In Latin America, a Reconquest

The Spaniards are back.

Their return has been called “the reconquest.” It is the latest stage in the remarkable evolution of the complex, intense and increasingly lucrative relationship between Spain and its former Latin American colonies.

Here in Venezuela’s capital, banker Juan Carlos Zorrilla is the new face of Spain. Stocky and urbane in an impeccable suit, he overlooks the city from his office on the top floor of Banco Provincial, the Venezuelan bank purchased for $480 million in 1997 by his company, Banco Bilbao Vizcaya of Madrid. The Spanish bank also owns financial institutions in seven other countries in the region.

“Latin America is the center of expansion,” said Zorrilla, a solemn 49-year-old who is from Bilbao and has a master’s degree in economics. “We have the same language and culture and it is easy to transfer it.”

Zorrilla’s bank is part of a mammoth wave of investment that is both symptom and cause of the changes that today are remaking Spain and Latin America alike: Spain is flexing newfound economic muscle and Latin America, for the first time, is opening itself in a major way to the outside world.

“Spain used to represent the past and now it represents the future,” said Rosendo Fraga, an Argentine political analyst.

Commerce is the most concrete manifestation of a phenomenon that has also become political and cultural, transforming the ways in which Spain and Latin America see themselves and one another. There is a rich give-and-take.

Spanish book publishers control the once-dominant houses of Buenos Aires and Mexico City, while Latin American bestsellers win Spain’s top literary prizes.

Spanish singers such as Azucar Moreno, Joan Manuel Serrat and Enrique Iglesias sweep triumphantly through the Americas as Cuban salseros and Argentine rockers take Madrid by storm.

An Argentine actress stars in the latest film by acclaimed Spanish director Pedro Almodovar. Fabulous salaries spur an exodus of soccer stars from Brazil and other nations to the Spanish league.

Although the arrest last year of former Chilean dictator Augusto Pinochet, on the orders of a Spanish judge, angered some Chileans, others in Chile and the region praised the move as an example of a democratic justice system in action.

A poll in the Spanish ABC newspaper this year showed that Spaniards are more interested in Latin America than in the rest of Europe or the United States. They regard Latin Americans as particular friends of Spain, singling out Argentina, Cuba and Mexico.

It might seem a natural affinity, but consider the bloody past. The original image of the Spaniards is as conquistadors who arrived 500 years ago: invaders, creators, destroyers. In the Bolivian capital of La Paz, the Simon Patino historical museum exhibits a diorama of conquistadors about to execute an Inca chief by tearing him apart with four horses bound to his limbs; it symbolizes the destruction of advanced, though in some cases brutal, indigenous civilizations.

After achieving independence in the 19th century, Latin America experienced a different influx: immigrants escaping a poor, isolated, dictatorial Spain.

In Argentina, the living archetypes of those wayfarers are the itinerant knife-sharpeners of Buenos Aires. Known as afiladores, they still make their rounds on bicycles, aging peasant entrepreneurs in berets who look as if they just rode out of the hills of Galicia, the Spanish province that sent the most immigrants overseas.

Today, instead of sending immigrants into the world, Spain receives them--from Africa, Eastern Europe and, of course, Latin America. The influx of Dominican domestic servants, Argentine dentists and others, though not without friction, has helped draw Spain and the region closer.

Instead of representing the genocidal violence and tyranny that is the dark side of the Iberoamerican experience, Spain has become a progressive, middle-class, low-crime society: a model for the democratic transitions of its former colonies.

The story of the reconquest is about a mid-sized European nation which, despite limited prospects in its home market, has attained impressive and disproportionate clout in Latin America.

Although the process still entails considerable risk and stirs scattered resentment, Spain has perfected a strategy of snapping up former state-owned monopolies that were sold off as Latin nations modernized and opened their economies in the 1990s.

During a $40-billion, four-year buying spree, Spanish companies have netted war trophies that include Latin America’s largest telephone, electricity and insurance firms and the largest banks in Chile, Argentina, Bolivia and Venezuela.

Spain will probably surpass the United States to become the region’s lead investor nation this year on the strength of its biggest mega-deal yet: Madrid-based Repsol’s $13.5-billion acquisition of YPF of Argentina, the largest energy company in South America. The purchase became final last month.

“Spain has become the model of possible development for our countries,” Argentine analyst Fraga said. “It has broken the thesis that Latin nations are not culturally capable of capitalist development.”

This thesis holds that cultural factors--the monarchic, Catholic influence of imperial Spain compared with the Protestant, Anglo-Saxon colonizers of the United States--explain why Latin America trails its northern neighbors in developing healthy market economies and stable political institutions.

As Latin America enters the 21st century trying to consolidate democracy and overcome inequality, the new Spain offers a hopeful path. Its rise since the end of the Franco dictatorship in 1975 has gained Spaniards a standard of living comparable to Britain’s and an equality of income distribution similar to those in Sweden and Japan.

The renaissance only moved Spain closer to Latin America because Spanish leaders recognized the connection as a valuable resource in their dealings with larger European powers, such as Britain and France.

Spain is a forceful advocate in Latin America’s emerging political and commercial relationship with Europe. Today, the European Community is the largest trade partner with Mercosur, the trade bloc comprising Brazil, Argentina, Paraguay and Uruguay.

“When Spain joined the European Community in 1986, it was said we would turn our back on Latin America,” said Carlos Carderera, Spain’s ambassador in Argentina. “That did not happen.”

Indeed, Spain’s role as the gateway between the region and Europe challenges the idea of Latin America as the natural “backyard” of the United States, a concept first expressed in the Monroe Doctrine of 1823. Spain capitalizes on cultural and linguistic connections to compete with the United States, which must contend with the age-old Yankee imperialist stigma and recent moves by Latin leaders to encourage a European counterweight to the vast U.S. influence.

