
They are also the result of irresponsible and greedy financial leveraging of companies by the investment community during the boom years. McClatchy and Univision (look at the 14:1 debt/equity ratio with which Broadcasting Media Partners invested in Univision and at the huge debt McClatchy took to buy Knight Ridder!) come to mind as prime examples of this practice. Hard working advertising and media professionals had to pay for these financial excesses by losing their jobs. A reform of the legal and tax system is needed with job creation and employment as its main objective. Job creation should be at the center of the legal and fiscal framework regulating companies, including those that operate in the Latin advertising, marketing and media space.
The Obama administration is providing tax incentives to small businesses that hire new employees. Another idea we would like to float here is that interest payments on debt should only be tax deductible as long as the debt is used to invest in expansion through product development and employment, not just in acquiring existing assets. We are all for the “creative destruction” intrinsic to the capitalistic process, but against the “financial destruction” origined by irresponsible lending practices and financial leveraging of companies.