How Multilatinas Are Taking Over the World

Latin America’s economic renaissance over the past two decades has fostered the emergence of a new generation of corporate champions with regional, and sometimes global, ambitions.


HERE’S A TEST OF YOUR GLOBAL BUSINESS IQ. Where would you find each of the following: the world’s largest baker, the leading iron miner and the second most valuable airline by market capitalization?

Answer: Latin America. Mexico’s Grupo Bimbo has built the world’s largest bakery products company through a string of acquisitions, Brazil’s Vale is the biggest producer of iron ore, and Latam Airlines Group, a Chilean-controlled company that combines Chile’s LAN and Brazil’s TAM airlines, is the continent’s dominant carrier, with a stock market value of $11.4 billion, second only to Delta Air Lines.

These companies are far from alone. Latin America’s economic renaissance over the past two decades has fostered the emergence of a new generation of corporate champions with regional, and sometimes global, ambitions.

The phenomenon isn’t entirely new. Mexico’s Cemex embarked on an acquisition spree that made it one of the world’s leading cement producers two decades ago, entering the Spanish market in 1992 and establishing a major presence in the U.S. in 2000. América Móvil, the wireless operator that has helped make its controlling shareholder, Carlos Slim, the world’s richest man, branched out from Mexico more than a decade ago to become the leading mobile telephone company across Latin America.


What’s striking today, however, are the scale and diversity of the “multilatinas,” as these multinational companies are called. In 1999 fewer than half of the largest companies in Latin America were homegrown, according to the Inter-American Development Bank. Today more than three out of four of the region’s top 500 companies are Latin American–owned. Roughly 100 of them qualify as multilatinas by virtue of having at least 40 percent of their investments outside their home countries.

“There is a widespread misconception that most multilatinas are linked to the exploitation of natural resources and commodities,” says Javier Santiso, a Barcelona, Spain–based economist and author of the recently published book The Decade of the Multilatinas. “In fact, these companies are more often in high-tech industries, telecommunications, retailing.”

Brazil’s Embraer, for instance, is the world’s third-largest manufacturer of commercial aircraft after Airbus and Boeing Co., while steelmaker Gerdau has plants in 14 countries, including the U.S. and India, and gets 63 percent of its sales from outside Brazil. In Chile retailers Falabella and Cencosud are rapidly expanding their chains across Latin America, while copper miner Antofagasta has invested in mines in the U.S. and Canada. Mexico’s Grupo Elektra provides financial services and sells furniture, electronics and household appliances in more than 6,000 outlets across the Americas.

Multilatinas are impressive not only for their swelling numbers but because they represent a sea change in the economic relationship between Latin America and the developed nations of the Northern Hemisphere. “You can clearly see the assertiveness of these Latin American businesses, their increasingly global thinking,” says Luís Alberto Moreno, president of the IADB. “As European and United States investors retrench, you see multilatinas buying their Latin American assets: businesses, banks, pension funds. That speaks volumes on what is happening in relations between Latin America and the developed world.”

The most dramatic shift has occurred between Spain and its former colonies. Spanish banks, telecom and energy companies, and other enterprises leveraged their cultural and historical ties with Latin America to become the largest foreign investors in the region in the 1990s and early 2000s. Now the tide is reversing. Spain’s Banco Santander, looking to shore up its capital adequacy in the face of recession and a property crash at home, raised $8 billion in 2009 by selling a minority stake in its Brazilian subsidiary and $4.1 billion in 2011 by selling part of its Mexican unit. In December 2011, Santander sold its Colombian subsidiary for $1.16 billion to Corpbanca, a bank previously unknown outside its home market in Chile but fast making a splash across the continent.

Many of today’s multilatinas were forged during Latin America’s so-called lost decade of the 1980s, when the region’s debt crisis, high inflation rates, extensive state control over the economy and political instability caused standards of living to stagnate, if not decline. Companies that managed to survive and grow through that turbulent period tended to be family-owned and largely debt-free.

