Latin Trade (English Edition) - Sep/Oct 2011 by Latin Trade Group

LATIN TRADE

LATIN TRADE SYMPOSIUM SPECIAL ISSUE • TOP BANKS

Leonel Fernandez Dominican Republic THE LATIN TRADE SYMPOSIUM & 17TH ANNUAL BRAVO BUSINESS AWARDS

Alberto Aleman Zubieta Panama

BRAVO BUSINESS AWARDS 17 Recognizing Excellence in Government, Business and Social Development

Alex Behring Brazil Agustin Carstens Mexico Laurence Golborne Chile Martin Migoya Argentina Marcelo Odebrecht Brazil Luis Carlos Sarmiento Gutierrez Colombia Luanne Zurlo United States

SEPTEMBER/OCTOBER 2011

Cover inspired by artist Carlos Cruz-Diez

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SEPTEMBER/OCTOBER 2011

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At McDonald’s, even successful recipes can be improved. How can you improve the composition of a meal adored by millions without changing the taste? How can you evolve a famous menu without disappointing your loyal customers? Arcos Dorados, the world’s largest manager of the McDonald’s brand, accepted the challenge in Latin America. After all, times are changing and consumer needs and preferences are always evolving. That is why Arcos Dorados is now bringing new choices to the menu of the McDonald’s restaurants in Latin America. The changes started in October in Brazil, and will expand to other Latin American countries as of November. This initiative iss ers’ part of the commitment to our consumers’ well being, yet never forgetting about the pleasure of a genuinely delicious McDonald’s sandwich. But what changes are these? Basically more vitamins and minerals, but less sodium, sugar and calories, as recommended by the World Health Organization. Great news for the little ones: the new McFries portion has fewer calories, in order to fit into children’s balanced diet. The bread and cheese of

our sandwiches, the McNuggets and the ketchup all had its sodium levels reduced by 10% . The fruit juices had a 40% reduction in added sugar in the past year. And, finally, some delicious news: now, there’s fruit for dessert in any Happy Meal combination. The main menu has also evolved. Now, the Combos can come with a salad – a mix of green leaves and tomatoes – as a side dish. In addition, we reduced the sodium in the bread, ketchup and cheese used in all sandwiches. You’re probably wondering: what about the taste? Don’t worry about it: Arcos Dorados dedicated two years in research along with its suppliers to ensure that the modifications in our menu aste as te o yyour ur would not change the ttaste off yo favorite dish. c hanges, Simple changes, yp erfect. simply perfect.

CONTENTS

S E P TE M BE R/O C TO BE R 2011 V O L. 19 NO . 5

36 38

32 44 30

Features 27 BRAVO Business Awards 17: The 2011 Winners

58 62 64

Lifetime Achievement: Leonel Fernandez, President of the Dominican Republic Innovative Leader of the Year: Laurence Golborne, Minister of Public Works of Chile Financier of the Year: Agustín Carstens, Governor, Bank of Mexico Distinguished Service in the Hemisphere: Alberto Alemán Zubieta, CEO, Panama Canal Authority CEO of the Year: Marcelo Odebrecht, CEO, Odebrecht Dynamic CEO of the Year: Luis Carlos Sarmiento Gutiérrez, CEO, Grupo Aval Emerging CEO of the Year: Martin Migoya, CEO, Globant Investor of the Year: Alex Behring, Co-founder and Managing Partner, 3G Capital Humanitarian of the Year: Luanne Zurlo, President, Worldfund INDUSTRY REPORT: Latin America’s Top 100 Banks: Strong Growth, Good Outlook Financial institutions in Latin America increased their assets by nearly 30 percent on average in 2010. Top bankers from the region weigh in on the prospects for continued growth. Top 100 Banks: Latin America’s leading banks ranked by assets as of year-end 2010. Top Banks by Country: The top five financial institutions in Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. Winners and Losers: The financial institutions that posted the biggest percentage gains and declines in assets and net income.

COVER ILLUSTRATION: DAVID NAVAS

LATIN TRADE

SEPTEMBER-OCTOBER 2011

COUNTRY REPORT: Dominican Republic Moves Ahead The tourism champion is increasingly boosting its other sectors, including mining, finance, telecommunications and infrastructure.

