The Hemisphere: The Joint Venture

In 1952 Toledo’s Jeep-making Willys Motors surveyed the Brazilian market and with its distributors in Brazil organized Willys-Overland do Brasil, capitalized at $250,000, more than 50% from the U.S. mother firm, the rest from Brazilians. Now Willys do Brasil is South America’s biggest carmaker (110,000 units scheduled for 1960), has a capitalization of $34 million, 55% owned by Brazilians, 35% by Willys of U.S., 10% by French investors. Half of its 6,000 Brazilian workers own shares, 95% of the Jeep parts are locally made, and Brazilians proudly call the product o Jipe Brasileiro. Says Founder Hickman Price Jr.: “Willys do Brasil is not an American company; it’s Brazilian.”

Nabisco-Famosa. The fastest-growing kind of foreign investment in Latin America is the joint venture combining skills and capital from abroad with capital and a knowledge of markets from local citizens. In an age of nationalism, the joint venture helps to give Latin America the outside capital it needs while giving the outside capitalist the security he wants.

In Mexico the joint venture accounts for 11% of the total $544 million U.S. investment in Mexico since 1950, includes many mergings of U.S. private capital with Mexican government funds. The Mexican government and the Celanese Corp. of America formed the jointly owned Celanese Mexicana, now grown 16 times into a corporation capitalized at $27 million. Other outstanding joint ventures in Mexico: Nabisco-Famosa (biscuits), Altos Hornos (steel), Tubos de Acero (a combine with Italian, French and Swedish capitalists to make steel pipe).

Plow-Backs. In Brazil, 23 of the 56 top stocks on the Rio and São Paulo exchanges are joint ventures. Japanese interests hold 40% of the USIMINAS steel plant (annual capacity: 500,000 tons), U.S., Canadian, French and Israeli interests are partners with Brazilians in seven cement plants. In Argentina, Kaiser Industries, which makes 2,500 vehicles a month, is owned 51% by Argentine stockholders, 16% by the Argentine Air Force, 33% by the U.S. parent firm.

While the local participation means an easier way through local prejudices, it also means taking on headaches. Biggest is the expectation of high returns by local investors. In an area where investment firms guarantee 8% and manufacturing profits sometimes top 50%, investors are loath to accept less, and dislike U.S.-type management, which believes in building up large reserves, plowing profits back into expansion. Nevertheless, the investors seem to be swinging around to the U.S. concept. In Brazil, where U.S. owners in 1945 held 95% of the stock in 67 companies, today they hold 95% in only 17 companies, as local capital moves in to fill the gap.