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Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 95
PART THREE APPRAISING AND COMPENSATING EMPLOYEES
C H A P T E R T S i x
Performance Management
and Appraisal
6
Lecture Outline
Overview
Basic Concepts in Performance Management
Why Appraise Performance?
- The Importance of Continuous Feedback
- Performance Management
- Performance Management Defined
- The Appraisal Cycle
Setting Effective Goals and Work Standards
Who Should Do the Appraising?
Basic Appraisal Methods
Graphic Rating Scale Method
Alternation Ranking Method
Paired Comparison Method
Forced Distribution Method
Critical Incident Method
Behaviorally Anchored Rating Scales
Appraisal Forms in Practice
The Management by Objectives Method
Computerized and Web-Based Performance
Appraisals
Electronic Performance Monitoring
Practical Suggestions for More Effective
Appraisals
Ensure Fairness
Deal with Common Appraisal Problems
Understand the Legal Aspects of Performance
Appraisal
Conduct First-Rate Appraisal Feedback Interviews
In Brief: This chapter gives an
overview of the performance
appraisal process and the different
tools and methods available. The
main topics covered include the
performance management process,
appraisal methods, appraisal
performance problems and
solutions, and the appraisal
interview.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
96
C H A P T E R T S i x
Lecture Outline Continued
Coaching and Career Management
Improving Your Coaching Skills
The Basic Coaching Process
Career Management Methods
Roles in Career Development
The Employee’s Role
The Employer’s Role in Career Management
Corporate Career Development Initiatives
Gender Issues in Career Development
Managing Employees’ Promotions and Transfers
Retirement
Performance Management vs. Performance
Appraisal
Using Information Technology to Support
Talent Management Practices and Strategic
Employee Appraisals
Appraising and Actively Managing Employees
Segmenting and Actively Managing Employees in
Practice
Interesting Issues: Despite lots of
attention, money, and effort,
performance appraisals remain an
area with which few managers or
employees are satisfied. The
following questions may be worth
discussing. Is it just that we don’t
have a good enough system yet, is
there an intrinsic problem with
performance appraisals, or is it
just human nature to dislike them?

ANNOTATED OUTLINE
I. Basic Concepts in Performance Appraisal and Management
A. Comparing Performance Appraisal and Performance Management
— Performance appraisal is part of a total integrated process of
performance management, which consolidates goal setting,
performance appraisal, and development into a single, common
system, the aim of which is to ensure that the employee’s
performance is supporting the company’s strategic aims.
Why Appraise Performance? — Performance management’s
emphasis on the integrated nature of goal setting, appraisal, and
development reflect Total Quality Management concepts. Second,
it reflects what many studies have shown: that traditional
performance appraisals are useless and counter-productive. Third,
it is a process that recognizes that every employee’s efforts must
focus on helping the company to achieve its strategic goals.
B. The Importance of Continuous Feedback — For accomplishing
several (or all) of these aims, traditional annual or semi-annual
appraisal reviews make sense.
C. Performance Management — Many employers take a continuous
process approach including having self-directed (and trained) work
teams give themselves ongoing appraisal information.
D. Performance Management Defined — Performance management is
a goal-oriented and continuous way to appraise and manage
employees’ performance.
E. The Appraisal Cycle — The three-step process is: (1) setting work
standards; 2) assessing performance relative to such standards;
and, 3) providing feedback aimed at improving performance
during the next cycle.
F. Setting Effective Goals and Work Standards — Some guidelines
for effective goal setting are: 1) assign specific goals; 2) assign
measurable goals; 3) assign challenging but doable goals; and 4)
encourage participation.
G. Why Appraise Performance? — For several reasons: 1) they play
an integral role in the employer’s performance management
process; 2) the appraisal lets the boss and subordinate develop a
plan for correcting any deficiencies, and reinforce those things he

