Corporate Latin America Reaches Into Canada
Corporate Latin America Reaches Into Canada
Few Canadians know much about Latin America’s major businesses. If they did, they might be surprised at the strength and multinational scope of their operations. Canadians might be even more surprised if they knew how many of these Latin American global challengers operate in Canada.
In 2012, for example, Brazilian companies paid $15.9 billion to acquire partial or total ownership of Canadian businesses. Brazil has ranked for several years among the top six or seven sources of foreign direct investment in Canada, behind the U.S., the UK and Japan but ahead of Germany, France and Belgium. According to a federal government report, when Brazilian companies look for opportunities to expand and invest beyond their domestic market, they regard Canada as their first choice.
The mining company Vale is Brazil’s largest investor in Canada, after its acquisition of Inco Ltd. in 2006for $19.4 billion. Other major Brazilian investors in Canada include Votorantim, the country’s largest cement company, which has owned St. Marys Cement in Bowmanville, Ont., for more than 10 years; Gerdau, a major global steel supplier, which has operated in Canada since it acquired the Courtice Steel Mill in Cambridge, Ont., in 1989; Ambev, which acquired Labatts, one of Canada’s oldest breweries, in London, Ont., in 2004 at the same time as it became part of Interbrew, a US$15-billion company with 14% of the global beer market, and JBS, Brazil’s largest food processing company, which acquired XL Foods, one of Canada’s largest beef-processing facilities, in Alberta in 2013. JBS now employs 135,000 people in 301 facilities around the world.
Boston Consulting Group calls these Latin American companies “global challengers”. Based in Brazil, Mexico, Colombia, Peru and Chile, they’re growing more quickly than established multinationals, they have larger average annual revenues than S&P 500 companies, they’re adding employees while payrolls of their more established competitors remain static or shrink, and they compete directly in a growing range of sectors with more widely recognized companies.
“Global challengers are starting to provide expertise, rather than just raw materials, in their supplier relationships with multinationals,” says a Boston Consulting Group report. “Mexichem, the Mexican chemical company, and Occidental Chemical (Oxychem), a U.S. chemicals firm, are involved in the construction of an ethylene plant, where Oxychem would convert ethylene into vinyl chloride monomer that it would sell exclusively to Mexichem for manufacturing PVC products, a major contributor to Mexichem’s annual revenues of almost US$5 billion.
This year, a Brazilian bus manufacturer, Marcopolo S.A., acquired almost 20% of New Flyer Industries Inc. in Winnipeg, the leading manufacturer of heavy-duty transit buses in Canada and the United States. Started in Brazil in 1949 as a small business with 15 employees, Marcopolo now has a market capitalization of US$2.8 billion, employs 22,000 people in Brazil, Argentina, Colombia, India, Mexico and South Africa, and exports buses to 60 countries.
In the technology sector, América Móvil, based in Mexico, has connected its Mexican telecommunication lines to a US$1.1-billion, 18,000-kilometre submarine cable designed to meet increasing demand in Latin America for high-speed data transmission of voice, data and video traffic between the U.S., Brazil, Colombia, Guatemala, Mexico, Puerto Rico and the Dominican Republic. At the same time, América Móvil, Latin America's biggest phone company, has reportedly been investigating an alliance with a Canadian telecom firm, although Canada’s restrictive rules against foreign ownership in the industry present a challenge to the deal.
In other industries, Canada has actively pursued corporate investors from Latin America, sending trade delegations to the region and establishing permanent positions in government agencies to cultivate relationships with Latin American businesses.
Not all investments turn out successfully, however, whether they come from Latin America or anywhere else in the world. Earlier this year, the Mexican home appliance maker Controlodora Mabe S.A. de C.V. announced that it would shut down a dryer manufacturing factory in Montreal’s east end, laying off about 700 workers by the end of 2014, The company blames the high value of the Canadian dollar and soft consumer demand. Since the company exports 90% of its output to the U.S., it also says producing dryers in Quebec is unsustainable.
Mabe is the manufacturer, distributor and marketer of General Electric appliance brands throughout Canada. It also owns the Moffat brand.