GlobalAutoTV
Click to watch Wim van Acker -
Click to watch Wim van Acker -
latin resources

Need an office in Mexico or Brazil? Office suites, meeting rooms, virtual offices, network access



free downloads
LATIN AMERICA: "Time to tune in: Latin American companies turn up the volume on global growth" repor

LATIN AMERICA: "Time to tune in: Latin American companies turn up the volume on global growth" report. 20-page report by Ernst & Young.

proceed to download
eJournals




back to index backLATINtalk October,  2015


Why Latin America’s multinationals are struggling to go global

Latin American companies have been expanding their horizons over the last couple of decades. From Brazil’s Embraer, which has become a world leader in regional jets, to Mexico’s Cemex, which has become a world-leading cement producer, the rise of these companies has been much-feted. The start of the 21st century has been heralded as the decade of the multilatinas”.

But it’s been slow going for many smaller companies with multilatina ambitions. And expanding beyond the Latin American region has proven particularly difficult for some, especially when it comes to entering developed and advanced markets.

Only a handful of Latin American corporate giants have done so. As well as Embraer and Cemex, there is Mexico’s Grupo Bimbo. It now has the largest bakery in the world, reaching 95% of the Wal-Marts, Krogers, and Costcos in the US with its baked goods. And Colombian coffee producer and café chain Juan Valdes is giving Starbucks a run for its money, also in the US.

These firms, however, are relatively exceptional. As Northeastern University academic Alvaro Cuervo-Cazurra has argued, it is more common for Latin American firms to expand within the region, and then struggle to make the next move into the wider world. This has been the case for the Chilean retail giant Falabella and Peruvian household goods firm Alicorp. Others, such as Peruvian fast food chain Bembos, have expanded beyond Latin America, but into other emerging markets – India in this case.

Labour market

One of the reasons why multilatinas struggle to internationalise beyond Latin America is that they face different political, legal, technological and cultural environments – particularly with regard to the labour market. As MIT professor Ben Ross Schneider has shown, Latin American businesses tend to be family-controlled, unions are weak and short-term employment is common. There is also little investment in skills and training, with workers having a relatively low education level.

This means that companies such as Alicorp find it relatively easy to compete in markets with similar conditions. However, it is far more difficult for them to go up against competitors with better access to cutting-edge technology and production methods.

It also means that multilatinas struggle to compete in environments where workers are more highly skilled and organised, companies are owned by shareholders rather than families, and, as a result, have more professional managers.

Investor power

While some Latin American business groups have access to significant financial resources for investment, many simply are not able to invest on a scale that would allow them to compete with much larger global rivals. Or they take on dangerously high levels of borrowing in an attempt to do so. This was the case with Cemex, which borrowed heavily in order to fund overseas acquisitions before being hit by the downturn in key markets during the global financial crisis.

This is why household goods, retail, food and beverage and banking giants within Latin America often do not compete with multinational players outside the region, even if they have been relatively successful within it.

Plus, the failure to expand outside Latin America means many firms have struggled to resist overtures from international multinationals and end up giving them entry to more local markets. This has led to the banking sector throughout the region being dominated by foreign players such as Spain’s BBVA and Santander, and Canada’s Scotiabank. Coca Cola, meanwhile, has acquired significant competitors such as Peru’s Inca Kola, drowning out the competition.

Tech troubles

A new generation of high-tech multilatina has emerged in recent years, which have internationalised extremely rapidly. A prime example is Easy Taxi, a taxi-hailing app founded in Brazil that is now used in 420 cities in Latin America and as far afield as Singapore, Saudi Arabia and Nigeria. It has been extremely successful by working with established taxi companies that provide a premium service. This has made it popular with the region’s growing middle class, which is concerned about crime and insecurity.

This is in sharp contrast to much larger online taxi companies such as Uber, which has been criticised for it vetting of drivers and potential safety risks. It has also faced hostility from established taxi drivers as an upstart competitor. For this reason, Easy Taxi and similar companies such as Cabify (which was founded in Spain, but has expanded rapidly throughout Latin America) have secured a significant head start in the region’s vibrant and lucrative taxi market.