98
does correctly; 3) they serve a useful career planning purpose; and
4) it plays a part in salary decisions.
H. Who Should Do the Appraising?
1. The Immediate Supervisor — is usually in the best position to
observe and evaluate the subordinate’s performance, and is
responsible for that person’s performance.
2. Peer Appraisals — becoming more popular with firms using
self-managing teams.
3. Rating Committees — consist of multiple raters, typically the
employee’s immediate supervisor and three or four other
supervisors.
4. Self-Ratings — tend to be higher than supervisor or peer
ratings.
5. Appraisal by Subordinates — or upward feedback, is where
subordinates anonymously rate their supervisor’s performance.
Research Insight—One study shows that upward feedback is very effective
in improving supervisors’ behaviors.
6. 360-Degree Feedback — where ratings are collected from the
employee, the employee’s supervisors, subordinates, peers, and
internal or external customers. This method is the subject of
considerable debate. One study found significant correlation
between 360-degree ratings and conventional ratings. Firms
should carefully assess potential costs, carefully train those
giving feedback, and not rely solely on 360-degree feedback.
II. Basic Appraisal Methods
A. Graphic Rating Scale Method — is the simplest and most popular
performance appraisal technique. A scale is used to list a number
of traits and a range of performance for each, and then the
employee is rated by identifying the score that best describes
his/her performance level for each trait. Managers must decide
which job performance aspects to measure. Some options include
generic dimensions, actual job duties, or behaviorally recognizable
competencies.

B. Alternation Ranking Method — involves employees being ranked
from best to worst on a particular trait, choosing highest, then
lowest, next highest, next lowest, and so forth until all are ranked.
C. Paired Comparison Method — involves ranking employees by
making a chart of all possible pairs of employees for each trait and
indicating which is the better employee of the pair.
D. Forced Distribution Method — Predetermined percentages of rates
are placed in various performance categories; similar to grading on
a curve.
Teaching Tip: Discuss what the ramifications of using the forced distribution
method for class grades would be. Students will have strong opinions.
E. Critical Incident Method — a supervisor keeps a detailed record of
uncommonly good or undesirable examples of an employee’s
work-related behavior, and reviews it with the employee at
predetermined times.
F. Behaviorally Anchored Rating Scales (BARS) — combine the
benefits of narratives, critical incidents, and quantified scales, by
anchoring a scale with specific behavioral examples of good or
poor performance. The five steps in developing a BARS are: 1)
generate critical incidents; 2) develop performance dimensions; 3)
reallocate incidents; 4) scale the incidents; and 5) develop final
instrument. The advantages of BARS include a more accurate
gauge, clearer standards, feedback, independent dimensions, and
consistency.
G. Appraisal Forms in Practice — involve rating the employee’s
performance for each performance factor, writing down examples
and an improvement plan, aiding the employee in understanding
where his/her performance was good or bad, and summarizing by
focusing on problem solving.
H. Management by Objectives (MBO) — requires the manager to set
specific measurable goals with each employee and then
periodically discuss his/her progress toward these goals. The
process consists of six steps: 1) set the organization’s goals; 2) set
departmental goals; 3) discuss departmental goals; 4) mutually
define expected results; 5) conduct performance reviews; and 6)
provide feedback.
I. Computerized and Web-Based Performance Appraisal — generally
enables managers to keep notes on subordinates during the year,

100
rate employees on a series of performance traits, and then generate
written text to support each part of the appraisal. About one-third
of employers use online performance management tools for at least
some employees.
J. Electronic Performance Monitoring — systems used to allow
managers access to their employees’ computers and telephones.
III. Practical Suggestions for More Effective Appraisals Few
supervisory tasks are as complex and poorly administered than
appraisals.
A. Ensure Fairness — The first challenge is to make sure the
subordinate views the appraisal as fair. Many managers don’t focus
on the developmental aspect of the appraisal, but instead use it for
political purposes.
B. Deal with Common Appraisal Problems — It can be difficult to
rate performance for several reasons. Much depends on a good
rating, including career progress, or being able to obtain a raise.
There are also technical problems that can affect the fairness of the
process.
1. Unclear Standards — Ambiguous traits and degrees of merit
can result in an unfair appraisal.
2. Halo Effect — the influence of a rater’s general impression on
ratings of specific qualities, can be a problem.
3. Central Tendency — involves supervisors sticking to the
middle of the rating scales, thus rating everyone approximately
average.
4. Leniency or Strictness — Supervisors have the tendency to rate
everyone either high or low.
5. Bias — the tendency to allow individual differences such as
age, race, and sex to affect the appraisal ratings employees
receive is a problem.
Research Insight — Bias can influence the way a person appraises another
person. In one study, for example, the identical employee was rated differently
if pregnant.

