The Multilatinas by Ramón Casilda

SPECIAL REPORT

The multilatinas by Ramón Casilda

Madrid, June 2015

BARCELONA BOGOTÁ BUENOS AIRES LIMA LISBOA MADRID MÉXICO PANAMÁ QUITO RIO J SÃO PAULO SANTIAGO STO DOMINGO THE MULTILATINAS

PRESENTATION

The changes undergone by the business world during the last PRESENTATION BY ALEJANDRO ROMERO decade and, more specifically, by Latin American organizations, can be clearly seen: many multinational corporations have increased THE MULTILATINAS BY RAMÓN their investments in emerging countries such as Brazil, China CASILDA or South Africa. Until recently, the latter were mere receptors of 1. A GLANCE AT THE LATIN foreign investment, and have now become important investors in AMERICAN ECONOMY international markets. 2. DEFINING THE MULTINATIONAL ENTERPRISE This is the case of the Multilatinas, Latin American business 3. DEFINING THE MULTILATINAS groups that are part of the known as “emerging multinational 4. REGIONAL EXPANSION OF organizations”. This idea may match the definition and objectives MULTILATINAS of multinationals. However, in this case, this organizational 5. INTERNATIONAL EXPANSION conglomerate belongs to a single region: Latin America. 6. BEYOND REGIONAL BORDERS 7. THE WORLD’S LARGEST Even though Latin American corporations have been part of the MULTINATIONAL AND MULTI- LATIN CORPORATIONS markets for centuries, it is necessary to understand the financial importance and strength that they currently hold, competing with 8. PROSPECTS OF MULTILATINAS, MORE PROMINENCE AND the largest business groups around the world and, sometimes, even GREATER RESPONSIBILITY reaching leading positions, as in the case of Latin American airlines, a sector where regional companies prevail and which Ramón Casilda thoroughly analyzes in this paper.

The value of multinationals for the countries in which they operate cannot be denied, and particularly now in a period where the Latin American region will experience an economic slowdown and negative forecasts have been made as regards the development of the region compared to that of recent years. Multilatinas have become a key element to enhance the economic forecasts of the region. However, it is crucial for these businesses to focus their business strategy in innovation, an essential feature which will help them be competitive in other business environments, beyond the regions that they already control.

This international and regional expansion of Multilatinas cannot be explained through an intelligible mathematical formula; but through foundations that have made it possible for these businesses to be successful and achieve leading positions in their markets. Ramón Casilda identifies five competitive advantages that improve their presence in the business environment: a high-quality upper management, access to capital market and founding tools, leadership in the local market, acquisitions and joint ventures and a sound corporate governance.

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Therefore, these are part of the conditions that other Latin American companies will need to meet in order to become Multilatinas, although they will face a highly competitive market. Besides the already known leading Multilatinas, almost all of them state-owned organizations from the petrochemical, energy and commodity sectors such as Pemex, Petrobras and YPF, there are several private Multilatinas across all sectors. The latter includes companies such as Mexican Gruma and Bimbo, Brazilian enterprise JBS-Friboi or the largest cement company in the world, the Mexican organization Cemex.

Special attention should be paid to Multilatinas located in Spain, a market where they have found a niche through which they can penetrate into Europe. Their entry into the Spanish economy can be partially explained through the historical, cultural and linguistic ties that link them and also thanks to the facilities that Spain provides to any organization willing to invest.

At this point, it would be interesting to wonder what the future of the Multilatinas will be: Will they become responsable for the changing of the economic map in the next decade? Everything suggests that their expansion will gradually increase and this will provide greater potential and international influence to Latin America.

Alejandro Romero Partner and CEO of LLORENTE & CUENCA in Latin America

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1. A GLANCE AT THE LATIN the International Monetary AMERICAN ECONOMY Fund (IMF): “The region is now “The region is now expected to grow by 1.3%, about Latin America (LA) has a GDP the same low rate as in 2014 expected to grow of USD 5,657 billion, which and almost 1 percentage point by 1.3%” accounts for 8% of the global below our previous forecast wealth, and a population of 588 (October, 2014)2. The challenging million people, comprising 8.5% external circumstances are of the world’s population. The an important burden for region has grown over the past many countries. But it is not three decades, also managing too late to define a list of to reduce poverty and raise resolutions for the New Year in the income level of its citizens order to address the internal to USD 9,536 at current prices weaknesses and improve the or USD 13,000 according to growth prospects”. purchasing power parity (PPP)1. However, it still has not been The prices of commodities able to close the welfare gaps have continued dropping due between the region and more to the unexpected weakening developed countries. of the demand in several major economies, such as China. The The region is slowly losing best, recent example is oil, its increasingly important where the growth of supply role within the global arena. has also played an important Experts and international role in relation to the price organizations have downgraded drop. In this context, the IMF its growth forecasts due to a has revised the forecast for mild, yet persistent, generalized world economic growth to 3.5% slowdown. Every New Year in 2015. The growth prospects usually gives rise to renewed in the U.S. have improved, optimism, but the prevailing but the weak state of the feeling among many Latin Eurozone, China and Japan is American countries is that affecting the global activity. of anxiety, as 2015 began with a further reduction in Within the context of global the growth expectations, economy, in general, it is according to Alejandro Werner, expected that the fall in oil Director of the Western prices will be neutral for Latin Hemisphere Department of America and the Caribbean as a

1 For more information, see: Ramón Casilda Béjar (2015): Crisis y Reinvención del Capitalismo: Capitalismo Global Interactivo (Crisis and Reinvention reinvention of capitalism: interactive global capitalism”). Editorial Tecnos. Madrid. 2 FMI. Regional Economic Outlook (October, 2014): “América Latina y el Caribe: Enfrentando tiempos complejos “(Latin America and the Caribbean: facing complex times). Washington.

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whole, but the effects at national Similarly to international level will greatly differ (Table 1). organizations, most analysts consider that there will be In 2015 it grew by 3%, in 2013 some recovery in 2015 and 2016, by 2.5% and in 2014 by 0.8%, since the region will grow by figures well below the ones 1.3% and 2.3% respectively as a recorded in the years before result of exports which will be the crisis (4%-5%). South boosted through the recovery America fell sharply due to of high-income countries, as internal factors, worsened well as the arrival of major by the economic slowdown capital flows which should that most of its international rise the GDP to an average business partners suffered and of 2.6% between 2015 and the severe consequences in 2017. However, the possibility some of the major economies of a stronger slowdown in entailed by the global drop China and a sharper fall in in prices of commodities. On prices of commodities and oil the other hand, the growth of pose significant risks (GEP, Mexico and Central America January 2015). has stabilized thanks to the strengthening of the U.S. In order to achieve a long- activity (WB, Global Economic term growth, it is essential to Prospects, January 2015)3. implement structural reforms and, in general, promote Table 1 access to more diverse funding sources and vastly enhance the business environment and climate. This environment is also suffering these negative consequences and, according to a study carried out by the Brazilian Foundation Getulio Vargas (FGV, October 2014), has recorded its lowest level since July 2009. The same has happened to the economic climate index, which dropped from the 84-points mark in July 2014 to 75- points by January 20154. This is the lowest score in over five years (July 2009),

3 World Bank (January, 2015): “Global Eco- nomic Prospects: Washington”. 4 Survey conducted quarterly by the FGV in partnership with the Institute of Economic Studies of the University of Munich among 1,071 experts of 117 countries.

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when the region was suffering as it shows the right path and the effects of the international the progressive improvement “The access of economic crisis. These 75 points that all countries should are below the average of the strive for. However, similarly enterprises to capital last ten years, which stood at to the situation in Spain and markets is limited” 102 points. other European countries, the access of enterprises to capital The study warns that this has markets is limited, as these been the fifth consecutive are mainly reserved for major quarter in which Latin America companies. Thus, there is a continued at a negative common objective; granting a level. The fall of the business broader and deeper access to climate in Latin America funding through stock markets contrasted with the slight for smaller companies, which global improvement thereof, would help them to grow and rising from 105 points in gain importance. October 2014 to 106 points in January 2015, fostered by a In this regard, the World better environment both in Bank, in its report: “El the U.S. and the EU, where the emprendimiento en América index rose from 104 points to Latina: Muchas empresas y poca 113 points in three months and innovación” (Latin American a slow improvement is taking entrepreneurs: many firms but place in Japan and Spain. little innovation)5, states that: “60% of the Latin American As regards promoting access employees work in enterprises to more diverse funding with five or less people. Thus, sources, the global economic entrepreneurship in the region crisis has taught us one of the is high, but the companies that most significant lessons. The survive, grow at a much slower World Federation of Exchanges pace than those in other regions confirms that the Santiago of average income. The economic Stock Exchange (Chile) and outlook in Latin America is such Bovespa (Brazil) are among the that business starts as small exchanges that have channeled enterprises and remain small. the most funding to their There is no problem with being respective enterprises in 2013. small, but remaining small In aggregate terms, the stock forever is a problem for survival”. exchanges of the region have translated into over USD 50 Moreover, size is not always billion, a figure that doubled the the best indicator of growth previous one. This is good news, potential and quality jobs. In

5 Ramón Casilda Béjar. Coordinator, with the World Bank, of the Conference: “Retos y oportunidades del emprendimiento en América Latina” (Entrepreneurial challenges and opportunities in Latin America). Fundación Ramón Areces. Madrid, June 24, 2014. www.worldbank.org/content/dam/Worldbank/document/LAC/ LatinAmericanEntrepreneurs.pdf

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fact, many multinational firms companies, start competing in Latin America are much less with multinational enterprises “Latin America is innovative and Multilatinas also of developed countries7. suffer from a lack of innovation a middle-income which affects their dynamism, This whole situation might region” that is, their competitiveness. put Latin America in the Thus, the report suggests known as “middle income the creation of an economic trap”. It should be taken into environment that promotes account that Latin America is innovation and competitiveness, a middle-income region: the therefore reducing the power typical country has a per capita of monopolies, improving income 25% higher to that of productivity and diversifying a typical global country, but the risks6. Furthermore, the 80% lower than the per capita report shows that multi- income of a developed country. Latin companies launch their This translates into a decline products at a slower pace than of its relative position: 50 years their counterparts in other ago the region was in a much developing countries. In fact, in better condition compared Ecuador, Peru, Jamaica, Mexico to the rest of the world and, and Venezuela the launch rate despite recent developments, of new products is less than it has been unable to converge half of that in Thailand or with, for example, the U.S. Macedonia and well below the (IDB, Rethinking productive rate recorded in South Korea. development)8.