76 78

Latin American Tourism Champion Santo Domingo Metro: Full Speed Ahead

COMPANY REPORT: South American Boost for General Motors How Brazil and the rest of South America are playing a key role in the automaker’s global business.

FOR PHOTO CREDITS, SEE PAGES 30-47.

30 32 34 36 38 40 42 44 46

Client commitment. Global solutions. Total connectivity. Taking your opportunity further. That’s return on relationship.

“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., all of which are registered broker dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured y May Lose Value y Are Not Bank Guaranteed. ©2011 Bank of America Corporation.

CONTENTS

104

The Scene

Opinion

On the Road

12 Sales Rev Up for Porsche

22 The Contrarian

101 Mexico City

A hit SUV model is driving sales for the German luxury carmaker.

14 The Cat Runs Fast Caterpillar outpaces more than 20 multinationals when it comes to revenue growth in Latin America.

John Price, managing director of Americas Market Intelligence, makes the case that Latin America presents better market opportunities compared to China ...at least in the short term.

A practical guide for the business traveler visiting the Mexican capital.

102 Ask the Concierge Advice from Agnes Ignacio of the Four Seasons Hotel in Mexico City.

24 The Bottom Line 16 What’s In a Name? What happens when two companies use the same name for the same product?

18 Job Hunting Via Text Messages A service connects job seekers with hiring companies using mobile technology.

20 Brazil’s Homemade Drones Unmanned aerial vehicles take to the skies for agricultural use and environmental enforcement.

Argentina’s economy has been transformed over the past decade but the country must make some hard choices to secure its longterm future, writes Alberto BernalLeón of Bulltick Capital Markets.

Made In: Ecuador 112 Bananas Although the United States is the leading destination for the popular fruit, bananas are gaining fans in Eastern Europe.

Tech Trends 104 Copa Pioneers Mobile Check-in The carrier is the first in Latin America to introduce digital boarding passes for mobile devices.

Editor’s Note 8

Recharge Latin America

SPECIAL SUPPLEMENT—URUGUAY: A NATURAL DESTINATION FOR BUSINESS, PAGE 89 6

LATIN TRADE

SEPTEMBER-OCTOBER 2011

BEACH: THE DOMINICAN REPUBLIC MINISTRY OF TOURISM; GENERAL MOTORS; COPA AIRLINES.

EDITOR’S NOTE

While Latin America has reason to be proud of its economic growth in recent years, the region needs to implement a series of reforms to make it much more competitive.

Port in Recife, northeastern Brazil

Here are our 10 top recommendations: 1. Improve Institutions. As the Swissbased World Economic Forum says: “Excessive bureaucracy and red tape, overregulation, corruption, dishonesty in dealing with public contracts, lack of transparency and trustworthiness, and the political dependence of the judicial system impose significant economic costs to businesses and slow the process of economic development.” WEF is speaking in general terms, but these complaints clearly describe most of Latin America today. 2. Lower Corruption. Despite the economic growth in recent years, corruption remains at dangerously high levels throughout Latin America. Part of the problem is the lack of a professional civil service, but the region also has weak law enforcement and judiciaries that enable corrupt officials to act with impunity. 3. Better Education. Quality higher education and training are crucial for economies that want to move up the value chain beyond simple production processes and products, WEF rightly points out. Improving Latin America’s wealth starts with decent education for the majority that today can’t afford private schools.

LATIN TRADE SEPTEMBER-OCTOBER 2011

4. Improve Security. Crime and insecurity remain a major problem in most countries in Latin America. Part of the problem is corrupt law enforcement, but also the fact that even honest police officers are underpaid and under-trained. The insecurity is adding an unnecessary cost to the private sector in the form of private security, higher insurance premiums and losses from theft. 5. Improve Infrastructure. The cost of exporting from Latin America is unnecessarily high because of inefficiencies in infrastructure. A study by the Inter-American Development Bank shows that the region’s exports to the United States pay freight rates that are, on average, 70 percent higher than those from the Netherlands, in part because of inefficient ports. If those ports were to improve to U.S. levels, that would lower costs about 20 percent. But seaports aren’t the only problem. Latin America also suffers from inadequate roads (especially in the case of Colombia) and airports (especially in the case of Brazil). Part of the problem is a lack of investment by the region’s governments. Latin America currently invests only about 2 percent of its GDP on infrastructure instead of 5-6 percent, as it needs to, as Luis Alvarez Satorre, president for Latin America, Europe, Middle East and Africa for British Telecom, has pointed out. 6. Liberalize Imports. Latin America needs to remove protectionist barriers to imports. Countries such as Brazil and Argentina (which have significant protectionist measures in place against imports) are only hurting their own consumers and companies, who have to pay more for products that aren’t locally produced. If Latin America were to reduce tariff rates to U.S. levels, that would reduce transport costs by 9 percent, the IDB estimates. 7. Reduce & Simplify Taxes. Latin America needs to lower its tax rates from today’s average of 27. 3 percent (higher than the 25 percent worldwide average, according to KPMG) to 17 percent, like countries such as Chile and Singapore have implemented. Meanwhile, the tax system needs to be dra-

