Last year, my friends at ICEX, the Spanish investment promotion agency, invited me to write a chapter in their Global LATAM series about Latin America's international investments.
It was an interesting exercise and it confirmed some of my worries: one, Latin American companies have reduced their overall investments abroad, and two, these investments are concentrated in a small number of large companies.
If Latin America is not able to encourage a broader range of companies to invest abroad, a continued domestic focus does not bode well for the future competitiveness of the region. Some of the findings are below.
While Latin America previously led the investments from emerging markets, its flows have declined since 2010 and have been surpassed by those of China. Most of the biggest economies of the region - Mexico, Brazil, Chile, and Colombia - are also the biggest investors abroad. Brazil represents 31% of accumulated stock from these four countries, while Mexico accounts for 27%, Chile comes third with 20%, and Colombia 9%.
My research team has used data from fDI Markets, which traces greenfield investments (i.e., companies opening a new factory or a new project) and excludes data about mergers and acquisitions, as a good indicator of the leading investors behind the above numbers. We find that only large organizations with access to large sums of capital are investing internationally.
Our data analysis shows that the big companies of the region - Vale in Brazil or America Movil in Mexico - concentrate a large part of the international investments. In Mexico, America Movil represented 45% of all greenfield Mexican investments abroad between 2009 and 2017. If we add Cemex with 11%, the might of these two titans represents more than half of all investments.
In Brazil, the...