The situation began to improve in the 1990s as governments adopted more-market-oriented policies. Stronger private companies took advantage of a wave of privatizations to buy up assets at bargain prices and establish dominant market positions that provided a springboard for foreign expansion.

The new wave of multilatinas is part of a broader trend of regional and global champions arising from emerging markets, including such companies as South Korea’s Samsung Electronics Co., Chinese computer maker Lenovo Group and telecom equipment provider Huawei Technologies Co., and Indian conglomerates like Tata Group. Few multilatinas have the global scale of Asia’s emerging giants, but their numbers are proliferating and they are attracting more and more attention from investors, analysts say.

“The lines between multinationals from emerging markets and those from developed countries are blurring,” says Adam Kutas, portfolio manager for the Fidelity Latin America Fund in London. “As a stock picker you have to focus less on labels and more on the company itself and the returns it is generating.”

Whether based in Mexico, Brazil or Chile, multilatinas have benefited from a stable macroeconomic and political climate. These companies enjoy access to cheap capital thanks mainly to the development of local markets. Latin America currently boasts almost $1 trillion in assets under management by local private pension funds and insurance companies. “It means multilatinas aren’t as beholden as they used to be to the New York and London capital markets,” says Axel Christensen, who oversees BlackRock’s South American operations outside Brazil.

Strong sovereign credit ratings in their home countries have allowed multilatinas to sell corporate bonds with low interest rates and lengthy maturities. Last October the Chilean government issued a $1 billion, ten-year bond at 2.38 percent. “It was the lowest rate that any emerging market has ever received on a comparable bond,” says Finance Minister Felipe Larraín. “This is a real competitive advantage for Chilean multilatinas because they also will be able to raise capital at a very low cost, and that allows them to further expand in the region.”  Yield spreads on ten-year Chilean blue-chip corporate bonds recently averaged 320 basis points more than U.S. Treasuries, according to Banco Central de Chile.

In Mexico, América Móvil, Cemex and Grupo Televisa, a giant broadcaster, are among the most recognizable multinationals. Grupo Bimbo, meanwhile, has quietly built an impressive global business in the profitable but low-profile sector of baking. It dominates the packaged-bread market in Mexico and the U.S. and has a big presence in Central and South America and Spain.

“Bimbo is just all about baking,” says Luís Miranda, an analyst for Santander Investment Securities in Mexico City. “They are totally focused on their core business: baking goods and packaged bread.”

The company got its start in 1928, when the Servitje family, immigrants from Catalonia, opened a bakery named El Molino, or the mill, in downtown Mexico City. Lorenzo Servitje took over the establishment in 1936, at the age of 18, after his father suddenly died. In 1945, Lorenzo and several associates founded Panificadora Bimbo. The name, which the owners have wisely avoided trying to export to the U.S. or other anglophone countries, came from a cartoon character, a cuddly white teddy bear that was supposed to represent the whiteness of the company’s sliced bread.

In the 1950s, Bimbo added cakes and pastries and extended its distribution to other major Mexican cities. Over the next three decades, the outfit opened factories throughout the country and invested heavily in modern equipment and an unparalleled distribution network. It did so, moreover, entirely with retained earnings. The company went public on the Bolsa Mexicana de Valores in 1980, but it declined to take on debt, a strategy that allowed it to prosper even as Mexico went into default in 1982, triggering a decadelong debt crisis. By the mid-1980s, Bimbo had reached its current 85 percent share of the packaged-bread market in Mexico. “I know of no other country where a single baker dominates the market so overwhelmingly,” says Miranda. This virtual monopoly has helped Bimbo achieve a return on equity of between 18 and 20 percent in Mexico, compared with average returns of 13 to 15 percent for major bakers elsewhere.