Consequently, this lack 2. DEFINING THE of innovation hurts MULTINATIONAL competitiveness, slows down ENTERPRISE growth and affects the creation of quality jobs, and thus, Collective nouns are a useful the desired virtuous circle is abstraction when defining not completed. It is a matter an idea or a thing with a of creating an innovative certain degree of accuracy, but business class, where first are dangerous when taken class companies, those which as an end by themselves. export goods, services and The collective definition of even foreign direct investment, “multinational” has been and as occurs with multi-Latin still is subject of discussion

6 “Retos y oportunidades del emprendimiento en América Latina” (Entrepreneurial challenges and opportunities in Latin America). www.worldbank.org/content/dam/ Worldbank/document/LAC/LatinAmericanEntrepreneurs.pdf 7 World Bank Report (2014): “El emprendimiento en América Latina. Muchas empresas poca innovación” (Latin American Entrepreneurs. Many firms but little innovation). Office of the Chief Economist for Latin America. Washington. 8 Inter-American Development Bank. 2014 Annual Report (Edited by Gustavo Crespi, Eduardo Fernández-Arias and Ernesto Stein): “Rethinking Productive Development. Sound Policies and Institutions for Economic Transformation”. Washington.

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and debate within specialized Street Journal had to edit his literature, largely due to article: “The European Common “This form of the broad diversity of these Market”. “As far as I know, organizations and their during my conference at the internationalization evolution in time9. Carnegie Technology, it was beyond the traditional the first time that the word meaning of Perhaps the most striking “multinational” was used: thus, I international” feature of multinational am inclined to think that it was companies is the amount me who coined it to refer to this of time it took for them to form of internationalization obtain a collective noun and, beyond the traditional meaning therefore, the possibility of international”. In any case, of a distinct identity. This it was positive for this term to denomination was coined by become part of the economic David E. Lilienthal10, during his language. Lilienthal deserves speech at the Carnegie Institute the credit for the term and of Technology (April 1960): his authorship and reasoning Multinational Corporations. has been recognized, as he During the speech, Mr. stated that the multinational Lilienthal referred to the corporation had three defining special problems of American characteristics12: companies with industrial or business transactions abroad • Has, at least, a production with direct management base or some form of responsibility, offering the direct investment in a following definition: “I would foreign country. It has a like to define such corporations truly international scope, –which have their home in one since its management country but which operate and makes the fundamental live under the laws of other decisions about marketing, countries: as multinational production and research corporations” (Lilienthal, 1960)11. according to the available global alternatives. In order to obtain acknowledgement of • The top management of the authorship of the the company takes full aforementioned term, the Wall responsibility for foreign

9 For more information, see: Ramón Casilda Béjar (2015): Crisis y Reinvención del Capitalismo: Capitalismo Global Interactivo (Crisis and reinvention of capitalism: interactive global capitalism). Editorial Tecnos. Madrid. 10 Initially, he was the Director of the Corporation Tennessee Valley, the Atomic Energy Agency and, since 1955, the CEO of Development and Resources Corporation in New York, jointly established with the investment bank Lazard to grant loans to less developed countries. Lazard is the parent company of the Lazard Group, a global independent investment bank with offices in 27 countries in Europe, North America, Asia, Australia, Central America and South America. 11 Fieldhouse (1990). 12 Business Week. New York, April 25, 1963.

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operations, so that the The multinational enterprise international division is considered to be a historical “The common is established as an continuation of the great independent department in modern industrial corporation. element is the charge of all international It can be said that, as we control of a business operations. know them today, their activity abroad” development started after • But, above everything, WWII, during the 50s and 60s, multinationals should be a time that greatly promoted considered as an integrated agreements or arrangements organization. The object of collaboration between is to achieve the greatest businesses, which led to the profits, even at the expense proliferation of horizontal and of the interests of a vertical integration processes. particular part of the whole. Consequently, multi-sectorial enterprises greatly developed, The simplest definition of a entailing the creation of multinational is: “a corporation industrial groups. that owns and controls productive assets in more than Mergers, takeovers and a country” (Dunning, 1974). acquisitions in the European Also: “a company of a specific Economic Community (EEC), nationality with partially or during the 60s and the 70s, wholly owned subsidiaries transformed large European within at least one other companies into multinationals national economy” (Gilpin, 2001). similar to U.S. multinational A more detailed one: “company corporations. Unlike the U.S., that conducts its activities at the European boom in the an international level, without growth of external businesses taking into account national was marked by horizontal borders, designing its actions integration, with the removal based on a strategy managed of competitors and, thus, by the corporate center, that is, an increase in the degree of its headquarters, located in the business concentration. country of origin (Vernon, 1971). However, Japanese As can be seen in the above multinational enterprises definitions, the common are more recent. During the denominator or common 60s and, particularly, the 70s element is the control of a Japan considerably acquired business activity abroad being importance within the global present in, at least, two countries, arena through exports. This one being the origin country rose during the 80s, when (the one to which the company the trade balance showed a belongs) and the other being the significant surplus as regards country where the company is the U.S. and the EEC, which led established (where the country to both countries pressuring owns assets or has subsidiaries). Japan to give greater facilities

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to import industrial products nouns are a useful abstraction from abroad. The response when they define an idea or a “Local companies was to increase capital export thing with a certain degree of through direct investments in accuracy. that started third countries, a prominent conducting business strategy in the 80s. Their origin, which took place across the Americas” during the 90s, coincided In all this corporate policy, the with a general context of incredibly powerful Ministry economic boom in the region of International Trade and (although with ups and downs), Industry (MITI) played a and the implementation of quite important role, as it was the Washington Consensus, responsible for the creation, whose policies facilitated the for many years, of the policies changes that Latin American that would increase industrial economies experienced growth, ensuring that the during the last three decades, capital was channeled towards which led to a greater the most productive sectors productive modernization and of the Japanese economy and transformation as well as the also avoided the proliferation international integration thanks of widespread destructive to increased openness and industrial processes. The liberalization. And all of this, MITI was considered to be benefiting from good economic the ministry with the largest times, mainly due to higher direct influence on the prices of raw materials, which economy of a country. increased thanks to the strong Chinese demand and a favorable According to these definitions international environment. and conceptualization of the multinational corporation, it Just like multinationals, which could be said that their nature originated from industrial is defined by the control and and mining manufacturing ownership they hold in the companies, Multilatinas first various countries in which started among the mining they operate. sector and then expanded to the industrial manufacturing 3. DEFINING THE sector, finally reaching fields as MULTILATINAS diverse as the cement industry, construction and engineering, Originally, Multilatinas were cosmetics, agribusiness, biofuels, defined by the magazine food, telecommunications, steel, América Economía in 1996. petrochemical, audiovisual, Its aim was to describe local distribution, department stores companies that started or aircrafts. conducting business across the Americas. In this sense, it The closest example of could be said that collective Multilatinas can be found in

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the “Spanish multinationals”13 increase in the confidence of (which I have been investors in their respective “The regional analyzing and following countries. up since they began their expansion were internationalization process The regional expansion favored by the across the region), which also strategies which sought implementation capitalized on the economic to achieve greater size, of several trade momentum and context with diversification and benefits, the incorporation of Spain were favored by the agreements” to the European Union and implementation of several the Single Market. Since trade agreements whose the Spanish economy has objective was the promotion of leading multinationals, its regional integration through transformation has been exchanges between the significant as regards its various economies that take dimension, organization, part in these regional treaties modernization and and have participated with international scope, and thus different intensity, such as: Spain’s weight has prominently MERCOSUR, CAN, CARICOM increased, becoming an and more recently the Pacific important international player. Alliance14.

4. REGIONAL EXPANSION According to the data annually OF MULTILATINAS published by the magazine América Economía, which The regional expansion of ranks the 50 most important Multilatinas, as previously Multilatinas, Brazil holds described, coincided with a the top position with 14 general positive economic organizations, followed by context and a favorable Mexico with 12, Chile with 11 international environment, and closing the list, Colombia, which was crucial for the Peru and Argentina with 3 start of a vigorous growth respectively (Table 2). cycle throughout the region, entailing excellent results During 2014, the total sales of which, in turn, led to an the top 50 Multilatinas grew

13 For more information, see; Ramón Casilda Béjar (2002): La década dorada. Economía e inversiones españolas en América Latina 1990-2000 (The golden decade. Spanish investment and economy in Latin America 1990-2000). Ediciones de la Universidad de Alcalá. Madrid; (2008): La gran apuesta. Globalización y multinacionales españolas en América Latina. Análisis de sus protagonistas (The great bet. Globalization and Spanish multinational enterprises in Latin America. Analyzing the players). Editorial Granica and Norma Editorial. Barcelona and Bogota; (2011): Multinacionales españolas en un mundo global y multipolar (Spanish multinational enterprises in a global and multipolar world). ESIC Editorial. Business & Marketing School. Madrid. 14 Ramón Casilda Béjar (10-06-13): La Alianza del Pacífico y la Cumbre de Cali(“The Pacific Alliance and the Cali Summit”). www.economia.elpais.com

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Table 2. The 50 largest private Multilatinas in 2014 by 29% over the previous year. A first analysis shows that the % 2014 RAN- COUN- internationalization of the MULTI-LATIN ENTERPRISE SECTOR SALES 2013 EMPLOYEES KING TRY ABROAD operations is a good way to

