Research paper Sample: Internationalization of Santander Bank in Venezuela
Publication Date:
Santander Bank is one of the banks in the United States which is third largest in Boston. This bank was established in 1902 formerly known as Sovereign Bank that was for saving and loans in Pennsylvania. Most of the earliest customers who were targeted by this bank were the textile workers. This bank expanded rapidly during the 1980s and 1990s such that by early 2000s the bank had started to expand its operations in Venezuela and other parts of Latin America. Santander Bank had the highest interest in establishing its operations and services in this region as compared to other banks (López-Morell, Bernabé, and María 2018). This was because the bank wanted to pursue this process as an adventure because it has a history of commercial connection with Latin America thus to thrive in Venezuela was perceived to be an advantage to the bank. This paper seeks to discuss the internationalization of this bank to Venezuela by exploring the pros and cons, achievements and failures and the strategy to enter the market in Venezuela.
Pros and Cons of Internationalization of Santander Bank in Venezuela
The internationalization process of Santander Bank in Venezuela begun in the 1990s but the bank was able to enter into this part of America with full vigor in 1997. This process provided both advantages (pros) and disadvantages (cons) to the bank. For instance, one of the advantages is that the bank was able to enter in a new market thus expanding its operations in other countries where there was less competition from American owned Banks (Calderón 2016). Therefore, the bank was able to gain more profit which was added to the one that was gained back in the home company. This made the company investments go up during that period as compared to the rivalry banks. This is because in Venezuela the bank experienced less competition as compared to the competition in the United States.
Additionally, internationalization of this bank in Venezuela boosted a lot of economic activities in this country. This means that the bank did not just benefit itself but it was able to help the host country increase its economic activities. For instance, productivity within the country increased such that local investors were able to get loans from this bank to start the business. As a result, the economy of the country was boosted also boosting the activities of this bank in this region (López-Morell, Bernabé, and María 2018).
However, there are several disadvantages (cons) that the internationalization of Santander Bank in Venezuela encountered which affected its operations. Venezuela is one of the Latin American countries that have experienced a lot of crisis mostly. Therefore, the internationalization of this bank was a high and vulnerable risk that was taken. This is because crises in any nation affect economic activities thus slowing down the profitability of any company. For example, as a result of the crises, the company expansion process in Venezuela was negatively impacted because the economic status of the country was unpredictable (López-Morell, Bernabé, and María 2018). Therefore, instead of making the profit the bank had to slow down its growth so as to maintain its operations in this region.
Another con of the internationalization process as a way of expanding Santander Bank into Venezuela is differing economic and government regulation economic policies. Policies are very important for any companies that intend to expand to other countries such that the policies may help the company to grow or may hinder the growth (Calderón 2016). In Venezuela, as a result of depending on oil as the major economic activities, the government has total control on the market policies thus difficult for companies to thrive in this region. This is because the government of Venezuela is likely to adjust policies so as to benefit itself at the expense of the Foreign Trade Direct Companies like Santander Bank.
Moreover, the government of Venezuela despite having a multiparty election system at all levels in the governance it lacks the aspect of checks and balance. As a result of such loopholes it a disadvantage for Santander Bank to fully explore the market as expected. For instance, in such cases, it is easier for policy-makers to manipulate policies so as they can favor them while other market key players such as foreign companies suffer (Calderón 2016).
Achievements and failures, the strategy used by Santander Bank to enter the market in Venezuela and what happened after it was expropriated by the government
During the entry days into Venezuela, Santander Bank was able to boost the economic activities in the region. This is because local producers know founder financial boosting ability which they had lacked in the previous years (Calderón 2016). However, as a result of Chávez, a former coup plotter came into power trouble begun for this bank’s operations in this country. This is because the election created loopholes for policy-makers to influence the market policies especially as a result of having an authoritarian government. There was no legitimacy in the government such that only a few people were favored by this government. The country faced tough economic realities including the banking crisis such that the economy entered recession in 2003 for the first time (López-Morell, Bernabé, and María 2018). This means that foreign companies including Santander Bank were greatly impacted.
Furthermore, Santander Bank was able to wave through the many economic obstacles that are created by government policies in Venezuela. This is because the governments of the past years established policies that don’t favor foreign companies to invest in Venezuela. Also, a lot of political instability in the region contributed to the failure of this bank to operate fully in Venezuela. The bank also failed to channel the resources of the state to small farmers and local producers to increase economic activities (Martín and Pablo 2016). This was because of issues such as insecurity and violence that threatened the production and farming activities in the region.
In order to enter Venezuela, Santander used several strategies so as to establish its operation in the country. One of the most important strategies that were used was negotiating with the government of Venezuela so as to get the opportunity. For instance, the bank negotiated with other banks that were operating in the country so as to have their clients transferred to Santander Bank (Calderón 2016). This negotiation included migration of the portfolio of those banks and even the assets that were being owned by those banks such as Swiss Private Banking Group.
Also, the bank also tried to help the government to channel funds to local farmers and producers. This was important for the bank that helped it to attract customers from already existing banks (Martín and Pablo 2016). However, when the bank was expropriated by the government it was nationalized by the government of Venezuela. This was because the bank had refused to finance the housing project that President Chavez had initiated in his speech. He accused the president of the bank of rejecting to give loans thus he raised the possibility of taking the step to seize the bank. The banking sector was then put under government control because of refusing to finance the construction of the housing project by the government (Martín and Pablo 2016).
In conclusion, Santander bank faced a lot of challenges as it tried to enter into investing in Venezuela as the new market. This is because its internationalization process was met with a lot of friction from the government which was trying to push its agenda to meet the demands of the people at the expense of the bank.
Works Cited
Calderón, Álvaro. “Spanish banks in Latin America: do they need each other?.” Latin America’s Quest for Globalization. Routledge, 2016. 191-211.
López-Morell, Miguel Angel, Bernabé Pérez, and María Mercedes. Conquering the market: The expansion strategies of Santander and BBVA in Latin America. No. 18-02. eabh Papers, 2018.
Martín, Félix E., and Pablo Toral. “The Foreign Conquest of Latin American Banking: What’s Happening and Why?.” Latin America’s Quest for Globalization. Routledge, 2016. 135-160.