Guest post: here come the multilatinas

beyondbrics

August 17, 2011 
By Javier Santiso

Since 2000, the global economy has undergone a huge rebalancing towards the emerging countries. Trade and financial flows shifted in the direction of the emerging countries. Not only did investors in developed countries rush to raise their stakes in emerging markets. South-south investment also blossomed, with emerging multinationals from Brazil, China, India and Russia bursting on to the world scene.

Now other countries are jumping on to the bandwagon. In Latin America in particular, the international expansion of companies from Mexico, Brazil and Argentina is being followed by groups from Chile, Colombia and Peru.

Last year, for example, Chile’s LAN and Brazil’s TAM merged to form one of the largest airlines in the world and the fifth most globalised company in Latin America, according to the latest ranking by the magazine the leading Latin American monthly newspaper, América Economía, published in 2011.

The companies are ranked by criteria including the percentage of sales of employees on foreign countries and the extent of international operations.

Rank Sales 2010 Globalization Index
1 BRIGHTSTAR 4,130.0 78.2
2 GRUPO JBS (FRIBOI) 28,417.6 78.2
3 CEMEX 14,434.5 77.7
4 TENARIS 7,711.0 77.0
5 LAN 4,387.1 73.2
6 TELMEX 8,132.5 70.0
7 GRUPO ALFA 11,044.5 69.8
8 IMPSA (PESCARMONA) 788.9 69.0
9 VALE 49,949.0 67.2
10 CONSTRUTORA NORBERTO ODEBRECHT 5,500.0 66.3
11 GERDAU 18,841.2 65.1
12 AJEGROUP 1,127.0 64.0
13 GRUPO BIMBO 9,487.2 63.8
14 PETROBRAS 128,000.0 61.3
15 AVIANCA – TACA 3,000.0 61.3
16 LABORATORIOS BAGÓ 654.5 60.3
17 AMÉRICA MÓVIL 49,220.6 60.2
18 GRUPO NAC. DE CHOCOLATES 2,224.9 59.1
19 GRUPO CASA SABA (FASA) 4,100.0 58.8
20 MARFRIG 7,788.1 57.0
21 SUDAMERICANA DE VAPORES 5,448.1 54.1
22 CENCOSUD 11,822.2 54.0
23 CAMARGO CÔRREA CIMENTOS 1,663.2 53.7
24 BRASIL FOODS 12,741.8 53.7
25 INTEROCEÁNICA 821.9 53.7
26 MEXICHEM 2,953.7 53.7
27 VIÑA CONCHA Y TORO 798.6 52.7
28 SONDA 951.9 51.7
29 GRUMA 3,761.3 51.2
30 EMBRAER 5,216.2 50.6

The list shows that the rise of the Latin multinational cuts across many countries and sectors. Not surprisingly, we find multinationals linked to raw materials (for example, Tenaris, from Argentina, and Brazil’s Petrobras and Vale); but there are also companies in pharmaceuticals (such as Argentina’s Laboratorios Bagó), cement (ie Cemex from Mexico), food and drink (ie Ajegrupo from Peru, the Brazilian groups JBS Friboi and Brasil Foods and Mexico’s Bimbo), and even technology (ie Brightstar, a a global leader in services and solutions for the wireless industry, based in Miami and set up by Bolivian investor Marcelo Claure and Carlos Slim’s Mexican mobile telecommuncations group, América Móvil).

Brazil dominates the lists of Latin-American multinationals. In 2010, a total of 27 Brazilian multilatinas figured in the list compiled by América Economía of the 66 most globalised companies in the region, ahead of Mexico (15) and Chile (11). But new countries have arrived: while Argentina now has 4 on the list, there are newcomers in the form of Peru and Colombia (with 2 companies each), and Venezuela with one.

Bolivia has one too, albeit the company is based in Miami. Some Central American companies also appear, such as the Guatemalan Pollo Campero, which is taking its fast-food restaurants to Asia, including China and Indonesia. Some groups such as the Brazilian motor-maker WEG now operate in almost 50 countries, while the mining group Vale does so in 38 and Cemex, one of the leading cement companies along with French Lafarge and Swiss Holcim, in 35.

In other words, the internationalisation of these groups is now developing into full-scale globalisation.

These companies are now making inroads on other continents. Of the 66 firms listed by América Economía, 53 have operations outside the region. In recent years Asia has been one of the most popular destinations outside the region, but we are also seeing growing interest in other continents, particularly Africa for Brazilian multinationals. Meanwhile, Mexico’s Cinepolis, the third largest chain of cinema theatres in the world, with operations in many Latin-American markets, landed in India in 2009.

The last year has seen a new development: technology firms coming into their own. Although the Mexican worldwide telecom giants América Móvil and Telmex figured in the lists in previous years, we now see the rise of technology groups such as Brightstar, the Chilean Sonda, a technology services firm that has embarked on a process of international expansion, and the Brazilian companies Bematech, a hardware manufacturer, and Totvs, a software development group.

This is undoubtedly good news. Others too are making their presence felt: the Brazilian technology firm Tivit now has operations beyond its borders on several continents. Te firm also serves to illustrate the growing interest of international investors in these sectors. In 2010, the venture capital fund Apax Partners paid almost $1bn for Tivit.

Californian venture capital is also eyeing the region: at the beginning of 2011, Riverwood Capital made an initial investment of $15 million in the Argentinean software firm Globant. Meanwhile, Silver Lake, one of the world’s largest venture capital funds, announced at the beginning of 2011 that it intended to raise and invest $1bn in Brazilian technology firms.

This decade is bound to witness an intensification of Latin American globalisation. It will undoubtedly be the decade of the emerging multinationals, and among them those of Latin America. They will continue to expand beyond their regional bases, seeking footholds in Asia, Africa and Europe.

This process could also become an opportunity for Spain, even a great one: just as recent decades were marked by the expansion of Spanish multinationals into Latin America, the coming decades will be marked by the expansion of many Latin American multinationals into Europe. In this, Spain could become the point of entry into Europe and house their international headquarters, following the lead of the Mexican Cemex and the Brazilian Alpargatas, who have decided to set up theirs in Madrid.

Others like Argentinean agro-industry Arcor or Sudamericana de Vapores, a Chilean shipping company, chose Barcelona. Already 1/3 of the 77 Latin multinationals that opened headquarters in Europe have chosen Spain (see Javier Santiso, El auge de las multilatinas, Madrid, Fundación Carolina and Siglo XXI, 2011).

With of daily flights serving all Latin American countries (more than any other European capital) and the strong historical entrepreneurial ties built by Spaniards over the past decade (Spain became with the US the largest investor in Latin America, ahead any other European country), Spain could become a perfect hub for the emerging multinationals from Latin America looking for international expansion, including in Europe.

Other European companies, including British Telecom, the Danish wind multinational Vestas, and the French insurance group Axa, have already done the same, locating their headquarters for most of the emerging markets (including Latin America) in Spain.

The writer is a professor of economics, ESADE Business School and the director of ESADE Centre for Global Economy and Geopolitics


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