31 May 2003
Isabel Vincent
Financial Post
RIO DE JANEIRO - It's a measure of how much security concerns figure in international business these days that a recent, routine visit to one of Molson Inc.'s breweries here resembled a minor military exercise, complete with bullet-proof van, driver and a well-armed, beefy bodyguard.
The brewery, which is about an hour outside Rio, is in the area known as the Baixada Fluminense, which is dotted with shantytowns that are ruled by local drug traffickers.
Canadian and Brazilian executives making the trip must take appropriate security measures, and are keenly aware of the dangers. There is the possibility that their van could be robbed by highway bandits, or worse, that they could be kidnapped. "It's a big reality of doing business abroad," said a spokeswoman for Molson. "So we just do it."
Dan O'Neill, Molson's CEO, knows better than anyone the security risks involved in doing business in Latin America. In the past, he has lived in both Brazil and Venezuela.
These days, when he flies to Brazil to do business, many of the local executives he deals with have been victims of kidnapping. "They're discreet about it, but it is amazing how many of them have been kidnapped," said Mr. O'Neill.
When the top brass from Molson held their annual meeting in Rio in January, security was predictably tight. Mr. O'Neill himself seemed nervous about even stepping onto Copacabana Beach, just outside his Rio hotel, for a photo shoot, without the requisite protection.
It is difficult to blame him. Kidnapping -- for ransom or for political reasons -- has long been a hazard of global business, but now it is getting worse, security experts say.
In addition to Brazil, most of Latin America is a dangerous place to do business, as are parts of the Middle East, Africa and Eastern Europe.
"Generally speaking, kidnappings are on the rise," says Mark Read, an expert on kidnappings in Latin America for London-based Armor Group. "By my estimation, there were 13,000 kidnappings in Latin America last year."
Even North America no longer seems such a safe haven.
Earlier this year a money manager named Edward S. Lampert was kidnapped from a parking garage in Greenwich, Connecticut and held for two days before promising to pay his captors US$5-million and negotiating his own release. (Police tracked down the kidnappers when they used Mr. Lampert's credit card to order a pizza). Furthermore, one international insurance underwriter, recently listed Canada alongside Mexico and Argentina as a place to watch out for.
Creechurch, which offers a number of corporate insurance products, notes on its Web site that there has been an increase in "demands for ransoms of $100,000 or more in Canada, Mexico, Hong Kong, Argentina and Costa Rica, all considered safe places to conduct business."
There have been no official reports of kidnapping of executives in Canada since the early 1980s, but this doesn't mean that such kidnappings for ransom haven't taken place. In many cases, kidnappings for ransom are negotiated away from the glare of television cameras, by private security firms who rarely speak publicly about their strategy or how much money was paid in a ransom. Disclosing any kind of details of a kidnapping can spur on other kidnap gangs, security officials say.
"It's an ugly world out there," says Donald Palmer, director of global kidnapping for Kroll Associates in London. The company is a private security and intelligence firm that has negotiated hundreds of kidnappings around the world. "It's a big problem that is not going to go away."
Depressed economic conditions in places such as Eastern Europe and Argentina have sparked a recent wave of kidnappings of foreign executives in those regions. In Mexico and Colombia, the world's kidnap capital, where some 3,000 people are kidnapped every year, "express kidnappings" have become quite common. In this case, the victim is kidnapped, usually from the back of a taxi, and taken to an automated teller machine and forced to withdraw funds. The kidnapping generally lasts for a few hours.
Another popular form of kidnapping for quick cash is known as the "lightning kidnaps" practiced mostly in Brazil where foreigners and local residents are held for a few days until their families pay a ransom of between a few hundred and a few thousand dollars.
But although these kidnappings are fairly common, they are not as worrisome as those that involve longer-term captivity and million-dollar ransom demands.
In 1994, Mexican banking magnate Alfredo Harp Helu was kidnapped, and released only after his family agreed to pay an estimated US$70-million, according to a source close to the Harp Helu ransom negotiations.
The figure is thought to be the highest ever paid for a kidnapping in Latin America.
"These groups may be working in developing countries, but they have developed their [kidnapping] business over a period of time and they are extremely sophisticated," says Mr. Palmer, who has negotiated dozens of kidnappings over the years.
Indeed, in Colombia, Revolutionary Armed Forces of Colombia guerrillas, known by their Spanish acronym FARC, use laptops in their jungle hideouts to gauge the net worth of potential victims, and scan government databases to find out which foreign companies have signed deals with local firms. The Marxist group, which relies on kidnapping for about half of its revenues (the other half comes from drug-trafficking and extortion forced on corporations doing business in the Colombian jungle), is divided into several factions that are trained in everything from negotiating ransoms, to guarding victims and planning and orchestrating kidnappings. There is even a special group of FARC guerrillas who compile detailed lists of potential targets, and monitor their daily movements.