matically improved. It takes an average of 187 hours per year to prepare, file and pay corporate taxes in the United States, but the average in Latin America is 544 hours, with Brazil setting a world record of 2,600 hours, according to a Latin Business Chronicle analysis of data from the World Bank. 8. Improve Health Systems. Latin America should provide universal health coverage for its citizens. However, rather than just beefing up public hospitals, governments should provide coverage at both public and private hospitals. Latin America’s private hospitals generally are far superior to their public counterparts. As WEF points out: “A healthy workforce is vital to a country’s competitiveness and productivity.” 9. More Privatizations. Although Latin America already went through a significant privatization process in the 1990s, it still has several state assets that can easily be sold off, helping to finance social spending. There’s no reason why, for example, Chile’s copper giant Codelco (the world’s largest copper producer) should remain in state hands. Meanwhile, Brazil can easily sell off Banco do Brasil (Latin America’s largest bank) as well as more of its shares in Petrobras (Latin America’s largest company). 10. More FTAs. Last, but not least, Latin America needs to increase the number of free trade agreements it has with the outside world. Brazil again remains a laggard and a stark contrast to countries such as Mexico and Chile, which have seen their exports and economies benefit from a large number of FTAs within and outside of the region. These recommendations will open up markets and let entrepreneurs thrive, thus reducing poverty and boosting wealth.

Joachim Bamrud, Executive Editor jbamrud@latintrade.com

HO/AFP/GETTY IMAGES/NEWSCOM

Recharge Latin America

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GRAPHIC DESIGNER SELVIN CHI schi@latintrade.com CONTRIBUTING EDITORS GABRIELA CALDERON (research), MARK LUDWIG CORRESPONDENTS Argentina: Charles Newbery • Brazil: Thierry Ogier (São Paulo), Taylor Barnes (Rio de Janeiro) Chile: Gideon Long • China: Ruth Morris • Colombia: John Otis France: Ilan Moss • Mexico: David Agren, Ronald Buchanan • Panama: Sean Mattson Peru: Lisa K Wing • Spain: Guy Hedgecoe • Venezuela: Jose Orozco CONTRIBUTING PHOTOGRAPHERS Brazil: Paulo Fridman • Chile: Helen Hughes Costa Rica: Juan Carlos Ulate • Peru: Alejandro Balaguer • USA: Matthew Pace TRANSLATION: Alejandra Labanca, Douglas Rojas-Sosa COPY EDITORS: Nancy Dahlberg, Julio Llerena, David Wisor

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THE SCENE

6 to 17 employees) but the single biggest driver of unit sales has been the introduction of a line of sport utility vehicles, the Cayenne, which ﬁred up Porsche’s regional standing. “It’s perfect for Latin America — suited to the road conditions and safety conditions,” Brück says. In 2010, Cayenne models accounted for 60 percent of all Porsche units sold in Latin America, equivalent to 1,374 SUVs. Within that, the V6 model is the best-seller. The SUV segment is hotly contested, Brück notes. “We have very strong competitors with very good cars,” he acknowledges. “We try to ﬁnd our niche.” He has high hopes for a smaller SUV that Porsche will introduce at the end of 2013.

editorial@latintrade.com

Top Trade Partners

Sweet Markets

2010 Latin America trade in billions of US dollars

2010 per capita retail sales of chocolate in US$

RANK 1 2 3 4 5

COUNTRY Uruguay............................................................ $49.50 Argentina ......................................................... $30.00 Chile.................................................................. $28.00 Brazil ................................................................ $24.70 Venezuela .........................................................$12.30

