The 20 largest cross-border mergers and acquisitions in Latin America in 2019

Much of the mergers and acquisitions in Latin America and the Caribbean in recent years were driven by the sale of assets for the purpose of restructuring and reducing the debt of some Brazilian transnational companies, and by the introduction of reforms aimed at increasing competition. in some regulated markets, as happened in the gas distribution sector in 2019.

Despite this, according to the Economic Commission for Latin America and the Caribbean (ECLAC), in 2019 the amount of deals completed fell 9 percent.

According to the report of Foreign Direct Investment in Latin America and the Caribbean 2020, released by ECLAC, the largest acquisition in 2019 was the privatization of Transportadora Associada de Gás S.A. (TAG): Petrobras sold 90% of the share capital of that company for $ 8.6 billion to a consortium formed by the French Engie and the Canadian public investment fund Caisse de dépôt et placement du Québec (CDPQ).

In July 2020, the consortium acquired the remaining 10%, so that now the French Engie owns 65% of TAG (half through its Brazilian subsidiary), and the Canadian CDPQ, the remaining 35%.

This sale is part of the natural gas market opening plan, which aims to increase competition to lower prices. It was by virtue of this plan that the state oil company Petrobras signed an agreement with the Administrative Council for Economic Defense (CADE), which is Brazil’s antitrust authority, through which it promised to sell, from then until 2021, a large part of the assets it had in the national gas transportation and distribution sector.

Mergers and acquisitions

The same report states that prior to the crisis caused by the pandemic, investment announcements were growing again in Brazil, after reaching the lowest values ​​of the decade in 2016 and 2017.

In 2019, the greatest dynamism was observed in the renewable energy sector, with hydraulic, wind and solar energy projects, and in the hydrocarbon sector, with projects mainly in the gas market, as well as in the automotive industry. in the iron mining sector, and in the transport and storage sector.

The largest announcement was made by the Italian-American company Fiat Chrysler Automobiles (FCA), which announced a project that involved expanding its activities in the Goiana Automotive Complex, with an associated investment of close to 1.8 billion dollars.

Despite the pandemic, the company confirmed in July 2020 its interest in continuing to expand its investments.

Origin of investments

In 2019, mergers and acquisitions by the United States in the region declined, with the United States ranking third after France and Canada, whose presence increased due to mega-acquisitions by companies from those two countries.

The operations of Chinese companies, meanwhile, also declined that year, but the amount of investment announcements made by them was higher than the annual average for the decade. This was due, on the one hand, to the fact that the number of advertisements made doubled (90 advertisements in 2019 compared to 42 in the average for the period 2014-2018) and, on the other hand, to the fact that some large-scale advertisements were made.

For example, COSCO Shipping Ports acquired 60% of the company Terminales Portuarios Chancay (TPCH) in Peru and announced investments for 3 billion dollars to build a multipurpose port terminal.

In Brazil, on the other hand, an agreement was signed with the Government of Pará for the purpose of building a railway corridor to the port of Barcarena with the aim of facilitating exports of iron and other natural resources.

This corridor, which represents an estimated investment of about 1,400 million dollars, is not without controversy due to its environmental impact.

China has also made various investments in infrastructure in Latin America and the Caribbean that will allow it to have greater control of the supply that originates in the region.

This growth positioned the country among the main investors in Latin America and the Caribbean, which added to its status as a preponderant trading partner. Considering the accumulated value of the decade, China and Hong Kong (Special Administrative Region of China) ranked second after the United States as the origin of cross-border mergers and acquisitions, and represented a greater volume of business than other historical investors in the region, such as Spain, Canada, the United Kingdom, or France.

Transport and logistics

The investment modality is one of the differences between China’s investments, which occupied a relevant position in the second half of the decade, and those of the region’s historical investors (the triad made up of the United States, the European Union and Japan).

In the triad companies, the amounts associated with investment announcements were higher than those of mergers and acquisitions; In Chinese companies, on the other hand, the amounts associated with the latter were higher than those of the advertisements, except in 2019.

These figures do not include construction contracts or concessions granted to Chinese companies, especially in the construction and transport and logistics sectors, as these do not constitute FDI in themselves.

However, this is a form of participation of Chinese companies in the economies of Latin America and the Caribbean that remained high until the end of the decade.

On the other hand, the amount associated with mergers and acquisitions fell by 42% from the first to the second half of the decade due to the decrease in operations carried out by companies in Europe, Asia, particularly Japan and Singapore, and of Latin America and the Caribbean.

Mergers and acquisitions carried out by European companies decreased in all sectors, except for the supply of electricity, gas and water; the biggest drops were in mining, manufacturing and telecommunications.

Thus, the share of Europe went from 38% in the 2010-2014 period to 27% in the 2015-2019 period.

Economic powers, mergers and acquisitions

The amount associated with mergers and acquisitions carried out by companies from China and North America, on the other hand, remained stable, and the participation of these origins increased from one five-year period to the next.

In 2019, however, China’s expansion through mergers and acquisitions slowed down considerably in the world, and this was also evident in the region.

Although, on average, from 2015 to 2019, the operations of Chinese companies represented 18% of the amount of cross-border mergers and acquisitions carried out in the region, the weight of these operations decreased in the last three years, since they represented a 34% of that amount in 2017, 20% in 2018 and only 9% in 2019