Latin America’s Multilatinas: Foreign Investment Explodes

Breadmaker Bimbo and cement giant CEMEX (Mexico), mining giant Vale (Brazil) and utility EPM (Colombia) are examples of successful multilatinas. (Latinvex collage)

Both Brazilian and Mexican companies have made the vast majority of their foreign acquisitions outside of Latin America




From 1990 to 2012, Latin America’s participation in global economic activity grew from 5.1 to 7.8 percent; in global trade from 4.1 to 6.1 percent; and in foreign direct investment (FDI) from 2.7 to 4.9 percent.

The region’s strong economic progress has also produced a marked improvement in the well-being and quality of life of Latin Americans, lifted 70 million people out of poverty, and enabled the middle class to
reach an all-time high of 30 percent of the population. (The increase in Latin America’s global economic and commercial importance is unquestionable, even taking into account the economic downturn experienced in 2013-14.)

It is in this context that we have seen the birth, development, and foreign
expansion of a large group of Latin American multinationals, known as “trans-Latins” or “multilatinas.”

The multilatina phenomenon comprises the growing number of companies—both public and private—that gradually began to invest abroad in the 1990s, and even earlier, but surged forward with a huge wave of investment starting in 2000. In the 2000-2005 period, average annual investment doubled over the previous five-year period, reaching levels of foreign investment outflows 
from Latin America that had never been seen before.

In the 2006-2012 period, annual FDI nearly tripled from its 2000-2005 level, and the last three years for which information is available (2010-2012) marked the highest-ever levels of FDI outflows from Latin America (more than $350 billion over the three years).

The surge of multilatinas is supported by both internal and external factors. The former include political and institutional stability, proper and prudent management of economic policy (such as public debt of 30 percent of G
DP, compared to 108 percent in the United States or 93 percent in the Eurozone), openness to the outside world and to liberalization and privatization, the push toward regional integration, or the exhaustion of opportunities in the domestic market. external factors of note include favorable financial conditions (driven by the drop in Fed rates from 6 percent in 2000 to 0.5 percent in 2013) as well as the boom in China and the supercycle in prices of raw materials (which led to a rise in Brent crude prices from $30 to $115 per barrel in that same period).

Despite the decades of privatization and economic opening, many multilatinas continue to have state participation, particularly in the hydrocarbon sector and other natural resources. These multilatinas channel the income derived from commodities to the public treasury; thus the performance of companies such as Petrobras, Pemex, PDVSA, or Codelco are essential to the fiscal stability of Brazil, Mexico, Venezuela, or Chile, respectively.

Some Latin American countries have a clear-cut goal of providing financial support for the international expansion of their companies, usually as part of a broader strategy of having national champions that have an impact on the
global economy. This is the case with Brazil, whose companies finance their expansion efforts through BNDES, the region’s leading lender, surpassing the IDB or The World Bank.

The region’s foreign investment is highly concentrated in three countries—Brazil, Mexico, and Chile—which together account for 83.3 percent of the foreign direct investment made, although their investment patterns are very different. Argentina (5.9 percent), Colombia (5.6 percent), and Venezuela (3.7 percent) also have a significant volume of investment abroad.

Brazil has 25 multilatinas and 41.5 percent of FDI outflows from the region, with total sales of $357 billion and an average of 20.3 percent of each company’s workforce abroad, covering an average of 15 countries. Brazil has multilatinas that are capable global firms with sufficient management capacity and financial muscle to make acquisitions in advanced countries, such as the mining company Vale’s acquisition of the Canadian firm Inco (the world’s second largest producer of nickel) for $13 billion. These firms show a clear preference for investing in Europe over the United States.

One distinguishing feature of the Brazilian multilatinas abroad is that they are able to find financing on less onerous terms and avoid the high interest rates in Brazil.


However, since 2010 we have seen a drop in Brazil’s FDI outflows, unlike in the rest of the region.


