beyondbrics

Mention the word multinationals in Latin America, and it is hardly surprising that some people still imagine rapacious capitalist monsters kicking aside ethics, laws and even human rights in their insatiable thirst for profit.

In June, Juan Manuel Santos, Colombia’s president, said he had evidence that a foreign contractor for an oil company had paid money to illegal armed groups.

A few years ago, and in one of the more egregious cases of corporate excess, Ohio-based Chiquita Brands, the banana producer, admitted to paying US$1.7m to Colombian rightwing death squads between 1997 and 2004.

The payments even continued after 2001, the year that the US State Department declared the AUC, as the paramilitary groups’ umbrella outfit was known, a terrorist organisation. The company ended up paying US$25m in a Department of Justice settlement in 2007.

Yet chilling examples of corporate abuse by multinationals are no longer so common in Latin America. Globalisation, with its growing application of international law, as well as increased oversight, has done a lot to keep foreign companies in line.

At the same time, more stringent and better-enforced domestic laws in host countries have helped ensure that international companies deviate less from the straight and narrow than they did in the past.

“More and more international firms are being singled out for non-compliance for the actions of their local partners or subsidiaries,” says Josh Miller, general director for Mexico, Central America and the Caribbean of Control Risks, the risk-management company.

While that may make compliance more of a challenge than it was in the past, it also ultimately makes operating in the region easier than before. Gone are the days when companies had to throw their weight around in local politics to do business.

Indeed, in some particularly investor-friendly countries, such as Mexico, most multinationals now mostly leave operations to local hires – a sign that fewer top-level company figures are needed to assert influence or pressure.

“In general, the environment in Latin America is much more welcoming than it used to be,” says Luis Rubio, president of CIDAC, a Mexico City-based think tank.

Yet Rubio rightly points out that it would be a mistake to view Latin America as a single, uniform region. While countries such as Mexico and Chile are in general friendly to foreign investors, places such as Venezuela are decidedly not.

To name just one victim of that country’s increasingly socialist tack, Cemex, the Mexican cement manufacturer, in 2008 suddenly found its Venezuela operations the subject of expropriation by the state. Three years on, it is still locked in a legal battle over compensation of a subsidiary that represented about 5 per cent of the company’s global sales.

Even in Argentina or perhaps Brazil, a country whose dynamic growth in recent years has helped woo foreign investors, conditions are not nearly as clear or favourable as elsewhere, argues Rubio. “Local governments tend to pick and choose rather than let the foreign company decide,” he says. “That means that companies have to lobby much more than elsewhere.”

In general, though, foreign investment is both easier and more welcome than it was, say, a few decades ago. As if to underline that point, even Cuba is now welcoming multinationals in some areas of its economy.

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