With its home market saturated, Bimbo looked abroad for expansion, a strategy that accelerated after Lorenzo Servitje, who had run the company autocratically for almost 60 years, turned over the reins to his son Roberto in 1994. Bimbo opened plants in Argentina, Chile and Guatemala in the early 1990s, then stuck a toe in the Brazilian and U.S. markets in 2001 and 2002, respectively. It made its biggest move in 2008, when it agreed to pay $2.4 billion for Weston Foods, a subsidiary of George Weston Ltd. The acquisition made Bimbo the largest bakery in the U.S., giving it brands including Arnold Bread and Thomas’ English Muffins, as well as a 30 percent share of the American packaged-bread market. Two years later the company extended its U.S. franchise by buying Sara Lee Corp.’s bakery products for $959 million. Bimbo’s U.S. appetite may not be sated. Speculation persists that the company, which controls 13 percent of the U.S. packaged-cake market, may acquire bankrupt Hostess Brands, which has a 17 percent market share.

High grain prices and the cost of integrating its U.S. acquisitions have hurt Bimbo’s bottom line. The company reported a 55.6 percent decline in profits in the first nine months of 2012, to $147 million; revenue rose 38.9 percent, to $10 billion. The U.S. overtook Mexico as the company’s biggest market, generating $4.4 billion in sales in the period, compared with $4.1 billion for Mexico. Bimbo’s share price stood at 33.39 pesos ($2.66) on February 22, up 13 percent from a year earlier and up 785 percent over the past decade. The shares trade at 26 times estimated 2013 earnings, a 66 percent premium to the Mexican stock market.

Many analysts expect the U.S. purchases to pay off before long. “Bimbo will benefit because the U.S. is performing better than expected,” says José Costa Buck, Latin America Fund manager at

T. Rowe Price Group. “Our biggest problem with Bimbo is that only a low volume of their shares are available on the market.”  Yet some are skeptical, contending that the U.S. offers less growth potential and more competition than many emerging markets. “Typically, I prefer multilatinas that use the strong cash flow from their home markets to go into faster-growing markets, like Peru and Colombia,” says Fidelity’s Kutas.

IN CONTRAST TO MEXICO, which has a large domestic market of 112 million inhabitants and a giant neighbor to the north, Chile is a small and geographically isolated country of only 17 million people. But those seeming disadvantages have prodded Chilean companies to venture abroad in search of growth and scale, creating a vibrant and diverse group of multinationals. Two such companies, store chains Falabella and Cencosud, are taking their model of finance-driven retailing across Latin America.

Falabella’s department store at the Portal la Dehesa shopping mall, on the outskirts of Santiago, shows how powerful that model can be. The store’s nerve center is a windowless corner of the second floor where Falabella brings together its credit card, banking, insurance and travel operations. These financial services account for more than half of the department store chain’s net income. Across the entire company, which also operates supermarkets and home improvement stores and has outlets in Argentina, Colombia and Peru, financial services generate nearly 40 percent of net income.

“Financial services help our stores to sell their products, and the stores help increase our financial services,” says Gastón Bottazzini, head of Falabella’s retail financing. “This ensures a permanent relationship with our clients.”

That relationship often begins when a bride and groom visit a financial services alcove like the one at Portal la Dehesa and sit down at one end of a semicircle of sales desks. To launch themselves into middle-class bliss, the couple need only move from one desk to another: Banco Falabella for a home mortgage, Seguros Falabella for car and life insurance, Viajes Falabella to arrange and finance a honeymoon trip, and Tarjeta CMR Falabella to obtain a credit card for use at Falabella’s department stores, Sodimac home improvement centers and Tottus supermarkets.

Portal la Dehesa, like most Chilean malls, also harbors rival retailers such as Cencosud and Ripley, which offer a similar gamut of financial services. A sophisticated use of credit maintains the loyalty of clients and gives Chilean retailers a profound understanding of consumer tastes.

