August 27, 2012 9:29 pm

LatAm on a spree

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Cash-rich companies are fast-expanding in US and abroad

Carlos Slim, the world’s richest man, has an eye for a bargain. In Mexico City it is said he now takes calls from any European or US bank that needs to shrink its balance sheet. As this process often leads to the forced sale of a juicy asset, the result has been a slew of deals from Austria to Argentina by the Mexican billionaire. Yet Mr Slim is not the only Latin American to brighten investment bankers’ days of late. Latin American firms are on something of a foreign shopping spree.

This regional boom is more than a flash in the pan. As with China’s “Go Global” policy, over the past 10 years Latin American “multilatinas” have been spreading their wings. Since 2006 alone, they have spent over $210bn going abroad.

Three forces propel them. Buoyant conditions at home encourage entrepreneurs to feel their oats. Cash-rich balance sheets give them the means. And saturated domestic markets, often dominated by near-oligopolies, push them to seek new opportunities. That is why companies from Chile – the region’s best-managed economy but also, geographically, one of its smallest – are among the most active dealmakers. This year’s merger of Chile’s LAN with Brazil’s TAM is the latest example. The creation of the world’s most valuable airline by market capitalisation is emblematic of how the private sector is stitching the Americas more tightly together.

In North America, the expansion by Mexican companies has been so broad some are calling it a “reconquista”; broadcaster Televisa is now even going after English-speaking television viewers in the US. In South America, a similar process is happening, abetted by debt-strapped European companies selling pan-regional assets to raise cash for home. Last year, the region’s biggest outward bound deal was the $3.6bn purchase of Dutch insurer ING’s pensions operations by Grupo Saura, a Colombian conglomerate. In 2011 five of Latin America’s 10 biggest foreign deals were of European assets.

True, this corporate-led process of economic integration is partial. Socialist Venezuela, its largely ideological drive for regional integration undermined by gross economic mismanagement and lower oil prices, has pulled in its horns. Brazil, self-absorbed by the size of its domestic market, often remains a continent unto itself. Nonetheless, the private sector is now achieving what the grandiloquent plans of politicians so often fail to do: greater cross-border commerce and co-operation. There is a lesson in that.

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