SOURCE: The Boston Consulting Group

The Boston Consulting Group

September 03, 2009 00:01 ET

A Bold New Breed of Companies Based in Latin America Are Reshaping the Competitive Landscape, According to a Report by The Boston Consulting Group

A Group of 100 Multilatinas Are Internationalizing Their Operations Across the Region and Beyond -- and Outperforming Both Their Peers and Multinational Incumbents

SAO PAULO, BRAZIL--(Marketwire - September 3, 2009) - One hundred high-performing Latin American companies, the 2009 BCG Multilatinas, are expanding their operations internationally with impressive speed, ingenuity, and sophistication, adopting approaches that may offer valuable lessons to others, according to a report published today by The Boston Consulting Group (BCG).

Based in eight Latin American countries, the 100 BCG multilatinas represent all industry sectors. Although they constitute only 21 percent of the 471 companies in the overall study group, they nonetheless generate an impressive 34 percent of the group's revenues, according to the new report, "The 2009 BCG Multilatinas: A Fresh Look at Latin America and How a New Breed of Competitors Are Reshaping the Business Landscape" (Please see the section "Methodology for Selecting the 2009 BCG Multilatinas.").

Notably, the total shareholder return (TSR) of the 68 publicly traded multilatinas over the past ten years was much higher than the TSR of the S&P 500 index, the MSCI Emerging Markets Index, or regional country indexes. A $100 investment made in June 1999 in a hypothetical multilatinas index would have grown at a compound annual growth rate of 19 percent, to be worth more than $560 in 2009.

While the multilatinas have focused their international moves primarily on relatively nearby markets in Latin America, many -- such as global contenders Cemex, Embraer, and Vale -- have also gone farther afield, conducting operations in the United States, Europe, and Asia.

Part of the reason for their success has been the recent revitalization of economies across Latin America. Today Latin America is a massive, diverse, and vibrant region with GDP ($4.2 trillion in 2008) equivalent to China's; a very large population (562 million) that is young, growing, and increasingly educated; market capitalization ($1.6 trillion as of June 2009) greater than that of Eastern Europe and Russia combined; and GDP growth of 3.9 to 4.8 percent per year for the past five years.

And although the region is home to 20 countries, it is more coherent culturally and linguistically than is Africa, Asia, or Europe, and barriers to regional trade are low, facilitating regional strategies for both local companies and outside investors.

While some Latin American countries' business and political environments still present risks, major countries across the region have reduced their debt levels, strengthened their currency reserves, and applied discipline to their fiscal deficits. The region is now home to five investment-grade economies: Brazil, Chile, Colombia, Mexico, and Peru, which together are responsible for 75 percent of the region's nominal GDP.

It is important to note that although countries across Latin America have certainly felt the impact of the current global financial crisis, the region has been less affected than most others, largely because of conservative financial practices. Household debt is at manageable levels, and banks are not highly leveraged. Meanwhile, unprecedented reductions in country risk and interest rates have created unique opportunities for investment.

Fortunately, most multilatinas have low leverage ratios. Nonetheless, they are responding to the crisis prudently by exercising tight cash management, improving their balance sheets, enhancing their cost and organizational efficiency, streamlining their organizations, managing their top lines aggressively, adopting product portfolio and pricing approaches, reassessing investments, divesting noncore businesses, and improving risk management.

At the same time, they are leveraging their internationalization experience to position themselves for growth: building in value creation discipline; defining international growth strategies and philosophies around core capabilities; monitoring global markets and planning the evolution of the company's international footprint; managing timing carefully; and creating and replicating capabilities to enable sustainable international growth.

The report's authors expect Latin America to sustain above-average performance in the medium to long term, with Brazil, Chile, Colombia, Mexico, and Peru leading the pack and providing critical mass for growth in the region. Against that background, the authors anticipate that, after a period of relative retrenchment, the multilatinas will continue their international growth, building on the lessons they have learned in their recent, highly successful internationalization experience.

Methodology for Selecting the 2009 BCG Multilatinas

To arrive at the list of 100 multilatinas, a team of BCG consultants performed a comprehensive analysis of nonfinancial companies active in the region. The team first compiled a list of 471 such companies with 2007 revenues greater than $500 million, based on international and local rankings from Argentina, Brazil, Chile, Mexico, and other Latin American countries, and on a detailed consolidation of international groups. Next, the team undertook a thorough study of the companies' annual reports, Web sites, and press coverage and built a comprehensive proprietary database that characterizes each player according to the nationality of its equity controller, the sectors and countries in which it operates, and its business model and apparent strategy, as well as its revenues, net equity, number of employees, and EBITDA. The 100 2009 BCG Multilatinas all have Latin American equity control and all have significant assets or operations (factories, mines, ports, railways, or distribution centers) outside their home countries. The analysis was based entirely on public sources.

To order a copy of "The 2009 BCG Multilatinas: A Fresh Look at Latin America and How a New Breed of Competitors Are Reshaping the Business Landscape," go to www.bcg.com/impact_expertise/publications/publication_list.jsp?pubID=2990

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

About The Boston Consulting Group

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