1 CEMEX MEX CEMENT 14,953.90 77.7 protect the enterprise against 2 LATAM CHI AIRLINE 13,266.10 77 the economic policies of each 3 BRIGHTSTAR USA/BO TELECOM 10,600.00 84 country (economic cycle), 4 GRUPO JBS - FRIBOI BRA FOOD 39,658.00 59.2 while risks are diversified and 5 SUDAMERICANA DE VAPORES CHI SHIPPING 3,206.00 83.1 6 TENARIS ARG METAL 10,597.00 74 synergies exploited. 7 TERNIUM ARG METAL 8,530.00 70 8 AVIANCA-TACA CO/SV AIRLINE 4,609.60 70 Over the last two decades, 9 MEXICHEM MEX PETROCHEMICAL 5,177.00 72 Multilatinas have gradually 10 AJEGROUP PER ALCOH. BEVERAGES 1,745.00 77.7 expanded throughout the 11 TELMEX MEX TELECOM 10,277.10 75 12 GERDAU BRA METAL 17,016.60 55 region and, thus, across 13 GRUMA MEX FOOD 4,138.00 58.8 the international markets, 14 AMÉRICA MÓVIL MEX TELECOM 60,079.70 58 promoted, as previously 15 MASISA CHI MANUFACTURING 1,364.70 68.4 described, by the economic 16 ARAUCO CHI PAPER 5,145.50 37.6 17 CENCOSUD CHI RETAIL 19,648.00 60.3 liberalization and openness AUTOMOTIVE COM- 18 NEMAK MEX 4,390.90 49.5 policies of the Washington PONENTS Consensus, but also, and this 19 SONDA CHI SOFTWARE 1,277.30 72.5 20 SIGMA MEX FOOD 3,744.10 95.2 point has to be reminded, 21 ARTECOLA BRA CHEMICAL 128,196.00 61.6 thanks to the open regionalism 22 EMBOTELLADORA ANDINA CHI ALCOHOL BEVERAGES 2,905.30 77.9 of the ECLAC. 23 CMPC CHI PAPER 4,974.50 43.8 24 MARFRIG BRA FOOD 8,007.20 30.9 25 I NDRA BRA MULTISECTOR 4,011.60 53.7 The implemented growth 26 COPA AI RLI NES PAN AIRLINE 2,608,30 24 strategies are various and are 27 GRUPO ALFA MEX MULTISECTOR 15,560.30 28.9 strongly influenced by the 28 ISA (I NTERCONEX ELEC) COL ENERGY 1,872.70 63.3 singularities of the countries 29 FEMSA (3) MEX BEVERAGES 19,640.40 21.8 30 GRUPO BELCORP PER CHEMICAL 1,963.00 79 of origin and destination, 31 GRUPO BIMBO MEX FOOD 13,785.00 39.8 although they share certain AUTOMOTIVE COM- 32 MARCOPOLO BRA 1,766.80 60.2 common points. For example, PONENTS 33 PDVSA VEN OIL/GAS 116,256.00 6 Chilean companies still lead 34 IMPSA ARG ENERGY 689.6 54.8 the ranking of mergers and 35 SQM CHI MINING 2,203.00 4.4 acquisitions. An illustrative 36 MADECO CHI MANUFACTURING 415.9 75 example is the merger between 37 VALE BRA MINING 43,323.50 19.1 38 COCA-COLA FEMSA MEX ALCOHOL BEVERAGES 11,931.70 47.7 Chilean airline LAN Chile and 39 LOCALI ZA BRA LOGISTICS 1,483.80 93.4 Brazilian TAM, which resulted 40 WEG BRA MANUFACTURING 2,915.10 18.2 in “LATAM”, among the top 10 41 GRUPO NUTRESA COL FOOD 3,156.10 32.8 airlines worldwide, providing 42 PETROBRAS BRA OIL/GAS 130,150.30 11.6 43 POLLO CAMPERO GUA FOOD 400 47.8 transport services for passengers PHARMACEUTICAL/ 44 NATURA BRA 2,966.70 80.2 and cargo to over a hundred CHEMICAL destinations in twenty countries. 45 CONSTRUTORA ODEBRECHT BRA CONSTRUCTION 4,101.50 32 46 GRUPO MODELO MEX BEVERAGES 6,771.70 7 A similar strategy was carried 47 SUZANO PAPEL E CELULOSE BRA PAPER 2,428.30 6 out by the largest private 48 ALICORP PER FOOD 2,047.80 46.7 Brazilian Bank, Itaú, which 49 METALFRIO BRA ELECTRO. 344.1 53 merged its subsidiary in Chile 50 FALABELLA CHI RETAIL 12,653.30 47.7 with Corp Banca Colombia, Source: América Economía. Ranking 2014. Santiago de Chile. through which the Brazilian

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company was granted access • Grupo Gilinski (Colombia): to the markets of Colombia, Took over the operation of Peru and Central America. The HSBC (UK) in Colombia, resulting company: Itaú Corp Uruguay, Paraguay and Peru Banca, will have Itaú Unibanco for USD 400 million. and Corp Group as main shareholders. • Grupo Sura (Colombia): Purchased ING This shows that the Latin Netherlands, assets in American business map is pensions, insurance and subject to rapid changes and mutual funds in Chile, variations, as evidenced by the Mexico, Peru, Uruguay and intense activity that Colombian Colombia. The transaction and Chilean groups are carrying computed USD 3,763 million. out, having acquired important European multinationals that • Grupo Argos (Colombia): decided to leave the region. Acquired several assets Among the latest transactions, of the French cement the following stand out: company Lafarge in the U.S., with a total cost of • Grupo Aval (Colombia): USD 760 million. Purchased Banco BAC Credomatic in Central • ISA (Colombia): Purchased America, financial arm of the subsidiary Intervial General Electric, for USD Chile of Cintra (Spain) for 1.9 billion. USD 580 million.

• Grupo Aval (Colombia): • Corpbanca (Chile): Acquired AFP Horizonte in Purchased Grupo Santander, Colombia previously owned Santander Colombia, for by BBVA for USD 530 million. USD 1,225 million.

• Grupo Aval (Colombia): • Corpbanca (Chile): Controls Editorial El Tiempo Purchased Helm Bank in of Spanish Grupo Planeta Colombia for USD 1,278 after purchasing it for USD million. 300 million. • Cencosud (Chile): Acquired • Grupo Aval (Colombia): French hypermarket Acquired the historical Carrefour and its stores in subsidiary of BBVA in Colombia for USD 2.6 billion. Panama for USD 646 million. • Compañía Sud Americana • Davivienda (Colombia): de Vapores (Chile): merged Took over the operation of with Hapag-Lloyd, its HSBC (UK) in Costa Rica, German competitor Honduras and El Salvador in containerized liner for USD 801 million. shipping services, becoming

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the fourth largest company countries, such as Spain15. This in the sector with a rise of Multilatinas indicates “These transactions turnover of USD 8.7 billion. their excellent skills to adapt The headquarters will be and transform resources to show a significant located in Hamburg and the successfully compete at a change in regional center in Santiago regional level, as occurs in the the growth pattern” de Chile. Latin American airline sector.

• Abbott Laboratories (EE. REGIONAL GROWTH STRATEGIES UU.): purchased CFR OF AIRLINES Pharmaceuticals, specialized in generic drugs, one of Due to their nature, the the largest companies airline sector is constantly in the region as regards transforming, seeking development, production expansion paths to successfully and sale of drugs, present compete at an international in 15 Latin American level. Competing globally is countries and Vietnam. It a capital-intensive project, has 7,000 employees and with network economies that manages production plants facilitate the integration of and research centers in subsidiaries in several countries Chile, Colombia, Peru and and the possibility of creating Argentina. The purchase global brands. amounted to USD 2.9 billion and the total cost is USD At the same time, because of its 3.33 billion if the debt of strategic nature, it is a highly the Chilean enterprises is regulated and protected sector added. Abbot will double its by national governments. presence in the generic drugs In fact, it is one of the few market in Latin America and Latin American sectors where its revenues will rise by 900 foreign owned enterprises are million annually. limited by law. These factors have resulted in a partial It should be noted that these consolidation of the industry, transactions show a significant completely dominated by change in the growth pattern, regional corporations. since until recently, these acquisitions were almost During the opening and exclusively carried out by liberalization of public services, multinationals of developed which took place during the

15 For more information, see; Ramón Casilda Béjar (2002): La década dorada. Economía e inversiones españolas en América Latina 1990-2000 (The golden decade. Spanish investment and economy in Latin America 1990-2000). (2008): La gran apuesta. Globalización y multinacionales españolas en América Latina. Análisis de sus protagonistas (The great bet. Globalization and Spanish multinational enterprises in Latin America. Analyzing the players), and; (2011): Multinacionales españolas en un mundo global y multipolar (Spanish multinational enterprises in a global and multipolar world).

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90s, it could have been thought airline in the Andean country that airlines would follow and LAN Colombia and LAN “The integration of the same path as energy or Argentina, the second most telecommunications enterprises important airlines in their local and regional and would end up being respective countries. corporations into the controlled by foreign groups. airline industry has However, the outcome has been The second largest airline considerably advanced quite different. group in the region is Avianca, the previous Colombian in recent years” In fact, purchases by national airline, which merged international investors were in 2009 with TACA Airlines16, a scarce and unsuccessful. Central American corporation The main transaction was headquartered in El Salvador the purchase of Aerolineas that previously acquired Argentinas by Iberia and Lacsa, the airline of Costa Marsans –both Spanish– before Rica, El Salvador, Guatemala, its re-nationalization in 2008. Honduras, Nicaragua and Peru. Likewise, Continental acquired With its extensive operations, a majority stake in Copa de Avianca offers a more complete Panama, an enterprises that services network than its main did not generate the expected competitors. Currently, Grupo benefits either and thus Avianca is owned by Synergy entailed the gradual withdrawal Group Corporation, founded by by Continental since 2005 until Germán Efromovich, a Bolivian it completely stepped down. entrepreneur, of Brazilian and Colombian nationality. In 2012, Contrarily to the results of Synergy also tried to purchase actions undertaken by foreign TAP Portugal, but the offer enterprises, the integration of was rejected by the Portuguese local and regional corporations Government. into the airline industry has considerably advanced The airline Copa has chosen a in recent years. The most different strategy and used its illustrative example is LATAM, base in Panama as a hub for which was created through the long-haul destinations for Latin merger between Chilean LAN America and the rest of the and Brazilian TAM, currently world. The only exception was the largest airline company the purchase of Aero República in Latin America and the in 2005, currently known Caribbean. Besides operating as Copa Airlines Colombia in these two countries, it is since 2010, the third largest also particularly important in Colombian airline. other Latin American nations thanks to LAN Peru, leader

16 It was a strategic merger and both Avianca and Taca kept their corporate image. This merger sought to strengthen the services of both corporations within the region and exploit synergies.

