Ramón Casilda: "The most natural market for Spanish companies is Latin America, let's not forget that"
In the latest episode of 'De Cara al Mundo', on Onda Madrid, we had the participation of Ramón Casilda Béjar, professor, analyst and consultant on Ibero-American economics and business, who reviewed the state of Spanish companies in Latin America and the opportunities for investment in a region in the midst of political transformation.
Question: About three weeks ago, when we discussed the situation in Latin America in the programme, I said that Spain should regain political leadership in the region because the economic leadership remains stable through Spanish companies. A few hours later, you told me that I was not entirely correct because Spain's economic presence in Latin America is not as good as it used to be. Why is that? What is happening?
Answer: There are many things going on that we are all aware of. Spain is experiencing a different economic moment and Latin America, obviously, is too. The years that I refer to as the golden decade, 1990-2000, when Spain was the standard-bearer for European and almost worldwide investment, because at that time we were even ahead of the United States, are not the same either. Although the Spanish project has been maintained, it has lost strength in terms of economic positions and influence. And I think that this is fundamental to maintaining the political influence and influence you mentioned. Spain, with the European semester [the rotating presidency of the EU], wants to recover and be the driving force, not only for Spain, but also for European influence, which has also lost ground in the economic sphere, of course, because there is a new actor that nobody can ignore, namely China, which has burst onto the scene in a powerful way.
Q: With the holding of summits, can business people be satisfied with the idea that they are encouraged to invest again, or are there specific issues that need to be addressed?
A: The summits help, they are a cohesive element of the Ibero-American continent, but they are not decisive in encouraging entrepreneurs, because Latin America is not monolithic. Each country has its own context, its own structure, and it is these countries that have to provide the runway for foreign investment, such as Spanish investment, to land. One of the things that is happening most strongly is the issue of legal security, which changes with each government. This obviously slows down investment. But I am not only referring to FDI, but also to financial investment. Capital leaves Latin America seeking refuge in other countries with more security. I wanted to give a figure because, of course, all this can be argued, but the data is the data. In 2019, according to the Secretary of State for Trade, Spain had a stock of 156,000 million euros in Latin America. In 2020, we are down to 133 billion. A country like Brazil, which is the second largest recipient of foreign investment, the first being Mexico, the curious thing is that in Mexico it remains in a range between 42 billion and 45 billion and Brazil drops from 40 billion to 30 billion. These are signals sent by countries on which investors accelerate or put the brakes on. In this case, it is not that companies are undecided, but that these countries are giving signals that it is not the right time to make these investments. I repeat, the most natural market for Spanish companies is Latin America, let us not forget. Just as trade is Europe, where 80% goes, and only 5% goes to Latin America, for FDI, 23% of Spain's global FDI is concentrated there.
Q: For those who don't know, what is FDI?
A: It is investment in companies. Foreign Direct Investment, which goes to companies. Another thing is financial investment, which goes to the stock market. To stocks, bonds or other financial assets.
Q: Do left-wing governments, far-left governments or a populist like Bolsonaro scare away investments? What is happening with the latest election results in Colombia, Peru, Chile, Brazil, etc.? In Lula's time, for example, Spain invested a lot. We will have to see which Lula we are going to find.
A: Exactly. With Lula we were, to put it colloquially, magnificent. We didn't have any problems, on the contrary. There is a bank that is one of the leaders in Brazil: Santander. With Lula, Brazil's great expansion took place. But I'll digress, Latin America has also changed because in the 1990s the privatisations of the large public companies, the service companies, began. Telecommunications, gas, electricity and banking. That is where we disembarked. Today in Latin America there is no such context of large privatisations, so we have to keep up with the times. The panorama has changed, not only politically, towards populism or leftism, but also in the investment context.
Q: Carlos Malamud, who was on the programme three weeks ago, rightly told us that we were placing a lot of emphasis on presidents who are left-wing or extreme left-wing, but who do not have an absolute majority in parliaments, so their control is reduced. There has been a change there because, firstly, each country is different and to put everyone in the same bag is a mistake, and secondly, each one has its own circumstances and citizens vote according to their needs or the illusion that one or the other may generate...
