THE BONDS OF BUSINESS.

• Author: Bustos, Sergio R.
• Position: Statistical Data Included

Trade between Europe and Latin America is being fueled by the improved economies of the former and an increased interest in the long-neglected markets of the latter

The scene in Mexico City was a familiar one. A banquet room full of businessmen wanting to hear about investment opportunities in Mexico. On hand were plenty of Mexican government officials touting the benefits of the country. But the businessmen mingling with the Mexicans earlier last year weren't from the United States. They were Europeans, mostly British, thirsty for information about the North American Free Trade Agreement (NAFTA) and other business opportunities in Mexico.

As the global economy expands, European companies and investors are flocking to the region to make up for lost ground and tap what has become one of the

world's most attractive emerging markets.

"The importance of Mexico wasn't always evident in Europe," says Jacques Lecompte, currently the head of the EU delegation in Mexico. "NAFTA brought a new conception of Mexico."

With its long-standing ties, its proximity, and its historical relationship--both good and bad--the United States has long dominated much of the rest of the world in terms of trade with Latin America and the Caribbean. Within the last few years, the domination has increased, mainly because of NAFTA.

However, with the improved European economies, many companies there are increasingly looking to Latin America for new business.

Trade among the eight largest Latin American economies and their five top European partners reached a total of US$61.3 billion last year an increase of 10.2 percent over 1996 according to IMF compiled by Latin Trade.

Germany remains the undisputed top trading partner, followed by Italy, France, Spain, and the United Kingdom, in that order. (see chart).

In terms of Latin American partners, Brazil tops the list, followed by Mexico and Argentina. But while Argentina saw modest growth in trade with Europe and Brazil a respectable 10.8 percent increase, it was Mexico that saw the strongest growth in 1997--a whopping 24.2 percent, largely spurred by strong trade growth with Italy and the U.K.

Still, European companies remain a far cry from their U.S. counterparts as far as foreign direct investment is concerned, according to a recent report by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). It found the United States well ahead of the European Union as the biggest source of foreign direct investment. It also found that Spain, Germany, and the United Kingdom were among the leading countries with investment interest in the region.

ECLAC's Michael Mortimore, who authored the report, says most European investment is destined for the Southern Cone because of Mercosur. But, he says, European companies have yet to develop a true investment strategy in Latin America.

"I don't find much to call a European strategy," says Mortimore, who says each European country seems to have a different plan. Spanish firms appear bent on concentrating on electricity, banks, telecommunications, and airlines, while German firms seem focused on automotive and chemicals. The British firms, he says, seem particularly keen on targeting oil, banks, telecommunications, and gas distribution.

The strategy of the Spanish...