C. Understand the Legal Aspect of Performance Appraisal —
Performance appraisals have legal implications, because they often
affect raises, promotions, training, and other HR actions.
D. Conduct First-Rate Appraisal Feedback Interviews — an interview
in which the supervisor and subordinate review the appraisal and
make plans to remedy deficiencies and reinforce strengths.
E. Preparing for the Appraisal Interview
Step 1 — give the subordinate enough notice to review his/her
work. Step 2 — Study his/her job description.
Step 3 — Choose the right place for the interview and schedule
enough time for it.
F. Conducting the Interview — Prepare for the interview by
conducting the interview in a private area without interruptions.
Talk in terms of objective, observable work data using examples.
Get agreement with the employee of how you will know
improvement has occurred. Ensure the process is fair and learn
how to deal with defensiveness.
IV. Coaching and Career Management
A. Improving Your Coaching Skills — Coaching means educating,
instructing, and training subordinates. Mentoring means advising,
counseling, and guiding. Coaching focuses on teaching shorter-
term job related skills, mentoring on helping employees navigate
longer-term career hazards.
B. The Basic Coaching Process — Preparing to coach involves
understanding the problem, the employee, and his or her skills.
Planning requires reaching consensus on the problem and on what
to change. Finally, once agreement is reached, educating,
instructing, training and ongoing encouragement are the important
steps in the change process.
V. Career Management Methods
A. Mentoring — Having a mentor — a senior person in the firm who
can be a sounding board for your career questions and concerns —
can enhance career satisfaction and success.
B. The Employee’s Role — An individual must accept responsibility
for his/her own career; assess his/her own interests, skills, and
values; and take the steps required to ensure a happy and fulfilling

102
career. Finding a mentor who can be a sounding board is often
helpful. Mentoring programs can be informal or formal.

B. The Employer’s Role — Employers can support career
development efforts in many ways. There are several
organizational career-planning practices. The means for helping to
further an employee’s career depends on the length of time the
employee has been with the firm.
C. Gender Issues in Career Development—Women and men face
different challenges as they advance through their careers. Women
face the glass ceiling. Minority women may be particularly at risk.
D. Managing Employees’ Promotions and Transfers
1. Making Promotion Decisions — Promotions usually provide
opportunities to reward the exceptional performance of tested
and loyal employees. However, unfairness, arbitrariness, or
secrecy can diminish the effectiveness of the promotion
process for all concerned.
2. Handling Transfers — Transfers are moves from one job to
another, usually with no change in salary or grade. The
frequent relocating of transfer employees has been assumed to
have a damaging effect on transferees’ family life. Transfers
are also costly financially.
E. Retirement—Some employers are instituting formal preretirement
counseling aimed at easing the passage of their employees into
retirement. A large majority of employees have said they expect to
continue to work beyond the normal retirement age. Part-time
employment is an alternative to outright retirement. Employers can
benefit from retirement planning by becoming able to anticipate
labor shortages.
1. Create a Culture that Honors Experience — Changing cultures
that are explicitly or implicitly biased against older workers
can help make a company more attractive to retirees.
2. Modify Selection Procedures
3. Offer Flexible Work — Redesigning jobs to include
telecommuting and other options will attract and retain
workers.
4. Phased retirement — Phased retirement programs combine
reduced work hours, job change, and reduced responsibilities.
VI. Performance Management

104
A. Performance management vs. Performance Appraisal — refers to an ongoing,
continuous process of deciding upon goals, evaluating results and providing
feedback. It is always goal-directed.
B. Using Information Technology to Support Performance Management —
allows the supervisor to assign financial and nonfinancila goals to each team’s
acitivities and to keep all employees informed of their goals.

VII. Talent Management Practices and Strategic Employee Appraisals
A. Appraising and Actively Managing Employees — Several examples of
strategically managing employees performance and value to the organization
are provided.
B. Segmenting and Actively Managing Employees in Practice — Compass
Group, Tesco PLC, McKinsey Consulting and others are highlighted as
examples.

