Home' Trinidad and Tobago Guardian : January 30th 2014 Contents JANUARY 2014 • WEEK FIVE www.guardian.co.tt BUSINESS GUARDIAN
THE ECONOMIST | BG21
Changes in relationships can be
hard to take. The economic bond
between Latin America and
Spain, its biggest former colonial
power, is shifting as the region's
economies mature. Despite some ruffled feath-
ers, though, the evolution is positive.
After two decades in which Spain amassed
assets worth US$200 billion in Latin America,
last year was the first in which Latin American
companies spent more on acquiring their
Spanish counterparts than the other way
around. Dealogic, a data provider, says that
Mexican firms were the biggest investors, put-
ting money into the bus company Avanza and,
with a Chinese partner, the meat processor
Mexican investors also have bought stakes
in Banco Popular and Sabadell, two Spanish
banks. Carlos Slim, Mexico's richest man, has
a variety of business ties with La Caixa, a
Catalan savings bank. The Venezuelan bank
Banesco recently bought NCG, a Galician bank,
for US$1.37 billion. A Colombian financier has
pledged to invest in a Spanish property firm
called, in a nice twist, Colonial.
Linguistic and cultural affinities attract Latin
American investors. Enrique Alberola of the
Bank of Spain, the central bank, sees parallels
with Spain's own modernisation path. Spanish
firms such as Telefonica, a telephone company,
and Santander, a bank, cut their teeth in Latin
America. Between 1993 and 2000 almost half
of Spanish foreign investment went there.
These firms then used their scale and expe-
rience to make big investments across Europe.
Likewise Latin America's "multilatinas" have
been investing regionally for years. Now they
are looking to broaden their horizons via Spain.
The amounts flowing from Latin America
to Spain are still small, and most of the invest-
ment on both sides is by big firms. In a new
departure, however, Latin American develop-
ment banks have begun extending credit to
Spanish firms. Enrique de la Madrid, head of
Bancomext, Mexico's export-development
bank, says that in 2013 the bank had out-
standing loans of more than US$225 million
to Spanish companies invested in Mexico and
US$340 million to Mexican firms operating
For both sides, de la Madrid says, traveling
across the Atlantic is a "good diversification
strategy. The Spanish have been doing it since
Such language is a reminder of the rela-
tionship's historical baggage. Sensitivities can
spill into the open. Witness the dispute between
a Spanish-led consortium contracted to expand
the Panama Canal and the Panama Canal
Authority. The consortium, headed by Spain's
Sacyr with Italian, Belgian and Panamanian
partners, has threatened to stop work on the
US$5.25 billion project unless the Authority
pays for big cost overruns. A deadline to settle
the impasse came and went this week.
"How do you think we Panamanians feel?"
PCA boss Jorge Quijano thundered in an inter-
view with El Pais. "They still think we wear
The dispute has raised questions about some
Spanish firms' ability to handle big contracts.
Spanish firms have been bruised too. In
2012 the Argentine government expropriated
the 51 per cent stake in the oil firm YYF that
had been held by Repsol, a Spanish oil com-
pany. Pemex, Mexico's state oil company, also
tussled with Repsol, in which it has a stake,
pushing the reluctant Spanish firm to accept
in principle a US$5 billion compensation offer
for its YPF stake.
Despite these hiccups, Latin America has
acted as a shock absorber during Spain's slump.
Brazil accounts for almost a quarter of
Santander's global profits, and Mexico two-
fifths of profits at BBVA, another Spanish
bank. New sources of credit, such as Ban-
comext, are welcome in a country with banks
as weakened as Spain's. De la Madrid says
that Latin American investment in Spain
should be seen as a helping hand.
Latin America also offers jobs to young
Spaniards. The number of Spaniards heading
to Latin America is rising, while flows the
other way are falling. Of emigres from Europe,
those from Spain are the largest group.