COUNTRY USA China Japan Germany Canada

TOTAL $636.3 $178.6 $66.7 $55.0 $48.4

CHANG 27.3% 51.2% 40.2% 31.0% 26.2%

Note: Percent change for Canada, European Union members in local currency. Source: Latin Business Chronicle

—Mary Sutter

LATIN TRADE SEPTEMBER-OCTOBER 2011

Source: Euromonitor International

ISTOCKPHOTO

orsche is zipping along in Latin America, a region where the luxury carmaker has dramatically grown over the past decade. The German automaker has seen its Latin America and Caribbean sales jump tenfold — from 269 vehicles in 2000 to 2,569 last year. Matthias Brück, president and managing director of Porsche Latin America, attributes the growth to network development; new model lines; and market development in key countries. “We started with a handful of dealers who were technically importers,” he says. “Now we have 17 importers servicing over 25 countries with 40 dealers.” Porsche Latin America’s headquarters in Miami has nearly tripled (from

Porsche continues to sell the sports cars for which it is globally renowned. Volume levels are not as high compared with the SUV, “but we are the segment leader with our 911, Boxcar, Roadster and the 2010 Panamera, our four-door sedan,” Brück says. Within the region, Brazil zoomed into first place for Porsche in January 2010. “Import duties are very high in Brazil but … customers are willing to spend the money,” Brück observes. For the full-year 2010, Brazil accounted for more than one-third of Porsche units sold — 911 — followed by Mexico at 18 percent (443 units) and Chile at 9 percent (225 units). Business in Mexico has slowed because of internal factors. “People are not conﬁdent,” Brück explains, though he says Mexico will continue to grow for Porsche. Middle-tier markets such as Panama, Colombia and Peru are doing well, he adds, but a ban on all imported cars stalled sales in Argentina. Brück is bullish for 2011 after posting a 33 percent annual increase last year. “We expect to set a new sales record,” he says.

COURTESY OF PORSCHE

Sales Rev Up for Porsche

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THE SCENE

hile it’s no secret to Latin Trade readers that Latin America is a global growth star, research by Latin Business Chronicle shows which multinationals are benefiting most from that boom. According to the online publication’s Latin Multinational Index, which tracks quarterly revenue growth of more than 20 leading multinationals operating in Latin America, U.S.-based Caterpillar is the undisputed star. Last year, Caterpillar increased sales in Latin America by 57.7 percent to $6.2 billion. That was nearly twice the growth rate of runner-up Volkswagen. The German auto giant boosted its Latin America sales by 29.8 percent to $17.9 billion. During the first half of 2011, Caterpillar also did well, boosting first-quarter revenues in Latin America by 84 percent and second-quarter sales by 34 percent. Caterpillar has been helped by strong growth in mining and construction in Latin America. “Mining customers are increasing their investment, which is driving significant demand for our large mining products and higher parts sales,” Caterpillar said in its second-quarter earnings release. Brazil was the largest contributor to higher machine volume in Latin America last year. The country’s mining sector — led by Vale (the world’s second-largest mining company) — benefited from

LATIN TRADE SEPTEMBER-OCTOBER 2011

Quoted “You can well say ‘you can drop dead due to heart failure’ due to lack of resources. But no, I am prepared, I have got my pills.” Petrobras CFO Almir Barbassa in Latin Business Chronicle.

“I went to the University of Chicago, but it’s not a religion.” Mexican Central Bank Governor Agustin Carstens in The Wall Street Journal on how he is not always orthodox on economic issues.

“We only have Plan A; there is no Plan B.” Carlos Rodriguez-Pastor, Chairman of IFH Peru, on his conglomerate’s bullish five-year plans despite the new government of leftist President Ollanta Humala, as quoted by Bloomberg.

“The key to Lula’s success was a combination of luck and low expectations.” Walter Molano from BCP Securities in Latin Business Chronicle.

“Frankly, we need some of that in the United States.” Donald Trump on President Ricardo Martinelli’s corporate approach to running Panama, as quoted by the Christian Science Monitor.

“The surge in the urge to merge continues in Latin America.” FIU professor Jerry Haar in Latin Business Chronicle.