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The Caribbean airlines, as well routes, particularly as regards as enterprises of other sectors, internal flights. This entails “The difference establish subsidiaries networks an organizational burden for in several countries to reduce the airlines that must create between these large the operating costs in very small this type of pan-regional airline groups in markets. The national airline of networks. In the case of Avianca Latin America is its Trinidad and Tobago, Caribbean and LATAM, this resulted in networking nature” Airlines, started operating in 2007 working with partially owned to replace West Indies Airways subsidiaries. (BWIA), a British company that went bankrupt. In 2010, This is the case of LAN, which Caribbean Airlines acquired only owns 49% of LAN Peru the remaining operations of Air and LAN Argentina and 45% Jamaica, and thus also became of LAN Colombia. However, the Jamaican national airline. these companies are an In late 2012, Caribbean Airlines integral part of LATAM, which also became the national airline owns aircrafts instead of of Guyana. Another important local airlines. When TAM was Caribbean airline is Leeward purchased in 2012 by LAN a Islands Air Transport (LIAT), specific agreement had to be a Panamanian enterprise, co- signed to comply with the owned by eleven Caribbean legal requirements of Brazil. governments and with important Ultimately, TAM is 100% owned hubs in Antigua and Barbuda, by LATAM Chile, but 80% of the Barbados, Saint Vincent and decision-making rights rests the Grenadines and Trinidad with Brazilian investors, in and Tobago, apart from private order to comply with Brazilian shareholders. Law, which requires that 80% of the domestic airlines must The difference between these be property of nationals. large airline groups in Latin Following a similar strategy, America is, undoubtedly, Avianca has not completely its networking nature. In integrated Lacsa into its each country of the region, operations to keep its Costa the operation of a group is Rican nature. executed through individual airlines, subsidiaries of a The reason behind the success parent company, in order to of these large networks comply with local regulatory in Latin America and the requirements as regards Caribbean seems to be related limiting foreign participation to the lower relative size of in the airline industry. Most of national markets and the the Latin American countries strong demand for various merely allow foreign investors flight choices across the to partially own a national continent. Furthermore, airline (often not over 50%) and regional entrepreneurs limit flight airlines on certain have been creative enough

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to operate within the legal investment in the Caribbean: framework of each country trends, determinants and “It is essential to and exploit the expansion policies. Caribbean Studies and possibilities of the networks. Perspectives, Nº 35 (LC/L.3777). exploit these dynamic ECLAC and the Caribbean Sub forces to incorporate Finally, it should be noted that Regional Office. Port-of-Spain. them as much as not all main airlines in the Trinidad and Tobago. possible to promote a region take part in this regional internationalization process; It is also mandatory to highlight regional integration” airlines operating in the main the positive impact that multi- internal regional markets tend Latin corporations have on to exclude themselves from such an important process as this process. Thus, one of the the “regional integration”17. This largest Latin American airlines is occurs due to the large and Aeroméxico. The Mexican airline increasing level of transactions, has implemented a completely projects and investments that different strategy than LATAM are carried out throughout or Avianca and has focused on the region, showing the its large national network and contribution they make towards the connections with the U.S. the enhancement, cohesion and These two features (internal integration of the Latin American market and opportunities in the markets. Therefore, producers U.S.) are probably the reason and consumers develop an why the airline did not need to unprecedented relationship at a establish these networks. faster speed than that of treaties and agreements in recent years18. Another important Latin Consequently, it is essential to American and Caribbean airline exploit these dynamic forces to is Brazilian Gol, the only low-cost incorporate them as much as airline, mainly focused on the possible to promote a regional huge internal market. However, it integration that, by the way, is is a growing business, which has still well below the expected level. a great room for expansion in its domestic market. In this regard, the Institute for the Integration of Latin America Source: Author, based on ECLAC and the Caribbean (INTAL)19, (2014): O. De Groot and Miguel shows that between 2003 and Pérez Ludeña: Foreign direct 2013, the trade between South

17 In the 23rd Ibero-American Summit, in Panama City, October 16-18, 2013, during the opening ceremony, the President of Panama; Ricardo Martinelli said solemnly and deeply that “integration is our future”, and added that “if we reflect on the future of the Summit, we will see that countries could find the Latin American community to be a useful tool to develop and strengthen their countries in the 21st Century”. 18 These integration agreements cover every aspect and are: ACS; ALADE; ALBA; CA-4; CAN; CARICOM; CELAC; MERCOSUR; NAFTA; OAS; OECS; ACTO; PARLACEN; SELA; SICA; UNASUR and AP. 19 INTAL is an institute part of the Inter-American Development Bank based in Buenos Aires (Argentina).

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American countries reached one of the key attributes levels over those of global exports of economic integration. “Developments are and sales of the region to the rest Diversifying the regional of the world. The most significant export supply and penetrating still being made as intra-South American growth new markets as Mexican regards the business exchanges were those of intra- multi-Latin corporations are regulatory framework industry trade, both in relation doing in Spain (Box 2), as well in many economies in to manufacturing and resource- as developing intra-industry based products20. exchange flows, creating new Latin America” potential for trade gains as a In general, Latin American result of economies of scale, economies complement each incorporating technology other. Those specialized in the and the creation of business production of raw materials networks entail positive effects are complemented by those for the rest of the economy specialized in manufacturing. and foster regional expansion INTAL considers that the region and business. shows a mixed picture as regards trade and identifies significant DOING BUSINESS IN LATIN industry flows in 11 out of the 66 AMERICA bilateral relations between 2003 and 2013. Only three economies According to the: Doing (Argentina, Brazil and Uruguay) Business 2015. Going Beyond have a high level of intra- Efficiency report by World industry flow, although Colombia Bank Group, developments are and Ecuador are close to it. still being made as regards the Argentina and Brazil are the two business regulatory framework countries with most significant in many economies in Latin intra-industry exchange; whereas America. Local Latin American in the other cases the two-ways entrepreneurs perceived exchange is almost nonexistent. certain improvements to do It is here where multinationals business in the last year, as can act to revert and enhance the the strong reformist pace to intra-industry flow. improve business regulations remained unaltered. These data undoubtedly According to the report, half contribute to the debate of the regional economies regarding Latin American implemented, at least, a integration and relevant regulatory framework reform conclusions can be drawn from between 2013 and 2014. them, both for policymakers and the private sector, since The report states that the exchange flows represent certain Latin American and

20 For more information, see technical note; Romina Gayá and Kathia Michalczewsky (May, 2014): El comercio intrarregional sudamericano: patrón exportador y flujos intra industrials (Intra-South American trade: export patterns and intraindustry flows). Insti- tute for the Integration of Latin America and the Caribbean. Buenos Aires.

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Caribbean economies took levels that can be compared steps to remove the barriers to the best global practices”, “Some Latin for entrepreneurship and according to Augusto López- strengthened the legal Claros (director of the global American economies institutions. For example both indicators group, development have improved Costa Rica and Guatemala economy, World Bank Group), their business implemented an electronic who considers that: “broadening environment” system to file and pay business and speeding up this process taxes, saving over 60 hours per would contribute to closing the year in time spent in meeting gap with the economies with tax obligations. Uruguay passed the best global performances a law that seeks to speed the and would also boost resolution of business disputes competitiveness”. and also implemented a system of risk-based inspection that In this issue, for the first time, reduces the time spent for Doing Business collected custom clearance. information for a second city of the 11 economies with a It should be noted that population of over 100 million Colombia is the easiest people. In Brazil, the business economy to do business. regulations of Sao Paulo and Additionally, it has led the Rio de Janeiro are analyzed, in ranking of implemented Mexico, it is Mexico City and regulatory reforms in the region Mexico D.F. The report shows since 2005, with a total of 29. For that the differences between example, in 2013/2014 access to the cities are more common in credit was made easier through indicators that measure stages, a new law that enhanced the time and cost to complete law of security in movable regulatory operations in which assets. Peru, Mexico, Chile and local agencies play a more Puerto Rico are the other four important role. countries in the top 5. These economies are among the top The report also shows that global scenarios to do business Singapore tops the global in many of the studied areas. ranking to do business, followed For example, ten years ago, it by the ten main economies with would have taken over 33 days positive environments to do for a Peruvian entrepreneur business: New Zealand, Hong to register the transfer of a Kong, China, Denmark, Republic property. Currently, this would of Korea, Norway, U.S., UK, only take 6.5 days, less time Finland and Australia. than in the U.S. (15 days) or Austria (20.5 days). “For almost Source: World Bank Group a decade, some Latin American (October, 2014): Doing Business economies have improved 2015 Report: Going Beyond their business environment, Efficiency. Washington. in many cases reaching

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5. INTERNATIONAL the form and manner of EXPANSION establishing relationships “There are certain with their environment, The international expansion of this also being the case advantages when Multilatinas has made certain of the Spanish companies operating under proposals related to traditional that were widely favored in close ‘cultural theories obsolete. For some their rapid and successful environments’” authors, now it is not enough to investment expansion across think that access to cheap labor, Latin America thanks to control of natural resources and the common language21, a productive skills are sufficient certainly valuable bond. In to explain these growth trends. the process of international The new trends differ from growth, the comparison these approaches by pointing between the institutional out, for example, that innovation environment of origin and that and quality are distinctive of the destination country features of the main enterprises can provide “signals” of the that expand internationally, as degree of ease or difficulty that Multilatinas do. the enterprise will encounter during its internationalization This expansion has some process, as well as regards the singularities, for example, consequent development of some argue that there are their activities. certain advantages when operating under close According to the above, the “cultural environments”, such corporation will try to establish as Angola, where Brazilian itself in the countries whose Multilatinas have rapidly and conditions are similar or lower successfully implemented large than those of its country construction, engineering and of origin, thus allowing the infrastructure projects. company to take advantage of these conditions to increase its The proximity of the cultural competitive advantage. This environment, as could be a hypothesis may largely reflect common language, allows the behavior, for example, of to develop skills more Colombian Multilatinas22 and easily in order to generate how they adapt to similar or attitudes and behaviors that better settings, the reason benefit them in relation to behind the incredibly growth