More than 50 percent of purchases at the big retailers are made with a store credit card. Interest rates can reach as high as 40 percent annually on card balances, yet the companies’ delinquency rates average only about 4 percent. “For many Chileans these retailer credit cards are their only access to credit, so they will make every effort to keep up payments,” says Sergio Olavarrieta, director of the University of Chile’s School of Economics and Management.

A strong knowledge of consumer credit histories and shopping tastes has enabled Falabella, Cencosud and Ripley to fend off foreign retailers. Texas-based J.C. Penney Co. spent eight years in Chile before giving up in 1999. France’s Carrefour sold its seven Chilean stores, built up over six years, to local retailer D&S in 2004. D&S, in turn, was acquired in 2009 by Wal-Mart Stores, which hasn’t yet mounted a threat to local players.

Chilean retailers learned from both the successes and failures of foreign heavyweights. “The arrival of international competitors really accelerated and perfected the management techniques of retailers and brought us closer to our clients,” says Enrique Gundermann, who heads Falabella’s home improvement division. Falabella studied the financial services business of U.K. supermarket chain Tesco to improve its own offerings. It also profited from the mistakes in Chile of its erstwhile U.S. partner, Home Depot. The two companies had agreed to set up a 50-50 joint venture in 1997, but, disappointed with its returns, Home Depot sold out to Falabella four years later.

According to Chilean retail experts, Home Depot aimed its marketing at the wrong sex. “In the U.S. men do a lot of the shopping in hardware stores, while in Chile women are the shoppers and prefer a more feminine, supermarket look,” Olavarrieta says. That’s just the environment that Falabella created in its highly profitable Sodimac chain, which replaced the Home Depot stores.

Chilean retailers also owe their success to the country’s long-standing economic reforms. Free trade meant that Falabella and other department stores were allowed to import anything virtually tax-free. And decades of solid economic growth spawned a mass of eager shoppers. “If you walk into a Chilean department store, you will see pretty much all the global brands,” says Andrea Teixeira, a J.P. Morgan analyst who covers the Chilean retail sector. “And the country has a huge middle class, which allows the department stores to sell all those goods.”

With their small domestic market largely saturated, the two biggest retail conglomerates — Falabella and Cencosud — are ramping up their foreign expansion. Their strategies reflect their different roots.

Falabella built its empire on department stores, beginning in 1937 in Santiago, then expanded into home improvement stores and supermarkets. Today the company boasts 153 retail outlets in Chile and 125 in other Latin American countries, including Argentina, Colombia and Peru.

Over the next five years, Falabella plans to invest $3.9 billion to add 231 stores and 20 malls in Chile, Colombia and Peru. Noticeably absent from the list is Brazil, which Falabella has avoided mainly because of import restrictions on consumer products. For the same reason, the company doesn’t plan much expansion in Argentina, where it has operated for seven years (and where Cencosud has its largest foreign presence). “Falabella’s expansion strategy has been a little better than Cencosud’s,” says Will Landers, Latin America investment manager for BlackRock. The freezing of supermarket prices and the lack of credible official statistics in Argentina, he adds, “make us uncomfortable with having a lot of exposure to the Argentinean economy right now.”

By contrast, Cencosud began as a supermarket chain in 1976, then spread into home improvement centers and, only since 2005, into department stores. Its Jumbo supermarkets, often sharing mall space with its Easy home improvement centers, have led Cencosud’s expansion into Argentina, Brazil, Colombia and Peru. In the past three years, the company has acquired three supermarket chains — Prezunic, Perini and Bretas — in Brazil and Johnson’s department store chain in Chile. The company’s most dramatic foreign foray was last year’s purchase of Carrefour’s 72 supermarkets and 16 home improvement centers in Colombia, for $2.5 billion. Cencosud now has 311 retail outlets in Chile and 597 in the rest of Latin America. In December, CEO Daniel Rodríguez said the company would shift its focus from acquisitions to lowering its debt and growing organically.

