The Emergence of Latin Multinationals: Spain, Mexico and Brazil

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


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


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%



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



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


1313




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


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


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


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


* 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




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: [email protected]

Based on Santiso, J. (March 2007) “The Emergence of Latin Multinationals”, OECD Emerging Markets Network Working Paper, OECD Development Centre, Paris.

Documents

The Emergence of Latin Multinationals: Spain, Mexico and Brazil