THE CHANGING PRESENCE OF TRANSNATIONAL FIRMS
IN LATIN AMERICA

- manufacturing is still the main activity of these companies, but services are growing, says annual ECLAC report on foreign investment in the region -

Combined sales by the twenty largest transnational firms in Latin American reached more than US$ 144,000 million in 1997, reports the 1998 edition of ECLAC’s study, Foreign Investment in Latin America and the Caribbean. Based on consolidated sales figures for such firms in seven Latin American countries, the study throws light on the changing nature of the foreign-owned sector in the region.

Despite some change in the mix of home countries represented, US or European-owned subsidiaries still account for virtually all of these companies. There are still no Japanese firms, while half are subsidiaries of US parent companies, nine have European parents, and one is Argentine, with subsidiaries in Brazil and Peru.

THE 20 BIGGEST NON-FINANCIAL FOREIGN FIRMS IN LATIN AMERICA,
BY CONSOLIDATED SALES, 1997
(millions of dollars)

Source: ECLAC, data base of the Investment and Corporate Strategies Unit of the Production, Productivity and Management Division based on inputs from América Economía, Expansión, Mercado, Dinero, The Wall Street Journal and other financial press.

The main changes have to do with areas of activity and the length of time the companies have been present in the region. While manufacturing is still the principal activity of most foreign companies - fourteen of the 20 firms manufacture locally - non-financial service companies in the retail trade, telecommunications, and electricity generation and distribution now appear on the list of largest companies. Indeed, the four main newcomers are from these sectors: Carrefour from France, Wal-Mart from the United States and Telefónica and Endesa of Spain.

In the case of the Spanish parent companies, the purchase of privatised state assets or concessions in Brazil and Argentina have been central to the expansion of their consolidated sales in the region.

However, for the most part, vehicle-assembling firms remain clearly dominant. Over half (US$53,700 million) of the total consolidated sales of the twenty firms came from the local activities of five automotive corporations, General Motors, Volkswagen, Ford, Fiat and Chrysler. Other principal manufacturing activities are food products (4 companies), soft drinks (2 firms) and tobacco products (2 enterprises). While food product companies are more numerous, soft drink manufacturers have bigger sales.

Most of the parent companies have a widespread and long-term presence in the region. Those with subsidiaries in four or more countries are mainly manufacturing companies which have operated in the region for many years, such as General Motors, Ford, Shell, Coca Cola, Nestlé, IBM, BAT and Cargill. It is noteworthy that the Spanish newcomers, Telefónica de España and Endesa España, already have operations in four countries each, indicating how the sharp rise in the volume of foreign direct investment during the 1990s is rapidly influencing the level of consolidated sales of the investing corporations. Of the four firms with a very limited presence - in two countries or less - two are newcomers, namely Carrefour and Wal Mart. The companies whose activities in Latin America greatly exceed their international presence include firms such as Fiat (Italy) and Bunge & Born (Argentina).

The increased level of foreign direct investment in Latin America in the 1990s has brought about important changes in the presence of foreign firms, as newcomers in the non-financial service industries begin to displace the manufacturing companies that have been active for many years. Nevertheless, the focal point of the operations of foreign firms in Latin America continues to be the automotive industry, and to a lesser extent food, soft drinks and tobacco.

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