Brazil's Corporate Raiders; Forget the Americans. The country snatching up some of Argentina's most prized industrial companies is its neighbor to the north.

Byline: Peter Hudson (With Mac Margolis in Rio de Janeiro)

Argentines have long feared corporate incursions by First World multinationals from the United States and Europe. But they don't need to look that far away to find hungry corporate raiders. In the past four years the biggest foreign buyer of Argentine companies has actually been the Brazilians. Later this year, when the industrial group Camargo Correa completes its acquisition of Argentina's biggest cement company, Loma Negra, firms from Brazil will have snatched up half a dozen of its southern neighbor's most prized corporations, in sectors ranging from textiles to tractors to steel, since Argentina's economy collapsed at the start of this decade.

The buying binge seems smart for Brazil, but it's rocked Argentina, which has long looked down its nose at its neighbor to the north. Argentina had a $2 billion trade surplus with Brazil in 2004, but it flipped to a $2 billion deficit last year. Recent trade negotiations between the two countries have been acrimonious. They've centered on quotas and temporary tariff barriers the Argentines have erected recently to protect their industries. Raul Ochoa, a consultant for the Argentine Department of Industry and Trade, says the measures have been necessary because of Argentina's "de-industrialization" during the 1990s, when an inflated exchange rate and high utility costs hurt the country's global industrial competitiveness. "We need time to regenerate sectors and production chains," he pleads. The time for such defenses may be past, however. Argentina's recovery is now crucially intertwined with Brazilian money.

Argentina's economic implosion resulted in the world's biggest-ever debt default and the collapse of the country's currency. Spooked, most outside investors raced for the exits. Brazilian firms did the opposite, rushing into a country where everything was losing value. First came the Belgo Mineira group's takeover of Acindar, a leading Argentine steel producer. Then the huge Brazilian-Belgian beverage maker AmBev launched a $700 million deal to buy a majority of the shares in Argentina's dominant brewery, Quilmes. The biggest cross-border purchase--so far--came in 2002, when Petrobras, the giant Brazilian oil conglomerate, paid $1.1 billion for control of Perez Companc, Argentina's principal integrated energy-generation and distribution company.

Brazil's aggressive push into Argentina is part of the country's growing global ambitions. Last year, for example, Brazil was the fifth largest foreign investor among emerging-market nations, according to the United Nations Conference on Trade and Development. Brazilian businesses have invested about $6 billion in Argentina alone during the past five years. Unlike European companies, they've concentrated their attention on the industrial sector. Why? "Brazil modernized its industry far more than our neighbors did," says Roberto Giannetti da Fonseca, foreign-trade director for the So Paulo Federation of Industries (SPFI). "Argentina is 15 years behind in technology, and in creating a secure political environment [for investment]." Brazilian firms have been prepared to take on companies with debt problems, and have been quicker to reinvest and slower to repatriate profits than European and American firms. Petrobras, for instance, has invested about $2 billion in Argentina, buying petrochemical and refining operations in addition to its Perez Companc acquisition. Coteminas, a huge textile combine founded by Brazilian Vice President Jose de Alencar, is helping to modernize the creaky Argentine textile industry. Banco Itau, a major Brazilian private bank, has bought out the Argentine Banco Buen Ayre and built up a nationwide presence.