"Multilatinas have unique capabilities to adjust to new environments and to thrive through volatility, but they will have to work to strengthen all of them to overcome new protectionist challenges."
I have written about the unique capabilities of multilatinas to flexibly adjust to new environments, their ability to thrive through volatility and their resilience to survive major crises. These capabilities are being put to the test because of the paradigm change that we are experiencing. On one hand, the U.S. administration is challenging the NAFTA agreement and being protective of its economic interests. On the other hand, the status quo is being shaken up by corruption scandals in Brazil (and elsewhere) and a new investment drive from China.
For 20 years Mexican companies adjusted their organizations and strategies to thrive within the NAFTA trade agreement. As a consequence, Mexico was successful in moving from a commodity exports dependent economy to one that is built on a solid foundation of manufacturing excellence. All of a sudden, the United States has questioned the agreement and companies are being forced to look for new markets to export to, including Latin America and China, and revise their strategies. At the same time, this year's unexpected U.S. tariffs on steel directly affected Brazil, one of the biggest steel exporters to the United States.
The second threat has come from the corruption scandals affecting Brazilian multilatinas that are also impacting the overall investment sentiment in the region. While during the period of 2009-2016, the value of M&A deals increased in India, Korea and China, with respect to the period of 2003-2008, the numbers contracted in Brazil--going down from $60.7 billion to $28.8 billion. International investments are a source of learning and should be...