April 2000

Harvest of Empire

Back in the third century B.C. the first Ch’in Dynasty
emperor began China’s Great Wall to stem the influx of Huns from the north. It took the Chinese several centuries to complete their barrier of stone, earth, and brick, which rises twenty-five feet high, extends for fifteen hundred miles, and remains a breathtaking testament to human insecurity.
Our American imitation is not nearly as impressive.
The federal government started its construction in the early 1990s, along sections of our two-thousand-mile border with
Mexico, and by 1998, some sixty-two miles had been completed. In California, where the wall separates the sprawling shanty slums of Tijuana from the immaculate lawns of suburban San Diego, the wall is made of corrugated steel cobbled together from troop
landing platforms left over from the Vietnam and Persian Gulf wars. There, it is ten feet high and barely an inch thick, with dull spikes combing its top. At other spots, the wall is made of salmon-colored concrete and has been rendered user-friendly by reinforced windows that allow passersby to peer into each other’s country. On the U.S. side of the San Diego wall, a small army of Border Patrol agents, aided by helicopters and the latest computer, motion-sensor, and video technology, lies in wait day and night, ready to pounce on anyone who crosses illegally. Agents
apprehend an astounding ten thousand people a week and perhaps that many more still get through. In some places, people burrowed holes under the wall’s base years ago. Graffiti dots the Tijuana side, slogans such as “No One Can Deny Us the Legal Right to Work.”
The fact is, the U.S.-Mexico border has become the epicenter of momentous changes in our hemisphere: by day, a constant stream of trucks heading south, carrying goods and capital like never before to newly erected factories bustling with nearly a million low-wage
workers; by night, the silent unstoppable flood of people heading north in search of the U.S. wages that can spell survival for a family the migrant has left behind. Both movements—of Yankee capital to the south and of Latin American labor to the north—have created huge windfalls for tiny investor elites on both sides of the border, while leaving horrendous social conditions in their wake. The poverty and environmental destruction along the
Mexican border today in some ways surpass conditions chronicled by Dickens in nineteenth-century England or Sinclair in early
twentieth-century America.
But this movement of labor northward, rivaling in size the great westward trek across the North American frontier by early European settlers, has led to something else—the Latinization of the United States. Unparalleled immigration has taken place from Mexico, the Caribbean, Central and South America since World War II, especially escalating since the 1960s. Some 14.2 million newcomers were admitted legally to the country between 1981 and 1997, and millions more came here illegally. When the final figures are in, the last two decades of the twentieth century will have surpassed the previous record from 1901 to 1920, when 14.4 million Europeans arrived. More than 50 percent of the immigrants since 1960 have been from Latin America—and that’s not counting an estimated 2.7 million Latinos believed to be here illegally, or the hundreds of thousands of Puerto Rican migrants the Immigration and Naturalization Service doesn’t keep track of because they are already U.S. citizens.
As the size of the Latino population skyrocketed, even politically moderate Americans became troubled by the demographic changes, by what they considered a rise of ethnic
nationalism in the new immigrants. And they perceived the new multicultural education movement in the public schools and universities as helping to nurture that dangerous nationalism by questioning the Eurocentered traditions of U.S. history and by fostering such radical reforms as bilingual education.
“Why do you Hispanics insist on speaking Spanish?” I have been asked innumerable times. “You’re in America now.” Or “Why are there so many Puerto Ricans on welfare? You won't get anywhere until you stop depending on the government to help you.” Or “Why do you prefer to be called Hispanics or Latinos or
Puerto Ricans, why not just Americans? As a newspaper columnist, I regularly receive
anonymous letters and calls from some Anglo readers so openly filled with hatred and venom toward Hispanics they make you shudder at the irrationality they reveal. Many of these callers, ironically, are the descendants of European immigrants who had to endure similar intolerance. Yet they are quick to conclude that Latin Americans in this country are ungrateful newcomers refuse to do what others have done before them.
Immigrants have existed, of course, from the beginning of civilization. And the basic reasons people move from one land to another have not changed in all that time—starvation or deteriorating conditions, political or religious persecution a chance to improve one’s lotby starting anew somewhere else.
The U.S. policy toward Puerto Rico is another issue of concern. That tiny island in the Caribbean has been a bigger source of profit for U.S. investors during the
twentieth century than any other country in the world. It also happens to be the last major American colonial possession. Yet it receives very little attention commensurate with its importance in media or academic circles. During the past few years, every major political leader and faction in Puerto Rico has called on Congress to end its
colonial control and authorize a genuine decolonization plebiscite, but Washington simply ignores that request. Ending
colonialism in Puerto Rico is a major issue with far-reaching repercussions for this entire nation, as well as for the 6.6 million Puerto Ricans here and on the island. Until Puerto Rico is decolonized, American democracy will not be complete.
We Hispanics are not going away. Demographics and the tide of history point only to a greater not a lesser Latino
presence throughout the new century. Ours, however, is not some armed reconquista seeking to throw out Anglo occupiers from sacred lands that were once Latino. It is a search for survival, for inclusion on an equal basis, nothing more. It is a search grounded in the belief that five hundred years after the experiment began, we are all Americans of the New World, and our most dangerous enemies are not each other but the great wall of ignorance between us. n elite core of Hispanic Americans is changing how the traditional investment world works and defining the new one through the advent of online trading.

