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June 27, 2017

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Latin American firms go from Spain to rest of EU

MADRID--Spanish firms seeking to escape a sluggish eurozone are heading in ever greater numbers to reap the financial benefits of doing business in the faster-paced economies of Latin America.

But the corporate business traffic now runs in both directions: Latin American groups are building business links with Spain as a gateway to entering the rest of Europe.

On a visit to Madrid this month by Mexican President Enrique Pena Nieto, for example, Spanish business chiefs, from the leaders of major bank BBVA to energy giant Iberdrola, lined up to meet with him.

Indeed, Spain's firms fall easily for Mexico's charms: an economy expected to grow five percent annually in the years ahead and which plans to invest 440 billion euros (US$600 billion) up to the end of 2018, notably in energy and telecommunications.

More generally, "we are witnessing a major boom in infrastructure construction in Latin America for the next decade," explained Juan Carlos Martinez Lazaro, lecturer at the IE Business School.

"We can see it from Mexico to Chile, where almost everything is yet to be done," he said, citing Brazil, which is hosting the World Cup and will also put on the 2016 Olympics.

With its cultural and linguistic affinity, Latin America became a natural destination in the 1990s for Spanish companies seeking to spread internationally.

In that period, construction and public works group FCC set foot in the region, first in Costa Rica and Mexico, said Vicente Mohedano, regional director for the group's construction branch.

FCC enjoyed "the same culture, the same language and practically identical values," he said. That offered it a competitive advantage that has led to FCC now undertaking about 40 percent of its construction activity in Latin America — slightly more than it does in Europe.

The eurozone's financial woes sent more Spanish firms to the region, particularly Brazil and Mexico.

In March this year, FCC in a consortium with Spanish construction group ACS won a 3.9-billion-euro contract to build part of the metro system in Lima, Peru.

Brazil became Spanish telecommunications group Telefonica's top market at the start of 2013. In Panama, another Spanish firm, Sacyr, is overseeing the enlargement of the Panama Canal.

In Mexico, Iberdrola plans to invest 3.5 billion euros over six years.

Mexican Investment

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