By Anthony Faiola
Washington Post Foreign Service
Monday, February 14, 2000; Page A01
SANTIAGO, Chile—Half a millennium ago, Spanish conquistadors swept
across a great southern swath of the New World, plundering, colonizing
and fattening royal coffers with native gold. Now, more than 100 years
after the last of their rebellious colonies won independence, Spain is back
in Latin America--doing with mergers and acquisitions what it once did
with swords and gunpowder.
To understand the depth of what's been dubbed the reconquista--or
reconquest--of Latin America, look no further than Humberto Illanes'
monthly bills. Spanish companies, including some still partially owned by
the Spanish government, now own Chile's largest telephone company,
power company and waterworks. In addition, Spanish banks control
roughly 40 percent of the Chilean market.
"Every time I turn on the lights, make a phone call, cash a check or drink
glass of water, I'm putting money into pockets in Madrid," complained the
head of the union at Banco Santiago, which was taken over last year by a
Spanish financial group. "It's as if we're a colony again, paying taxes to the
Spain, which only 20 years ago was a minor economic presence in the
region, is now second to the United States in annual investment and is
challenging the United States for regional influence for the first time since
the Spanish-American War in 1898. In 1998, the last year complete
statistics are available from both governments, U.S. investment across
Latin America totaled $14.3 billion, while Spanish investment was $11.3
billion. Last year, Spaniards plunked down almost $20 billion, according to
Spanish government estimates.
But the reconquest, analysts say, is far more than economic. It underscores
the renewal of cultural and political bonds between Latin America and its
colonial master. Despite growing resentment like that of Illanes, much of
the region has embraced what Spain has been careful to cast as a new
golden era of mutual exchange rather than the birth of a new economic
Take, for example, the hot film "All About My Mother" that is generating
Oscar buzz: It pairs Spain's best-known director, Pedro Almodovar, with
one of Argentina's top actresses, Cecilia Roth. And as King Juan Carlos
and other members of the Spanish royal family periodically touch down in
the region on official visits, so Colombian rocker Shakira is holding court
as the toast of teens in Madrid and Barcelona.
Spain Resurgent Spain is also extending a promise that its own model
transition to democracy from the dictatorship of Francisco Franco can
become a guide for its former colonies, now charting a similar course after
the downfall of unelected regimes in all countries in the region except
Cuba. Implicit in that suggestion is a promise that Latin America will also
emerge from the shadow of the United States.
Only by "reinforcing [and] consolidating the Ibero-American community of
nations [through] our shared languages and cultures, and with our firm
conviction in genuine democracy . . . can our peoples successfully face up
to the challenges of the 21st century," Juan Carlos said on a recent visit to
Cuba for an Iberian-American summit meeting.
For the United States, Spain has reemerged as a challenge to the spirit
the Monroe Doctrine, the principle of U.S. foreign policy that claimed the
region as a sphere of exclusive American influence.
As Spain's economic might has grown here, so has its political voice--and
some of its positions are polar opposites of Washington's. The decision to
hold the Iberian-American summit in Havana, for example, highlighted
widespread opposition shared by Spain and many Latin American
governments to the U.S. embargo against Fidel Castro's Cuba. Spanish
companies have helped lead investment in Cuba throughout the 1990s,
providing the island with desperately needed hard currency.
"Spain understands Latin America in a way that no other country outside
Latin America possibly could," said Carlos Gasco, cabinet chief of Spain's
Economy Ministry in Madrid. "We have used that to our advantage to
build what we see as a long-term economic connection that is only going to
keep binding us closer to Latin America."
Even in giant Brazil, which as a former Portuguese colony differs in
language and culture from its neighbors, Spain is gaining economic
importance. Spanish investment in Brazil's economy, the largest in Latin
America, soared from $112 million in 1996 to $6 billion in 1998.
Telefonica de Espana became one of the largest players in the privatization
of Brazil's national telephone monopoly--winning the bid to buy Telesp, the
local phone company for Sao Paulo, the world's third-largest city. The
Spanish company now operates one of every four phone lines across Latin
But in a region where the historical image of colonial Spain is only
marginally better than that of a bullying Uncle Sam, the new bonds are
creating a measure of friction. Nowhere is that more evident than in Chile,
a country of 15 million where massive Spanish investment--symbolized by
the futuristic Telefonica tower, the tallest skyscraper in Santiago--has
mixed with Madrid's "meddling" into domestic politics.
Indeed, Spanish judge Baltasar Garzon's crusade to put Chile's aged
former dictator, Gen. Augusto Pinochet, on trial in Madrid for crimes
committed during his 17 years in power has fanned Chilean nationalism.
Then-President Eduardo Frei boycotted the Iberian-American summit last
year, and leading Chilean businessmen and right-wing politicians have
called for Santiago to break diplomatic ties with Madrid. Incoming Spanish
executives have been met with the cold shoulder--one was even denied
membership in an exclusive Santiago country club because he is Spanish.