The Spaniards have also benefited from the reluctance of some U.S. companies, especially banks, to move aggressively back into Latin America after suffering massive loan losses in Mexico and Brazil in the 1980s.

Spaniards already in Mexico and South America are connecting the dots by entering Central America as well. Spanish telecommunications, banking and insurance firms have sunk tens of millions of dollars into El Salvador, Nicaragua and other underdeveloped nations that are just now opening up their tiny economies.

But there are weaknesses and danger areas. The rapidity and scope of Spanish forays into strategic industries have started a backlash among some local officials, who worry they have exchanged state-run monopolies for private ones.

Spain has gambled big in a region where economies such as Ecuador and democracies such as Colombia are near the edge of collapse; there is always the potential for a big fall. The Spanish commitment could weaken if the region suffers another of its periodic economic catastrophes.

“Not everyone is happy in Spain. Some of the big banks are beginning to worry about this extension into Latin America because of the risks,” said Carlos Alberto Montaner, a Madrid-based author and exile from Cuba, where Spanish interests dominate the burgeoning tourist industry.

Although even the king and queen of Spain project the nation’s new progressive, down-to-earth attitude on well-received visits to the region, Spanish dominance can create friction. Some Spanish investors are in danger of reviving their own imperious image, especially in societies such as Peru and Mexico where memory of the conquest smolders.

“The language factor is important, but to work in the region requires a much deeper knowledge of culture and different working practices than one finds among many executives trained in Spanish or European business schools,” said Christian Freres, an economist at Madrid-based think tank AIETI. “They also bring with them a sense of Spanish arrogance which has caused many problems.”

The comparative experiences of Argentina and Peru sum up the triumphs and pitfalls of the reconquest.

Argentina is the best case. Spaniards are a recent and successful immigrant group, the second-largest after Italians. Spain is the nation most admired by Argentines, according to polls. Even traditional jokes poking fun at the “Gallego,” the stereotypical hard-working bumpkin from Galicia who owns a corner grocery, have an affectionate flavor.

Spain’s prosperity makes the jokes increasingly outdated: Today the Spanish government has enough extra cash to have created a program that pays for free round trips to the mother country for immigrants and their families--in Argentina and the world over--who never made a return visit.

Argentines seek to emulate Spain, as demonstrated by the close ties between President Carlos Menem and his counterpart from Spain, Jose Maria Aznar. Fully 81% of Argentines have heard of the Spanish president, a low-key figure on the world stage.

The interplay of commercial and cultural ties has become extraordinary: At recent exhibits in Buenos Aires of the work of Salvador Dali and Antonio Gaudi, the famed Barcelona architect, the sponsors were a roster of former state industries that were privatized and acquired by Spanish companies in the early 1990s: Aerolineas Argentinas, bought by Iberia; the telephone company, acquired by the Telefonica telecommunications giant; the water company; the electricity company; the gas company; numerous banks.

“These privatizations took place in difficult times. There was hyper-inflation, attempted coups,” said Ambassador Carderera. “But there was a mutual sympathy. We are less worried about the future of this region than other nations, who find the reality difficult to understand. Our investments are not speculative; they are beneficial and long-term.”

The experience in Peru is different: Two-thirds of Peruvians have an average or poor view of Spain and rank it below Japan, the United States and several European nations as friends and models for Peru, according to opinion polls.

One reason was the initial heavy-handedness of Telefonica, the lead battleship of the Spanish corporate armada, whose sweeping acquisitions included Peru’s national telephone system in 1994. The Spanish firm more than doubled the bids of GTE Corp. and Southwestern Bell Corp.

Telefonica’s early missteps, including an executive who suggested publicly that Peruvians were provincial, created the worst image among big foreign companies in Peru, souring impressions of Spain in general, judging from public opinion surveys.

“Today, Peru is one of the most advanced nations in terms of telephones, but the image work was very poor,” said Manuel Torrado, a Spanish-born pollster who has lived in Peru for 30 years. “The executives came off as very haughty, very arrogant. This hurt the image of Spain. Telefonica had to replace managers and create strategies for getting closer to the people.”

Telefonica is losing its exclusive franchise in Peru as a result. Nonetheless, Spain remains the top investor in Peru, having contributed at least $2.3 billion since 1993, and in Chile despite the Pinochet affair.

Indeed, across Latin America, the emerging debate centers on controlling the Spanish presence, not resisting it.

For example, the Repsol bid prompted Argentina to consider new antitrust laws. A merged Repsol-YPF entity will control 50% of Argentina’s gas stations, 44% of all refining capacity and 56% of all petroleum production, hardly the picture of a competitive energy market, according to Cesar Mac Karthy, Argentina’s energy secretary.

“On the one hand, Argentina has encouraged foreign investment. On the other, the high concentration in the energy and oil sectors worries me and some people in the Congress,” Mac Karthy said at a Latin American Energy Conference in La Jolla in May. “Now when the Spanish sneeze, we get a cold.”

Mauro Guillen, a Wharton school economist who has studied Spanish investment in the Americas, sees little chance of a slowdown because the region’s need for money is so great.

“These are expanding markets that haven’t realized their economic potential, countries that are essentially friendly to foreign investors, including the Spanish,” he said. “So the trend is there and it will continue. I think it’s healthy that the reaction to the Repsol-YPF deal isn’t to deny it but to say, ‘Let’s regulate it.’ ”

*

Rotella reported from Buenos Aires and Kraul from Caracas. Times staff writer Juanita Darling in San Salvador also contributed to this report.