A Fresh Start for Europe in Latin America?

MILAN – By 2050, Brazil and Mexico will be among the world’s six leading economies, according to analysts at the investment bank Goldman Sachs. Does the European Union care? Is Latin America to be Europe’s next missed business opportunity?

Latin America has a population of 550 million, with average yearly per capita income of $4,000, immense natural resources, and substantial human capital. It accounts for 8% of world production and grew by more than 5% in each of the past three years. Although the United States remains the main destination of Latin American and Caribbean exports, Asia is becoming an increasingly important market for goods based on natural resources.

During the past four years, Latin America attracted an annual average of $61 billion in foreign direct investment, 60% of which went to Brazil and Mexico. In the 1990’s, foreign investors were chiefly attracted by privatization programs in the region, but more recently mergers and acquisitions and greenfield projects have been the most common type of investment. Predictably, Spain is the most important European investor in the region, though several important Spanish operations have recently passed to Italian companies, among them the utility Endesa, acquired by Enel, which is now the biggest private energy distributor in Latin America.

Meanwhile, Latin American businesses have been increasing their own foreign investments. In 2006, Brazil invested $28.2 billion abroad, compared to inflows of $18.8 billion. Indeed, emerging giants from Latin America and Asia will be at the center of worldwide investment in the coming decades. In 2006, Italy’s Fiat Group and India’s Tata Motors established a joint venture to make passenger vehicles and engines in India. The following year, they extended their partnership to Latin America, investing $80 million in production of a Tata pick-up truck at Fiat’s factory in Cordoba, Argentina.