The Emergence of Latin Multinationals: Spain, Mexico and Brazil Javier Santiso Director and Chief Economist OECD Development Centre Vale Rio, March 2008

2 2 1 Spain and Latin America: A Helping Hand New Emerging Multinationals: Mexico & Brazil? 2 3 Conclusions

3 3 The IBEX 35: A Latin Flavour Source: Bolsa de Madrid, October % of Spanish capitalisation

4 4 Latin America: a helping hand for Spain Source: OECD Development Centre 2007, based on Annual Reports. 30%

5 5 Spain: a helping hand for Latin America Source: OECD Development Centre 2007, based on Annual Reports.

6 6 Spanish multinationals: a helping hand for Latin America Source: OECD Development Centre 2007, based on Telefónica Annual Report. Total fiscal contribution Euro 7266 Fiscal contribution of Telefónica per country in México Colombia Chile Venezuela Perú Argentina España Brasil Euros Millions Fiscal contribution of Telefónica as % of GDP in % 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% México Colombia Chile Venezuela Perú Argentina España Brasil

7 7 Spanish multinationals: a helping hand for Latin America Source: OECD Development Centre 2006, based on Telefónica data.

8 8 Source: UNCTAD, World Investment Report Spain has become one of the leading direct foreign investors in Latin America Source: Ministerio de Industria Turismo y Comercio de España, 2006.

9 9 Spanish multinationals have a huge stake in Latin America Source: OECD Development Centre 2007, based on Annual Reports.

10 …leaving other European firms far behind Source: OECD Development Centre 2007, based on Annual Reports.

11 …leaving other European firms far behind Source: OECD Development Centre 2007, based on Annual Reports.

12 Spanish multinationals also generate some of the highest employment rates in Latin America Source: OECD Development Centre 2007, based on Annual Reports.

13 1 Spain and Latin America: A Helping Hand New Emerging Multinationals: Mexico & Brazil? 2 3 Conclusions

14 Leaders of the globalisation process in Latin America are Mexico… Source: OECD Development Centre 2007, based on América Economía.

15 …and Brazil Source: OECD Development Centre 2007, based on América Economía.

16 Emerging multinationals: from recipients to foreign investors Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit). Investments in China Brazil Mexico Argentina Chile Venezuela India Colombia Peru US$ millions Inward Outward Investments in Peru Argentina Colombia Chile India Venezuela Mexico China Brazil US$ millions Inward Outward

17 Mexico and Brazil leading the investment trend abroad Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit).

18 …and competing with China and India Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit).

19 Source: OECD Development Centre, 2007; based on UN Comtrade datababase, World Bank. Source: World Bank, Global Development Finance, Capital flows from emerging markets are increasingly important

20 …and South-South flows are a key financing source, both in Asia and Latin America Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit).

21 LatAm companies have multiplied their acquisitions at home and abroad Source: OECD Development Centre 2007, based on BBVA Corporate Finance.

22 …helped by the fall of cost of capital Source: OECD Development Centre 2007, based on Emerging Markets Bond Index - Global, Source: OECD Development Centre 2007, based on Economist Intelligence Unit, * Data for 2007 is estimated and includes recent deals Spreads of major emerging economies in LatAm /1993 9/19945/19951/19969/1996 6/19972/ /1998 6/19993/ /2000 7/20013/ /2002 8/20034/ /2004 8/20055/20061/2007 BrazilLatin AmericaMexico

23 …helped by the fall of cost of capital Source: OECD Development Centre 2007, based on Thomson Datastream (Economist Intelligence Unit). * Data for 2007 is estimated and includes recent deals

24 Increasing appetite for overseas expansion can also be seen in other countries such as India… Source: OECD Development Centre., 2007; Based on Dealogic and local press. TargetNationalityAcquirerDeal Value ($m) CorusUK/NLTata Group7700 Oil & Gas Assets (Campos Basin)BrazilOil & Natural Gas Corp1670 Omnimex de ColombiaColombiaOil & Natural Gas Corp: China Group850 Oil & Gas Assets (Brazil)BrazilONGC Videsh820 Greater Nile Petroleum (25%)SudanOil & Natural Gas Corp783 Glaceau (30%)USTata tea677 Shell Development AngolaAngolaOil & Natural Gas Corp600 Oil & Gas Assets (Syria)SyriaOil & Natural Gas Corp: China Group581 Betapharm ArzneimittelGermanyDr Reddy's Lab572 Hansen TransmissionsBelgiumSuzlon Energy562 Eve HoldingBelgiumSuzlon Energy548 TerapiaRumaniaRanbaxy 324 Total15687

25 1 Spain and Latin America: A Helping Hand New Emerging Multinationals: Mexico & Brazil? 2 3 Conclusions

26  Globalization strategies have turned into success stories in Spain, Latin America and other emerging markets.  Multinational groups are becoming leaders in their domestic market but also in foreign markets.  In the future we will see more emerging giants from Latin America and Asia taking over OECD-based firms and continuing to be at the centre of the globalization process. Conclusions

27 Thank you! For more information contact: Javier Santiso: Based on Santiso, J. (March 2007) “The Emergence of Latin Multinationals”, OECD Emerging Markets Network Working Paper, OECD Development Centre, Paris.