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April 14, 2016
Recently, Spanish companies have been seeking to escape the years of austerity in the eurozone by trying to reap the rewards of doing business in the faster-paced economies of Latin America. However, a new trend seems to be appearing as the roles are reversed and corporate business traffic is now beginning to flow in both directions. With Latin American companies building relationships and business linkswith companies in Spain, they are using this as a gateway to reach the rest of Europe.
This can be seen with the President of Mexico, Enrique Pena Nieto’s visit to Spain in June 2014 where the leaders from the major bank, BBVA and energy giant Iberdrola among many others, lining up to meet with him. It is easy to see why Spanish companies are now lining up to meet Mexico’s President considering the Mexican economy is expected to grow 5% annually and which has plans to invest up to US$600 billion until 2018 most notably in energy and telecommunications. There has been a considerable change in Latin America with a major boom in infrastructure construction and one which is set to continue for the next decade. This is especially true of Mexico and Chile and is an on-going process in Brazil which having prepared itself for the World Cup which is currently taking place, will need to begin preparations for the 2016 Olympics.
The Latin link between Spain and Latin America in terms of language and culture meant that Spain saw the region in the 1990s as a natural destination for expansion into a new market. Enjoying the same culture, language and practically equal values, many Spanish companies saw an early advantage over other foreign investors from China, North America or the rest of Europe. As the market in Latin America continued to grow, this translated into Spanish companies forming strongholds throughout the region. When the financial woes began in the eurozone, the other late Spanish and European companies were behind the early adopters. This didn’t stop a huge wave of firms moving into the Latin American market particularly into Brazil and Mexico. The Spanish telecommunications group, Telefonica noted that their top market at the start of 2013 was in fact Brazil while in Panama, another Spanish firm called Sacyr is overseeing the enlargement of the Panama Canal.
Whilst investment continues to flow into Latin America from Spain, the roles are being switched with Spain now becoming a target for Latin American companies, especially those from Mexico. Latin American multinationals have begun to announce their presence not only within their own region but on the international stage in Europe, Asia or the United States. The multinationals from Latin America are not just concentrating on one particular segment but are instead investing in all sectors. Since the Spanish banks were hit by the collapse of a decade long housing boom, leaving newly built ghost towns, Mexican investment has risen to about €20 billion. More recently this investment has been in the banking sector with Banco Popular, Liberbank and Banco Sabadell all opening up their capital to Mexican investors.
As well as being regarded as the mother country of Latin America, Spain is an attractive country for investment as it begins its journey to recovery. Although the flow between Spain and Latin America has not completely turned it is extremely clear that the tides are beginning to turn with the recent investment schemes seen arriving from Latin America. Many of these Latin American multinational companies are then using Spain as a springboard into exploring the wider European markets profiting from the combination of business and cultural links. This phenomenon that has only just begun to really take is going to grow Latin American businesses and help them gain strength economically and in terms of their international presence in outside of their own borders.
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