The acquisition spree has allowed Cencosud to overtake Falabella as Chile’s biggest retailer. In the first three quarters of 2012, Cencosud reported net income of $325 million, down 53.8 percent from the same period a year earlier. Sales rose 22.7 percent, to $13.5 billion. During the same period Falabella had net income of $475 million, down 19.9 percent from a year earlier; sales were up 17.1 percent, to $8.9 billion. Both companies attributed the earnings declines to the cost of their recent acquisitions. International operations account for 43 percent of Falabella’s revenue and 41 percent of Cencosud’s.

Falabella has the more sophisticated financial services operation, with near-replicas of its Portal la Dehesa alcove showing up in its retail outlets in other Latin American countries. “In all markets that Falabella operates, we are building a substantial financial services operation comparable to the one in Chile,” says retail financing chief Bottazzini. Already half of the company’s 4 million active credit card customers are abroad. Chile continues to account for 70 percent of client loans, but lending in Peru and Colombia is growing at twice the pace as in Chile.

The company has noticed that retailers outside Latin America are losing strength in financial services. “So we are looking to follow the model of Capital One, which means acquiring banks and moving into a much broader set of financial services for credit card holders,” says Bottazzini. A pioneering example of this initiative is a stand-alone financial services shop that Falabella has opened on a downtown Santiago pedestrian mall, Paseo Ahumada; the outlet combines the company’s branded credit card operation, travel agency and insurance firm, as well as Banco Falabella.

Investors welcome the deeper push into financial services. “Falabella already has a strong base of captive clients who regularly come to their stores,” says BlackRock’s Landers. “So it makes good sense if they are able to build on that and expand their financial services.”

WHILE FALABELLA IS STILL in the embryonic stage of turning itself into a full-service bank in Chile, another financial entity, Corpbanca, has recently become the first Chilean bank to acquire foreign lenders. Surrounded in its home market by larger banks — Santander, Banco de Chile, Banco Estado and Banco de Crédito e Inversiones — that are more prominent capital markets issuers, Corpbanca long remained under the radar of many foreign investors. But its investments over the past 14 months in fast-growing Colombia, where it bought Santander’s subsidiary and a local bank, have vaulted Corpbanca into prominence.

The Saieh family, which controls Corpbanca, has roots in both Chile and Colombia. The Saiehs were a Syrian-Lebanese couple who settled in Colombia after World War II, then moved to Chile in the 1950s. They opened a general store called Casa Saieh in Talca, an agribusiness town 160 miles south of Santiago. Their son, Álvaro Saieh, earned a Ph.D. in economics at the University of Chicago and combined a sterling academic career with eye-popping investment successes. In 1986 he was approached by several Chilean businessmen, mainly relatives, who asked him to find a bank to buy. Chile was just emerging from a brutal financial crisis that had led to the nationalization of most banks, and the government was eager to auction them off.

After looking over four banks, Saieh decided on Banco Osorno; his investment group bought it for $10 million. Only a decade later, in 1996, the group sold it to Santander for $1 billion. Led by Álvaro, Grupo Saieh has gone on to become a multibillion-dollar conglomerate in publishing and broadcasting, wireless communications, bottling, supermarkets and, once again, banking. In 1995, Grupo Saieh acquired another troubled bank, Banco Concepción, and turned it into Corpbanca, whose current chairman is Álvaro’s son, Jorge Andrés Saieh.

Now Chile’s fifth-largest bank, with $27.3 billion in assets, Corpbanca focuses on corporate banking, with 78 percent of its $20.4 billion credit portfolio in business loans. Its net income for the first nine months of 2012 was $54.5 million, exceeding the $52 million earned in all of 2011.

Corpbanca is aiming to expand its Chilean consumer banking business by offering loans and credit cards through the group’s supermarkets and department stores. Its Unimarc chain operates more than 20 percent of Chile’s supermarkets and has allowed Corpbanca to install its ATMs throughout the country. “This distribution network will help us reduce the gap that the bigger banks enjoy through their larger number of branches,” says chairman Saieh.