106
KEY TERMS
Performance appraisal Evaluating an employee’s current or past performance
relative to his/her performance standards.
Performance management Is the continuous process of identifying, measuring, and
developing the performance of individuals and teams and
aligning their performance with the organization’s goals.
Performance appraisal Involves this three-step process:
process 1. Setting work standards
2. Assessing the employee’s actual performance relative to
those standards
3. Providing feedback to the employee
Peer appraisal Appraisal of an employee by his or her peers.
Upward feedback Appraisals in which subordinates rate their supervisors’
performance.
Graphic rating scale Lists a number of traits and a range of performance for
each.
Alternation ranking This method is used to indicate the employee who is the
method highest on the trait being measured and also the one who is
the lowest.
Paired comparison method An appraisal method in which every subordinate to be rated
is paired with and compared to every other subordinate on
each trait.
Forced distribution method The manager places predetermined percentages of
subordinates in performance categories.
Critical incident method Entails keeping a record of uncommonly good or
undesirable examples of an employee’s work-related
behaviors and reviewing it with the employee periodically.
Management by objective This method requires the manager to set measurable goals
with each employee and then periodically discuss the
latter’s progress toward these goals.
Halo effect Means that the rating of a subordinate on one trait
influences the way you rate the person on other traits.

Central tendency Refers to a tendency to rate all employees about average.
Appraisal interview An interview in which the supervisor and subordinate
review the appraisal and make plans to remedy deficiencies
and reinforce strengths.
Coaching Means educating, instructing, and training subordinates.

108
Career management A process for enabling employees to better understand and
develop their career skills and interests and to use these
skills and interests both within the company and even after
they leave the firm.
DISCUSSION QUESTIONS
1. Discuss the pros and cons of at least four performance appraisal tools. The text
lists nine different performance appraisal tools (methods). Students might discuss the
pros and cons of any four of these nine. (Examples of some of the pros and cons are:
Graphic Rating Scale method is easy to use, simple, and does not take much time to
administer. However, different supervisors may interpret a numerical rating
differently, and the traits rated may or may not relate to performance.)
2. Explain how you would use the alternation ranking method, the paired
comparison method, and the forced distribution method. The alternation method
would be used by listing all employees to be rated, deciding who is the best in a trait
to be rated, and who is the worst. Then decide who is the second best, and the second
worst, the third best and the third worst, and so on, until all the employees have been
ranked for that trait. Then do the same with the next trait to be rated. With the paired
comparison, for each trait to be rated, the supervisor would have a sheet with
employee names in pairs; every employee name is paired with every other name. For
each pair, the supervisor would circle the one of the two that is better in that trait.
Forced distribution gives the supervisor a set rating scale (such as 1 through 5). The
supervisor is limited to giving a predetermined percentage of his/her employees’
rating. For example: 15 percent can get a 1, 20 percent can get a 2, 30 percent can get
a 3, and so forth.
3. Explain the problems to be avoided in appraising performance. The five main
rating-scale problems listed in the text are: 1) unclear standards; 2) halo effect; 3)
central tendency; 4) leniency or strictness; and 5) bias. Students should define and
describe them, not simply list them.
4. Discuss the pros and cons of using different potential raters to appraise a
person’s performance. The advantages of using several raters (either a rating
committee or a combination of peer, supervisor, and subordinate ratings) are that the
ratings tend to be more valid than those of one individual rater. The negatives might
include the time and cost involved, as well as problems with the amount of daily
contact that some raters may not have with the employee being rated.
5. Explain how to conduct an appraisal interview. There are four things listed in the
text to keep in mind: 1) be direct and specific; 2) don’t get personal; 3) encourage the
person to talk; and 4) don’t tiptoe around. Students should expound on these basic
principles of conducting the interview.

