SUNS  4315 Tuesday 3 November 1998



LATIN AMERICA: GROWING FOREIGN PRESENCE IN INDUSTRY

Santiago, Nov 1 (IPS/Gustavo Gonzalez) -- Industrial growth in Latin America during the past decade generally favoured subsidiaries of foreign companies, while the state's presence in
industry steadily disappeared, according to a new U.N. study.

The report "Large Latin American Companies and Industrial Groups" released at the Santiago headquarters of the UN Economic Commission for Latin America and the Caribbean (ECLAC), was based on studies carried out in Argentina, Brazil, Chile, Colombia and Mexico.

The report analysed the situation of the 100 largest conglomerates in the five countries from 1990 to 1996, during which period privately-owned national companies increased in size but less than
foreign companies while the influence of state-owned industrial conglomerates fell sharply.

According to ECLAC, these developments were the result of two major processes that arose in the framework of structural reforms undertaken since the 1980s aimed at stabilising the Latin
American-Caribbean region's long-term economy.

"The first (of those processes) was the privatisation of public enterprises throughout the 1980s and 1990s, which has made them practically disappear from the universe of large manufacturers in
the region," the report said.

The other basic change was the installation of subsidiaries of foreign companies, thanks to economic deregulation in areas like property and labour, monetary and trade legislation.

The freeing-up of local markets included liberalising measures that previously limited the participation of foreign capital in specific industrial sectors, as well as the implementation of policies
designed to attract foreign investmen and capital.

Taking as the base the 100 largest industrial groups of the five countries covered by the study, ECLAC pointed out that the average turnover by privately-owned national companies rose from $827 million in 1990 to $1.345 billion in 1996. The turnover of privately-owned foreign companies, meanwhile, grew even more: from $1.075 billion in 1990 to $1.879 billion in 1996.

And while privately-owned local or national companies accounted for 45.9% of the total in 1990, that proportion dropped to 40.2% in 1996. Foreign firms, meanwhile accounted for 45.9% in 1990 and 57.3% in 1996, and state-owned companies dropped from an already modest 8.2% to 2.5 percent.

Among foreign companies, the fastest-growing sector was the auto industry - an important branch of industry in Argentina, Brazil and Mexico - accounting for 22.1% of all sales in 1990, a share that
had risen to 30.2% by 1996.

In Argentina, reported ECLAC economist Roberto Bisang, some 40 business groups control around 700 large industries, accounting for close to 30% of the country's industrial production and 20% of
jobs.

Regis Bonelli, author of one of the studies on Brazil, said that nearly 90% of the 300 largest private economic groups in Brazil were under control of families that had an interest in privatisation as well as the internationalisation of their activities.

The report by Mario Castillo and Raul Alvarez declared there was a nucleus of 20 leading industrial conglomerates in Chile, controlled by traditional and emerging groups, among which telecommunications and electricity stand out.

Gabriel Misas Arango underscored the fact that industry in Colombia had joined the process of liberalisation after a previous process of import substitutions, and that instead of increasing export
capacity this gave rise to a certain level of concentration.

Thanks to the opening of the markets in the region, large economic groups have reaped major profits by providing services linked to electricity distribution, telecommunications and financial
activities.

Just as the main market for Argentina and Brazil is the Southern Cone Common Market (Mercosur), the subregional bloc in which they are linked with Paraguay and Uruguay and which has fuelled the
development of their industries, the internationalisation of Mexico's industrial sector has been without a doubt linked to its membership in the North American Free Trade Agreement (NAFTA).

During the 1990s, sales and investment of Mexico's large private industrial groups were internationalised, while they increased in size and took on a position of economic leadership in the country, the ECLAC study said.