'Trans-Latin' Corporations: The New Conquistadors of America “Life takes many turns,” an old Spanish proverb assures us. This phrase illustrates perfectly the recent rise of the so-called “trans-Latin companies” -- businesses that are not only expanding in neighboring countries, but also crossing regional borders in order to conquer the prosperous U.S. market. They are even trying their luck in Europe and Asia. No longer outdone by competitors from other continents, these companies have even undergone changes in their mentality. The first trans-Latin company to attract significant attention was Mexico’s Cemex, which purchased Rinker, the Australian cement company, last July. That acquisition made Cemex the global leader in sales of construction materials. Cemex, which paid $14.6 billion for Rinker, now enjoys a sales volume that is 2% larger than France’s Lafarge, a total of more than $15 billion a year. But Cemex’s acquisition has not been the only such move undertaken by a Mexican company over the last two years. In 2006, Banorte, a financial group, acquired 70% of Inter National Bank (INB), headquartered in the U.S. Early in 2007, Banorte paid $19 million to acquire total control of UniTeller, an American company active in the remittances sector. Meanwhile, America Móvil, owned by the Mexican magnate Carlos Slim, has continued to conquer Latin America. It now provides mobile phone service in Guatemala, El Salvador, Nicaragua, Honduras, Colombia, Peru, Brazil and Chile, among other countries. In the middle of 2006, America Móvil purchased Verizon’s assets in Venezuela, the Dominican Republic and Puerto Rico, in a deal valued at $3.7 billion. In addition, Slim’s company is waging a fierce battle with Spain’s Telefónica for domination of the telecommunications market in the region. Mexican food companies Bimbo and Gruma, which had already strengthened their positions in Latin America, the U.S., and Europe, have begun to make investments in Asia (especially China and Japan) as well as in Australia. Brazilian companies have not been left behind. Last year Vale do Rio Doce (CVRD) purchased Canada’s INCO for a price of $16.7 billion, making CVRD the second-largest mining company in the world. This year, CVRD paid $662 million for AMCI, the Australian coal producer. Embraer, one of the largest airplane manufacturers in the world, along with oil producer Petrobras and Itaú Bank -- which bought the assets of BankBoston in several Latin American countries -- are just a few of the most active Brazilian companies when it comes to this process of globalization. Chilean retailers Falabella and Ripley are already opening up their doors in other countries ofLatin America. Last year, Colombia’s Nacional de Chocolates group acquired food companiesin Costa Rica, Panama and Peru. In addition, Colombia’s Cementos Argos, the country’s largest cement producer and the fifth-largest cement producer in Latin America, has been making purchases in the United States for several years. These are only some examples of the new phenomenon of trans-Latin companies that are globalizing their operations. They are pursuing three different approaches: They are conquering markets in neighboring countries; they are moving directly into the U.S. (because of its size and cultural characteristics) without moving into other Latin American markets; and, in exceptional cases, they are moving ahead in Europe and Asia. According to Juan Carlos Martínez Lázaro, a professor at the IE business school in Spain, apart from two orthree trans-Latin firms that are already giants -- such as Cemex, Vale do Rio Doce and Embraer -- there are some “small, more embryonic companies that jump around from country to country, expanding throughout the region. The surprising thing is that this has not occurred until now,” he says.A Change in Mindset These developments have been produced by a change in mindset that “results from many years of accumulating skills and learning how to compete,” says Mauro Guillén, director of the Lauder Institute at the Wharton School. Latin American companies, he adds, “are in the vanguard of their respective sectors, as shown in the cases of Cemex, Vitro (glass), Modelo (beverages), Cisneros (communication), Embraer, Concha y Toro (wine), and Techint (steel) among many others.” In reality, this phenomenon “has been developing over the course of the last 10 years but it is attracting more attention now because these companies have managed to position themselves correctly in international markets,” he adds. According to Carlos Ronderos Torres, a Colombian economist who was once that country’s minister of foreign trade, the key is that these companies “have overcome fears about the scarcity of foreign currency that affected Latin American economies until the beginning of the 1990s. Countries and companies have figured out that it is important for them, not only to attract investments, but to make investments. They aren’t losing foreign currency [as a result of these investments]; instead, the investments have become a source of additional foreign currency.” Ronderos believes that this earlier mindset was caused “by fear, isolation and parochialism …. Now, [Latin American] companies need to expand beyond their own markets [in the region].” Martínez Lázaro suggests that the process of economic deregulation has made it just as easyfor foreign companies to set up operations in Latin America as it has for Latin American companies to expand into foreign markets. From now on, companies will be taking that sort of leap more frequently because many of them “are aware that they operate in small markets, and they have no other way to grow because they are competing with other multinationals from the U.S., Asia and Europe. If they want to grow, they need to expand intoforeign markets. This phenomenon occurred in Spain 10 or 12 years ago, and it is gaining strength now in Latin America.” He believes there are three requirements for successfully undertaking this expansion. First, you need significant human and financial resources. Second, you need managerial skills, which are currently becoming professionalized in Latin America. Third, you need a concept, product and brand that are not necessarily linked to your country’s natural resources, as they were in the past. “In earlier times, we had large Latin American companies but they always focused on the
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