INDIVIDUAL AND GROUP ACTIVITIES
1. Working individually or in groups, develop a graphic rating scale for the
following jobs: secretary, engineer, and directory assistance operator. Job
characteristics may include but not be limited to: Secretary—quantity of work,
frequency of errors, attendance, and initiative; Engineer—initiative, significance of
contribution to the organization, problem-solving skills, frequency of errors, and
communication skills; Directory Assistance Operator—speed, attendance, accuracy,
and friendliness.
2. Working individually or in groups, describe the advantages and disadvantages
of using the forced distribution appraisal method for college professors. The
disadvantages include decreased morale, interdepartmental inequities, and unfair
rankings. The advantages would include steering clear of many of the biases listed, as
well as overcoming the central tendency problem.
3. Working individually or in groups, develop, over the period of a week, a set of
critical incidents covering the classroom performance of one of your instructors.
If you had the class conduct a job analysis and create a job description for an
instructor in Chapter 3, it would be helpful to refer to that to help identify what kinds
of behavior and tasks the instructor should be doing. This will give a good basis for
students to observe and watch for critical incidents. If they find critical incidents that
are not based in these other documents, it will be a good opportunity to go back and
review how all this ties together and that we haven’t communicated to the instructor
in the job description these behaviors or tasks for which they are now wanting to rate
them.
4. Working individually or in groups, evaluate the rating scale in Figure 6.1.
Discuss ways to improve it. There are many things that might be suggested for
improvements. These suggestions might include but not be limited to: clearer
explanation of the rating scale (what does “very descriptive” mean?), consider
reducing the rating scale from seven points to four or five, provide behavioral anchors
for the scale points, and rework the items so that each one is only rating one trait or
behavior (some have several).
HR in Action Case Incident 1: Appraising the Secretaries at Sweetwater U
1. Do you think that the experts’ recommendations will be sufficient to get most of
the administrators to fill out the rating forms properly? Why? Why not? What
additional actions (if any) do you think will be necessary? Although controversial,
APPLICATION EXERCISES

110
the recommendations would, in fact, encourage administrators to fill the forms out
correctly. Using the more detailed form and not tying the performance ratings to
salary increases would allow the managers to feel more free about rating the
secretaries accurately. There would, however, need to be some strong training
sessions (both for administrators and secretaries) to help them understand the new
system. Because all secretaries have traditionally received the same salary increases,
and have been pleased with that, it would be advisable to consider lowering the
maximum increase to an amount that could be given to all secretaries while staying
within budget. Then all secretaries with a satisfactory rating or better would receive
that increase.
2. Do you think that Vice President Winchester would be better off dropping
graphic rating forms, substituting instead one of the other techniques we
discussed in this chapter such as a ranking method? Why? Certainly other
methods could be used. He has already had a taste of what would result if he went to
a forced distribution or other ranking method. A BARS system might be best, but it
could be costly to develop if the clerical staff has positions that are significantly
different.
3. What performance appraisal system would you develop for the secretaries if you
were Rob Winchester? Defend your answer. If the development costs are not too
great, the BARS system would give the strongest solution to the current situation. The
behavioral anchors would make it more difficult to just rate everyone at the top. It
would also help to eliminate the different interpretations of what the rating scales
mean.
Continuing Case: Carter Cleaning Company
1. Is Jennifer right about the need to evaluate the workers formally? The
managers? Why or why not? Based on the information presented in the chapter, the
students need to determine if the workers and managers should be evaluated formally
or informally, and they need to provide reasons for their decision. Of course she is
right! Jennifer already outlined some of the reasons for the need for appraisals:
probationary period, motivation, feedback, and so on. It is not clear that objectives
and goals have been clearly established and communicated. Also, it is important to tie
salary, promotion, and disciplinary decisions to these goals. Without it, employees
will do what they prefer or enjoy doing. With it, they should understand what the
priorities are and what they need to be doing.
2. Develop a performance appraisal method for the workers and managers in each
store. The students need to be familiar with different appraisal methods discussed in
the chapter. They should use the sample appraisal forms given in the chapter as
guides.

Experiential Exercise: Setting Goals and Appraising an Instructor
Purpose: The purpose of this exercise is to give you practice in developing and using a
performance appraisal system.
Required Understanding: You are going to develop a performance appraisal form for
an instructor and should therefore be thoroughly familiar with the discussion of
performance appraisals in this chapter.
How to Set up the Exercise: Divide the class into groups of four or five students. 1)
First, based on what you now know about performance appraisals, do you think Figure
6.1 is an effective scale for appraising instructors? Why? 2) Next, the group should
develop its own tool for appraising the instructor. 3) Last, have a spokesperson from each
group put his/her group’s appraisal tool on the board.

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The Project Gutenberg eBook of Selling Latin
America: A Problem in International
Salesmanship.

