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BUSINESSES/2: THE FAILURE OF THE ITALIAN INTERNATIONALIZATION

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The perfect storm for the Italian productive fabric, raided by foreigners who continue to shop in Italy, saving jobs but at the same time limiting the country's economic independence.

A series of government documents obtained by WikiLao analyze the failure of the internationalization attempts made by most Italian businesses. The majority of them is small or medium sized and with limited capital, and didn't have the strength to cross the border.

The one-two punch of the crisis (initially with the drop in exports in 2008 and 2009, then with the domestic market free-falling in 2011) further weakened the productive fabric, that had already been damaged by the star-high interest rates of the summer of the rising spread. Italian businesses had to finance themselves at a much higher cost than their foreign competitors.

But there was no room for improvement because of Italy's ancient problems. First of all: family-led businesses, which create strong links between ownership and management. Businesses that didn't open up to external shareholders were exposed to indebtedness with banks, the only channel that could guarantee capital to finance growth projects.

The confidential reports analyzed by WikiLao also include an explicit condemnation of "continuous irregular procedures." They cite the bankruptcy of Parmalat. Without having to bring up Parmalat, the documents call to mind that the Telecom takeover "dumped the debt that was necessary to buy the company onto society."

One of the documents written by government officials states that "making the management of businesses opaque" doesn't work on the international arena. The same report stresses that the end of the agreements with the unions and the end of cross-holdings made the shareholding of big Italian companies more prone to attacks, also through the stock market, which is now pretty much controlled by the British.

What analysts consider absurd is that not only heavy industry is being handed over to foreigners, but that entire chunks of sectors traditionally linked to Italy are being sold off: the fashion and food industries, for example, have been raided by foreigners who bought out dozens of businesses taking advantage of their global trademark.

The made in Italy brands turned out to be better than the companies that bought them and that had, in many cases, founded them. The sad truth is that these companies could have conquered the world, but instead they were swallowed up because of bad, short-sighted management.

The fears of fast-approaching outsourcing, obviously linked to issues of employment, are uncalled for. The big holdings that purchased Italian brands aim for a high-quality clientele, especially in emerging markets. And they are choosing to keep important productive shares in Italy. This proves that with determination and with the appropriate structure it is possible to live with the countless systemic challenges that undeniably exist in Italy.

December 14, 2014