“Now that Latin America hasn’t proved to be the goldmine that it looked like it would be during the heady days of policy reforms at the beginning of the 1990s, more multinationals are reappraising what it means to be global,” Forteza explains. “You have to look at the world economy as a series of tiers. If you want to be global, you need to first make up your mind what you are trying to do in the developed [Group of Seven] economies [Canada, France, Germany, Italy, Japan, the United Kingdom and the United States]. Then there’s a whole tier of large, secondary developing economies – Mexico, Brazil, Russia, India, China and Indonesia. They add up to 60% of the potential of emerging markets.”
In the 1970s and 1980s, Forteza posits, multinationals had one goal – to have a presence everywhere. But circumstances have changed.
“The tide of globalization has reached its high level,” Forteza says. “We’ve done an analysis of multinationals that shows the footprints of large multinationals are shrinking, not growing.” In part, this is because of pressures on domestic markets. But it is also because MNCs have to come to terms with competition from countries like India and China, and are becoming much more selective about their global footprint. “We feel most multinationals want a footprint in the G-7 countries. All the rest is being reappraised.”
The downward shift in financial markets has also had an impact on the plans of MNCs. “The decline in the stock market is forcing companies to become much more shrewd about cost-benefit calculations,” says Forteza.
As global MNCs retrench, Forteza and Martinez of Booz Allen see some of the emerging Latin American MNCs eventually becoming competitive forces outside the region. “Over the next 10 years, we will see a new development,” says Forteza. “For the local players the big question is, ‘How do we become a multinational?’”
Booz Allen research suggests that, again, there will be a tiered strategy. Says Forteza, “Latin American players are starting to see whether there are niche structures for them. Brazil, for example, is putting a lot of emphasis on China and India. We have a vision [in the years ahead] of the emergence of Latin American multinationals.