This ebook is for the use of anyone anywhere in the United
States and most other parts of the world at no cost and with
almost no restrictions whatsoever. You may copy it, give it away
or re-use it under the terms of the Project Gutenberg License
included with this ebook or online at www.gutenberg.org. If you
are not located in the United States, you will have to check the
laws of the country where you are located before using this
eBook.
Title: Selling Latin America: A Problem in International
Salesmanship.
Author: William Edmund Aughinbaugh
Release date: August 22, 2019 [eBook #60150]
Most recently updated: October 17, 2024
Language: English
Credits: Produced by Richard Tonsing and the Online Distributed
Proofreading Team at http://www.pgdp.net (This file
was
produced from images generously made available by
The
Internet Archive)
*** START OF THE PROJECT GUTENBERG EBOOK SELLING LATIN
AMERICA: A PROBLEM IN INTERNATIONAL SALESMANSHIP. ***

SELLING LATIN AMERICA
A Problem in International Salesmanship
WHAT TO SELL AND HOW TO SELL IT
BY
WILLIAM E. AUGHINBAUGH, M.D., LL.B., LL.M.
Illustrated from Photographs
BOSTON
SMALL, MAYNARD & COMPANY
PUBLISHERS

Copyright, 1915
By Small, Maynard and Company
(INCORPORATED)
Printers
S. J. Parkhill & Co., Boston, U.S.A.

FOREWORD
I made the acquaintance of Doctor W. E. Aughinbaugh about eight
years ago, when I was in charge of the advertising department of a
large concern doing an international business. The doctor came with
us to look after the export trade, especially in the West Indies and
South America. My work naturally brought me into close association
with him, and I soon began to appreciate his unusual ability in many
directions and his special fitness for the position he occupied. There
seemed to be no phase of merchandising in far-off markets with
which he was not fully conversant; nor did this knowledge relate
solely to Latin America. He had previously travelled the distant
markets of the Orient in the interests of an American house whose
products he successfully introduced there and to him the Far East
was an open book.
He has been in Egypt eight times on business missions. He has
travelled Somaliland, Palestine, Asia Minor, Morocco, Tunis, Tripoli,
Algiers, South Africa, Persia, Arabia, Afghanistan, Cashmir,
Beluchistan, India, Assam, Burma, Siam, China, Cochin-China,
Japan, the East Indies and all over Europe with the single exception
of Russia. The doctor also spent two years of his restless life in the
Far North where a business mission of importance took him into
Iceland, Greenland, Labrador, Newfoundland, Cape Breton Island,
Prince Edward Island and the Hudson’s Bay Country. As to the West
Indies and South America, he has been not only to them, but through
them many times and in every habitable spot where business was to
be done. Some idea may be gained as to the frequency of his visits to
South America by mentioning the fact that he has made thirty-six
trips across the Equator.
Dr. Aughinbaugh talks about the markets of foreign countries with
the authority of long experience for he has been engaged in these

special fields for more than twenty years; yet he is still a young man
with a modern viewpoint. He speaks the languages of many countries
and speaks them well. His information is first-hand, reliable data
gathered on the ground where he lived and worked, whose people he
knew and could speak to in their own tongue, not the unreliable,
superficial vaporings of some dilettante globe-trotter who has given
the high-spots of civilization the “once over” and therefore considers
himself a competent authority to write upon the commerce, customs
and manners of foreign countries the very languages of which he
does not understand without the aid of an interpreter, or who could
not find his way back to the railway station or dock without the
assistance of a guide.
Doctor Aughinbaugh is no such lightweight. He has not written
this book because he believes he knows it all. Left to himself he
would never have written it. It was only after repeated urgings on the
part of some of his friends who appreciated his ability to write an
unusual book, that he consented to undertake the work, and then he
did so under protest.
It may be asked with pertinence how a man could travel in the
interest of one line and yet be in possession of so much information
relating to every other line; or how one could master the intricacies
of foreign banking and credits and still attend to his business. The
answer to all of this is that no man can successfully negotiate foreign
markets unless he is more than a mere “order taker.” As to the
doctor’s ability to measure the requirements of a market all the way
from cereals to concrete, that may be accounted for by the fact that
he is both a physician and a graduate of the law, and while he never
practised at the bar to any great extent he did have considerable
experience in medicine, a profession which developed a naturally
analytical mind, so that he looked at things with the eyes of a student
and from the viewpoint of the trained diagnostician. For six years he
followed medicine in Latin America, finally giving it up to accept an
offer from a large company who compensated him accordingly. His
experience in that line alone took him all over the world and the
ramifications of the business brought him into close contact with the
marketing of nearly every other commodity. But even had this not
been so, he is the sort of man who would have sensed a business
opportunity because he is naturally a keen observer and everything

