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The Emergence of Latin Multinationals:Spain, Mexico and Brazil
Javier Santiso
Director and Chief Economist
OECD Development Centre
Vale Rio, March 2008
22
11 Spain and Latin America: A Helping HandSpain and Latin America: A Helping Hand
New Emerging Multinationals: Mexico & Brazil?New Emerging Multinationals: Mexico & Brazil?22
33 ConclusionsConclusions
33
The IBEX 35: A Latin Flavour
Capitalisation of 7 major companies from Ibex 35
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
SantanderTelefónica BBVA Endesa Iberdrola RepsolYPF
GasNatural
Percentage share on total capitalisation
Telefónica13%
BBVA12%
Endesa7%
Iberdrola6%
Others38%
Repsol YPF6%
Gas Natural
3%
Santander15%
Source: Bolsa de Madrid, October 2006.
60% of Spanish capitalisation
44
Latin America: a helping hand for Spain
Source: OECD Development Centre 2007, based on Annual Reports.
Percentage of sales to Latin America
0%
10%
20%
30%
40%
50%
60%
RepsolYPF
GasNatural
Iberdrola Endesa Santander Telefónica BBVA
20042005
30%
55
Spain: a helping hand for Latin America
Number of employees in Latin America
299,347
131,96861,543
2,894
0
100,000
200,000
300,000
400,000
500,000
600,000
Iberdrola Endesa GasNatural
RepsolYPF
BBVA SantanderTelefonica TOTAL
Nu
mb
er
em
plo
ye
es
Latam employment 2005
total employment 2005
Source: OECD Development Centre 2007, based on Annual Reports.
66
Spanish multinationals: a helping hand for Latin America
Source: OECD Development Centre 2007, based on Telefónica Annual Report.
To
tal fis
ca
l co
ntrib
utio
n E
uro
72
66
Fiscal contribution of Telefónica per country in 2005
0
500
1000
1500
2000
2500
3000
3500
Méx
ico
Colom
biaChile
Venez
uela
Perú
Argen
tina
Españ
a
Brasi
l
Eu
ros
Mil
lio
ns
Fiscal contribution of Telefónica as % of GDP in 2005
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
Méx
ico
Colom
biaChile
Venez
uela
Perú
Argen
tina
Españ
a
Brasi
l
77
Spanish multinationals: a helping hand for Latin America
Waiting time for fixed line installation
40
0.15
49
0.40
18
0.13
72
0.400
10
20
30
40
50
60
70
80
1998 2005 1990 2005 1990 2005 1994 2005
Brasil (TeleSP) Argentina (TASA) Chile (CTC) Perú (TdP)
Mo
nth
s
Source: OECD Development Centre 2006, based on Telefónica data.
88
Spanish FDI flows to Latin America
0
5000
10000
15000
20000
25000
30000
35000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Th
ou
sa
nd
s E
uro
s
Total FDI stock to Latin America Vs. cumulative Spanish flows
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Mil
lio
ns
US
Do
llar
s
Source: UNCTAD, World Investment Report 2006.
Spain has become one of the leading direct foreign investors in Latin America
Source: Ministerio de Industria Turismo y Comercio de España, 2006.
99
Spanish multinationals have a huge stake in Latin America
Major European companies' sales to Latin America(more than 10 percent of their total sales)
0%
10%
20%
30%
40%
50%
60%
BBVA
T. Movi
les
Telef
onica
Santa
nder
INBEV
Nestle
Portu
gal T
el.
Diageo
Tenar
is
Endes
a
BHP Bill
iton
Iber
drola
Holci
m
Gas N
atura
l
Repso
l YPF
Cimpor
Claria
nt
Beier
sdor
f
Unile
ver
Suez
Syngen
ta
BG Gro
up
Bayer
Ericss
on
Rhodia
Arcel
or
Telec
om It
.
% sales LatAm2004 % sales LatAm2005
Source: OECD Development Centre 2007, based on Annual Reports.
1010
…leaving other European firms far behind
European companies' sales to Latin America (5-10 percent of total)
0%
2%
4%
6%
8%
10%
12%
% sales LatAm2004 % sales LatAm2005
Source: OECD Development Centre 2007, based on Annual Reports.
