Any company that sets itself the goal of growth must put Latin America in its sights. This is the idea that summarises the interventions of the experts gathered by the Club de Exportadores in a webinar in which they discussed the presence of Spanish companies in the region, as well as the risks, challenges and opportunities that arise for them in this new economic context marked by the pandemic.
The meeting was attended by the Secretary of State for Global Spain, Manuel Muñiz, who recalled that Spanish companies have been key to the development of the region, as Spanish investment and exports have contributed to the improvement of infrastructures and quality of life in the destination countries, as well as to the advance of digitalisation in countries that had been left behind in the field of technology.
Muñiz also highlighted some factors of concern for the region, such as the economic slowdown it has been suffering for years and which has been accentuated by the COVID-19 crisis, or the limited fiscal and monetary margin that these countries have, which significantly increases the risk of suffering a debt crisis. To this end, he argued, "it is necessary to implement bilateral or global initiatives, through multilateral institutions, that help to alleviate the situation and allow Spanish companies to develop with greater security".
Alejandro Patiño Raffo, from Santander Spain, stressed that, despite a reduction in the rate of investment in the region, in the last five years the number of SMEs that have set up in Latin America has grown significantly. "This is a phenomenon that we have been seeing since 2012, but which has clearly reached a turning point since 2015, especially in destination countries such as Colombia, Peru and Chile. In this regard, Patiño recalled Banco Santander's commitment to Latin America as a region with "a large number of opportunities for Spanish companies in areas such as infrastructure, renewable energy and new technologies".
The data corroborate the interest that Latin America continues to arouse for Spanish companies, which is confirmed by the fact that it continues to be the second region in the world that receives the most Spanish investment. "This was the case in 2020, placing it behind the EU countries and ahead of the United States," recalled Alfredo Arahuetes, Professor of Applied Economics at ICADE and expert in Latin American economics.
Manuel Muñiz, Secretary of State for Global Spain, also agreed in highlighting that the stock of Spanish investment in Latin American countries is, according to the latest data, 140,000 million euros, "which represents a third of worldwide investment", and assured that in the last fifteen years "the figure for commercial exchanges has doubled and the number of exporting companies has multiplied fourfold".
Arahuetes also explained that Spanish investment in the region is concentrated in a group of six countries which include, in this order, Brazil, Mexico, Argentina, Chile, Peru and Colombia. "This group accounts for 90% of net and gross flows, and of the stock of direct investment," he explained. The remaining 10% of investment goes to Uruguay, Panama, the Dominican Republic, Ecuador, Costa Rica and Cuba. "Venezuela, due to organisational problems in the country, is not on the list at the moment," he explained.
The Professor of Applied Economics at ICADE assured that it will be in this group of countries where there will be opportunities to continue investing in the future. "In the 1990s, it was the large companies that set up in the region, attracting smaller ones. However, we are now seeing how Spanish companies have begun to relate to local companies", explained Alfredo Arahuetes.
For this expert, Latin America continues to have great potential for Spanish investment, both because of the experience accumulated over the last thirty years and for reasons of cultural proximity. "Companies end up investing where they understand things, and in the case of Spanish companies, they feel comfortable in a region where companies from other countries have not been, due to the cultural factor", he said.
The webinar organised by the Exporters' Club and Iberglobal also featured the participation of Carlos Malamud, Professor of American History at the UNED and Senior Researcher at the Real Instituto Elcano, who pointed out that beyond the economic impact, the COVID-19 pandemic has had a "terrible social impact because it has come at a time of strong disaffection with politics, with the elites and with democracy", which has resulted in the rise of "extremist populisms" of the right and the left.
Malamud recalled that in the period 2021-2024, presidential elections will take place in all Latin American countries, which will contribute to the widening of the region's fragmentation. "The reaction we have seen from Latin America in relation to the fight against the pandemic has been a predominance of individual country responses rather than collective responses from groups of countries or economic integration zones. This is a new challenge for Spanish companies, but also for local companies," he explained. This has shown that "the road to regional integration is quite complicated and still far away. In fact, the processes of regional economic integration that were born at the beginning of the 21st century are in crisis or have disappeared, which means that the creation of a large Latin American market is, at present, an impossible wish to achieve".
In this sense, he stressed the importance of "not having a global policy for the region". In his opinion, it is better to focus on "bilateral relations with each country", which would allow us to adjust to the characteristics of each one of them.