interests him. He is the type of man who absorbs information; he
does not have to be shown—he sees.
Here, then, is a man possessed of a fund of particularly desirable
information—especially valuable to-day when Europe is war-mad
and, in her sanguinary frenzy, has left open the door of opportunity
to peaceful Uncle Sam. Why not put this information in concrete
form for the benefit of American commerce?
These considerations were put up to the author by some of his
friends who knew him to be a keen, accurate, analytical observer, a
writer and a raconteur of more than ordinary ability, and this book
was the result.
Probably never—let us fervently hope never for the same reason—
will the United States have another opportunity such as the present
one, to enter those fruitful fields to the south, where Europe in
general, and Germany in particular, has reaped a golden harvest for
so many years.
A careful reading of this book—not a difficult matter, for unlike
most works on commerce it is full of lively interest—will be profitable
to every business man interested in the subject of Latin America. It
will be valuable to those who are equipped or willing to prepare
themselves to cope with conditions as they really are, and just as
valuable to those who are not, for it may save them from the costly
mistakes of experimentation in foreign fields.
Maurice Switzer.
New York, March 20, 1915.

CONTENTS
CHAPTER PAGE
I General Remarks on Foreign Trade 1
II Brazil 13
III Argentine 31
IV Uruguay 49
V Paraguay 57
VI Chile 67
VII Bolivia 79
VIII Peru 91
IX Ecuador 106
X Colombia 114
XI Venezuela 126
XII Central America 138
XIII Mexico 156
XIV Cuba 168

XV Santo Domingo 176
XVI Haiti 182
XVII Porto Rico 186
XVIII The Guianas: British, Dutch and French 191
XIX European Possessions in the West Indies 199
XX Foreign Trade with Latin America and How It
Developed 212
XXI Methods of Doing Business 224
XXII The Salesman and the Customer 242
XXIII Custom-Houses and Tariffs 266
XXIV Trade Marks 276
XXV Finance and Credits 288
XXVI Packing and Shipping 311
XXVII Advertising 331
XXVIII Reciprocity 345
XXIX Health Precautions 368
Appendix 377
Index 401

ILLUSTRATIONS
PAGE
The harbor of Rio de Janeiro 14
Avenida Rio Branco and Opera House, Rio de Janeiro 28
Taking produce to the station, Argentine 36
Grain elevators, Buenos Aires 44
Interior of a gentlemen’s hat store, Asuncion, Paraguay 60
A country store in Colombia 60
Valparaiso 68
Lake Titicaca at Puno, Peru 86
Oroya Line, Peru 98
A comparison of climates 224
Drying hides and skins in Argentine 240
Avenida Central, Rio de Janeiro 262
Calle Rivàdavia, Buenos Aires 288
A Pack-train on the Andes Trail in Colombia 312

Llamas in Cerro de Pasco, Peru 316
Chilean infantry. See page 220 340
Advertisement of Cognac Bisquit 340
South American appreciation of advertisements “made in U. S.
A.” 342
The Plaza Hotel in Buenos Aires 368
MAPS
South America Frontispiece
Central America 138
Mexico 156
The West Indies 168

I
GENERAL REMARKS ON FOREIGN TRADE
War completely changes commercial currents. The victor takes the
established and profitable trade, leaving to the vanquished the
harder lines of business and the development of new fields. This is as
true of the first war recorded by history as it will be of the last.
As an illustration of the veracity of this statement it is only
necessary to recall our war with Spain. Prior to her defeat, Spain
controlled the bulk of the banking and commerce of the Philippines,
Cuba and Porto Rico. To her possessions she exported wines, foods,
manufactured articles, textiles, drugs, perfumes, canned goods,
shoes and hats, receiving in exchange their sugar, tobacco and coffee.
To-day the United States consumes all of these exports, while the
requirements of the three countries are supplied by America, which
also does their financing through banks organized in these
possessions, and capitalized with American money. To be more
specific and by way of a concrete example let me mention Cuba,
which in 1913 exported $165,000,000 worth of products, all but 15
per cent. of which was taken by the United States, the amount
shipped to Spain being about four-tenths of one per cent. During the
same period of time she imported goods to the value of
$132,000,000 of which we supplied 65 per cent. against Spain’s 8
per cent. Since 1902, Cuba’s foreign commerce has increased 250 per
cent. due absolutely to the part played by the United States in the
Spanish-American war. The same condition of affairs in exports,
imports and other lines is equally true, although not on such a large
scale, of course, of the Philippines and Porto Rico.
The Napoleonic wars gave to England the strong position she now
occupies in the financial and commercial world. Her bankers and
shippers, merchants and manufacturers, with one accord grasped the