21 For more information, see; Ramón Casilda Béjar (2011): El español en el mundo. Una década de inversiones españolas en Iberoamérica (1990-2000) (Spain in the world. A decade of Spanish investment in Ibero-America [1990-2000]). Anuario del Instituto Cervantes. Madrid. 22 Andonova, V. and Losada, M. (2010): Las nuevas multilatinas y sus retos. El caso Colombia (The new multi-Latin enterprises and their challenges. The Colombian case). Business Magazine ITAM, issue 34. Mexico

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in their sales, well above operates in eight countries in those obtained by Mexican Latin America and Spain. “Argentinian and Brazilian organizations, which is attracting attention of As an international recipient Multilatinas were several experts23. of FDI, Brazil is the leading the pioneers of country in the region and internationalization” As regards foreign direct fourth worldwide. In 2013, investment by Multilatinas, it received over USD 63 these have a high volatility billion. Regarding other BRIC from year to year, partly countries, Russia is third with because the figure that these USD 94 billion, while India, flows generate is still limited fifth, received 28 billion. The and focuses on specific projects. U.S. leads the ranking with Some examples can be found USD 159 billion followed by among Brazilian Multilatinas China with USD 127 billion companies24 such as Jbs-Friboi, (UNCTAD, 2014). Embraer, Natura, Petrobrás and Vale, the two latter with It should also be taken into the largest global reach and account that Argentinian presence in all continents. Also, Multilatinas were the pioneers Mexican América Móvil, Cemex, of internationalization. The Femsa and Bimbo stand out shoe factory Alpargatas thanks to their international (currently Brazilian) launched ranking and others, such as a subsidiary in Uruguay in the Chilean enterprises, should 1890 and later in Brazil. This be noted because of their path was followed by the dynamism; becoming leaders agricultural organization in certain fields like the wine Bunge & Born which, in 1905, sector through Concha y Toro, built a mill in Brazil, and which exports wine to over 100 then expanded to Uruguay countries; Peruvian companies and Peru. This would are gradually improving their ultimately lead to industrial ranking, with Aje Group at activities. However, Brazilian the top of the beverage sector, corporations currently lead present in over 10 countries the ranking and have quite and Astrid & Gastón, a symbol important international of the catering sector which Multilatinas. Although among

23 Casilda Béjar, R. (2014): Multilatinas y translatinas. Las nuevas realidades empresariales de América Latina (Multi-Latin and trans-Latin corporations. The new business realities in Latin America); in: LANMARQ. LID Editorial. Madrid. 24 For more information, see; Ramón Casilda Béjar and Jaime Llopis Juesas (August, 2014): “Brasil. Las multilatinas. El reto de la internacionalización y la seguridad jurídica de las inversiones extranjeras”, en: “Brasil, un socio estratégico para España” (Brazil. Multilatinas. The challenge of internalization of legal certainty for foreign investments, in: Brazil, a strategic partner for Spain). Boletín Económico de Información Comercial Española, issue 2054, June 2014. Ministry of Economy and Competitiveness. Government of Spain. Madrid.

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the various international can have for Latin American mergers and acquisitions, modernization and “Mexico is the sixth according to the ranking industrialization is clear, as of Brazilian multi-Latin they cover a wide productive most important corporations abroad, only spectrum and, at the same investor in Spain” 15 out of 40 increased their time, constitute the tool internationalization rating that governments should compared to 2008 (Fundação use to promote growth and, Dom Cabral 2013). consequently, achieve a greater presence and a more successful Regarding the 65 participation and international internationally most important projection. Mexico and its Multilatinas (América Multilatinas in Spain are a Economía 2014), Brazil is the good example. leading country with a total of 25 corporations, followed MEXICAN MULTILATINAS IN by Mexico with 14, Chile 12 and SPAIN. THE MOST NOTEWORTHY Argentina and Colombia with TRANSACTIONS 2012- 2014 4. In relation to the enterprises operating in the most countries, The increasing investing Brightstar25 (Bolivia-U.S.) presence of Mexico in Spain tops the list, as it operates during the last years is in 50 countries, followed by evidenced by the significant Weg (Brazil) in 49, Lupatech purchases made by Mexican (Brazil) in 39, Vale (Brazil) in investors taking advantage 39 and Cemex (Mexico) in 36. of the various opportunities As regards the number of offered by several sectors due employees: Femsa (Mexico) to the economic crisis. Mexico leads the ranking with a total is the sixth most important of 177,470 workers, followed by investor in Spain with a FDI Andrade Gutierrez (Brazil) with volume close to EUR 19.5 billion 175,503 and Ibs-Fribobi (Brazil) (12-31-2013)26, followed at a with 128,036, Brazil Foods considerable distance by Brazil: (Brazil) is fourth with 127,982 5,683 million27. and Bimbo (Mexico) closes the top 5 with 126,747 people. Thanks to financial holdings in banking, real estate, ground Considering their size, the transportation, the food importance, significance industry and shipping Mexico and scope that Multilatinas has become the largest Latin

25 Although headquartered in Miami, its founder is the Bolivian businessman Marce- lo Claure, its current CEO. In January 2014, SoftBank invested USD 1.26 billion thus controlling the enterprise. Brightstar is the world’s largest wireless distributor and a leading innovator of diversified services within this industry. 26 Source. Investment Register Stock. General Authority for Investment and Trade. Secretariat of Commerce. Ministry of Economy and Competitiveness. 27 Source. Investment Register Stock. General Authority for Investment and Trade. Secretariat of Commerce. Ministry of Economy and Competitiveness.

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American investor in Spanish The U.S. fund Fintech, headed economy. The position of Spain by Mexican financier David “The singularity of as a gateway to Europe and Martinez, acquired 4.94% of the price adjustment due to Bank Sabadell. This great these transactions is the crisis offers acquisitions commitment is also promoted the close relationship possibilities at highly by Colombian investor that defines them” attractive levels, which entails Jaime Gilinsik, the largest an unprecedented activity. shareholder with 7.5% of the These are some of the most entity and an investment noteworthy Mexican capital of EUR 700 million. Gilinsik transactions. is the owner of the fourth local Colombian bank: GNB The pioneer was Petróleos Sudameris, which controls Mexicanos (Pemex), as it 4% of the Colombian market acquired 5% of Repsol between and has been strengthened 1990 and 1992, gradually thanks to being part of the increasing the figure until it operation of HSBC in four reached 9.34%, thus becoming Latin American countries. the second largest shareholder. Another acquisition, for the Finally, on June 4, 2014 Pemex moment, is the equity holding decided to sell 7.86%, which of Liberbank by Mexican marks the beginning of new corporations Davinci Capital plans driven by the energy with 2% and Inmosan with reform enacted by the 7.02%, which became the third government of President Peña largest shareholder. Nieto on December 10, 2013. Part of a group of Mexican In 2012, businessman Carlos investors led by the Del Valle Slim made a major investment family acquired 6% of Banco through the purchase of 439 Popular for EUR 450 million. branches of La Caixa for EUR In exchange, the Spanish bank 490 million. This was how his purchased 24.9% of the shares real estate business began in of the Mexican bank BX+ for Mexico, with Inmobiliaria Carso EUR 97 million. The transaction as one of the main pillars of his further strengthens the business conglomerate. At the solvency of Banco Popular same time, Slim has almost 1% and allows it to start its of the capital of CaixaBank, thus international expansion in becoming the largest individual Mexico and, consequently, shareholder. The singularity of in Latin America with its these transactions is the close experience and leadership as relationship that defines them regards SMEs and individuals. with a share exchange between Meanwhile, BX+ (Ve por más, the Spanish banking group and “Go Get More”) expects to triple the financial holding: Inbursa, its size within the next five since La Caixa acquired 20% of years. It currently has 23,000 Inbursa, Slim’s financial holding, customers and its balance sheet in 2008. has assets that amount to EUR

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1,850 million. The NPL ratio The TEC of Monterrey is is below 1.6% and its solvency present in Spain, through the “The agreement level reached 12.5% at the time creation of e-learning content of the transaction. and training courses for BBVA, confirms the renewed which in turn owns the largest interest in Spain as Fibra Uno acquired 253 branches bank in Mexico: Bancomer, the a gateway to other of Banco Sabadell Atlántico most important asset for the European markets” from the British fund Moor turnover sheet of the Spanish Park Capital Partners for EUR corporation. Other information 300 million. This was the most systems enterprises such as important real estate transaction Neoris, BSD Enterprise or of 2013 in the sector. The bank Softek, which has a research will keep the branches during center in A Coruña, show the 35 years, with a mandatory dynamism and technological minimum of 25 years. competitiveness of Mexican businesses. The ADO group purchased Avanza, the largest Spanish Bimbo has built new factories, business in the field of urban with the plant of Azuqueca de transport and second in long- Henares (Guadalajara) as the haul transport. The new owner most important one, with an has 2,000 buses and a turnover investment of EUR 50 million, close to EUR 450 million. a production line of just bread; Although the prize of the the largest, fastest and most transaction is not public, it is efficient of Europe, designed by estimated to have been close to the company. The enterprise EUR 800 million. expects to increase its size over the next years, although Mexican frozen foods company the specific number of new Sigma and Chinese Shuanghui, facilities, location or investment a practical example of global has not been defined yet. The alliances, share ownership of organization also wants the Spanish meat industry leader, headquarters of Barcelona to Campofrío, valued at EUR not only control the Iberian 695 million. The agreement market, but also Europe and confirms the renewed interest North Africa. in Spain as a gateway to other European markets. For Sigma, Pemex, through its subsidiary part of the Mexican group PMI, has become the majority Alfa, the agreement offers shareholder of Hijos de J. the possibility of exporting Barreras, the largest private leading brands such as Fud shipyard in Spain, with over 100 and Nochebuena from the U.S. years of experience. The scope and Latin America to Europe, of the energy reform does not where both companies seek to only translate into the arrival strengthen the leading position of new businesses in Mexico, of Campofrío. but also the international

