Latin America on Saturday pledged investment opportunities for recession-hit Spanish and Portuguese companies, but warned its former colonial masters drastic cost cutting would only deepen their misery.
The economic plight of Iberia dominated a two-day summit of leaders from Spain, Portugal and Latin America in the southern Spanish city of Cadiz — a principle port for Spanish galleons loaded with riches in the days of empire.
In a reversal of fortune, Spain and Portugal are now banking on Latin American markets to get them on the road to recovery.
Brazilian President Dilma Rousseff was the star of the meeting because of hopes consumer demand and public building projects in her country’s US$2.5 trillion economy will create opportunities for Iberian companies, from energy to retail.
“We have also been hit by the crisis because of the slowdown in international markets, but we are widening public and private investment in infrastructure,” Rousseff told fellow leaders at the summit, which ended on Saturday.
Latin American countries are all too familiar with the type of fiscal crisis that Portugal and Spain are now going through.
Over past decades they went through boom-and-bust cycles, and devaluations and austerity programs monitored by the IMF.
“Don’t commit the same errors we did,” Ecuadorean President Rafael Correa said, warning austerity may worsen recession.
In the 1980s and 1990s, Spanish tycoons built up business empires in Latin America in what is known as the “Reconquest.”
Spain’s biggest companies, from banking groups Santander and BBVA to technology firm Indra and Telefonica, are increasingly dependent on Latin American revenue as domestic operations slump.
Angel Gurria, secretary general of the Organisation for Economic Co-operation and Development (OECD) group of wealthy nations, said Latin America has new opportunities for Spanish investment in infrastructure, technology and education.
However, Latin America also holds risks for Iberian firms.
Spanish Prime Minister Mariano Rajoy said Spanish companies needed an environment of legal certainty in Latin America, referring to nationalizations in Venezuela and Argentina.
Argentine President Cristina Fernandez did not attend the summit this year, which takes place during a dispute over Argentina’s nationalization in April of YPF, a unit of Spanish oil major Repsol.
Leaders of Venezuela, Paraguay, Uruguay, Guatemala, Cuba and Nicaragua were also absent. Still, attendance at this year’s summit was better than last year when only half of the members showed up, raising serious questions over the event’s relevance.
Portugal was rescued last year by Europe after it risked defaulting on public debt and now Spain — the eurozone’s fourth-biggest economy — is on the brink of needing aid. They are both in deep recession, while Latin America is seen growing 3.2 percent this year by the OECD and more robustly next year.
A quarter of the Spanish workforce is jobless. Hundreds of thousands of workers and unemployed marched on Wednesday in both countries protesting budget cuts.
Ecuadoreans, Bolivians and Colombians flocked to Spain during a building bubble that imploded in 2008, leaving the country littered with empty apartment buildings and underused airports and highways.
Now some of those immigrants have headed home and a growing number of Spaniards are seeking their fortune in Latin America.