The Latin American Foreign Investment Boom: Recent Trends and the Evolution of Multilatinas

June 11, 2015

multilatinasBy Adrián Blanco Estévez

Latin American companies—both public (state-owned enterprises) and private—have been growing in size and presence abroad, through operations that range from modest representation offices to acquisitions of first-world corporations. The phenomenon of “multilatinas” comprises the growing number of companies that gradually began to invest abroad in the 1990s, but surged forward with a huge wave of investment starting in 2000. In fact, 2010-2012 marked the highest levels of FDI outflows from Latin America in the region’s history.

Mexico is no stranger to the birth of multilatinas. Mexico, along with Brazil and Chile, leads the way in terms of presence of multilatinas, and is the second most important country in the region in terms of FDI outflows, accounting for virtually all outflows from Central America. Additionally, Mexico is the leader among the Latin American countries in terms of investment in the United States. Thus, with 18 multilatinas and 24.5 percent of total FDI outflows from Latin America, the surge in foreign investments by major Mexican companies is clear

This publication, The Latin American Foreign Investment Boom: Recent Trends and the Evolution of Multilatinas, analyzes the multilatina phenomenon in order to define its characteristics today, including political, institutional, economic, and financial factors that explain these companies’ birth, develompent, and transformation into global players.

Download the publication here.


What Does Mexico’s Oil Industry Reform Mean For Investors?

December 16, 2013

Forbes, 12/16/2013

Ancient Mayan pyramid, KukulcanLast week Mexico’s Congress approved a bill to end a seven-decade long state oil monopoly. In coming years foreign companies could invest as much as $20 billion a year in Mexico’s oil sector, thanks to new rules that will allow production sharing.

Although the energy reform bill, spearheaded by Mexico’s President Enrique Peña Nieto during his first year in office, has been vociferously opposed by Mexico’s left, the bill has the backing of Peña’s centrist PRI party as well as the right-of-center party of former President Felipe Calderon. Together the PRI and the PAN had enough votes to push the bill through Congress, where it was approved 353-134.

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Analysis: Mexico’s reforms hook U.S. investors

March 18, 2013

120px-Philippine-stock-market-boardReuters, 3/18/2013

Don’t be fooled by the Mexican stock market’s slow start to the year. The country’s push for economic reforms and the revival of the economy of its largest trading partner, the United States, are stirring investor interest in Latin America’s No. 2 market. International fund managers say recent announcements of reforms to Mexico’s education system and telecommunications sector provide a positive backdrop for U.S. investors to keep putting roughly 30 percent of their allocations for Latin America into Mexican stocks and bonds.

“You saw a lot of optimism around elections and the potential reforms,” said Darren Capeloto, portfolio strategist focused on Latin America at Payden & Rygel in Los Angeles. Mexican President Enrique Pena Nieto, in office since December, has managed to reach agreement with opposition lawmakers to push through reforms, the most important of which will be in the state-dominated energy sector this summer.

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Señores, start your engines: Cheaper than China and with credit and oil about to start flowing, Mexico is becoming a Brazil-beater

December 3, 2012

The Economist, 11/24/2012

CuernavacaCuernavaca, a once pretty, now sprawling city with volcano views just south of the capital, is a typical Mexican town. Hernán Cortés stopped off there after toppling the Aztec emperor Moctezuma in 1520; the conquistador’s stables have since been converted into a smart hotel. Yet on the outskirts of the city, in an enormous industrial park, a visitor could forget he was in Latin America. Nissan, a Japanese car giant, has created a factory the size of a village where from next year it will begin turning out thousands of yellow and chessboard-chequered New York City taxis.

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Mexico Raises Forecast for Direct Investment 11% to $20 Billion for 2011

August 22, 2011

Bloomberg, 8/22/11

 

Bruno Ferrari

Mexico may receive as much as $20 billion in foreign direct investment this year, 11 percent more than a prior forecast, as the second-biggest Latin American economy’s low wages and proximity to the U.S. draw producers.

“Companies are looking for the best place to invest,” Economy Minister Bruno Ferrari said in an Aug. 19 interview in Los Angeles. “It’s obvious that Mexico has been that place for North America.”

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Investment flees violence (in Spanish)

December 13, 2010

El Norte, 12/13/2010

Planes de inversión privada cancelados, dificultades de los empresarios para conseguir socios capitalistas y migración de fábricas son problemas que están sufriendo la mayoría de los estados de la frontera norte debido a la creciente ola de violencia.

Cifras de la Secretaría de Economía reveladas recientemente evidencian cómo, a excepción de Chihuahua, los Estados del norte del País registraron caídas en el rubro de Inversión Extranjera Directa (IED) en el periodo de enero a septiembre del 2010, en comparación con el mismo periodo del 2008, es decir, previo a la crisis económica mundial.

En conjunto, la IED en Nuevo León, Baja California, Baja California Sur, Coahuila, Sonora y Tamaulipas retrocedió 78 por ciento en el periodo de enero a septiembre del 2010 respecto a los primeros nueve meses del 2008.

Tan sólo para Nuevo León, la caída fue de 88 por ciento.

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Op-Ed: The Financial Storm Hits Mexico

March 9, 2009

Op-Ed, Wall Street Journal, 3/9/2009

felipe1The crisis is captured in the plummeting peso, which has fallen more than 30% against the dollar in the past six months. Yet the feeble peso is only the most visible symptom of what ails the country. The real problem is that in the current global recession, Mexico as a destination for capital has lost most of the limited appeal it once had. And while public dismay offers an opportunity to reform longstanding inhibitions about foreign investment, the political class appears apathetic toward that possibility.

These are some of the reasons Mexico may be considered an innocent victim of circumstances. But there are also homegrown rigidities in the economy that are exacerbating the problem. Monopoly privileges in key sectors like energy and telecom have made Mexico a far less competitive producer than other emerging markets. Moreover, the tax code is burdensome and labor laws are inflexible. The drag applied by this pernicious tax and regulatory environment helps explain, in part, the 32% drop in foreign direct investment from 2007.

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