Art. Chilean Multinationals Contexts, Paths and Strategies
Art. Chilean Multinationals Contexts, Paths and Strategies
Art. Chilean Multinationals Contexts, Paths and Strategies
Chilean Multinationals:
Contexts, Paths and Strategies
Introduction
One of the most prominent aspects of the ‘Second Global Economy’
since the 1980s has been the development of multinational enterprises
(MNEs) with their base in emerging or middle-income economies. Their
presence has created a challenge, not only for MNEs from developed
countries facing new competitors in their domestic and foreign mar-
kets but also for theories of multinational enterprise, which to a large
extent have been constructed from the experiences of multinationals
from developed countries.
The objective of this chapter is to study the growth of Chilean MNEs,
analysing their expansion strategies and seeking to establish a dialogue
between theory and history. It is divided into four parts. The first focuses
on the phenomenon of the ‘emerging market multinational enter-
prise’ (EMNE), considering both historical and contemporary aspects.
The second analyses various theories of the MNE, emphasising recent
M. I. Barbero (*)
Facultad de Ciencias Económicas, Universidad de Buenos Aires,
Buenos Aires, Argentina
Apart from these forces arising from changes in the global business
environment, the internationalisation of EMNEs was also possible thanks
to the development of competitive capacities that allowed them to posi-
tion themselves as relevant players in international markets. This raises
the question of whether older theories of MNE provide satisfactory
explanations for the behaviour and performance of EMNEs. Can existing
models of how multinational companies evolve and compete be adapted
to new realities, or does the impact of EMNEs on global competition
require new theories (Williamson et al. 2013)?
Table 10.1 Latin America and the Caribbean (selected countries): annual flows
of outward foreign direct investment, 2005–2015 (in millions of dollars)
Chilean FDI has been linked closely both to the evolution of the
Chilean macroeconomy and to the opportunities generated by the
global economy, especially within Latin America, where it has been
concentrated (see Table 10.2). Of the total stock of Chilean FDI at
the end of 2015, 81.3% had gone to six Latin American economies:
Brazil, Colombia, Argentina and Peru stand out, with 75.6% of the total
10 CHILEAN MULTINATIONALS: CONTEXTS, PATHS AND STRATEGIES 291
investment among them (DIE 2016). After the 1990s Argentina became
increasingly less relevant as a destination for new investment, which
favoured the other three countries instead, in particular Brazil. However,
investment in North America has also increased in recent years. The
United States was the main destination for Chilean FDI in 2015, with
27.6% of the outflow.
The conditions of the Chilean economy (country-specific advantages)
provide a partial explanation of the internationalisation of Chilean firms
from the 1990s. The early implantation of pro-market reforms by the
military dictatorship of General Augusto Pinochet (1973–1990) obliged
economic agents to operate in an open, deregulated economy, in which
building competitive advantages became a necessity. In the face of this
‘competitive shock’, companies had to become more efficient in order to
operate satisfactorily in a market open to imports and the establishment
of subsidiaries of foreign multinationals.
Although liberalisation seriously threatened local companies accus-
tomed to operating in the context of a closed, protected economy, it
also generated new opportunities, due to falling prices for imported
inputs and machinery, greater access to finance and the opening of
activities to private capital which had previously been reserved for the
public sector (Del Sol 2010). Liberalisation also worked as a mecha-
nism of selection in which companies that survived were those most
capable of adapting to the new context. Once consolidated in the local
market, they could expand abroad, first by exporting and later through
direct investment (Albeck and Huth 2014). The privatisation of state-
owned companies offered numerous opportunities to private-sector
firms which possessed the resources to acquire them. In many cases
they were sold at prices below their market value and under conditions
that were far from transparent, thus generating a significant transfer of
resources to the business sector (Informe Comisión Diputados 2004).
The state also offered subsidies for certain activities, such as forestry
investments, which stimulated the development of the pulp, wood
and paper industries, now one of the leading sectors in the Chilean
economy.
Chilean multilatinas also enjoyed a series of advantages linked
to the economic and political context of the country after the 1990s.