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expansion of Pemex. The in its first edition in 2014. Díez strategy of PMI is to acquire the Morodo, one of the creators “Carlos Slim had skills and advanced technology and Vice President of the of Barreras to export it to Grupo Modelo, after its sale become the largest Mexico and develop larger and to Belgian-Brazilian Company shareholder of the more advanced ships. AB INBEV, the largest brewer company Fomento in the world, remains as a de Construcciones y Entrepreneur Roberto Alcántara shareholder. The appointment invested EUR 100 million in the of Carlos Fernández González Contratas (FCC)” Prisa group, thus becoming the as independent director of the majority individual shareholder Santander Bank during this with 9.3% of the shares. new stage with Ana Patricia Therefore, the group reinforces Botín as President should also its commitment towards Latin be highlighted. This Mexican America, the leading media in businessman is President of the education, information and Grupo Televisa and Emerson entertainment in Spanish and Electric Co. He also founded Portuguese. It is present in 22 the Academia Mexicana de la countries with an audience of Comunicación, the Fundación over 60 million people (40% in Carolina, and the Fundación Spain and 60% internationally) Beca and is Chairman of the through its global brands Consejo Consultivo del Agua. such as El País, Santillana, 40 Principales, Cadena SER or By the end of 2014, Carlos radio Caracol among many Slim had become the largest others. Slim’s participation is shareholder of the company more of a token presence, since Fomento de Construcciones the Mexican businessman y Contratas (FCC), leading had over 3% of the shares that enterprise in construction gradually diminished through and services in Spain, with the business’ capital increases. an extensive and intense Gruma, one of the leading global international activity, after manufacturers of corn tortillas 50 years under control of recently acquired the Mexifoods the Koplowitz family. The Spain factory seeking to invest, investment amounts to EUR 650 modernize and increase the million: 25.634% of the shares. capacity of the Spanish plant. It will start producing tortillas, With these successive wraps and other products for investments, Carlos Slims southern Europe, entailing an shows his confidence in Spanish investment of EUR 35 million. economy and its future, where he seems to be creating a replica Mexican businessman Valentín of his Mexican conglomerate. Díez Morodo is also part of Although it is still far from this dynamic and was awarded his Mexican conglomerate as the prize Enrique V. Iglesias regards economic size, it can be for the development of the compared in terms of covered Ibero-American business space sectors: construction, services

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and infrastructure concessions, deposits”, according to the operating through Inmobiliaria Andalusian government. “Multilatinas Carso and the Ideal group, both exclusively present in Mexico, as A perception of this Mexican can expand they are complemented by FCC investing presence is that it will beyond regional through its vast experience and grow in its different categories borders to become international relevance. So far, hand in hand with the recovery international he still has to invest in energy, of Spanish economy. These mining and telecommunications transactions, in its diverse leaders” to fully replicate his Mexican manifestations, strengthen conglomerate in Spain. Difficult Spain’s position as a hub, a bridge objectives, each for different for Multilatinas to penetrate and reasons. In any case, what does grow in Europe and, likewise, seem clear is that his investments Spain can be used as a platform are gradually increasing and are for European companies to arrive close to EUR 1.5 billion, which and invest in Latin America. shows his confidence in Spain and its attractive prices. 6. BEYOND REGIONAL BORDERS The mine of Aznalcóllar (Seville) will be reopened after There are several reports, studies remaining closed for 16 years and surveys that confirm the and the responsible company sound state of Multilatinas will be Minorbis-Grupo México and their dynamism to expand (formed by Spanish Magtel and beyond regional borders. One Grupo México, one of the leading of these reports is: “América copper producers in the world Latina sin fronteras” (Latin with extraction sites in Mexico, America without borders)28, U.S., Peru and Chile). This which analyzes the 500 leading society won the international corporations of the Latin Trade competition held in January 2014 Ranking 2013. The singularity by the Andalusian Government of the study is its conclusion: to reopen the site, closed after “Multilatinas can expand beyond the environmental disaster regional borders to become caused by the rupture of tailing international leaders, since pond in 1998. The awarded zone they do not only successfully is Los Frailes, with deposits of compete at a local level, but are copper, lead and zinc of around also gaining relevance beyond 30 to 35 million tons and another regional borders”. 45 million tons in “possible

28 Deloitte Américas (September 2014) and the successive reports of El País Negocios on Multilatinas. For more information, see; Alejando Rebossio (4-1-2015): “Techint una multilatina argentina de acero” (Techint, an Argentinian steel multi-Latin enterprise). JackelineFowks: (1-2-2015): “Belcorp cosmética peruana para las Américas” (Belcorp, Peruvian Cosmetics for the Americas). Elizabeth Reyes (8-2-2015): “Bavaria en cada bar de Colombia” (Bavaria in all Colombian bars), and Pedro Cifuentes (15-2- 2015): “El “oro negro” hace sufrir las Américas” (Black gold keeps America suffering). El País-Negocios.

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While major multinationals Each and every one of the in Latin America used to factors are of great interest “Multilatinas have be Canadian, European because of their importance (particularly Spanish) or U.S. to design strategies for conquered new corporations, during the first international expansion, regional markets” years of the 21st century, which requires a process of the region has witnessed organizational and productive a massive influx of foreign transformation to successfully direct investment from Asian compete. Three of these multinationals, specifically factors are competencies that from South Korea and China. enterprises can influence This picture has greatly through their own actions, while changed as years passed, and the two remaining ones are the report confirms this pattern, structural by nature, meaning showing how Multilatinas have they are greatly determined gained ground, to the point of by the local environment on becoming local leaders. The six which business have no control major economies in the region: direct. This lack of control Brazil, Mexico, Argentina, does not necessarily mean that Colombia, Chile and Peru businesses will not be able to account for 86% of the GDP of succeed internationally. Latin America. Multilatinas have conquered “One of the most important new regional markets in conclusions was that over a fierce competition with 70% of the revenue generated foreign multinationals, as by these 500 corporations occurred in Chile, Peru, was produced by Latin Argentina, Brazil or Colombia. American enterprises and Thanks to these learning not foreign multinationals experiences and successive that operate locally, which approaches, they initiated their refutes the popular belief that internationalization beyond multinationals control the Latin regional borders, as Spanish American market”. The report multinationals did when they raises a number of reflections expanded towards Latin America regarding international where, by the way, they achieved expansion of Multilatinas and the necessary experience to analyzes the challenges they start a new era with great face, while highlighting “five international activity of global factors or key competencies”. scope29. The five key factors that

29 For more information, see; Ramón Casilda Béjar (2002): La década dorada. Eco- nomía e inversiones españolas en América Latina 1990-2000 (The golden decade. Spanish investment and economy in Latin America 1990-2000). (2008): La gran apuesta. Globalización y multinacionales españolas en América Latina. Análisis de sus protagonistas (The great bet. Globalization and Spanish multinational enterprises in Latin America. Analyzing the players), and; (2011): Multinacionales españolas en un mundo global y multipolar (Spanish multinational enterprises in a global and multipolar world).

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confer advantages in the context position of leadership is of global competition are: reflected on the huge growth “Global Multilatinas of sales, an advantage over • Senior managers: the regional Multilatinas and are powerful business environment local enterprises. companies” of a country plays a key role in the availability • Acquisitions and strategic and retention of senior alliances: the expansion managers, key in the of global Multilatinas process as they directly corporations is often affect the capacity of a based on inorganic growth business to efficiently through acquisitions and guide the international joint ventures. On average, expansion of an enterprise these companies run nearly in a sound manner and four times more joint its consequent operations ventures and over six times abroad. According to the the number of mergers and distribution of the top acquisitions. 100 CEOs in the world, Brazil and Mexico are the • Governance practices: countries of Latin America implementing leading with the highest number of international corporate senior managers. governance practices helps global Multilatinas • Capital markets and operate more effectively financing: to finance their at an international level. international expansion, Furthermore, it helps them Multilatinas need to gain access to capital of diversify their access to state pension funds and both capital and a relatively sovereign wealth funds, cheap financing. On which usually have a strict average, global Multilatinas regulation regarding the are listed on two stock type of companies which can exchanges in comparison request them. with regional enterprises, on an average of 1.3 and 1.25, These five factors are respectively. considered to be key elements to gain experience and • Market leadership: global successfully expand at an Multilatinas are powerful international level. As noted, companies with strong three of these factors can growth prospects that, be influenced by companies thanks to their sound through their own actions: performance, lead the market in their home • Achieving a leadership countries before expanding position in the market of abroad. The dominant their home country.

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• Implementing strategies Multilatinas should remember that focus on acquisitions that the implementation of “40% of the regional and “joint ventures” as these five factors will yield the primary means for them greater chances of households have international growth. success in their international improved their expansion. These same factors ‘social class’” • Carrying out leading could also serve as guidelines corporate governance for foreign multinationals that practices of international seek to operate or establish scope. themselves in Latin America.

