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 a
                  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
                  Spanish crown."

                  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
                  empire.

                  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 of
                  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 of
                  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
                  America.

                  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
                  afterward.

                  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
                  predominant.

                  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
                  in Spain.

                  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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