The restitution of democracy and the acceleration of growth within a
framework of institutional stability had the spillover effect of reducing
country risk and, consequently, making it easier to access international
292 M. I. BARBERO
(continued)
Table 10.3 (continued)
employees outside the home economy, geographic coverage, and the expansion of each company in the year in question
10 CHILEAN MULTINATIONALS: CONTEXTS, PATHS AND STRATEGIES
299
300 M. I. BARBERO
Masisa S.A., founded in 1960, was the first Chilean company to pro-
duce timber boards such as plywood and made its first investment in
forest lands after a few years. During the 1970s and 1980s, it expanded
in Chile, acquiring several of its competitors, thus consolidating its posi-
tion in the production of boards, and integrating vertically with the pro-
duction of inputs (self-adhesive resins) and the inauguration of its first
distribution centre in 1992. That year also saw the beginning of its inter-
nationalisation strategy, with the formation of a subsidiary in Argentina
for the production of boards. It established other subsidiaries in Brazil
(1995), Peru (1997), Mexico (2002), Ecuador (2002), and Venezuela
(2003), both through greenfield investments and acquisitions (www.
masisa.com). One motive for its external expansion lay in the saturation
of the internal market, but management also felt a need to broaden the
scale of its forestry activities. The leap in its production capacity trans-
formed it into one of the major Latin American firms in the sector. At
the same time, it advanced with its forward integration, developing an
extensive distribution network in different Latin American countries
(Calderón Hoffmann 2007). The company, which had been listed on the
Santiago Stock Exchange since 1970, began to issue ADRs on the NYSE
in 1993, helping its financing.
In 2002 Masisa, which had formed part of a Chilean group,
Pathfinder, since 1992, was sold to Terranova, part of the so-called
Grupo Nuevo controlled by Stephan Schmidheiny, a Swiss business-
man. Forestal Terranova S.A. had itself been founded in 1994, with
Schmidheiny’s investment company, Compañia de Inversiones Suizandina
(later the Grupo Nuevo), as the main shareholder, in order to take over
the management and administration of forestry companies owned by
Compañia de Aceros del Pacífico (CAP), which the government had
privatised in 1987. In 1997 Terranova started investing, through green-
field projects and acquisitions, in forest lands and industrial plants in
Venezuela and Brazil (1997), the United States (1998), and Mexico
(1999), and in trading subsidiaries in other Latin American countries, at
times in association with a Canadian firm, Masonite. As with Masisa, the
company developed a strategy of vertical integration, encompassing for-
estry, timber products (boards, mouldings, doors), the manufacturing of
inputs (resins) and distribution. Terranova shares started trading on the
Santiago Stock Exchange in 1994, and the company began the process
of registering with the US Securities and Exchange Commission in order
10 CHILEAN MULTINATIONALS: CONTEXTS, PATHS AND STRATEGIES 303
For us it is a logical process that the customer should satisfy all their needs
under one roof, with a system of integrated retail that delivers everything
s/he needs. This is why we have tourism, insurance, credit, we have a
bank, department stores, supermarkets and home improvement outlets …
We reach all sectors with this credit and we have reached sectors which the
banking system often does not reach – I am talking about the C3, D, E
segments. (interview with Reinaldo Solari 2008)
Conclusions
The historical and comparative analysis of the paths of these twelve
Chilean companies provides us, first, with a general profile of the most
important multilatinas based in the country. It is striking that eleven
of the twelve firms belong to business groups. Except for the case of
SONDA, all the other companies form part of (or formed part of, in
the case of TechPack) either the most important traditional groups
(Angelini, Matte, Luksic) or those that have grown more recently
(Cueto, Said, Paulmann/Cencosud, Solari-Del Río, Sigdo Koppers and
Guilisasti-Larrain).29 If we were to add to this sample another seven
Chilean multinationals included in the 100 most internationalised mul-
tilatinas, we would find that six more of these also belong to business
groups.30 In most cases, the groups are conglomerates whose ownership
is concentrated in the hands of one or more families, but they have pro-
fessionalised management.
10 CHILEAN MULTINATIONALS: CONTEXTS, PATHS AND STRATEGIES 317
both to traditional groups and to new ones. The exceptions are the retail
companies, SONDA in IT, and Concha y Toro in wine production. It
can be argued, therefore, that the internationalisation of the leading
firms was part of a broader process under which the Chilean private sec-
tor was reconstituted. This involved important property transfers and a
process of concentration, in the context of an open, deregulated econ-
omy and market-friendly public policies.
The CSAs combined with the capacity of Chilean companies to
develop firm-specific advantages in a competitive environment. These
included a remarkable change in organisational and management capaci-
ties (via the professionalisation of management and corporate restructur-
ing), and the ability to carry out incremental innovations and to develop
successful business models that could be replicated in foreign subsid-
iaries. Examples are the integration of the value chain in the forestry
complex, multi-format retail, the combination of cargo and passenger
transportation in the case of LAN, and related diversification in the wine
or beverage industries. Another pillar for the competitiveness of Chilean
multilatinas lies in their capacity to establish strategic alliances and joint
ventures with large international companies (the case studies have illus-
trated numerous examples of this), and their capacity to manage mergers
and acquisitions, most recently, in some instances, of firms in developed
countries. Membership of business groups has also facilitated economies
of scale, access to human, natural and financial resources, synergies among
companies, and an enhanced capacity to develop and implement new pro-
jects. The evidence of the case studies warns us against simplistic explana-
tions, which simply emphasise ‘liberalisation know-how’ or the transfer of
resources from the state to private enterprise, and offers a more nuanced
and complex perspective which also considers the business environment,
public policies, and the competitive capacities that firms developed.