Internationalized Multilatinas For all these reasons, in order tend to be very strong in these to achieve the results expected three areas and any local of powerful Multilatinas, or regional enterprises that it is mandatory for them seek to achieve international to internationalize their success will probably have operation to benefit from the to take all three points into major trends in Latin America account. The other two which, as previously stated, factors are structural, largely is a rising star within the determined by the local global economy. Although not environment. They are: currently being at its peak, it should be noted that according • Availability and capacity to to the World Bank poverty was retain the most qualified reduced by 40% in the year managers to lead the 2000 and 30% by 2010. This international expansion. means that 50 million Latin Americans lifted themselves • Access to capital and out of poverty during that financing markets. decade. Furthermore, it is estimated that at least 40% of Since companies have no the regional households have absolute direct control over improved their “social class”. these factors, they must have appropriate alternative These critical structural strategies. Successfully changes as regards the meeting the five previously composition of social classes discussed factors entails a have reshaped the Latin clear competitive advantage. American map and business However, this does not value. Thus, between the 30 completely guarantee success, Multilatinas whose revenue is as there is no single formula increasing, over 20 specialize for international expansion. in sectors that respond to Various companies will face the growing demand of the different opportunities and middle class, such as food, challenges and walk divergent cement, retail, electronics, paths. However, regional education, construction and

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others that have an export and In total, ranking firms have import component, but also generated revenues amounting “They generally respond to a great extent to the to USD 38 billion31 and 3 demand of the thriving middle billion in profits. The assets operate and work class, such as electronics and of these global giants reach within the old communications, automotive USD 161 billion and employ 90 mentality of central and air transportation. million people worldwide. The planning” pattern remains unaltered: According to the World Bank Chinese companies continue report: “Latin American growing, taking the top three entrepreneurs: many firms but positions and five among the little innovation”, it is a matter top ten (four banks and an oil of creating an innovative company). business class, where first class companies, those which These firms are increasingly export goods, services and important but they still even foreign direct investment, have to go a long way to gain as occurs with Multilatinas, the influence, image and start competing with global projection of their multinational enterprises of U.S., European and Japanese developed countries. counterparts. So far, thanks to their condition of state 7. THE WORLD’S LARGEST companies, they generally MULTINATIONAL operate and work within AND MULTI-LATIN the old mentality of central CORPORATIONS planning and the rigidity, limitations and burdens that The Forbes Global 2000 this approach entails. The ranking. “The world’s largest best option would be, once companies of May 2014”30 predominant positions had (Table 3 and Graph 1), only been achieved, to review includes enterprises listed on this approach and strive for stock exchanges, taking into greater agility and flexibility as account just four indicators: South Korean multinationals “profits, sales, assets and have done, which strengthen market value”. The list features through the most advanced companies from 63 countries, technology sectors, with the largest figure since it went benchmark multinationals public in 2002, when only 46 such as LG and Samsung, nations took part. leader in mobile phones (27% of the global market share), surpassing Nokia, which

30 For more information, see: www.forbes.com 31 In 1998, revenues amounted to USD 11.5 trillion and in 2008 it was more than twice that figure: USD 25.2 trillion.

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seemed impossible some years América Móvil as the most ago (purchased by Microsoft in important company (115th), “The global September 2013)32. Femsa (373rd), Grupo Financiero Norte (469th), Grupo México corporate landscape For the first time, no European (529th) and Modelo (564th). is, above everything, bank or firm ranks among There are also eight Chilean a dynamic and the top ten of the list. For the enterprises, with Falabella at constantly changing second consecutive year the the head of the list (581st), six list is headed by the Industrial Colombians with Ecopetrol environment” and Commercial Bank of as the most important one China (ICBC), while China (128th), two companies from Construction Bank ranks Venezuela, Mercantil Servicios second. Agricultural Bank of (774th) and Banco Occidental China raised five positions to (1,423rd), Credicorp from Peru reach the third place, followed (901st) and Popular from Puerto by JP Morgan Chas and Rico (1,301st). The growth of Berkshire Hathaway, Exxon the ranking shows that, year Mobil, General Electric and Wells after year, the global corporate Fargo (all three from the U.S.) landscape is, above everything, which hold the sixth, seventh a dynamic and constantly and eight places. Bank of China changing environment. This and Petro China appear at the is evidenced by the progress bottom of the top ten. Apple, achieved by China, although fifteenth, ranks first in terms of the U.S. maintains the overall market capitalization or market lead with 5 of the 10 largest value, while the superstores companies. giant Walmart, twentieth, ranks first in sales volume. In the case of Spain, there are 27 large multinationals in the list, Among Multilatinas, Brazil is again led by the Santander bank, the country with the largest which ranked 43rd; Telefonica representation with Petrobras (68th), BBVA (118th), Iberdrola leading the list, ranked 30th. (133rd), Gas Natural (230th) and It is followed by Itaú (46th), Inditex (313rd). Caixa Bank (325th), Bradesco (63rd) and Banco Mapfre (376th), ACS (382), Repsol do Brasil (104th). The second (471st), Bankia (582nd), Abertis country is Mexico, with (616th), OHL (1.610th), Liberbank

32 Microsoft purchased the patents and businesses of Nokia and paid EUR 3,790 million for the mobile manufacturing unit and 1,650 million for the patent portfo- lio. There was a time where everything mobile-related revolved around Nokia. Its past speaks for itself; fourteen years as the world leader. But then touch phones arrived. It was then, when almost by magic, the concept of mobile phones, simple and convenient, completely changed. Off with the old, in with the new. In April 2012, Samsung, the Korean giant, became the main supplier of mobile devices. This transaction entailed loses for Europe, since Nokia was not a mere corporation, but symbolized the fact that European manufacturers and technology companies could be competitive in today’s market. The end of Nokia as a manufacturing company means that no options are left to compete against the U.S. and, particularly, the Asian technology world.

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(1.646th) and Bolsas y Mercados which fell sharply in 2013, rose de España (1.679th) are also listed. from position 438 to 80. “Chinese By country, the U.S. leads with The ranking shows how corporations 564 firms, followed by Japan with certain industries dominate dominate the 225 and China with 207. This the business landscape. It is world arena” is the first appearance in the no wonder that banks and ranking for Mauritius, Slovakia diversified financial corporations and Togo. By regions, the power continue topping the list balance between the East and the with 467 members. The three West has considerably changed. following industries are oil and The present issue shows this gas (125), insurance (114) and shift by dividing the corporations services (110). As regards growth, in seven regions: Asia with 674 the semiconductor industry corporations is ahead, followed leads in sales (11%); while by America with 629 and Europe diversified financial corporations with 506. This sharply contrasts have sharply risen in the with the results obtained 11 years field of profits (90%) and the ago, when it had over half the construction sector leads the in companies of Asia. terms of growth in assets (18%).

Emerging markets, particularly It can also be noted that Chinese the Middle East and Latin corporations dominate the world America, also had a significant arena thanks to the size of their participation during the market. However, they still need last decade with growths of to face their weakness: further 265% and 76% respectively. enhance their international Africa, although with fewer relevance. The perception representation, is also growing, of these companies greatly and had seven companies growing through mergers and listed. Four of the newcomers acquisitions is not a reflection are headquartered in Nigeria, of reality. These transactions which represents a total of five amounted to USD 52 billion, a companies for the African nation. figure 20% lower than that of 2013 (the lowest result since Another singularity is the 2009); a rather moderate figure incorporation of 179 new in comparison to the global companies, many due to the amount which exceeded USD 3.2 equity market, the rise in trillion33 (the largest result since corporate transactions and the 2007). Of that amount, the U.S. increase in takeover bids. Thus, represents a third, 1.053 trillion. significant developments can be seen, such as the one achieved However, Chinese FDI has by Facebook, climbing 561 places greatly grown, fivefold during to reach the position 510. On the 2005-2010, becoming the other hand, Hewlett Packard, fifth largest global investor

33 According to the specialized firm Dealogic, 2014.

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(UNCTAD, 2011). Furthermore, • JP Morgan Chase: U.S. in 2010 they had 16,000 - Bank. Main West and subsidiaries in 178 countries. U.S. bank, global leader Therefore, Chinese companies in investment banking, have taken a very active role financial services and in the international markets. private investments Many of these operations have worldwide. been carried out by Chinese companies listed in the Forbes • Berkshire Hathaway: Global 2000 ranking. U.S. – Diversified financial institution. One of the THE 10 WORLD’S LARGEST leading producers in the COMPANIES OF 2014 (FORBES world, with over 80 years GLOBAL 2000, MAY 2014) of experience, it has a large-scale, diversified • Industrial & Commercial manufacturing. Bank of China (ICBC): China - Bank. Once again, • Exxon Mobil: U.S. – Oil it appears as the world’s and gas. The largest energy largest bank and the world’s company in the world and largest company. The one of the most global Industrial & Commercial corporations, Exxon Mobil Bank of China is one of the specializes in exploiting, 4 major Chinese banks, all processing and marketing state-owned. petroleum products and natural gas. • China Construction Bank: China - Bank. China • General Electric: U.S. Construction Bank, also - Conglomerate. The one of the 4 state-owned company with the largest Chinese banks, is second international presence again. The bank has been (over 100 countries), internationalized and diversifies its products investments are starting to and services, ranging from yield profits. infrastructure, financial services, media or industry. • Agricultural Bank of China: China - Bank. The • Wells Fargo: U.S. – Financial Agricultural Bank of China, services. Fourth largest also among the 4 state- U.S. bank, specializing in owned banks of China, has diversified financial services experienced an interesting worldwide (deposits, growth which allows it to mortgage servicing and reach the third place, rising debit cards). 5 positions compared to its result in 2013.

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• Bank of China: China - 8. PROSPECTS OF Bank. The oldest bank in MULTILATINAS, MORE China, state-owned since PROMINENCE AND 1912, is nowadays the main GREATER RESPONSIBILITY Chinese bank and part of the 4 state-owned Chinese The prospects of Multilatinas banking corporations. gain significant weight. Consequently, it should be • Petro China: China – Oil taken into account whether and gas. State-owned these constantly growing company which belongs to companies will take the China National Petroleum leading role to modernize Corporation (CNPC). It is their respective countries and, the largest Chinese oil and by extension, the region and gas producer and trader. thus become the promoters of productivity34 (a key issue as The 10 World’s Largest Companies 2014 regards the competitiveness of the region), innovation and the internationalization of a new global economic environment for the 21st century.

It should be noted that, just like multinationals of developed countries have become important

34 The new conceptual framework published in the annual report of the IDB (2014): “Rethinking Productive Develop- ment”, allows countries to implement essential productive development policies in order to progress, avoiding past mistakes. The report reviews productive development through the research of market failures that hinder transformation, as well as government failures that can turn policy remedies into something worse than the market’s defects. Using a simple conceptual framework, the authors systematically analyzed the policies of the countries in key areas such as innovation, financing, human capital and internationalization. They recog- nize that even the best policies will fail without the technical, organizational and political skills to implement them. The book concludes with ideas on how to design institutions with appropriate incentives, increase public sector capabi- Source: Forbes Global 2000 (May, 2014). lity over time and promote a constructi- ve public-private partnership.

