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The investment of Latin American companies in Spain has grown by 92% in the last decade | Economy

The investment of Latin American companies in Spain has been increasing notably over the last decade, with growth of 92% since 2010. Currently, it amounts to more than 63,332 million euros, 12.1% of the Foreign Direct Investment (FDI), making the region the fourth largest investor, behind the United States, the United Kingdom and France, if investment in the holding company. are the data of the IV LATAM Global Report 2021, a project led by ICEX-Invest in Spain and the Ibero-American General Secretariat (SEGIB) that aims to analyze foreign investment flows from Latin America abroad. The document highlights the improvement in economic expectations thanks to the advance in vaccination, but at the same time adds to a new uncertainty after the explosion of the war in Ukraine that endangers the world recovery. For the first time, the report incorporates a barometer to learn about the investment prospects of Latin American companies and the obstacles they face for their internationalization.

The indicators show that Latin America has almost overcome the impact of covid, which contracted the region’s GDP by 7% in 2020, the highest figure in 120 years. In 2021, when Foreign Direct Investment (FDI) flows tripled, activity rebounded 6.3%, one of the highest increases in the historical series of pre-pandemic levels, says María Peña, CEO of ICEX. “This shows that most of the operations were paralyzed, not eliminated, to wait for a better moment. And Spain is a preferential destination for these direct investment flows”, continues Peña.

After the sharp drop recorded in 2020, and accompanying the recovery in the region’s economy (+6.3% GDP growth in 2021), the foreign investment of Latin American companies increased to 57,403 million dollars last year. This is one of the highest figures in the historical series, and 25.5% more than pre-pandemic levels, explains the report.

A total of 652 Latin American companies have investments in Spain, having generated more than 32,715 direct jobs, according to the report. Mexico is the one that is far ahead as it accounts for 58.9% of Latin American investment in Spain, followed by Argentina with 15.5% and Venezuela with 8%.

Andrés Allamand, general secretary of SEGIB, recounts the effervescence of business creativity in the region with the emergence of more than 40 unicorns Latinos – emerging companies that reach a valuation of 1,000 million dollars without having a presence on the Stock Exchange – and that are very powerful in innovation and attract advanced human capital. Allamand adds that they not only generate employment, but also because of their orientation “they solve social problems of great importance”. The negative points that Allamand points out about Latin America are the low economic growth, “one of the endemic evils of the region”, the lack of confidence of investors in their public bodies and the various governance problems. For this reason, he acknowledges that SEGIB is committed to continuing to work with ICEX on these reports and advancing in the creation of Euro-Latin companies, establishing Spain as “the gateway to a Europe where there are deep markets and high-level consumers.”

The conclusions drawn by the first Global LATAM barometer, carried out in collaboration with the Council of Ibero-American Entrepreneurs and which includes the responses of 361 Latin American companies, serve to establish an x-ray of the current perception of these companies and their international investment forecasts, with a 34% of them expect to start operations in 2022 and 28.8% expect to increase them. The main investment destinations would be Latin America itself (46.6%), the United States (26.9%) and Spain (9.8%). By sector, the largest investments were registered in those industries least impacted by the crisis resulting from the pandemic, such as information technology, food and beverages, and financial services. It is also important to know the five challenges that Latin American companies encounter for their internationalization: regulation in the destination market, taxation in the company’s headquarters country, access to knowledge about international business opportunities, the image of the country of origin of the company and find a suitable partner in the destination of the investment.

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In the particular case of Spain, the general secretary of SEGIB points out that businessmen demand a greater understanding of the regulatory frameworks and more mechanisms to generate associations, such as join ventures, that allow them a smooth landing in the country, beyond the advantages of language and the deep cultural ties they share with Spain. Apart from the aspects mentioned, the companies surveyed indicate that in order to increase their investment abroad, Latin American governments must work on the elimination of administrative obstacles and on greater economic and commercial integration within the countries that make up the region.

This barometer was prepared before the Russian invasion of Ukraine, although Adrián Blanco, head of ICEX’s LATAM Desk, points out that this is a case of “long-term investment” and that “possibly they will not be as impacted”. Latin America is thus drawn as a disruptive region that is in good health, continues Blanco, “a fundamental reservoir of the world’s raw materials and biodiversity”, playing a fundamental role in the fight against climate change. For example, he mentions that Argentina, Chile and Bolivia condense 63% of the world’s lithium, essential for batteries that will lead to decarbonization in a horizon dominated by the electric car.

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