Spain's economy is now starting to recover,
but the relationship will keep changing. At
Christmas Campofrio launched a tongue-in-
cheek advertisement called "Make yourself a
foreigner," which sought to dissuade Spaniards
from emigrating. By then it was already half-
owned by Mexicans.
@2014 The Economist Newspaper Ltd. Distrib-
uted by the New York Times Syndicate
Nicolas Maduro, a former bus driver and trade-union activist,
is fond of styling himself "Venezuela's first worker/president."
Like his mentor and predecessor, the late President Hugo
Chavez, Maduro believes that the primary role of the labour
movement is to help the regime crush capitalism and install
Employers predictably bemoan the rigidity of the labour
market, saying that it cripples business and leaves Venezuela
trailing in terms of productivity. As the country prepares for
a visit by the International Labour Organisation, however, the
bosses are not the only ones complaining. Many workers are
not happy either.
A plethora of ostensibly pro-worker decrees have been
passed in recent years, culminating in a 2012 labour law known
as the LOTTT The law includes a virtual ban on firings, a
shorter work week and improved vacation and maternity ben-
efits. In December Maduro renewed another decree, in force
for the past decade, which makes it almost impossible for
private firms to fire workers.
Under the LOTTT job security is virtually guaranteed after
the first month. The result, employers say, has been absenteeism
rates ranging from 15 per cent to 40 per cent of the work force,
depending on the industry and the time of year. Under these
circumstances most firms are unsurprisingly reluctant to
Luis Alfredo Araque, who chairs the labour commission of
the main employers' federation, Fedecamaras, says that busi-
nesses are being bankrupted by unproductive workers.
"I know one American company here which is paying 250
workers to stay at home, rather than come to work and cause
trouble," Araque says.
Labour Ministry inspectors refuse to approve firings on any
grounds whatever, leaving many employers with no choice
but to bribe workers to leave.
Employers are not the only ones who plan to present their
grievances to the ILO delegates, however. The unions also
want to have their say.
In practice only the private sector is held to the law. The
government seems less keen on employees' rights when it is
the employer. Hundreds of labor activists have been prosecuted
for taking industrial action, especially against state-controlled
firms. Ruben Gonzalez of Sintraferrominera, an ironworkers'
union, spent 17 months in detention for organising a strike
in 2009, and still has to attend monthly court hearings. Ivan
Freites, an oil-workers' union leader, was sacked in December
after disputing the official account of a refinery fire in 2012
that left more than 50 people dead.
As well as briefing the ILO on cases such as those of Freites
and Gonzalez, labor representatives also will argue that a new,
central register of trade unions violates the ILO's rules and
threatens to leave most unions with no legal status. That suits
the government, which prefers to raise wages by fiat, presenting
salary increases as the product of its own largesse, rather than
as the result of negotiations with workers' representatives.
"If you want to hold a trade-union election," says Pablo
Zambrano of Mosbase, an alliance of grass-roots unions, "you
have to fill in a form and take it to the government."
By delaying elections, sometimes for years, the regime can
deny the legitimacy of union officials.
A majority of collective agreements governing pay and con-
ditions in the public sector -- around 350 at the last count --
have expired. Most are not being renegotiated. According to
Zambrano, more than half the country's 2.6 million public
sector workers now are not covered by these deals.
Labour disputes have been running at elevated levels since
the 2008 financial crisis brought the economic good times to
an end. With inflation running at 56 per cent in 2013 and
widespread shortages of basic goods, even the government,
which blames these ills on an "economic war" allegedly waged
by the private sector, admits that productivity must rise.
How to achieve that is another matter. The World Economic
Forum ranks Venezuela 134th out of 148 countries for com-
petitiveness. An inflexible labor market is part of the reason
for its feeble score.
It also is a hard thing for a worker/president to reform.
@2014 The Economist Newspaper Ltd. Distributed by the New
York Times Syndicate
The worst of both worlds
For Latin America,
Spain, the shoe's
on the other foot
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