1111
…leaving other European firms far behind
0%
1%
2%
3%
4%
5%
6%
Volvo PernodRicard
Linde Sabmiller Havas Invensys SaintGobain
DeutscheLufthansa
EADS Heineken CRH
% sales LatAm2004 % sales LatAm2005
Source: OECD Development Centre 2007, based on Annual Reports.
1212
Spanish multinationals also generate some of the highest employment rates in Latin America
Percentage of Employment in LA in 2005(European companies with over 10% sales in LA)
0%10%20%30%40%50%60%70%80%90%
per
cen
tag
e o
ver
tota
l nu
mb
er o
f em
plo
yees
Source: OECD Development Centre 2007, based on Annual Reports.
1313
11 Spain and Latin America: A Helping HandSpain and Latin America: A Helping Hand
New Emerging Multinationals: Mexico & Brazil?New Emerging Multinationals: Mexico & Brazil?22
33 ConclusionsConclusions
1414
Leaders of the globalisation process in Latin America are Mexico…
Source: OECD Development Centre 2007, based on América Economía.
Major Mexican exporters in 2005
1
10
100
1,000
10,000
100,000
Pem
ex
Pem
ex R
ef.
Dai
mle
rchr
ysle
rP
emex
Gas
&P
et.
Gru
po A
lfa
Gru
po M
abe
Gru
po I
msa
Gru
po C
intr
a
Gru
po M
asec
a
Gru
po B
imbo
Imsa
Ace
ro
Gru
po M
odel
o
Alp
ek
Des
c
Nem
akId
ustr
ias
Pen
oles
Indu
stria
CH
Gru
po S
imec
Gru
po V
itro
Sie
men
sM
exic
oD
esc
Aut
omot
rizG
rupo
S
altil
lo
Cor
p. S
an L
uis
Des
c Q
uím
ico
Fem
sa
Gru
po T
elev
isa
Pem
ex P
etro
q.V
itro
Vid
rioP
lano
Ver
zate
x
0
20
40
60
80
100
120
Exports US$bn % of sales
1515
…and Brazil
Source: OECD Development Centre 2007, based on América Economía.
Top Brazilian exporters in 2005
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Pet
robr
asV
ale
de R
ioO
derb
rech
tE
mbr
aer
Car
gill
Bun
geV
olks
wag
enG
rupo
Gen
eral
Mot
ors
Sad
iaG
erda
uD
aim
lerc
hrys
ler
CS
TA
DM
MB
RS
amar
coC
ater
pilla
rP
edirg
aoB
rask
emA
racr
uzC
SN
Alb
rás
Vol
voR
ober
t B
osch
Cop
ersu
car
Fia
t A
uto.
Sea
ra A
lim.
Pet
robr
asS
hell
Sie
men
s B
rasi
lS
uzan
oA
cesi
taA
luno
rte
Car
aiba
Met
ais
CB
AP
irelli
Pne
usC
oam
oR
enau
ltE
mbr
aco
Cop
esul
WE
GS
ouza
Cru
z
0
10
20
30
40
50
60
70
80
90
100Exports % of sales
1616
Emerging multinationals: from recipients to foreign investors
Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit).
Investments in 2000
0
10000
20000
30000
40000
50000
China
Brazil
Mex
ico
Argen
tina
Chile
Venez
uela
India
Colom
bia Peru
US
$ m
illio
ns
Inward Outward
Investments in 2006
-10000
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
Peru
Argen
tina
Colom
biaChil
eIn
dia
Venez
uela
Mex
ico
China
Brazil
US
$ m
illio
ns
Inward Outward
1717
Mexico and Brazil leading the investment trend abroad
Outward investments - Brazil
0
5000
10000
15000
20000
25000
30000
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
US
$ m
illi
on
s
Outward investments - Mexico
0
4000
8000
12000
16000
20000
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
US
$ m
illio
ns
Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit).
1818
…and competing with China and India
Outward investments - China
0
5000
10000
15000
20000
25000
30000
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
US
$ m
illio
ns
Outward investments - India
0
4000
8000
12000
16000
20000
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
US
$ m
illio
ns
Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit).
1919
Source: OECD Development Centre, 2007; based onUN Comtrade datababase, World Bank.
Source: World Bank, Global Development Finance, 2006.
