Big players: Global recession, scarce financing and devaluations have nailed most companies to the wall, but not all. (Cover Story).

Brutal market conditions level weak and strong companies alike in Latin America. Companies default on international debts. Major multinationals corporations that have gorged on acquisitions now suffer from indigestion. Private equity funds lurk on the fringes waiting for opportunities although, as TCW Latin America CEO Mario Baesa says, "No one knows what 'cheap' is yet."

Well, almost no one. A select group of Latin American and multinational companies are picking carefully through the carnage for assets, markets and even their own outstanding shares. They buy today to build for tomorrow.

Brazil's Companhia Vale do Rio Doce is boring into the global iron ore market with a string of acquisitions to secure local reserves. Citigroup and Banco Bilbao Vizcaya Argentaria wowed Mexico last year with takeovers of the country's No. 1 and 2 banks, respectively; now Bradesco is bidding aggressively on nearly every Brazilian bank privatization--no waiting around for a foreign invasion. Telefonos de Mexico and Grupo Bimbo, among other Mexican operations, are snapping up companies in Brazil and beyond.

To be sure, these voracious eaters remain in the minority. According to Thomson Financial, mergers and acquisitions in Latin America, including Citi-group's colossal US$12.5 billion buyout of Mexican financial group Banacci, plummeted more than 55% to $48 billion in 2001, the lowest total since 1996. The Institute of International Finance (IIF) in Washington predicts that direct foreign and other net private equity investment to Latin America will decline almost 40% to $35 billion in 2002--the lowest level in the last four years.

In Argentina. an increasing number of companies simply can't pay the bills. In January and February alone, pay TV company Multicanal, gas pipeline company Transportadora de Gas del Norte, highway operator Autopistas del Sol and a host of others missed principal and interest payments on more than $150 million in debt. Banks with roughly $3.2 billion in debt due this year also appear headed toward a meltdown.

The burgeoning list of buyout targets in Argentina, however, will not necessarily translate into takeovers. Only the strongest companies in Mexico and elsewhere in Latin America will use the downturn to acquire weaker competitors and open new markets.

Bradesco President Marcio Cypriano says the Brazilian bank will continue to build its business in Brazil through buyouts and organic growth, but it won't go overboard on international acquisitions. Any adventure into Argentina, for example, would have to be unusually tantalizing. "The idea would be to seek to acquire a bank, but that's not in our plans yet," he says.

The savvy acquisition strategy probably explains why Bradesco remains among the region's big players and well positioned to acquire local and multinational companies that until recently were aggressively buying or building businesses. Says Everett Santos, CEO of equity fund Emerging Markets: "Clearly, nature has a need for vultures."