Latin American companies have been expanding their horizons over the last couple of decades. From Brazil’s Embraer, which has become a world leader in regional jets, to Mexico’s Cemex, which has become a world-leading cement producer, the rise of these companies has been much-feted. The start of the 21st century has been heralded as “the decade of the multilatinas.”
But it’s been slow going for many smaller companies with multilatina ambitions. And expanding beyond the Latin American region has proven particularly difficult for some, especially when it comes to entering developed and advanced markets.
Only a handful of Latin American corporate giants have done so. As well as Embraer and Cemex, there is Mexico’s Grupo Bimbo. It now has the largest bakery in the world, reaching 95 percent of the Wal-Marts, Krogers, and Costcos in the United States with its baked goods. And Colombian coffee producer and café chain Juan Valdes is giving Starbucks a run for its money, also in the United States.
These firms, however, are relatively exceptional. As Northeastern University academic Alvaro Cuervo-Cazurra has argued, it is more common for Latin American firms to expand within the region, and then struggle to make the next move into the wider world. This has been the case for the Chilean retail giant Falabella and Peruvian household goods firm Alicorp. Others, such as Peruvian fast food chain Bembos, have expanded beyond Latin America, but into other emerging markets—India in this case.
Labor Market
One of the reasons why multilatinas struggle to internationalize beyond Latin America is that they face different political, legal, technological, and cultural environments—particularly with regard to the labor market. As MIT professor Ben Ross Schneider has shown, Latin American businesses tend to be family-controlled, unions are weak, and short-term employment is common. There is also little investment in skills and training, with workers having a relatively low education level.
This means that companies such as Alicorp find it relatively easy to compete in markets with similar conditions. However, it is far more difficult for them to go up against competitors with better access to cutting-edge technology and production methods.
It also means that multilatinas struggle to compete in environments where workers are more highly skilled and organized, companies are owned by shareholders rather than families, and, as a result, have more professional managers.