The Internet is changing how the world invests, and Hispanic Americans are among those leading the way toward border-free trading and 24-hour financial market access and information.

Make no mistake—the overall number of Latinos on Wall Street is small. Merrill Lynch reported last year that of the firm’s 14,700 brokers, only 3.5 percent were Hispanic American, even though Latinos make up nearly 12 percent of the United States population. Merrill’s figures are probably about average in the securities industry, where a recent unscientific survey by the Securities Industry Association found that about 3 percent of securities professionals are Hispanic.

Fortunately, many Latinos haven’t been waiting around for the Merrill Lynches of the world to get their acts together. They’ve started their own businesses, some of which are breaking new ground on Wall Street.

Evidence of this can be found as far away as a small coffee-farming village in the Amazon Valley between Colombia and Brazil, where an independent financial advisor trades U.S. stocks and options for local clients via the Internet. He’s one of about 750 such operators around the world who’s wheeling and dealing in the United States’ financial markets through WallStreet Electronica’s Front End Multiple Account Management Information Systems.

Carlos Otalvaro-Coronado, founder, CEO, and president of WallStreet Electronica (www.WallStreetE.com), says that the Internet has “democratized the information process,” making it possible for financial advisors to open their own businesses rather than work for the large brokerage houses. “The Internet makes [them] ask, ‘Do I have to be hostage to Merrill Lynch when I have the trust of my client?’ ”

WallStreet Electronica’s Front End Multiple Account Management Information Systems has given independent brokers and financial advisors the ability to create their own Web sites in which they can access their client accounts and place trades. Many of these affiliates, called WallStreet E Advisors by the company, cater to markets previously underserved by the old guard of financial service providers.

“An independent financial advisor in Los Angeles can set himself up as José González Financial Services Inc., for example, and tie into our system so that we do all the back-office work for him,” Otalvaro explains. “He can [thus] dedicate his human assets to serving his accounts.” About 10 percent of the 750 WallStreet E Advisors—including the one in the Amazon—post their Web sites in Spanish. WallStreet Electronica’s Web site is also completely bilingual.

While WallStreet Electronica’s service has attracted much attention since its launch earlier this year, the Coral Gables, Florida-based company is best known as a bilingual online brokerage house specializing in the trading of U.S. stocks and options. But as is the case with most online brokerages, the company had its roots in the bricks-and-mortar financial world. In fact, despite Otalvaro’s quest to liberate the José Gonzálezes of the brokerage world from Merrill Lynch, that company played a major role in WallStreet Electronica’s creation.

Carlos Otalvaro Sr. worked for Merrill Lynch for many years. Otalvaro and several of his five siblings helped their father as sales assistants while in school. One son, Noah, had an interest in computers that spurred him to create a database management system for his father. In the late 1980s, this evolved into a communications system to link the elder Otalvaro with company headquarters in New York during his frequent business trips to Latin America.

“Our firm, with the help of my brother, who knew technology, and the guidance of my father, has been able to evolve from a simple way to communicate to a full-service brokerage service to a Web-based brokerage service,” says Otalvaro. The company, ranked the last four years as one of “The Best Online Brokers” by Barron’s, became a fully-Web-based brokerage service in 1994.

Among WallStreet Electronica’s accolades is its distinction as a top-ten online brokerage for “on-site resources” and “relationship services” by Gómez Advisors.

In the online brokerage world, the Gómez Advisors’ stamp of approval is a coveted sign of legitimacy. Founded in 1997 by Cuban-born Julio Gómez, Gómez Advisors set out to assess participants in the then-nascent online brokerage sector, where there was “a vacuum of expertise available.” There were only 24 such brokerages when the Wall Street trader/investment banker/industry analyst with Forrester Research started his business. Today there are nearly 200.

“The first lesson I learned on Wall Street was that you have to be in the middle of the information flow to get a trade done,” Gómez says. “At that time, I definitely wanted to be involved in the Internet. Forrester Research was at the center [of the Internet research industry] and at the time unchallenged. Now there are many competitors, of which I am one.”

