Latin American populism and the Europeanization of corporate Spain

Juan Luis Martínez. Professor. Instituto de Empresa

22 February 2006

The author of this article examines the latest political events in Latin America and says Spanish companies should look to more stable markets for future growth. Strengthening Spain’s presence in Europe, he says, may be the best option.

The recent visit to Spain by Evo Morales, the President of Bolivia, highlighted the dire situation in Latin America. The economic and social hardships plaguing the country have provoked a shift to the left on the political spectrum that is heightening investor wariness over the country’s future. Morales’s decision to exercise the government’s right of sovereignty and return Bolivia’s natural resources to the people is likely to jeopardise the interests of several Spanish companies. This includes firms that already operate in the country, as well as others with plans to invest there. With corporate growth expectations under review, many businesses may now reconsider their investment plans for the country.

Internationalisation poses a major challenge for Spain, and market know-how is vital for the success of companies seeking to expand abroad. Acquiring this know-how minimises risks and enables companies to evaluate business opportunities as they arise around the world. Spanish companies began with Latin America. After all, the region presents no language barrier, while offering a familiar culture that makes business easier for Spaniards. But the populist policies of several of the region’s leaders threaten political stability and restrict market access. Perhaps Spanish companies have fallen victim to a certain 'commercial ostracism'. We have unquestionable natural bonds with Latin America, but share a common history that hinders mutual understanding.

Where is the future?

Where, then, is the future of Spain to be found? Without disregarding the potential of Latin America, now may be a good time to take another look at the wide range of business opportunities in Europe. Despite recent setbacks suffered by European markets, the area’s stability and its geographical proximity to Spain could help us widen our footprint.

In our opinion, there are two forces which come to bear on our internationalisation policy. On the one hand, the allure of taping a market with a high level of purchasing power. Europe can boast of being the world’s second most important market in terms of stability and economic growth potential. On the other hand, we have a mature internal market, which propels companies to seek alternative growth opportunities beyond Spain’s borders, in an effort to improve competitiveness and achieve the economies of scale needed for adapting supply to the specific needs of consumers.

Latin American populism may reinforce Spain’s European roots. The relations between Spain and Europe have traditionally revolved around culture. Perhaps it is the moment to seriously consider making them corporate.

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