That won’t be easy, though, given the big lead enjoyed by Corpbanca’s rivals, analysts say. “It’s going to be quite a challenge to follow in Falabella’s footsteps,” says Jeanne Del Casino, senior credit officer for Moody’s Investors Service. “What Corpbanca wants to do is use Grupo Saieh stores as distribution outlets, so they don’t have to go out and build brick-and-mortar branches.”

The bank has taken on an even bigger challenge in becoming the first Chilean bank to make a foreign acquisition. In December 2011 it purchased 95 percent of Santander’s Colombian subsidiary for $1.16 billion. It followed that splash with the $1.3 billion purchase last October of 100 percent of Colombia’s Helm Bank. The two deals have made Corpbanca Colombia, its local brand, the nation’s fifth-largest bank, with $12 billion in assets.

“For us Colombia offers the same opportunities that Chile did two decades ago,” says Saieh. “It has low bank penetration, a fast-growing economy and a banking industry that’s fundamentally sound but needs to become more efficient.”

As in Chile, Corpbanca is focusing on corporate banking in Colombia, with some 60 percent of its portfolio committed to business loans. Growth prospects are tantalizing. The country has a population of 46 million, nearly three times the size of Chile’s. It is seriously underbanked, with total bank loans amounting to only 35 percent of GDP, less than half of Chile’s 74 percent, which is the highest ratio in Latin America. Net interest margins are fat at about 5 percent, well ahead of Chile’s 3 percent.

Executives say the bank is focusing on developing the Colombian business and has no plans to expand into other countries. To finance its expansion, Corpbanca in October issued $253 million of 26-year bonds at a yield of 4.48 percent and $47 million of 30-year bonds at 4.28 percent. Then, in early November, Corpbanca shareholders approved a $600 million share issue to help finance the acquisition of Helm Bank and allow the World Bank’s private-sector arm, International Finance Corp., to buy a 5 percent stake for $225 million. Besides IFC, Corpbanca’s biggest outside shareholder is Colombia’s Grupo Santo Domingo, with a 2.7 percent stake. Grupo Saieh remains the majority shareholder, with 52.9 percent.

BRAZIL, WITH 200 million inhabitants, remains the sleeping giant of multilatinas. Protectionism has encouraged insularity. Chile developed world-class retailers because it allows duty-free imports of consumer products. “Considering the country’s population, Brazilian retailers should be dominant in the region,” says Chilean economist Olavarrieta. “But they are underdeveloped compared to Chilean retailers because they depend on local suppliers and cannot import freely.”

Even more stunning than the supremacy of Chilean retailers is the success of Chile’s LAN Airlines. After systematically acquiring rival airlines in Peru, Ecuador, Argentina and Colombia over the past decade, LAN merged last June with Brazil’s biggest airline, TAM Linhas Aéreas, to create Latam. The $3 billion share-swap deal took almost two years to win regulatory approval.

Latam is firmly in the hands of LAN’s major shareholders, Chile’s Cueto family, which controls about 70 percent of voting shares. Enrique Cueto runs the carrier as CEO; his younger brother, Ignacio, runs LAN.  When the two airlines announced their intention to merge in August 2010, LAN had a market cap of $9.25 billion, compared with TAM’s $2.5 billion, even though the latter carried almost twice as many passengers and had 40 percent more aircraft. LAN flew 3.5 times more cargo, though, and was consistently profitable. The carrier posted a net profit of $320 million in 2011, while TAM had a net loss of $195 million.

Latam aims to generate $700 million a year in cost savings by 2016 through joint procurement of jet fuel and supplies and a large-scale expansion of its cargo business. “LAN is among the top managements in emerging-markets airlines,” says BlackRock’s Landers. “They will use Brazil to beef up their cargo operation, which has been the most profitable part of LAN’s business.”