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players in the process of To establish themselves in globalization of production Spain, Multilatinas have, “There are many and, thus, industrialization just like Spanish companies and modernization of their in Latin America, historical opportunities in Spain” countries, Multilatinas and cultural links, a common must do the same, by language and very important greatly developing, offering economic and trade relations, increasingly attractive goods largely promoted by Spanish and services as regards cost firms of all sizes and conditions and quality according to the that operate across the region. needs of demand through the same slogan used by “There are many opportunities multinationals: act locally, in Spain. For us what is think globally. important is achieving as many synergies as possible with our Multilatinas must broaden activities in Latin America and their perspectives if they vice versa. We are convinced really wish to internationalize that this is the decade of Latin beyond their traditional America. The continent is market, the U.S. They have living a great time of growth to take advantage of the and wealth. It is very exciting. opportunities other markets And, why not incorporating offer in a decisive manner, as Spain into this Latin American could be the case, for example, force? For us, it makes a lot of of the clear opportunity sense”, said Adriana Cisneros, that the economic situation Vice President of Organización of Spain has entailed, with Cisneros, although, for the highly attractive prices in moment, these undeniable several sectors. This is exactly good intentions have not what Spanish companies did materialized35. when a favorable economic cycle started thanks to its This “two-way path”, which I integration into the European have always strived for, that is, Economic Community (1986), a flow in both directions, makes the creation of the Single a lot of sense. Many Spanish European Market (1993) and the businesses, with its diversity common currency (1999), taking and size, have already done so advantage of the situation and continue doing so. Now to expand with force and it is the time for Multilatinas determination towards Latin to undergo an expansion that America, which offered highly is slowly taking place with beneficial opportunities. the arrival of important Latin American investors and groups.

35 Adriana Cisneros. Vice President of Organización Cisneros. “La tecnología es el me- jor aliado de la democracia” (Technology is democracy’s best ally). El País-Negocios. Madrid, Sunday, September 11, 2011.

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It seems as if this trip to is also occurring at the Latin Spain and, by extension, American forums, evidenced “Another important to Europe, mainly involves in the 21st and 23rd Ibero- large Mexican36 Multilatinas, American Summits, when aspect in the long followed by Brazilian37 and Ibero-American Secretary- term is to promote Colombian enterprises, which General, Enrique V. Iglesias, Spain as a hub” almost fully complete the during the opening speech, top 50 of the ranking (Table referred to Multilatinas 2). A very important point and its strength to compete is that these companies internationally and the need to often trade on the Spanish reflect on how the countries of stock market through the the Ibero-American community Latin American Securities could mutually reinforce Market in Euros (Latibex)38, themselves, enhancing their representing the advance of a relations to face the tough broader movement that will international competition in a be followed by Multilatinas global context. of several sectors, such as consumption, food, catering or Another important aspect fashion. in the long term is to promote Spain as a hub, i.e., Given these great prospects, it as a distributor or entrance is important to point out the bridge to Europe and North crucial economic and business Africa. This is a permanent significance that Multilatinas objective, since there are have both within and outside several important points, Latin America, the reason for besides a common language, which its presence among such as a broad presence specialized business literature and collaboration with is gradually increasing. This Spanish corporations of

36 For more information, see; Ramón Casilda Béjar (2014): “Las multilatinas. Una mención especial a las mexicanas” (Multi-Latin corporations. Special mention for Mexican organizations.) Boletín de Información Comercial Española (BICE). Ministry of Economy and Competitiveness. 37 For more information, see; Ramón Casilda Béjar and Jaime Llopis Juesas (2014): “Brasil. Las multilatinas. El reto de la internacionalización y la seguridad jurídica de las inversiones extranjeras” (Brazil. Multi-Latin corporations. The challenge of internalization of legal certainty for foreign investments). Boletín Económico de Información Comercial Española (BICE). Ministry of Economy and Competitiveness. Government of Spain. 38 Latibex is a stock market for Latin American securities based in Madrid, operating since December 1999. It is governed by Spanish Securities Market Law and is part of the holding Bolsas y Mercados Españoles (BME). It uses the same securities trading platform as the Spanish stock market and the securities therein are quoted in euros. It was created to, firstly, allow European investors to buy and sell Latin American securities through a single market, whose security and transparency standards were similar and in a single currency and, on the other, to grant access to the main Ibero- American corporations to the European capital market. The updated list of companies part of the Latibex, as well as a history of additions and withdrawals is available at www.latibex.com.

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all sizes, important banks, should in the 21st century a noteworthy network of world. As regards the role to “The thriving regional universities, business schools, be played by Multilatinas in law firms and consultancies the international projection and international for which Spain becomes of their countries, the closest dynamic carried out by the perfect partner and a example is that of Spanish Multilatinas could be strategic gateway to Europe. multinationals. The process of slowed down” In addition, there are several becoming a major actor on the Ibero-American organizations international arena for Spain is such as the headquarters closely related to the creation of the Secretaría General of its multinationals, whose Iberoamericana (Ibero- internalization was certainly American General Secretariat, late but intense through the SEGIB), the Union of Ciudades rapid expansion of large banks Capitales Iberoamericanas and companies across Latin (Union of Ibero-American America, reaching a FDI of EUR Capital Cities, UCCI), the 135 billion (Bank of Spain, 2013). Latin American Stock Market in Euros (Latibex), But from a different the Organización de Estados perspective, the thriving Iberoamericanos (Organization regional and international of Ibero-American States, OEI) dynamic carried out by and the representation offices Multilatinas could be slowed of the two major multilateral down. Not only because of the development banks in Latin changes in the global economic America such as the Inter- conditions, but due to the American Development Bank concerns regarding middle (IDB) and the Corporación income countries. It may be Andina de Fomento (Andean possible for Latin America (and Development Corporation, China), to be caught in the CAF)39. middle income trap. This trap occurs when a middle-income From a close perspective, country is unable to take the Latin America must gain next step to become a high- relevance within the global income nation (Foxley, 2012). arena through important Multilatinas, developed Latin America is the perfect and competitive. Were the example as it has the largest region not to do so, it would number of countries with be unlikely for it to achieve middle-income worldwide, the position it deserves in according to the ranking made the international scene and by the World Bank. The growth to play the crucial role it rates of the income per capita

39 For more information, see; Ramón Casilda Béjar (10-4-2011): “La importancia del efecto sede en la globalización” (The importance of the headquarter effect in globalization). El País. Madrid.

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of Latin American economies other economic players are were inferior to those of part of a natural, social and “Productive, developed countries during the political environment that 20th century, which prevented determines and conditions institutional and the region from further their activities and possibilities. social organization reducing the gap. During This was already mentioned systems also compete” the last 50 years, the region by Fernando Fajnzylber has not been able to reach when he referred to the the welfare levels of more determinants of international developed countries. Although competition: “... within the the per capita income in international market not constant dollars has increased only companies compete. by 4.5 compared to the U.S. Productive, institutional population, the welfare gap and social organization is now 8% larger than that of systems also compete, and their parents or grandparents although the companies are (IDB, 2014): “Rethinking an important part of this Productive Development. process, they are integrated Sound policies and institutions into a network of linkages for economic transformation”. with the educational system, technological infrastructure, The relative stagnation has management skills, labor led to the known as “middle- relations and public and income trap”, the situation private institutional system. that defines the context of These factors have been many economies in the region, highlighted when the economic whose wage costs are too high performances of countries such to compete in international as the U.S. and the UK have markets, compared to other been compared with those of countries that exploit cheaper Japan or Germany. The latter labor and, at the same time, are an example of “organized do not compete with more capitalism” where the developed countries as they competitive relations between find it difficult to access the companies and economic highest part of the industrial groups are complemented chain with products and by systems of long-term services that call for intensive agreements with specific knowledge and technology40. banks and a relationship with the State, which provides Yet, it is essential to take into incentives and develops account that businesses and comprehensive policies in

40 For more information, see; Pablo Sanguinetti and Leonardo Villar (2012). “Patrones de desarrollo en América Latina. ¿Convergencia o caída en la trampa del ingreso medio?”(Latin American development patterns. convergence or the middle income trap?”) CAF. Working Papers. Issue 2012/02. July, 2012. Caracas.

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cooperation with the major forward and achieve a higher companies and industrial productivity, industrialization groups”41. and a sustained long-term development which will entail If Latin America were caught an improvement in the income in this trap it will be, to a great and welfare levels. extent, Multilatinas42, which will have defuse it and become the thrusting force to take a leap

41 For more information, see; Fernando Fajnzylber: “Competitividad internacional: Evolución y lecciones” (International competitiveness: Evolution and lessons”). ECLAC Magazine, issue 36. Santiago de Chile, December, 1998. 42 For more information, see; Ramón Casilda (2014): América Latina. Región emergen- te del siglo XXI (Latin America. Emerging region of the 21st century), and; Ramón Casilda (2014): Multilatinas y translatinas. Las nuevas realidades empresariales de América Latina (Multilatinas and trans-Latin corporations. The new business realities in Latin America); in: LANMARQ. LID Editorial. Madrid

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Author

Ramón Casilda is one of the leading Spanish business investment and internationalization analysts, both in relation to Latin America and worldwide. He has recently started analyzing the field of Multilatinas. He is Professor at the Institute of Latin American Studies at the Alcalá University and the Estudios Bursátiles Institute. He has been Director of the International Business Management Professorship of Grupo Santander in the Antonio Nebrija University. At a professional level, he worked as CEO of the Investment Promotion Center for Ibero-America of the Spanish Confederation of Business Organizations (CEOE) and directed the Union of Ibero-American Capital Cities (UCCI). He was the Director of Institutional Relations and Analysis for Soluziona and Director of Corporate Development and Institutional Relations for Probanca. He was the Banking Manager of BNP Paribas and Rumasa, Adviser and Member of various advisory boards in companies such as Repsol, Prointec, Hispasat and BT Global Services. He was President of the Commitee on Relations with Ibero- America at the Spanish Confederation of Directors and Executives (CEDE) and Member of the Board of the Spanish Association of Financial Executives (AEEF). He is author of an extensive economic work, of which his recently published book should be highlighted: Crisis y Reinvención del Capitalismo. Capitalismo Global Interactivo (Crisis and Reinvention of Capitalism, Interactive Global Capitalism), Editorial Tecnos, 2015; where he analyzes the phenomenon of globalization and internationalization of multinational and Multilatinas. [email protected]

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