"What gives the Spaniards the moral authority to be our judges and
masters?" said Cristian Labbe, a Pinochet supporter and mayor of
Providencia, an affluent neighborhood in Greater Santiago. The Spanish
Embassy in Chile is located in his bustling urban center, and Labbe lashed
out the only way he could: temporarily suspending the embassy's trash
pickup. "The last time I checked the history books, Latin America had
won its independence from Spain. But you wouldn't know it from their
haughty actions," he said.
The cultural memory of the ruthless Spanish conquest of Latin America
dies hard. Conquistadors fanned out over the New World in the early 16th
century, driven by a lust for gold. They found it in abundance, especially in
what are now Mexico and Peru, where Hernan Cortes decimated the
Aztecs and Francisco Pizarro did the same to the mighty Incas. The
Spanish campaign would end in the annihilation of millions of indigenous
people and leave their descendants on the margins of society.
"Especially now that they've come back, the Spanish should be made to
make reparations for the slaughter and robbery committed by them and
their descendants," said Maria Catrileo Airemilla, a leader of Chile's
Mapuche Indians, who successfully resisted the conquistadors, but
nevertheless endured loss of life, land and culture during the conquest and
In the first decades of the 1800s, the great Latin America liberators led
drives for independence from Spain. Although the descendants of wealthy
Spanish families went on to become Latin America's aristocracy, emotional
bonds to the motherland gradually eroded--especially in countries such as
Argentina, which experienced massive immigration from other European
nations, and Mexico and Peru, where racially mixed populations are now
Spain's reemergence as a power in the region dates to 1986, when it
gained entry to the European Union. A decade after the end of Franco's
dictatorship, Spain shed its image as Europe's rube cousin as financial
reforms ignited the economy. Spanish companies became flush with cash
and eager to enter the global economy. They looked first to their distant
cousins across the Atlantic.
Latin America was just then entering its own era of economic reform,
privatizing government-run enterprises and dropping investment barriers as
never before. There have been some stormy seas. Spain's Iberia airline
continues to lose millions on investments in the national airline of Argentina.
But other Spanish companies, aided by their own recent experiences at
rapid modernization, have largely met with extraordinary success. Today,
Telefonica, for instance, makes more money in Latin America than it does
The Cultural Connection "Culture has played a significant role," said Mateo
Budinich, general manager of Telefonica CTC in Chile. "We have a shared
language, but each nation is extremely different in Latin America. The
Spanish are sensitive to that, while at the same time capitalizing on the
similarities in our cultures to smooth the way in business deals."
A vital key for the Spanish has been their stronger stomachs for Latin
America's economic volatility. Even as U.S. investors panicked after the
devaluation of the Brazilian currency sparked a recession in Latin America
last year, Spanish investment reached a peak. Repsol, the Spanish oil giant,
gobbled up Argentina's largest private company, energy titan YPF, for
$13.5 billion, the largest Spanish investment in Latin American history.
Telefonica pumped billions more into a massive expansion into Brazil.
And as corporate Spain established a beachhead here, it has opened the
door for its subsidiaries and smaller Spanish firms. Many Latin Americans
today buy their clothes from Zara--Spain's cutting-edge version of The
Gap--and scoop up romance and science fiction novels from the massive
Spanish publishers who now virtually monopolize the markets in many
Latin countries. The Spanish have won lucrative contracts to build ports in
Chile and reconstruct colonial buildings in Havana. New firms are
launching Internet startups in a region considered to be the fastest-growing
high-technology market in the developing world.
"I think the difference between Spanish and U.S. companies in Latin
America is that the Spanish have been less afraid of the risk involved," said
Raimundo Monge, head of corporate strategy for Spain's Banco
Santander in Chile. The bank expanded dramatically in Chile last year--a
25 percent increase in profits over 1998--despite the country's worst
recession in 16 years. "During the bad times like last year or the Mexican
peso crisis [in 1995], we've continued to invest heavily while U.S. firms
like Citibank have decided to curb their commitments to the region."
"But we're in this for the long run. Remember, the Spanish have known for
a long time that Latin America is a gold mine."
Spain Reaches Out
Spanish companies have acquired companies in Latin America at a fast
pace in recent years, and some Latin Americans have dubbed the
acquisition spree the "reconquest."
Direct investment by Spain in Latin America and three selected countries
In billions of dollars
Here are some of the biggest recent Spanish investment deals:
Repsol (Spain) bought YPF (Argentina)
* Industry: Oil sector
* Year of purchase: 1999
* Price tag: $13.5 billion
Telefonica de Espana (Spain) bought Telesp (Brazil)
* Industry: Telecommunications
* Year of purchase: 1998
BSCH (Spain) bought Banco Santiago (Chile)
* Industry: Banking
* Year of purchase: 1999
Endesa Espana (Spain) bought controlling stake in Enersis (Chile)
* Industry: Electric Utilities
* Year of purchase: 1999
Note: 1999 data is estimated
SOURCES: Spanish Ministry of the Economy, staff reports
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