The arrival of Spanish electric companies in Latin America in the nineties had scant impact on the diversification of the region’s energy matrix. In fact, the Spanish conglomerates are less diversified in Latin America than in their market of origin.

In his book Internationalization and expansion of Spanish electric companies in Latin America, Patricio Rozas, Economic Affairs Officer at ECLAC’s Natural Resource and Infrastructure Division, explains how the initial goal of transforming these companies into global infrastructure service providers began to cede to such an extent that it was reduced to energy specialization objectives.

In spite of this shift, Spanish companies followed clearly different routes with regard to companies of other origins (United States, French and Multilatinas), which progressively diminished their presence in Latin America.

The process of market liberalization and the privatization of State-owned complexes in many countries of the region during the eighties and nineties opened the door to significant amounts of foreign capital.

Spain’s electric sector was one of the most active participants in this process. Conglomerates such as Endesa, Iberdrola and Union Fenosa invested generously in the region and radically changed the map of Latin America’s energy sector.

“The expansion of Spanish electric companies was the result of State policies established by the government of Spain,” said Rozas. “This process was characterized by a set of measures that provided the Spanish government with the tools to develop a more modern and efficient energy system in Spain.”

This differs from the privatization process that took place in Latin America. “The countries in our region didn’t have strategic development plans for the sector and the mechanisms of control were insufficient, with many regulatory voids. This did not occur in Spain,” says Rozas.

The outcome in the region varied according to the different strategies and mechanisms used by these corporations in their process of internationalization and expansion.

In addition, regulatory problems and the weakness of legal frameworks in recipient countries had a decisive influence on the results of these companies, states Rozas in his book.

This scenario makes it advisable for governments in the region to implement measures geared at heightening the diversification of energy sources, tending towards the development of clean and renewable sources. For this to happen, governments should provide incentives to encourage investments in this direction.

Another of the book’s main conclusions is that the development of solid ties between Latin American countries and international electric operators should be based on long-term strategic partnerships that include mechanisms that clearly establish the framework for the insertion of foreign companies in local industries.

“One of the main lessons from the book is the need to de-ideologize this kind of analysis: just as it is a mistake to believe that foreign investment is beneficial per se, it is also wrong to base any analysis on a ‘perverse’ logic that says the contrary,” explains Rozas.

“Experience shows that if a set of measures is established as part of a strategic plan, it can result in the synergies needed to generate a series of forward leaps in each area,” he added.

The book, published by ECLAC and LOM Editions, analyses the reasons behind the internationalization and expansion of three Spanish electric conglomerates, the strategies for insertion they adopted and the decisions they made to address critical scenarios at the beginning of this decade. It also outlines the characteristics of the insertion of these companies in the region today.