A: Undoubtedly. And also, the big companies are already privatised. When people tell me that China is competition for Spain, I say no, not at all. We are in service companies, China is not in any service company. Neither is the United States. The United States is more interested in export platforms and China is more interested in platforms for the supply of raw materials. That is why it builds so much infrastructure, because they are very deficient in Latin America and the cost of exports is much higher even than the price of those raw materials. That is why China invests so much in ports, airports, highways... We are in services, and those services are already privatised. We should expand, increase our role. For example, there is an operation now that I have not yet digested. In Mexico, a large bank is being sold, the second largest, Banamex, owned by Citibank, which curiously is leaving Mexico. There is a great opportunity for a big Spanish bank to take over Banamex! We already have the first franchise, which is Bancomer, BBVA, but the bank that we all thought was going to make a splash, for whatever reason, doesn't seem to be making a splash, which is Santander.
Q: Mrs Botín can't make up her mind... Maybe you have to keep your clothes on because, to what extent does the Russian invasion of Ukraine, the energy crisis, the food crisis and the global context make it advisable to make investments that could entail risk or, simply, that you don't have the liquidity to be able to afford such a purchase?
A: Santander is the leader in commercial banking, nobody disputes that. And surely with the privileged position that Bancomer would give it, it would become the leader in Mexico. And it is already the leader in Brazil, so it would be the benchmark bank par excellence in Latin America. Not only for the region, but for the global market, for the whole of Europe and Asia. It is always said that the second wave of investment has to be led by medium-sized companies. Medium-sized companies in Spain are well managed, we have good technology and production. What we need is that decision that involves taking risks in each country depending on your product, your service or your market positioning in Latin America. With medium-sized companies, Spain would make a great leap forward and we would become even more prominent in the region.
Q: In these Latin American countries, you would not be taxed on banking as you might be in Spain.
A: For example.
Q: You mentioned China and the U.S. Has the U.S. dangerously forgotten Latin America for some time now? Is there a risk that China, with what it is doing in Africa, could forget Latin America a little and leave a vacuum that could cause the region to suffer?
A: All these variables could occur, given the context of uncertainty we have reached with the war in Ukraine. To make predictions is to take too many risks, but on this global geo-economic chessboard there is no doubt that China has Latin America on its radar and I don't think it is going to disappear from the region insofar as it needs its raw materials for its industrial locomotive. It already has relevant positions. It is Latin America's leading trading partner, replacing the United States, because Washington has taken a step backwards. That is why we, in this back-and-forth, should advance our positions and increase our influence in multilateral institutions and in local institutions, in governments. And I think we have taken a step backwards, perhaps, because there are now political regimes that don't see this Spanish influence very well either. We have suffered attacks from the president of Mexico [Andrés Manuel López Obrador, AMLO] that are totally unjustifiable given the work that Spanish companies have done in that country.
Q: Or in Argentina, when the big problem occurred, the only companies that remained in 2001 were Spanish companies, and yet they demonise us.
A: There is no explanation for what happened in Argentina. And we also supported, I will never forget, with 1,000 million dollars for the IMF bailout in the corralito. What happened in Argentina is unjustifiable, but it has a name and a surname.
Q: The Kirchner family.
A: For example.
Q: Spain has almost 10 billion dollars with Morocco, a country that some are discovering to invest and do business in. That is considerably more than all the trade we have with Latin America.
A: Trade is the great unfinished business between Spain and Latin America. We have not managed to pick up. It is true that it has grown, but the potential of the countries does not come close to intra-regional trade. Just as we trade with Europe, which is our main client, we do not trade with Latin America. Trade takes a different route, it has other parameters. Countries also compete to attract foreign investment. Morocco is clearly competing and is providing facilities for this investment to settle on the basis of tax issues and legal security. This is perhaps what some governments that are closed to foreign investment should be made to understand that it brings added value and can be very favourable for the development of their country. Multilatinas are a reflection of the large Spanish companies that decided to internationalise in the 1990s. In fact, the Community of Madrid is a very active player in attracting these investments to be the hub not only for Europe, but also for North Africa.
Americas Coordinator: José Antonio Sierra.