“I think there are protectionist forces in our country and in the United States that don’t care about development and prosperity in this part of the world.” Canadian Prime Minister Stephen Harper during his visit to Colombia in August 2011.

PAUL J. RICHARDS/AFP/GETTY IMAGES/NEWSCOM

THE CAT RUNS FAST

strong demand in China last year. In fact, Vale is the multilatina that grew its revenues most last year, according to the Multilatina Index from Latin Business Chronicle. Mexico contributed the secondhighest volume growth in 2010 for Caterpillar. “Positive factors were lower interest rates, higher mining production and a more than 30 percent increase in exports,” the company said in its 2010 annual report. Meanwhile, Caterpillar volume more than doubled in Peru, the third-largest contributor to volume growth in Latin America last year. “Peru beneﬁted from a 200 basis point reduction in interest rates, increased exports and a 14 percent increase in manufacturing production,” Caterpillar said. The company has also boosted the number of employees in Latin America — from 10,776 in 2009 to 15,220 last year. Caterpillar has been an avid supporter of the United States’ free trade agreement with Colombia, which was signed in February 2005 but suffered from repeated delays in winning U.S. congressional approval. “Not only is Colombia one of Caterpillar’s 10 largest U.S. export markets by country, but it is also one of America’s closest allies,” Caterpillar Chairman and CEO Doug Oberhelman said earlier this year. “The U.S.-Colombia Free Trade Agreement will promote U.S. exports and support American jobs. The agreement is also a validation that Colombia is a good place to conduct business. Perhaps more importantly, it will bolster understanding and improve living standards of citizens in both countries.” Since other FTAs went into effect in Latin America, Caterpillar exports have dramatically increased, it points out. Last year, exports to Mexico were up ﬁve-fold, three-fold to Chile and by more than 60 percent to Peru. Caterpillar expects to continue doing well in Latin America, pointing to the region’s estimated GDP growth rate of 4.5 percent. “Our outlook assumes continued growth in construction spending and mining production,” the company said in the second-quarter earnings release.

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THE SCENE

What’s in a Name?

SAME NAME, DIFFERENT PRODUCTS: Havana Club produced by Bacardi (left) and Pernod Ricard (right).

Thanks to the U.S. embargo against Cuba, no Cuban-made products can be sold in the United States. However, Pernod argued that the launch of the second Havana Club brand would confuse consumers and violate its trademark. In August, a U.S. Court of Appeals ruled in favor of Bacardi that there would not be any confusion. Although Cubaexport registered the Havana Club trademark in the United States in 1976, the U.S. Congress in 1988 made trademarks conﬁscated by the Cuban government unenforceable in the United States.

Meanwhile, cigars — often used in conjunction with rum — are facing their own trademark confusion. Cohiba and Partagas are manufactured in Cuba by Habanos SA, a joint venture between state company Cubatabaco and FrenchSpanish tobacco giant Altadis. They also are manufactured in the Dominican Republic by U.S.-based General Cigar Company (a unit of Swedish Match). A third brand — Montecristo — is manufactured both in Cuba (by Habanos SA) and in the Dominican Republic (by Altadis itself), thus allowing the latter version to be sold in the United States.

HAVANA CLUB: VICTOR CARLISLE

ompanies put a lot of thought into product brands and names, but what happens when two companies use the same name? That’s the case with France-based Pernod Ricard SA and U.S.-based Bacardi, which both produce Havana Club rum. Meanwhile, cigar brands such as Cohiba and Partagas are both manufactured by two separate companies — Cuba-based Habanos SA and U.S.-based General Cigar Company. Pernod Ricard produces the Havana Club that is manufactured in Cuba, while Bacardi manufactures its version in Puerto Rico. Havana Club was originally created by the Arechabala family in Cuba in the 1930s, but the family assets were conﬁscated in 1960 after the Cuban revolution. Pernod has been using the Havana Club brand since 1993, when it formed Havana Club International, a joint venture with the Cuban state company Cubaexport. Meanwhile, Bacardi acquired the rights to the Havana Club name from the Arechabala family (in exile in the United States) and applied for a U.S. trademark of the brand in 1994. That application had been opposed legally by Pernod. While Pernod successfully sold Havana Club in Cuba and internationally — boosting sales from 400,000 cases in 1993 to 3.5 million cases today, according to Bloomberg — Bacardi in 2006 launched the Havana Club brand on the U.S. market.

