How does agnes() in R treat factor columns?

I'm new to R, and I haven't seen this discussed anywhere, so I'm only 95% confident of my results.

Reading the agnes() documentation, I see that in the input "matrix or data frame, each row corresponds to an observation, and each column corresponds to a variable. All variables must be numeric."

I have been working with a large dataset containing survey responses from 144 countries. I created a data frame with a Country name column and several columns representing the averages of normalized numeric variables (range 0-1) for that country (one row per country). I used that data frame as the input to agnes(), and I noticed that the resulting dendrogram showed the countries in alphabetical order.

Code:

Calculate the average value for each numeric variable for each country.
wm <- aggregate(wd2[!names(wd2) %in% c("Country")], list(Country=wd2$Country), mean)

Create dendrogram.
w_dendc <- agnes(wm,method="complete",diss = FALSE, stand = FALSE)
pltree(w_dendw,labels = wm$Country)

This made no sense, so I scoured the documentation and found the quote above. It certainly looked like agnes() converted the country names into numeric values 1-144. Because that was by far the largest distance measure, it overwhelmed the other variables and resulted in the alphabetized result.

So I tried again leaving out the Country column and simply using the Country as the label source in pltree(). When I did that, the dendrogram had some very interesting features, and the countries seemed to be grouped by some combination of geographic proximity and educational/economic attainment.

Create dendrogram, leaving out the Country column (first column).
w_dendc <- agnes(wm[,-1],method="complete",diss = FALSE, stand = FALSE)
pltree(w_dendw,labels = wm$Country)

I'm simply asking for validation that my interpretation is correct about agnes() and the use of factor variables like this.

Thanks!