Juan Carlos Martínez. Professor. Instituto de Empresa
22 February 2006
For Spanish companies with investments in Latin America, the last decade has provided an often difficult learning experience. But the author believes Spain and Latin American have both profited from close economic ties and will continue to benefit in the future.
Over the last decade, the growing investments by Spanish companies abroad have turned the economy into a net exporter of capital.
Latin America was the first choice destiny for large services companies seeking to expand abroad. The region offered enormous opportunities as a result of the wave of privatizations and public sector deregulation that swept over it. This process was similar to the changes that took place in Spain only a few years earlier.
Spanish investments in Latin America have two main denominators: The sharp jump in investments over the last 10 years and the intensity with which these investments were made. This trend turned Spain into the second-largest investor in the area, just behind the United States.
A decade-long learning experience
This decade in Latin America has proven to be an often difficult learning experience for Spanish companies. But not only has it contributed to modernising local economies, it also has provided a fillip to many Spanish companies, as a growing percentage of their revenues and profits are derived now from their Latin American subsidiaries.
However these opportunities also carry important risks caused by endemic financial, economic and political instability. Tariffs and other regulations pose additional hurdles. But most Spanish companies have overcome these obstacles and now consider their presence in these markets to be an intrinsic part of their overall strategy.
To conclude, the overall balance of this decade can be considered very positive for Spanish investments in Latin America. The future, in the mid-term, looks bright, considering the favourable economic forecasts for the region. As Latin American countries continue to liberalise trade flows, their growing economic ties with the Asia-Pacific region will provide new opportunities for Spanish companies, both those with operations in Latin America and those with plans to set up there.