With regard to timing, internationalisation has taken place gradu-
ally. After their initial foundation companies have tended to expand first
within the country (this applies to most of them, over several decades),
and invested abroad later. SONDA provides a clear exception to the rule.
Several started by exporting and only moved some time later to direct
investment. Companies have also tended to commence their interna-
tional growth in neighbouring countries, before advancing to others in
Latin America, and eventually, in some cases, reaching North America
and Europe.
320 M. I. BARBERO
Notes
1. Multilatina has become a shorthand term to refer to emerging-market
MNEs based in Latin America.
2. This and the following section are based on Barbero (2014).
3. Given the vast and complex literature that focuses on developing theories
of multinational enterprise, this following section presents only a rather
stylised version with the objective of providing a framework to analyse the
experience of Chilean companies.
4. For summaries of the development of this theoretical literature on inter-
national business, see Dunning and Lundan (2008, Chapter 4), and the
chapters by Dunning, Buckley and Casson, and Hennart in Rugman and
Brewer (2001).
5. The internationalisation index that América Economía calculates each
year is based on four indicators: the percentage of sales outside the home
country; the percentage of employees outside the home country; geo-
graphical coverage; and the expansion of each company in the given year,
see https://rankings.americaeconomia.com/2016/multilatinas/ranking.
6. The population of Chile in 1990 was just over 13 million, which rose to
18 million in 2015 (data.worldbank.org).
10 CHILEAN MULTINATIONALS: CONTEXTS, PATHS AND STRATEGIES 321
7. See especially the chapters by Nazer, Islas, and Salvaj, Lluch and Gómez
in this volume as well as the discussion in the Introduction.
8. On the development of the Chilean electricity industry, see the chapter by
Cesar Yáñez in this volume.
9. Latam is fourth among the top 12 Chilean firms in terms of total sales,
with sales of US$9713 million in 2015.
10. In 2016 the Cueto group occupied 22nd place in a general ranking of
Chilean business groups (UDD 2016).
11. In terms of turnover the firm occupies seventh place among the top
twelve Chilean multilatinas, with sales of US$2646.8 million in 2015.
12. In 2015 Masisa was tenth among the top twelve Chilean multinational
companies in terms of the value of sales with a turnover of US$1052.6
million. Some authors do not consider Masisa to be a Chilean com-
pany, since it has been controlled by Swiss capital since 2002, although
it is headquartered in Santiago. See, for example, Calderón Hoffmann
(2007), who includes it in a list of companies sold to transnational firms.
13. With a turnover of US$1256.3 million in 2015, it ranked ninth in terms
of sales among the twelve leading Chilean companies in the América
Económica list.
14. See Bucheli’s chapter in this volume for the history of Copec.
15. The firm ranks eighth in terms of turnover among the twelve leading
Chilean companies with sales in 2015 of US$2414.5 million.
16. Enaex, whose main shareholder was Dupont, was nationalised in 1972
and reprivatised in 1987, when it was acquired by the Claro Group, asso-
ciated with FAMAE and Austin Powder Corp of the United States. Sigdo
Koppers acquired a share in Claro Group in 1990. Emec and CTI were
sold in 1999 and 2011, respectively.
17. Its companies include Sigdopack (high-technology plastic film), SK Rental
(machinery leasing), SKK Montajes e Instalaciones (industrial assem-
bly and installations), Puerto Ventana S.A., Ferrocarril del Pacífico,
Compañía de Hidrógeno del Bio Bio and SK Industrial.
18. Its annual sales put it in second place among the twelve most internation-
alised Chilean multilatinas, with turnover of US$5495.9 million.
19. In terms of its turnover, US$376.1 million, Techpack occupied twelfth
position among Chilean companies.
20. On the early stages of the group, see the chapter by Gonzalo Islas in this
volume. Andrónico Luksic, the group’s founder, was closely connected
with Pascual Baburizza; his father had worked for Baburizza on his arrival
in Chile.
21. Viña Concha y Toro occupies eleventh place in terms of turnover among
the leading twelve Chilean multilatinas.
322 M. I. BARBERO
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