SOUTH - SOUTH CAPITAL FLOWS BY TYPE, 2005
0
10
20
30
40
50
60
70
80
90
100
Export revenues Remittances Syndicated Loans FDI
% o
f Tot
al fl
ows
to L
DC .
South-South
North-South
SOUTH - SOUTH FDI AS A SHARE OF GLOBAL FDI 1999-2003
0
20
40
60
80
100
120
140
160
180
1995 1999 2000 2001 2002 2003
US B
illions
.
Total inflows
South-south FDI
Capital flows from emerging markets are increasingly important
2020
…and South-South flows are a key financing source, both in Asia and Latin America
Outward FDI flows from emerging countries in LatAm and Asia
0
100000
200000
300000
400000
500000
600000
US
$ m
illio
ns
Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit).
2121
LatAm companies have multiplied their acquisitions at home and abroad
Source: OECD Development Centre 2007, based on BBVA Corporate Finance.
Acquisitions in Latin America by LatAm companies in 2000-2006
(US$ billions)
010203040506070
Brazil
Méx
icoChile
Argenti
na
Colombia
Other
s
Including internal market Excluding internal market
2222
…helped by the fall of cost of capital
Source: OECD Development Centre 2007, based on Emerging Markets Bond Index - Global, 2007.
Source: OECD Development Centre 2007, based on Economist Intelligence Unit, 2007.
* Data for 2007 is estimated and includes recent deals
Total outward FDI from LatAm
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
US
$ m
illio
ns
Spreads of major emerging economies in LatAm
0
500
1000
1500
2000
2500
12
/19
93
9/1
994
5/1
995
1/1
996
9/1
996
6/1
997
2/1
998
10
/19
98
6/1
999
3/2
000
11
/20
00
7/2
001
3/2
002
12
/20
02
8/2
003
4/2
004
12
/20
04
8/2
005
5/2
006
1/2
007
Brazil Latin America Mexico
2323
…helped by the fall of cost of capital
Total LatAm outward FDI vs LatAm spreads
05000
1000015000200002500030000350004000045000
2003 2004 2005 2006 2007
US
$ m
illi
on
s
0
100
200
300
400
500Outward FDI Spreads
Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit).
* Data for 2007 is estimated and includes recent deals
2424
Increasing appetite for overseas expansion can also be seen in other countries such as India…
Source: OECD Development Centre., 2007; Based on Dealogic and local press.
RECENT INDIAN INVESTMENTS 2006(EXCLUDING CORUS-TATA DEAL)
9%
22%
43%
26%
USEurope
Latin AmericaAfrica
RECENT INDIAN INVESTMENTS
4%
61%
22%
13%
US
Europe
Latin America
Africa
Target Nationality Acquirer Deal Value ($m)
Corus UK/NL Tata Group 7700Oil & Gas Assets (Campos Basin) Brazil Oil & Natural Gas Corp 1670Omnimex de Colombia Colombia Oil & Natural Gas Corp: China Group 850Oil & Gas Assets (Brazil) Brazil ONGC Videsh 820Greater Nile Petroleum (25%) Sudan Oil & Natural Gas Corp 783Glaceau (30%) US Tata tea 677
Shell Development Angola Angola Oil & Natural Gas Corp 600Oil & Gas Assets (Syria) Syria Oil & Natural Gas Corp: China Group 581
Betapharm Arzneimittel Germany Dr Reddy's Lab 572Hansen Transmissions Belgium Suzlon Energy 562Eve Holding Belgium Suzlon Energy 548Terapia Rumania Ranbaxy 324Total 15687
2525
11 Spain and Latin America: A Helping HandSpain and Latin America: A Helping Hand
New Emerging Multinationals: Mexico & Brazil?New Emerging Multinationals: Mexico & Brazil?22
33 ConclusionsConclusions
2626
Globalization strategies have turned into success stories in Spain, Latin America and other emerging markets.
Multinational groups are becoming leaders in their domestic market but also in foreign markets.
In the future we will see more emerging giants from Latin America and Asia taking over OECD-based firms and continuing to be at the centre of the globalization process.
Conclusions
2727
Thank you!
For more information contact:
Javier Santiso: javier.santiso@oecd.org
Based on Santiso, J. (March 2007) “The Emergence of Latin Multinationals”, OECD Emerging Markets Network Working Paper, OECD Development Centre, Paris.