Mexico has 18 multilatinas and 23 percent of total FDI outflows from Latin America. Taken together, the companies América Móvil (telecommunications), Femsa (bottling), Cemex (cement), Bimbo (food), Grupo México (mining), and Gruma (food) account for 50 percent of foreign operations. The Mexican companies are expanding mainly toward the United States, due to geographic proximity; the 12 million Mexican emigrants now living in the United States; or the North American Free Trade agreement (NAFTA). The expansion of Mexican multilatinas could significantly benefit from advances in the regional integration process through the Pacific Alliance.

Chile, with 20 multilatinas, has the highest FDI growth from the region, and the total volume of investments has quadrupled since 2005. Despite its smaller economy, Chile has a significant number of multilatinas.

Chilean companies have benefited from the country’s long tradition of
economic openness and from a favorable business environment for investing abroad (top Latin American economy in the “Doing business” rankings). Moreover, Chilean firms have been forced to grow abroad so they can continue to be competitive, due to the limited opportunities in a domestic economy of 17 million consumers.

The other Latin American countries have fewer multilatinas. Those worth mentioning include Argentina, through the Tenchint group, though the country has lost clout as a foreign investor in recent years;  Colombia, with firms in clear expansion as a result of the advantageous economic  environment and with the country’s three major state-owned multilatinas linked to the electricity and energy sector (Ecopetrol, ISA, and Eléctricas de Medellín); and Venezuela, with its foreign investments excessively concentrated in activity by PDVSA and local companies falling back to fill in the gaps that foreign companies have left in the domestic market

Total investment by Latin American companies in the United States is nearly $26 billion, a mere 1 percent of the total.

Among the Latin American countries, Mexico is the absolute leader in investment in the United States, with 57 percent of the total—4 times that of Brazil and 35 times that of Chile.

Still, investment by Latin American companies is far above the $5 billion invested by firms from China, the world’s second largest economy and one with a higher GDP.

Multilatinas are more important to the fabric of European business, where together they make up close to 20 percent of total FDI received by the EU 27 from outside the EU 27 itself.

Both Brazilian and Mexican companies have made the vast majority of their foreign acquisitions outside of Latin America (around 70 percent and 80 percent, respectively).


In general terms, multilatinas do not have a strong presence in the main growth areas worldwide, which means they do not seem to be taking advantage of business and market opportunities inherent to fast-growing economies or frontier markets. The presence of these firms in emerging Asia (including China) or Sub-Saharan Africa is very modest.

Despite the considerable progress made by Latin American firms in size and global impact, multilatinas still have a long way to go in terms of both volume of assets abroad and brand recognition in the world of European, North American, or Japanese firms. There is no Latin American company among the 100 companies with the highest brand recognition in the world, and only 3 among the 100 with the most assets abroad (Vale, América móvil, and Cemex) compared with fast-growing companies in emerging Asia, multilatinas share certain traits, such as total or partial state ownership or a common pattern of the state-owned company as developer of natural resources. The differences are that the Asian companies tend to be more innovative, operate in more technology-intensive sectors, and channel a large portion of their investments abroad through sovereign funds, such as the China Investment Corporation (CIC) or Temasek.


Various factors will determine the evolution of multilatinas in the medium term: the economic environment (China’s growth rate and an eventual fall in prices of raw materials, normalization of global financial conditions); advances in internal structural reforms; the strengthening of regional integration processes (particularly the course of the Pacific Alliance); modernization of state-owned enterprises; and the capacity of companies to become part of global value chains and improve the business and regulatory environment.

The birth of new multilatinas in the coming years will depend to a large extent on investment in R&D and development of capacity, since new, fast-growing business groups are rooted in innovation.

In this respect, Latin America has a considerable gap both with advanced countries and with the economies of emerging Asia.

Moreover, the region’s industrial sector must improve its productivity and accelerate its investment in R&D. Latin American companies invest $0.60 per $100,000 in income in R&D, compared with $17 for companies in emerging Asia.

Adrián Blanco is a Spanish researcher. This is the summary of  a new report from the Latin American Program at the Wilson Center, La explosión de la inversión exterior Latinoamericana: tendencias y evolución reciente de las multilatinas (The Explosion of Latin American Foreign Investment: Recent Trends and the Evolution of Multilatinas.) Republished with permission.