In June 1997 Gómez launched the Internet Broker Scorecard, which “took on a life of its own.” The Internet Broker Scorecard helps online investors evaluate and learn about Internet brokerages. On the company’s Web site (Gomezadvisors.com), online brokerages are evaluated using the following criteria: ease of use, customer confidence, on-site resources, relationship services and overall cost. In addition to its assessment of financial-sector outfits, Boston-based Gómez Advisors posts scorecards on just about all other Web-based business. “Customers were hungry for this kind of guidance,” Gómez says.

Agreeing with Otalvaro, Gómez credits the Internet with introducting “a whole new class [to investing]” and giving consumers greater access to investment information. Yet while online investing has indeed diversified Wall Street’s customer base, Gómez says that Hispanics have yet to make major employment inroads into the industry. He praises such initiatives as Jesse Jackson’s Rainbow/PUSH Coalition’s Wall Street Project and efforts by national Hispanic groups and the Securities Industry Association to increase Hispanics’ presence in the financial sector. But he admits that he has not seen much evidence of growing Hispanic participation.

If greater minority presence on Wall Street becomes a reality, though, Gómez is confident that the Internet will be to thank for it. “It’s clear that the Internet is colorblind and diverse. It is a welcoming environment, not an old boys club like the old financial sector was.”

The New York Stock Exchange, the unofficial headquarters of the old boys club Gómez refers to, was graced in 1992 with the membership of Guzmán & Company, the first and only Hispanic-owned firm to become a member. Since joining the NYSE, Guzmán & Company has risen in the ranks, becoming one of the top 25 program trading firms on the Big Board. In November it was recognized by Institutional Investor as the twelfth most effective and efficient NYSE brokerage.

Located in Coral Gables, the firm specializes in U.S. institutional business. But Cuban-born founder Leo Guzmán always has an eye on Latin American markets.

“The economic integration on the investment side between Latin America and the United States is much greater than it is between Europe and the United States or Asia and the United States,” he says. He points to the fact that Brazilian telephone company Telebras was the highest-volume foreign company trading on the NYSE’s American Depository Receipt market last year. (ADRs are shares issued by U.S. banks that enable foreign companies to trade on U.S. markets.)

There are currently 91 Latin American companies from eight countries with ADRs listed on the NYSE, compared to 112 European companies from seventeen countries and 37 Asian companies from nine countries. But according to Guzmán, the Internet is enabling a new kind of connection between U.S. and Latin American financial markets.

“We’re seeing the emergence of pan-American companies, companies that are addressing themselves not to the financial needs of one country but several, particularly Internet companies,” he says. “There’s tremendous growth in Spanish-language media.” And much of this growth has been facilitated by Guzmán & Company, which has served as underwriter for such major Latin American listings as StarMedia’s. [see Technology, page 68.]

Guzmán says that the growing consumer power of the U.S Hispanic community has facilitated the boom in Spanish-language media, but that it has yet to translate into widespread representation of Hispanics as professional service providers. He, like Gómez, applauds the efforts of Jackson’s Rainbow/PUSH Coalition as well as those of national Hispanic organizations to increase Hispanic participation on Wall Street.

According to the Securities Industry Association, Wall Street generates more than $300 billion in annual revenues for the U.S. economy and employs more than 700,000 people. Representing more than 740 securities firms (including investment banks, broker-dealers and mutual fund companies), the SIA has no numbers on how many brokers are Latino or how many brokerage firms are Hispanic-owned.

According to Frank Fernández, senior vice president, chief economist, and director of research for the SIA, the numbers of Hispanics working on Wall Street fall somewhere above just a few percent and somewhere below what would be representative of the Hispanic population—about 12 percent.

“No one has bothered to ask that question,” Fernández admits. “We are working hard to find those numbers, because we need to know the lay of the landscape. Latinos are the fastest-growing segment of the U.S. population, and now and in the future it will be the consumer, the individual that will set investment trends instead of institutions.”

Fernández joined the SIA in September after working for the New York Federal Reserve, where he focused on assessing risk of cross-border lending by U.S. banks. While he had initially wanted to do domestic work at the New York Fed, his last name and his Spanish-speaking abilities landed him the Latin America-oriented assignment.

“Any language skills are always going to be helpful,” Fernández says. “It’s been a blessing and a curse, though, in the sense that in Latin America it’s always two good years followed by one bad year” with the fluctuating economies.

If his ambivalence over Latin American markets strikes a contrast with what Otalvaro and Guzmán have to say, so too does his cautious optimism about the Internet. For the time being, he fears that the Internet will widen the gap between the technology haves and have-nots instead of closing it.

“Talking with other Latinos, there’s a great recognition of the need to give access to technology and to educate the community if you want to close this gap,” he says. “You’ve got to get people online. The Internet is a great opportunity for the Latin community as a whole—in the United States as well as in Latin America—to close the divide. Latinos see the huge potential for the Internet, but we’re just at the beginning.”

Well, counting the options trader in the Amazon, maybe just a few steps beyond the beginning.