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Latin American Multinationals gaining power

Multilatinas – Latin American Multinationals – are gaining global importance and emerging in their markets as economic titans, an example of the growing economic power of the Global South.

Fernando Prada of FORO writes,

"A series of events have demonstrated the growing importance of multilatinas in the global corporate sector. The Brazilian Companhia Vale do Rio Doce (CVRD) took over control of Canadian company Inco in 2006 to create one of the world’s top mining conglomerates (Vale), comparable in market capitalization to the largest companies, Anglo-Australian BHP Billiton and Rio Tinto. Petrobras, one of the largest oil companies in the world, announced in September 2010 the biggest ever initial public offering (IPO), 1.59 billion preferred shares valued at US$65.4 billion. Table 1 describes two trends followed by the most important private multilatinas companies. First, their surge has occurred in the last five years. Second, these companies are becoming global leaders in their respective sectors.

There are three factors that explain this expansion. A key factor in multilatinas internationalization has been favorable economic conditions for tapping local and international financial markets. A second factor has been the ability of multilatinas to innovate in management, understand the local economic conditions and expand their operations to the low‐income segments, and they are implementing these new ideas in other developing countries."

Implications

The rise of multilatinas is part of the growing power of Global South trading networks: “the growth of multilatinas is part of a trend of South-South foreign direct investment expansion, which is more pronounced in the case of the Asian region.”

It also opens the possibility for regional economic and social development. Prada writes, “Some of these companies are already funding cooperation programs through their social responsibility initiatives or financing development projects through their foundations. But there is a great opportunity here to expand these companies’ development role and innovate in social responsibility schemes.”

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Sources:

Searchlight Latin America: Trends and Challenges for Development, FORO; pg. 3
http://newsletters.clearsignals.org/FORO_Sept2010.pdf#page=3

Casanova, L. (2009), From multilatinas to global Latinas: the new Latin American multinationals (compilation of case studies). Washington D.C.: Inter-American Development Bank.

Santiso, J. (2008), “The emergence of Latin multinationals”, CEPAL Review 95 August, Santiago de Chile: CEPAL.

Claessens, S. and S. Schmukler (2007),”International financial integration through equity markets: firms from which countries go global?”
International Money and Finance, vol. 26, No. 5, Amsterdam, Elsevier, September 2007.

The Economist (2010),”A special report on innovation in emerging markets”, April 15th 2010.