The media loves to tell the tale of the fairy tale recovery of Latin Tiger economies, which have risen up from the scourge of runaway inflation and odious debt that cursed the continent in the 1980s. But at the New York Forum today, a panel of experts took a more sophisticated examination of the evolving role of the so-called “Multilatinas,” the growing segment of companies in Latin America that are expanding globally to become mature multinational players.
“There are about 3,500 ‘multilatinas,’ though most people only know the top companies like those represented here (i.e. Cenepolis, Odebrecht),” noted Karl Sauvant, Executive Director of Columbia University’s Vale Columbia Center on Sustainable International Investment. That shows immediately a need to identify who the players are in the foreign direct investment market headquartered in Latin America becoming serious players in the world investment markets.”
Moderating the discussion, president of the Inter-American Development Bank Luis Alberto Moreno, asked what the biggest challenges are for growth to a couple of top executives of Multilatinas. Felipe Jens, President of Odebrecht Participacoes e Investimentos, cited challenges in Brazil such as a lack of long-term sustainable financing for local companies to raise capital and a complicated legal tax structure, which he expects will be a major issues for newly elected President Dilma Roussef to tackle. But the biggest challenge is “a lack of qualified people, which translates to education. We don’t have enough qualified people at all levels to cope with the future forecasted growth of Brazil.”
Constraints in human resources is a problem throughout the emerging economies of Latin America. Alejandro Ramirez, CEO of Mexico’s Cinepolis, which operates cinemas throughout Latin America as well as India and the U.S., explains, “We’ve been able to overcome the scarcity of talented managers and engineers by sending Mexican expats abroad for knowledge transfer from our local teams. All of the multinationals are fighting for the same pool of talent, which gets expensive, so we are trying to train people ourselves.” Federico Restrepo, CEO of Colombian utility Empresas Publicas de Medellin, says that trusting in the local talent when expanding is an important part of deciding where to focus the company’s acquisition strategy.
The Multilatinas owe much of their success internationally to the threat of competition at home, mainly from foreign companies. Ramirez described how when Mexico opened up after NAFTA, Cinepolis competed against some of the world’s biggest cinema companies from the U.S. “This intense competition period allowed us to develop operation capabilities to expand successfully outside of Mexico.” Restrepo also noted how multilatinas triumph through adversity, explaining that “it has actually become an advantage to come from an environment with a lot of risk. We have an advantage against companies in Europe and the US in our expansion, since we are more accustomed to handling that risk.”
“Go south,” Moreno encouraged the crowd, as he closed the discussion with a decidedly bullish shout-out to Latin America. “There are huge opportunities in South-South expansion using new and disruptive business models, thanks to a quiet story happening the last 20 years that has come together with democracy and market reform.”