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Published: 9/11/02
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The Changing Face of Strategic Alliances in Latin America

Perspective of Global MNCs
MNCs seeking inroads into Latin America have a somewhat different perspective than that of local firms, according to Wharton management professor Mauro Guillen.

“In some countries, there has been more of a need for alliances because these are politically imposed on multinationals by governments,” he says. Another important variable is the industry or activity. “With certain manufacturers there’s no need to go with a local partner,” says Guillen. “But in telecommunications, banking or other sectors that are strictly regulated and where politics plays a role, there’s more of a need. Right now in Mexico, which has liberalized many of its rules and regulations and is part of NAFTA, the need for having a local partner has been greatly reduced over the years. I would put Chile in this category, too. In other countries, such as Peru, Colombia, Venezuela, Argentina, and Brazil, it’s probably more useful to have a partner.”

Forteza points to Chile as an interesting example of how MNCs are taking a closer look at where they want to establish alliances.

“Chile is the best Latin American country in terms of macroeconomic performance, but we see more multinationals reappraising whether they should stay in Chile,” he says. “It’s a small country and may not be worth management’s time. If I’m a multinational and I don’t see the possibility of building a business in Chile, what do I do? Maybe I combine Chile with a regional alliance that includes Brazil. Sometimes it works, sometimes not. But in that way you can manage to stay in Chile. If your analysis shows you won’t benefit, the next thing you have to ask is, ‘Do I exit the country completely?’”

Many MNCs, instead of seeking outright acquisitions, are opting for alliances on a selective basis. Forteza says this holds true in many different countries – those that are attractive but small, like Chile; those that are both small and are suffering economic turmoil, like Ecuador, and those that are large, attractive markets but are nonetheless troubled, like Argentina.

“Multinationals now say, ‘Maybe we can do an alliance with a local player with complementary products and footprint.’ This is happening in big countries like Brazil and Mexico, such as the alliance between ING and Seguros,” notes Forteza.

In 2001, ING, the Amsterdam-based global financial services group, acquired Seguros Comercial America, the largest insurance company in Mexico. It controls 21% of the Mexican life and health insurance market and has a 33% share of the property and casualty insurance market. Following the acquisition, ING rebranded the company ING Comercial America.

“Companies need to be mindful of political and economic differences that can make alliances more difficult in some countries than in others.”
This acquisition builds on ING’s other banking and insurance joint venture and pension fund activities. ING announced on July 31, 2002 that it entered into an agreement with Grupo Financiero Bital for a 19.2% stake in Banco Bital, a leading retail bank in Mexico. The $200 million investment will enable ING to further enhance its banking and insurance strategy in Mexico. In 1998, ING entered into a joint venture with Bital to enable ING to distribute its insurance products through Bital's branches. ING said it owns 49% of that joint venture. The alliance between ING and Bital dates back to 1997, when both companies established Afore Bital, one of the largest pension funds in Mexico. In October 2000, ING acquired Bital's interests in Afore Bital.

In a 1997 article in strategy+business, “Betting on Strategy and Growth: Strategic Alliances in Latin America,” Wouter Rosingh and Artur Ribeiro Neto of Booz-Allen wrote that most strategic alliances in Latin America fall into three categories: “Multinationals supplying technology and know-how to local firms in exchange for market access; leading multinationals or regional firms joining together – often across borders – in regional ventures to increase the scale of their operations; or large capital providers joining forces with industry specialists to take advantage of major infrastructure opportunities.”

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