"That's why we are constantly telling people to vary their daily routines and never allow their photograph to appear in the local press," said one intelligence analyst who did not want to be identified.
In 1999, seven Canadian oil workers were held for more than three months in a remote corner of the Ecuadorean jungle by a small FARC-affiliate known as the People's Liberation Army. The Canadians, who worked for United Pipeline Systems were freed after their company paid a US$3.5-million ransom.
The kidnap group had initially demanded US$15-million for their release, but negotiators brought the price down. They killed one of their American hostages who was held with the Canadians. A few months after the Canadians were released, the same group kidnapped several other foreign oil workers, releasing them after their company paid a US$13-million in ransom.
"The problem with kidnapping has been around for a while," says Mike Ackerman, CEO of the Ackerman Group LLC in Miami, who negotiated the release of the Canadian hostages in Ecuador. "There's a certain ebb and flow that takes place. It will flare up in a country and then settle down again." In 26 years in business, Mr. Ackerman has negotiated some 120 cases. He said his company started up as a result of a wave of kidnappings in Argentina and Central America in the 1970s. Now the Ackerman Group is opening up offices in Prague and Mexico in response to the latest global trends in kidnapping. According to Mr. Ackerman, in addition to Colombia, places like Georgia (the former Soviet republic) and Chechnya have become some of the most dangerous places in the world for foreign executives.
Professional negotiators like Mr. Ackerman and Mr. Palmer, of Kroll Associates, refuse to discuss their strategy, or how much their services cost, but the going rate in an emergency situation when a ransom is being negotiated often tops US$2,000 a day plus expenses, which may include paying off corrupt local police forces in developing countries in order to encourage their greater co-operation or to pay off sources that could lead them to a hostage.
"It's no longer just the big executives that are seeking out our services," says Bill Daly, senior vice-president of Control Risks Group, an international security, consulting and investigative firm. "These days the top brass of a company is usually in and out of a place pretty quickly. It's the employees -- product managers, engineers -- who often find themselves in the greatest danger. The criminals know that these people work for companies with deep pockets."
Furthermore, kidnappers are increasingly focusing on middle-class targets and their teenage children, who are easier to grab than wealthy industrialists, says Mr. Read.
"Kidnappers now don't like to kidnap people who are too young or too old," says Mr. Read.
"We're increasingly seeing mothers and teenagers as the preferred targets."
Mr. Daly and others offer a wide range of products and services that range from conducting background checks on household staff in a foreign country to defensive driving techniques, and how to handle yourself if you are involved in a high-speed car chase. Fully 90% of kidnappings take place in cars.
In the wake of global uncertaintly after the Sept. 11 terrorist strikes, an increasing number of executives and their families are taking out enhanced insurance policies that cover home invasions, child abductions and stalking threats. Some companies offer a nanny security awareness training program that teaches security skills to child-care workers.
Insurance companies and private intelligence firms are also reporting an increase in the demand for armed bodyguards, who range in price from about US$600 to US$800 per day, plus meals. For that price, they carry semi-automatic weapons and are often trained in martial arts. There are also a number of courses that teach defensive-driving techniques and firearms use. The Seven Day Executive Protection Program offered by R. L. Oatman & Associates costs US$3,150.
Kidnap insurance policies which have become de rigueur for companies doing business in Latin America and the republics of the former Soviet Union, where kidnapping is rampant, range from thousands of dollars per year to several hundreds of thousands, depending on the country risk and the size of the corporation.
In Brazil, where kidnapping has become both a cottage industry, practised by local drug traffickers for relatively small ransoms, and a multi-million dollar business organized by criminal groups that demand tens of millions of dollars, foreign executives rarely go anywhere without a well-armed coterie of bodyguards and a bulletproof Mercedes (which retails for up to US$150,000)
Molson, which last year set up its Brazilian corporate headquarters in Sao Paulo, typically does not discuss the security measures it has in place for its Canadian and Brazilian employees.
Still, security seems constantly on their minds. Earlier this year, when Molson's held its annual general meeting here, the company made sure that there was a contingent of well-armed body guards and bullet-proof cars on call for visiting and local executives.
Security, as one Molson executive put it, takes some getting used to in Brazil.
"This is not the kind of place where you can play hockey on the street," he said.
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