Bi-regional private sector networks

Lourdes Casanova, lecturer in comparative management at INSEAD, explores different private sector networks (PSNs) between the European Union and Latin America and classifies them along two dimensions. First, enablers: those factors in the geo-political contexts of the network actors which aid the creation and sustain the development of effective PSNs. Second, purpose, which refers to the overarching goal of the PSN.

by Lourdes Casanova
Last Updated: 23 Jul 2013

The author identifies three different purposes in PSNs: those designed to enhance the level of market access for the actors in the network, those that exist to complete and enhance the supply chains of the network actors, and those whose primary goal is to share and spread knowledge.

There has been a long history of successful private partnerships between the European Union and the Latin America and Caribbean (LAC) region since the colonial era. Private firms have exploited their mutual commercial synergies and economic bonds have been strengthened by close cooperation in the social and political arenas.

The 1990s marked a decade of transformation for Latin American economies through trade liberalization, privatization of the public sector, market deregulation and fiscal reform. As a consequence the region became more attractive to multinational corporations and net inflows of foreign direct investment (FDI) grew from US$18 billion in the early 90s to US$72 billion in 2005.

Europe overtook the US in levels of FDI in Latin America in 1998 and has remained the most important investor since then. There are multiple successful networks between private sector actors from both regions and PSNs are becoming stronger as European investors continue to embrace the LAC region with less aversion to risk and volatility than their US counterparts.

In complementary fashion, the successful enlargement of Europe, the integration of new member states from the ex-Soviet bloc, the prospect of increased access to ex-Soviet republics, and the simplification and integration of business practices within Europe have helped to stimulate Latin America investment in Europe.

For the purposes of this paper, the author defines a bi-regional private sector network (PSN) as "a formal or informal agreement between private sector actors, both firms and individuals, which aims to enhance the achievement of relevant mutual goals, comprising both for-profit and social objectives".

The framework focuses on two important dimensions. First, "enablers" - those factors in the geo-political contexts of the network actors which aid the creation and sustain the development. Typical examples would be government sponsored initiatives such as trade agreements. Second, "purpose" - the key reason for the creation and existence of the PSN.

The multiple successful networks that exist between private sector actors from Europe and LAC are becoming stronger as European investors continue to embrace the LAC region with less aversion to risk and volatility than their US counterparts.

Harnessing the potential of the private sector in the EU and Latin America and the Caribbean
Lourdes Casanova
INSEAD 2006

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