strategy+business is published by PwC Strategy& LLC.
or, sign in with:
strategy and business
 / Fall 2003 / Issue 32(originally published by Booz & Company)


Multinationals vs. Multilatinas: Latin America’s Great Race

Ultimately, the decisions for local companies — and their fates — revolve around four variables: the degree of scale required in their sectors; the presence and eminence of multinationals aggressively building pan-Latin positions; the desire of the current shareholders to remain in the business; and their willingness to share control.

A few Latin American companies have begun to compete globally. For example, Cemex SA de CV has grown from a Mexican conglomerate to become one of the most successful cement companies in the world. Of course, some sectors are more globally scalable than others. The pharmaceutical and automotive industries require massive investments and are fated to be dominated by global players. Yet the construction materials industry will probably remain dominated by locals, because the building products used in the region differ markedly from those used elsewhere. Corporate banking increasingly requires global scale, but retail banking can be more local.

Scenarios for the future depend largely on the pace at which multinationals continue taking over different sectors, and the degree to which the leading locals rise to the challenge of becoming viable pan-Latin competitors. Brazilian and Mexican multilatinas will almost certainly become a significant force to be reckoned with. Brazilian companies, which have formidable positions and vast market potential at home, headed abroad initially by developing or acquiring companies in neighboring Argentina, although many were burned in the process. A recent Booz Allen Hamilton study of the multinational strategies of Brazilian companies revealed that, after a decade of domestic market liberalization and industrial transformation, leading Brazilian firms are now focusing on international growth. As companies begin their internationalization process and diversify their risks, they tend to increase their access to capital, and do so at a lower cost. Indeed, the study suggests that Brazilian CEOs understand they have no choice but to expand internationally to become more attractive to international investors, and to lower the country risk premium they pay above MNC competitors.

How Mexican companies play their cards depends on whether they decide to capitalize on NAFTA to develop a position in the U.S. market, or expand toward Central and South America, leveraging the cultural and market affinities together with their relative size advantage. Several companies have discovered that they can apply the investment and effort required to develop a small presence in the U.S. to buy or build a leading position in most Spanish-speaking Latin American markets.

The Ideal Scenario
Recent political and economic problems in Latin America have resulted in sizable stumbling blocks to market integration. The collapse of the Argentine economy has hurt the Mercosur Pact. Political volatility in Venezuela and security concerns in Colombia remain hurdles to trade and to the stability of the relationship between the two largest countries in the Andean Pact. In the next 10 years, the economies of Latin America are not going to grow significantly, and political and economic turbulence will continue. And even though Mexico and Chile today are more stable, a crisis could come unexpectedly.

None of this will prevent continued Latin American market integration and the “multinationalization” of the business landscape. It is inevitable, and it is the best path: No other group of emerging market countries has so much in common. Latin American countries largely share a Spanish language and heritage; the Portuguese language and heritage are close enough to allow Brazilians and their neighbors to communicate easily. The Southern Florida melting pot, where Latin Americans of all nationalities mix easily in a blend of Hispanic cultures, is a picture of what Latin America itself can be. Tapping into the region’s cultural affinities through the network scale approach is the right competitive strategy.

Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store



  1. ResourcesJorge H. Forteza, “Competing in Emerging Countries: The Case of Latin America,” s+b, Second Quarter 1997; Click here.
  2. James A. Gingrich, “Five Rules for Winning Emerging Market Consumers,” s+b, Second Quarter 1999; Click here.
  3. C.K. Prahalad and Stuart L. Hart, “The Fortune at the Bottom of the Pyramid,” s+b, First Quarter 2002; Click here.
  4. “The Changing Face of Strategic Alliances in Latin America,” strategy+business and Knowledge@Wharton white paper, September 11, 2002; Click here.
  5. Geri Smith, “War of the Superstores,” Business Week, September 23, 2002
  6. Christopher C. Williams, “La Vida Loca: Latin American Markets Are Surging — and Money Is Still Pouring in,” Barron’s, June 17, 2003
  7. John Williamson and Pedro-Pablo Kuczynski, “After the Washington Consensus: Restarting Growth and Reform in Latin America,” Institute for International Economics, 2003
  8. “Wanted: A New Regional Agenda for Economic Growth,” The Economist, April 26, 2003
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.