How and where do the big companies operate?

05/02/2014 | Rafael Martínez González (Alumno UC)

Investment by Spanish companies has increased since the crisis began. Companies are looking for liquidity in Asia, the USA and Latin America because of the poor financing in Europe. This has been demonstrated by several studies that confirm that the Spanish companies increased their investment by 154% in Asia (China and Hong Kong, mainly), between 2007 and 2010. Also, there was a 91.2% increase in North America and a 62.4% increase in Latin America. Before, their own subsidiaries abroad were the recipients of Spanish financing. But is this still true nowadays? We all know that the internal situation of Spain has not been very good during these last few years. The economic crisis is affecting the development of the companies, their activities have decreased and they have lost costumers at home. For this reason, they have to look for economic opportunities that exist in other places.

One study has showed that foreign investments have been successful. In 1990´s, a lot of attention was on Latin America. With the creation of the single currency, companies switched their focus on the European Union between 1999 and 2007 but, with the crisis, wide-spread corruption in Spain and stagnation in the European economy, companies have returned their gaze to Latin America and they have extended it into Southeast Asia. The Spanish presence in Latin America over the last few years has recovered its importance of the 1990s, in spite of the legal risk of nationalization without compensation in some countries.

On the other hand, as another interesting piece of information, the European Central Bank has issued a report on the economic situation of large companies. In this report, the ECB pointed out three important findings. Firstly, the profits of the large Spanish companies are excessive. Secondly, these profits are not compatible with wages they pay and their restrictive policies (workers´ wages are going down, for example). Finally, if prices are stable but the wages are going down, people won´t have money to buy goods in order to meet their basic needs. In this sense, if we decreased profit margins, the prices could go down or wages could come up and the pressure would be taken off consumers.

To summarize, big companies operate outside of their own country in order to make things easier on themselves, and they save a lot of money by dismissing people, which is especially true in the case of Spain.

Nota: Este artículo ha sido elaborado por Rafael Martínez González, alumno de la Universidad de Cantabria, como una de las actividades enmarcadas dentro del programa de capacitación lingüística, dando su permiso para la publicación del mismo en FxM.

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