opportunity that presented itself then and have held the supremacy
thus gained for more than a century.
Perhaps it was the recollection of what gave Great Britain her start
in this field which led the London Spectator to remark, at the
outbreak of war in 1914:
“The present war gives the United Kingdom an excellent
opportunity to capture the export and import trade of Germany and
Austria-Hungary.”
If England, engaged in the most desperate and expensive war she
or the civilized world ever has known, with her enormous resources
taxed to their utmost, saw an “opportunity” for trade expansion, how
much greater is the chance in this line for an absolutely neutral
power, populated with keen business men, and provided by Nature
with unparalleled productive possibilities.
The war in Europe developed the most remarkable business
situation for the United States ever presented to any nation. The
virtual closing of all the doors of the export and import trade of the
Old World and the almost total dependence heretofore of the Far
East and Latin America, especially, on Europe for finance and trade
connections made the war truly the psychological moment for us, as
a nation, not only to overcome the lead of the European commercial
world, but also to cement by other than ties of business the bonds of
friendship due us not only on account of our ideal geographical
position, but also because of our similar republican form of
government.
By embracing this extraordinary opportunity—apparently almost
created for our express benefit, we being the only people able to
profit by it—we can make the nations which formerly depended on
Europe for support in their trade ventures our business allies, our
sincere friends and well-wishers, and at the same time bring about a
new trade alignment so that all America will reap the benefit.
Let us briefly consider some of the enormous possibilities of
foreign trade in Latin American countries.
Latin America—that is, the countries of Central and South
America, together with Mexico, Cuba, Santo Domingo and Porto
Rico—comprises twenty distinct states, with a total population of
about 65,000,000, a large portion of whom are Indians and half-

breeds—a fact which we should not lose sight of in view of the
tremendous imports.
Statistics recently compiled by the Pan-American Bureau show
that these countries, in 1913, conducted a foreign commerce valued
at $2,870,178,575. Of this the imports were $1,304,261,763, and the
exports, $1,565,916,812, thus giving Latin America a favorable
balance of $261,655,049.
Ten of these countries alone purchased goods to the amount of
$961,000,000. Of this sum Great Britain supplied $273,000,000;
Germany, $180,000,000; France, $84,000,000; Italy, $54,000,000;
Belgium, $47,000,000, and Austria-Hungary, $8,000,000. The
United States exported to these ten countries last year $160,000,000
and imported from them $250,000,000. Brazil, in 1913, imported
$15,000,000 in textiles alone, of which amount the United States
supplied only $500,000. In the same length of time Argentine
imported goods to the amount of $468,999,996, of which amount
less than 8 per cent, was supplied by this country. The United
Kingdom exported to all of Latin America $23,500,000 worth of coal
in 1913, the United States, during the same period of time, $750,000.
Practically the same story in all lines of exports could be told of
these countries, demonstrating that individually in nearly all cases
the United States is the largest consumer of their raw or finished
products and the smallest exporter of the goods they most require.
Fearful that some one may infer after looking at these figures that
European countries have preferential duties with Latin America, let
me state most emphatically that this is not the case. With one single
exception no favoritism is shown any of the trading nations, in the
matter of import fees, and in that instance we benefit by it. Brazil
makes a decided preferential tariff in favor of some of our goods in
view of the fact that we are the largest consumers of her chief
product—coffee.
Everyone of these countries is in process of development and
expansion. They have in profusion the things the busy world most
needs. Their mines are the richest known to man. Some have been
worked for thousands of years and are still productive. Their broad
fields are destined to make them the granaries of the world. Their
miles of pasture lands and their extensive acreage mean that Europe
and the United States will depend upon them for meat. Their vast

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