But they will face a growing threat from Uber, which is making an effort to improve its background checking procedures in Latin America and to ensure a high calibre of drivers. And, perhaps more importantly in the long-run, Uber has a more sophisticated and better-resourced technological platform. This could make its dominance inevitable, despite the latter’s first mover advantage.

The taxi app competition illustrates a key challenge for the region’s emergent tech giants – being able to invest aggressively enough to keep up with the technology, while also responding to international giants adapting to local market conditions. While in some countries, such as Mexico, governments have intervened to regulate Uber, experience elsewhere suggests this is possible only in the short-term, with Uber adapting rapidly to regulatory hurdles in markets in which it seeks to compete.

While some of Latin America’s largest business groups, such as Mexico’s Telmex, owe success to close relations with government, the region’s governments have yet to show much effectiveness in promoting their corporate giants as they seek to expand overseas.

Source: The Conversation
- GAI




previous page

go top
search our site


Loading

LATINtalk

Other articles from the same issue (October,  2015).

Growth In Mexican Auto Industry Creates Opportunities, Challenges For U.S. Suppliers
play read on

Canada, Mexico share concerns about TPP impact to auto industry
play read on

Carmakers in crisis-ridden Brazil are looking for the way out
play read on

Growth in Mexican automotive production is impressive in first half of 2015
play read on

Auto: Brazil Declines Worsen in September (2015) report
play read on

Truck: Brazil Market Sees Significant Declines Continue in Q3 2016 report
play read on

Automakers Driving to Mexico
play read on

Latin America may be down now, but it's not out
play read on

Latin America's 2013/15 exports, worst performance in eight decades says ECLAC
play read on

Is Turnover Mexico’s Formidable Foe?
play read on

Why Latin America’s multinationals are struggling to go global
play read on

Mexico: New Requirements for Corporation Publications
play read on

Foreign investors are choosing Mexico over Brazil
play read on

Capital Investment, Technology Upgrades to Bolster Mexico’s Diverse Manufacturing Sectors
play read on

Mexico manufacturing set to decelerate
play read on

Energy reform and its impact on the Mexican manufacturing sector
play read on

Brazil leaves Selic rate unchanged at 14.25%; inflation the target but with no timetable
play read on

Rousseff Says Brazil Still Attractive for Foreign Investments
play read on

Fitch: Downward Trend Continues for Latin America Corporate Cash Flow
play read on

Reform to the Mexican Federal Labor Law ("FLL")
play read on

Economic activity in Brazil plunges 4.47% in the last twelve months to August
play read on

Brazil: Health Savings Accounts Coming Soon
play read on

A new test for Mexico’s structural changes: antitrust reform – key points in one chart
play read on

Brazil and Colombia Sign Economic Trade Agreements
play read on

Business Challenges and Tax Pitfalls in Latin America
play read on

The rise of cross-border antitrust investigations: US, Canada and Mexico enforcers meet to discuss even closer collaboration
play read on

Argentine September inflation 1.92% and 25.91% in last twelve months
play read on

Costa Rica, Panama And Puerto Rico Lead As Promising FDI Destinations
play read on

US airlines bet big on Latin America
play read on

IT Multinationals Invest In Data Centers In Brazil Despite Recession
play read on

Latin America Update: global headlines
play read on


Our Free eJournals
GlobalAutoExperts

To visit GlobalAutoExperts Directory, click here.


©2008 GlobalAutoIndustry.com | HCI Group, Ltd.
101 West Big Beaver Road, Suite 1400 | Troy, MI 48084 USA
USA Tel: +1.248.687.1060 | USA Fax: +1.248.927.0347
Fax UK: +44.(0)845.127.4765 | Fax Europe: +31.20.524.1659 | Fax Asia: +852.3015.8120