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XIII Panorama Report on Spanish Investment in Latin America by IE Business School, in collaboration with LLYC, and IBERIA

XIII Panorama Report on Spanish Investment in Latin America by IE Business School, in collaboration with LLYC, and IBERIA
Best sectors to invest in are construction and engineering, energy and tourism, technology and startups.

Some 65% of Spain’s largest companies will increase their investment in Latin America during 2020, according to the XIII Panorama Report on Spanish Investment in Latin America by IE Business School, in collaboration with Llorente y Cuenca (LLYC) and IBERIA. The report analyzes the opinions of 87 companies, 35 of which are listed on the Madrid Stock Exchange, and notes that 74% expect their turnover in Latin America to continue to increase over the next three years, 2% down on 2019.

The report analyzed the investment of Spanish companies in Latin America in 2019, a year of economic stagnation for the region, where the IMF predicted growth of 2%, but that only reached 0.1%. Factors included trade tensions between the United States and China, Mexico’s stagnation and the recession in Argentina, along with social upheavals in Chile, Ecuador and Colombia. Per capita GDP between 2015 and 2019 has fallen by 0.6%. But the commitment of large companies to the region is generally stable, and in the case of SMEs, is increasing.

For their part, 85% of SMEs expect to increase their turnover in Latin America over the next three years. “Despite the low growth experienced at the beginning of the six-year period, Mexico will once again be the country where most Spanish companies plan to increase their investments during 2020, followed by Colombia, Peru and Brazil. In the rest, the number of companies that plan to increase their investments is only slightly higher than those that believe they will keep their businesses stable this year,” says Juan Carlos Martínez Lázaro of IE Business School and responsible for the report.

He adds: “More investment will be made this year through organic growth than in 2019 (61% versus 55%), compared to 34% of companies that will combine organic growth with acquisitions. If we look only at SMEs, the percentage of those that plan to grow only by developing their current businesses remains at 62%, due to the lower availability of financial resources to acquire other companies.”

Juan Cierco, Iberia's Corporate Director noted during the presentation of the report: “By 2020, we at Iberia have forecast moderate global growth, around 2.5%, and part of this increase in supply will be allocated to Latin America, more specifically to markets such as Puerto Rico and Ecuador.”

He added: “One of the great challenges facing the region is to promote the development of sustainable tourism. In the last 40 years, we have witnessed a spectacular evolution of the tourism sector and there are countries in Latin America that have given us real lessons in international promotion, a diversified offer and innovative proposals. Now it is a matter of transforming the sector towards a more sustainable model that ensures its future viability.”

“Latin America represents a fundamental market for us, and Spanish companies are important because of their long-term investment and contribution to economic transformation and full development.”

José Antonio Llorente, Founding Partner and Chairman of LLORENTE & CUENCA, pointed out that for his part, José Antonio Llorente, Founding Partner and President of LLYC, said that despite the economic and social uncertainty in Latin America, the report reveals encouraging data: “It is expected that 65% of Spanish companies will increase their investments in Latin America in 2020, with Spain still being the second-largest investor in the region. It is clear that our country's ties with the Latin American community go beyond the economic situation there. Latin America represents a fundamental market for us, and Spanish companies are important because of their long-term investment and contribution to economic transformation and full development.”

Colombia, Peru, Panama, Costa Rica and the Dominican Republic: preferential destinations.

The economies most rated by Spanish companies present in Latin America are Colombia, Peru, Panama, Costa Rica and the Dominican Republic. Colombia’s macroeconomic environment for 2020 was given a rating of 3.75 out of 5, and Peru, 3.65. Ratings have remained stable in recent years.

The third place is occupied by Panama, with 3.62, and fourth by Costa Rica, with 3.61. Uncertainty about Argentina earned it the penultimate place on the list (2.03 out of 5), while Chile has moved from second place to the middle of the table. Mexico has slipped down the league table, albeit to a lesser extent. Brazil, with a score of 3.17, is the country with the highest increase.

The main sectors for Spanish investment in the region are infrastructure and services, construction and engineering, energy and tourism for large companies, and for medium-sized businesses, software, technology and startups.

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