Are Latin American Companies too Focused on Domestic Markets?

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 con­rmed 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 ‑ows 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 fou­nd 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 América Móvil in México – concentrate a large part of the international investments. In Mexico, América Móvil 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 investments are less concentrated than in Mexico. Still, Vale represents 23% of the total, followed by Votorantim with 13%, and Odebrecht with 9%. The three of them represent almost 50% of total Brazilian investments abroad. A more balanced picture emerges from Chile with the three biggest companies: LATAM Airlines with 14%, retailer Falabella with 10%, and Siglo Koppers Group with 9% representing 33% of the total.

Still, the concentration persists even in Chile. As a result of this concentration of power, the overall investments abroad of a country will slow if one of these top companies suffers as it happened in the corruption scandal of Odebrecht or the reputational damage caused to Vale by the Brumadinho dam tragedy. A strong domestic focus can reduce the pressures on the Latin American fi­rms to innovate and can constrain their competitiveness.

To prepare for the future, Latin American countries should encourage big companies to help medium sized fi­rms to go abroad and provide an ecosystem more conducive to competition and the international expansion. Countries should provide examples and best practices that create opportunities for all.

Chilean fi­rms thrive in the region. Its agency, Prochile, is one of the engines behind that and an example to follow.


Senior lecturer of management, director Emerging Markets Institute, Cornell S.C. Johnson College of Business,

Cornell University. [email protected]


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