A bigger challenge will be taking market share in Brazil from upstart rivals GOL Linhas Aéreas Inteligentes and Azul Linhas Aéreas while improving margins. The round-trip shuttle fare between São Paulo and Rio de Janeiro is as much as $900 — very steep for a 40-minute flight — “but nobody is making a lot of money from the other domestic routes because Brazil is the only Latin American country with strong domestic competition,” says  T. Rowe Price fund manager Costa Buck.

Success in Brazil might also lead to further acquisitions by Latam, with Panama’s Copa Airlines seen as a possible candidate. But for now the company appears focused on regaining the triple-B credit rating that LAN enjoyed before the merger, which made it one of the few international airlines with an investment-grade rating. (Fitch Ratings rates the carrier at BB.) To reduce debt and help achieve this goal, the company suspended dividends in the second half of 2012.

The merger traffic between Brazil and Chile isn’t all one-way. The recent acquisition of Chilean investment bank Celfin Capital by São Paulo–based BTG Pactual reflects Brazilian companies’ growing appetite for foreign acquisitions.

In June 2011, André Esteves, controlling shareholder and CEO of BTG Pactual, approached Celfin’s co-founder and managing director, Jorge Errázuriz, about a deal. The two had known each other for seven years and had often spoken about how illogical it was for Latin American companies to continue going to New York or London to raise capital. “In Latin America we have the savings pool, the know-how and a lot of potentially lucrative investment projects,” Errázuriz recalls Esteves telling him. “This is the right moment to launch a strong Latin America–wide investment bank.”

Errázuriz had been thinking along the same lines. In addition to Chile, where it was the second-largest investment bank, Celfin already operated in Peru and Colombia, but it had only $150 million in capital. “We would not have been able to reach our goal of a Latin America–wide bank on our own for another ten or 15 years,” says Errázuriz, 60. “So we were all ears to BTG.”

The Brazilian firm had just raised $2.8 billion by selling an 18 percent share to a group of investors that included three sovereign wealth funds — China Investment Corp., Government of Singapore Investment Corp. and the Abu Dhabi Investment Authority — New York–based investment firm J.C. Flowers & Co., the Ontario Teachers’ Pension Plan and families such as Italy’s Agnellis, the U.K.’s Rothschilds and Colombia’s Santo Domingos.

Esteves told Errázuriz that he intended to use the capital from the stake sale to expand in Latin America. Although he ultimately hopes to go as far as Mexico, his immediate priorities were Chile, Colombia and Peru — precisely the markets where Celfin was active. He proposed a merger between Celfin and BTG Pactual.

Given BTG’s size (the IPO valued the bank at $15 billion), Errázuriz had no illusions about which investment bank would be in the driver’s seat, but he was delighted that the share exchange valued Celfin at $300 million, twice the bank’s market cap. Errázuriz and Celfin co-founder and president Juan Andrés Camus each own 32 percent of the firm.

Errázuriz is also happy with Celfin’s new clout in the region. “We have won mandates that were unthinkable for Celfin working alone,” he says. In December, Celfin joined BTG Pactual in arranging a secondary share offering on the international markets for Sonda, a Chilean software company that makes about 50 percent of its revenue in Brazil. Celfin acted as the issuing agent, while BTG and Goldman Sachs Group were joint book runners on the $861 million deal.

There have been frustrations for Celfin. The merger deal with BTG was signed in February 2012. But it took the Banco Central do Brasil eight more months to grant approval. “To me that indicates the bureaucratic slowness and inefficiency in Brazil compared to Chile,” says Errázuriz.

Nor is such foot-dragging confined to the financial services sector. According to the World Bank, it takes 119 days, on average, to open a business in Brazil, more than twice as long as for Latin America as a whole. Chile, by contrast, is the country with the least red tape. And beginning in May the process to set up a new company will be free and online, and it will take a single day.

But Errázuriz sees a silver lining. “It would require just a few bureaucratic adjustments to create enormous opportunities for Brazilian multilatinas at home and in the region,” he says. “And then, watch out.” • •