2. SPAIN AND FDI
When Spain joined the EU, many large
domestic companies realized they needed to
make themselves globally competitive.
By 2006 outward FDI stock had risen to 41%
of GDP (BBVA)
“Spain’s outward direct investment continues
to rise. At the end of 2010, it stood at
US$660.1 billion, higher than Italy’s and
Germany’s in GDP terms.” (Real Institute
Elcano)
3. FDI AND TALGO
Talgo is a Spanish company which conducts
outward FDI
Talgo manufactures train sets
Mission: “To be the leading company in the
Spanish railway sector, with international
industrial presence, renowned worldwide for its
capacity in innovation, for its technology,
quality, reliability and the added value of its
products and services.”
4. TALGO WORLDWIDE
Talgo Patents S.A. was incorporated in 1942
Trains and maintenance services in Germany,
Spain, US, France, Kazajstan, Portugal,
Russia, Switzerland, Italy and Bosnia
Herzegovina
Commercialized maintenance equipment in 25
countries
Recently signed deals with Saudi Arabia and
Russia and is competing for business in India
5. TALGO AMERICA
Talgo was incorporated in
the U.S. in 1994 and
operates mainly in the
Pacific Northwest
Has experienced success
in its operations with
Amtrak Cascades®
Wants to take advantage
of funds available from the
American Recovery and
Reinvestment Act of 2009
(ARRA)
6. ARRA
The American Recovery and Reinvestment Act of 2009
set aside $8 billion for intercity railway projects
This is a “signature project” of Obama’s and was
mentioned in the 2011 State of the Union Address ;
U.S. infrastructure got D grade
Obama wants high-speed rail to serve 80% of the
population by 2025, as an infrastructure investment to
promote American competitiveness and help “win the
future.”
This initiative has been highly politicized
7.
8.
9. TALGO AND ARRA
Talgo set up operations in Wisconsin; both
manufacturing and maintenance
Governor Scott Walker of Wisconsin opposed
government funding for high-speed trains, and
in 2010 announced removal of those grants
Talgo subsequently had to lay off workers and
eye other states
10. TALGO AND ARRA (CONTINUED)
Talgo put in bids for Florida’s high-speed rail
construction projects, but in 2011 Governor Rick Scott
“killed” the Florida High Speed Rail Project
The main source of contention was that though these
infrastructure projects had government funding,
taxpayers would still have to shoulder some of the
burden
In Florida, “allocated $2.4 billion for the project, a
funding gap estimated somewhere between $280
million and $1.5 billion remains (depending on who's
doing the estimating). That does not include expected
operational deficits.”
11. BENEFITS OF THIS FDI: RECIPIENT
NATION
The U.S. used to be known for its superior
infrastructure, but in recent decades has not
focused on utilizing modern methods such as
high-speed trains
The nation gains foreign expertise in
engineering and manufacturing, added local
jobs, and infrastructure alternatives that do not
rely on gas
Increased mobility of labor, tourism
Less hassle than flying
12. BENEFITS OF THIS FDI: INVESTOR
In this case Talgo already has an introduction
to the U.S. market and has great success
stories with the Pacific Northwest line
By attempting to tap into ARRA funds, Talgo (in
theory) does not have to work as hard to
convince individual states or other firms to foot
the bill
Additionally, a stronger foothold in the U.S.
market might assist Talgo’s operations in other
developed nations
13. DRAWBACKS OF THIS FDI
As we have studied, the risks of international
business in general and outward FDI in
particular are important for management to
consider
In the case of Talgo and the U.S., funds were
set aside on the federal level, but states had to
accept money and make infrastructure plans
This has proven to be a long process already,
and even what appears to be fixed can be
taken away (as was the case in Wisconsin)
14. DRAWBACKS (CONTINUED)
In this example, it is important to note that
many Americans are not sure high-speed
trains are very important or useful
According to a 2011 poll, just less than half of
Americans are in favor of plans laid out in the
ARRA, with the 25% opposed and the rest
unsure
High speed rail could be expensive for
consumers until demand steadies
15. CURRENT EVENTS AND FDI
As we have seen with recent events,
sometimes FDI can be particularly risky
politically (with operations being nationalized,
etc.)
In the U.S. FDI may be “safer” (i.e. foreign
firms are not likely to be nationalized), but
there is still a lot of red tape and political
rhetoric to deal with
16. SUMMARY/CONCLUSION
Though Talgo has been operating in the U.S.
for years, it is looking to expand in that market
Expansion seems to be linked to citizens’
(read: consumer) demand, which appears to
be weak at the moment
Talgo does right by looking to some BRICS
nations such as Russia and India while at the
same time not giving up on ARRA funds in the
U.S.
18. SOURCES
Wikipedia, accessed 15 April 2011
http://en.wikipedia.org/wiki/High-speed_rail_in_the_United_States
Sunshine State News, 29 January 2011
http://www.sunshinestatenews.com/story/talgo-race-florida-high-speed-train
Time.com, 9 February 2011
http://www.time.com/time/politics/article/0,8599,2047110,00.html#ixzz1s8SnQVJf
Real Institute Elcano, 15 September 2011
http://www.realinstitutoelcano.org/wps/portal/rielcano_eng/Print?WCM_GLOBAL_CONTEXT=/wps/wcm/c
onnect/elcano/Elcano_in/Zonas_in/DT17-2011
Google Images
http://www.beyond.fr/map/raileuropemap.html
Talgo America, accessed 15 April 2011
www.talgoamerica.com
BBVA Working Paper, 13 April 2011
http://www.bbvaresearch.com/KETD/fbin/mult/WP_1113_tcm348-253767.pdf?ts=1542012
