Ever since the 1990s, Spanish investors have been making a major impact on Latin America. Endesa, Banco Santander, BBVA and Telefónica invested about 74.5 billion euros in Latin America between 1993 and 2003. Although this situation benefits both sides, Latin Americans have a largely negative view of Spanish investments.


In his study, “The Image of Spain and Its Investments in Latin America,” Javier Noya, a political science professor at the Complutense University of Madrid, investigates the impact of intangible factors on the “made-in-Spain” brand. Noya also looks into the impact of capital flows into the region on the Spanish brand. 


Noya emphasizes the role of expectations and stereotypes in creating this image, and the fact that capital flows from Spain have been in high-profile sectors. Spanish investments have been especially visible because they have occurred mostly during one brief period. Unlike capital from the United States, Spanish capital arrived in Latin America during one particular time, the middle of the 1990s.  For the Latin American public, “this created the illusion of a flood,” according to Noya.


Spain’s investments in Latin America are also concentrated in a few locations – Chile, Brazil, Mexico and, especially, Argentina, which took in 60% of Spain’s foreign direct investments in 1999. As a result, says Noya, “You can anticipate that the impact on Spain’s image varies from country to country.” Moreover, Spain’s investments are concentrated in a few sectors – such as financial services, telecommunications and energy – where “people are extremely sensitive, especially in countries with a more nationalistic, populist culture,” writes Noya.


Finally, the political landscape provided extra visibility. “The arrival of capital took place in a context of deregulation and privatization of public services in Latin America,” notes Noya. At first, Spanish companies benefited from the privatization process. Later on, however, they suffered from widespread disenchantment with the process.


According to a study by Latinobarómetro 2003, 37% of Latin Americans believed Spanish investments were not beneficial for their countries, compared with only 30% who thought they were beneficial. The greatest discontent was in Argentina.


Changing Image of Spain

During the 1980s, before Spanish industry began to move across the Atlantic, Latin Americans saw Spain as the closest country in Europe. They did not view Spain as a country with financial power. The arrival of Spanish firms surprised Latin Americans and “contradicted the image of Spain in the region,” writes Noya.


Nevertheless, Spain’s investment record has not damaged the positive image of Spain itself in Latin America. According to Latinobarómetro 2003, nearly 60% of respondents have a positive image of Spain. Spain’s rating is highest in Paraguay, Uruguay and Colombia. Respondents in Venezuela, Mexico and Bolivia gave Spain lower grades.


To explain the origins of Spain’s positive image, Noya cites two research projects carried out in 1996 and 1999 by FCECRA, the foundation of Argentina’s chamber of commerce. The studies found Argentines were more sympathetic to Spain than to any other foreign country. Strong historical and cultural ties between Latin America and Spain were the key.


According to a study by Young & Rubicam, Spanish brands get low global ratings for quality but there are differences from region to region. Spain’s most favorable ratings are in Europe. In Latin America, unlike Europe, Spain is viewed with “cultural proximity and emotional distance,” says the study. Europeans see Spain as “a sorceress” (amusing, enchanting and sensual); Americans see Spain as “an entertainer” (amusing and original); and Latin Americans see Spain as “a warrior” (prestigious and intelligent, but aggressive and tough.) Without doubt, “Spanish companies are seen as new conquistadores [conquerors],” notes Noya.


“Dissatisfaction with Spanish investments does not translate into lower ratings for Spain or for Spaniards,” notes Noya. Dissatisfaction has not spread to the point where it contaminates Spain’s overall image. In Chile, which has taken in the most investment from Spain, the image of Spain has actually improved. Only in Mexico and Venezuela do lower ratings for Spanish investments go hand-in-hand with lower ratings for Spain as a country.


The Illusion of Cultural Continuity

The poor image of Spanish investments is often rooted in negative perceptions of all foreign investment and market economies. In countries with higher levels of foreign investment, the image of Spanish investments is worse; in those countries that have yet to deregulate markets, there is less criticism of investment. “The economic and political culture of recipient countries affects how people rate Spanish investments.” Nevertheless, Noya notes, “In some privatized sectors, there is dissatisfaction with specific services offered by Spanish companies.”

The FCECRA studies show deeper causes for the poor image of Spanish investments in Latin America: Monopolies have undermined competition and raised prices without improving the quality of services, as in the case of Argentina, where profits have been sent back to Spain, rather than used to generate new jobs.


Some companies lack social and ethical responsibility, and the management of some privatized firms is confused, the research shows. Argentina’s political leaders have been discredited by several corruption cases, leaving a bad impression on investors and discrediting Spanish companies as well as the politicians. “Spanish companies don’t have the kind of impact on local institutions that reflects the degree to which they have invested [in Latin America],” writes Noya. Spanish companies have not created a common communications strategy. “They have failed to create emotional bonds with the public.”


By and large, Spanish companies have failed to take advantage of the historical, cultural and emotional ties that bind Spain and Latin America. Those ties still represent an enormous source of social capital. “The [common] culture created the illusion of continuity between the two markets,” notes Noya. “Spanish companies were quite confident” they would succeed.


Spanish firms were also unaware of Latin Americans’ high expectations regarding corporate social responsibility. Because of their cultural and linguistic affinities, Latin Americans expected Spanish investors to behave differently than other investors. U.S. investors were popularly associated with improvements in working conditions and salaries, but U.S. companies showed little sensitivity and commitment to local problems. “On the contrary, Spanish investors were expected to be more committed to the overall society,” writes Noya.


“Once again, Spain has become a conquistador – a conqueror. Spain was expected to be more humanitarian than the United States. There was a dis-connect between expectations and perceptions because of the cultural proximity between Spain and Latin America, which doesn’t exist in the case of the United States,” adds Noya.


Promoting ‘Made in Spain

Ultimately, Spain surprised Latin Americans who did not realize Spain was as advanced as other developed countries. Moreover, many Latin Americans were overconfident that investments from Spain would lead to improvements in living conditions.


Spain should do a better job of managing the social capital it retains in the region, writes Noya. The negative image of its investments has not yet contaminated Spain’s overall image. “Collaboration between government and industry in Spain is required, in order to strengthen the ‘made-in-Spain’ brand in the region.”


Some Spanish companies in Latin America are making the mistake of trying to disassociate from Spain, according to Noya. Long term, however, “Every [Spanish] company could be damaged, especially in those sectors where a strong, clearly differentiated country brand can help a great deal to open minds of consumers.”


To prevent damage to Spain’s overall image, Noya recommends that the Spanish government “intervene to promote a country brand that helps everyone.” In his view, “strengthening Spain’s image in Latin America would reduce the damage done by the lack of coordination. It would wind up helping every company.”


According to Noya, the Spanish government should demand that Spanish companies take greater social responsibility in the region. A few days before the latest summit between the European Union and Latin America, the Spanish government mentioned the possibility of creating a code of conduct for regulating the behavior of multinationals. Noya believes that it is equally legitimate to demand that the Spanish government invest more resources in improving the image of Spain throughout Latin America. “That is the only way to achieve a necessary cross-fertilization of everything that is Spanish in the region.”