Unveiling Latin America’s economic success
Monday, March 23, 2009
A lot of attention has been focused on the remarkable economic success of China, India and other Asian countries. So much so that the rise of Latin American companies as major players on the international economic scene has almost gone unnoticed.
“Latin American companies have fallen through the cracks,” says Lourdes Casanova, a lecturer in strategy at INSEAD and author of Global Latinas: Latin America’s emerging multinationals. “While other emerging market economies have been oversold, Latin America has been undersold. This book wants to celebrate the success of the region and its multinationals.”
Since 2002, while the spotlight has been on Asia, Latin American firms have expanded aggressively on a global scale and Latin American investment in foreign countries has jumped accordingly. In addition, commodities (which historically have taken up the majority of Latin America’s export basket) now account for less than 30 per cent. A highly diversified range of products now accounts for the rest – from IT services and technologies to steel, electricity, wine, cosmetics and oil and gas.
In Global Latinas, Casanova examines the factors that made it possible for Latin America’s large- and medium-size companies to succeed internationally.
Until 1980, Latin American countries were the emerging market of choice. Brazil and Mexico had China-like growth of 7-10 per cent for 25 years. But during the 1980s (the so-called ‘lost decade’ because of the debt crisis that afflicted much of Latin America) the region’s stunning growth stalled. And in 1989, the fall of the Berlin Wall saw the re-emergence of economies such as Russia, China and India, potential competitors with Latin America for the same resources and attention.
Prompted by the strict policies imposed on the region in the 1990s by the IMF and World Bank, Latin American governments began to liberalise their economies. These policies required the privatisation of state-owned companies, deregulation and the reduction of tariffs. They also brought a new wave of foreign multinationals to compete against domestic firms. To survive, Latin American companies had no choice but to grow in scale and expand internationally.
“These companies had been growing in a protected environment before this,” Casanova says. “Now they felt threatened by foreign multinationals competing against them in their own region. The best defense was to attack.”