More Ads Annual advertising expenditure in Latin America in US$

2010 ........................$31.3 billion 2011* ...................... $33.4 billion 2012* .......................$36.1 billion 2013* ...................... $39.5 billion

................15.7% ................. 6.7% ..................8.1% ................. 9.3%

Notes: Figures include TV, radio, print, digital and outdoor investments. *2011 estimate. Projections for 2012 and 2013. Source: ZenithOptimedia

LATIN TRADE SEPTEMBER-OCTOBER 2011

Playtime 2010 retail value of toys and games in US$

COUNTRY Mexico.......................................$2.1 billion Brazil.........................................$1.9 billion Argentina ............................$575.9 million Chile ....................................$480.2 million Source: Euromonitor International

ISTOCKPHOTO

YEAR .......................... AD SPEND ............... CHANGE 2009 ............................ $27.1 billion ................. 2.0%

THE SCENE Job Hunting Via TextMessages

Argentina. The country experienced Latin America’s highest growth in international arrivals last year and replaced Brazil as the region’s second-most-popular destination, after Mexico, according to the Latin Tourism Index from Latin Business Chronicle.

LATIN TRADE SEPTEMBER-OCTOBER 2011

Ollanta Humala. The Peruvian president deserves praise for naming a marketfriendly finance minister and keeping the country’s well-respected central bank governor. Canada. It has now implemented a free trade agreement with Colombia (beating the United States) and signed a new FTA with Honduras. Meanwhile, Canada has replaced Korea as Latin America’s fifth-largest trade partner, according to Latin Business Chronicle. Sales, administrative (such as entry-level office) and operations constitute the biggest proportion of listings. “Sales is a huge segment for us,” Reich says, noting that postings range from cashier at a Subway restaurant to insurance agent for Grupo Nacional Provincial. The system was designed to be user-friendly for both sides. “We have a florist shop that has posted a couple of jobs,” Reich says. Companies pay to post, although a free option to post one job per month recently was introduced. So far, about 100,000 job-seekers have registered and more than 800 companies have posted jobs in Mexico. Meanwhile, Assured Labor has teamed with media group Prisa Digital, which will give the service greater exposure, Reich says. The company plans to enter a third country before year-end. “No one else in Latin America is doing this in the digital sphere,” Reich says. “They are still running ads in classified sections and working with staffing agencies.” — Mary Sutter editorial@latintrade.com

Ecuador. The government has slapped import duties on completely knocked-down vehicles, a move that will hurt both foreign automakers and Ecuadorian consumers. Chile. Despite being a Latin American leader in business climate and human development, the country also is a regional leader in strikes and protests. Argentina and Brazil. The two countries have imposed restrictions on foreign companies’ reinsurance business.

Retail Kings Country 2011 2010 Brazil ................ 1............. 5 Uruguay ............2............. 8 Chile .................3............. 6 India................. 4............. 3 Kuwait ..............5............. 2 Source: A.T. Kearney Global Retail Development Index, 2011. The index ranks 30 emerging markets by retail attractiveness and opportunity.

ISTOCKPHOTO

hrough his world travels, Assured Labor CEO David Reich had met smart people who could not ﬁnd jobs. In his former profession as an equity analyst, he encountered executives complaining about ﬁnding workers. His solution was to integrate mobile technology within an online job-search platform at Assured Labor, the U.S. company Reich cofounded in 2008 with a fellow MBA student at MIT Media Lab and other partners. They focused on non-executive positions, particularly those in the mid- to lower-pay ranges, in Latin America. “Those candidates were not on the traditional jobposting websites,” Reich says. Although initial market research took the team to Rio de Janeiro, where they studied how job-hunting Cariocas used technology, Assured Labor went live in 2009 as a pilot project — in Nicaragua. The budding entrepreneurs had local contacts in Managua and had partnered with wireless operator América Móvil. Given low rates of computer ownership and limited Internet access, the Assured Labor system minimized online time for jobseekers. They need only register once, at no cost to them, uploading their experience and other details. Proprietary software matches up seekers with existing openings and alerts the hiring company, which contacts prospects via text messages to their mobile devices. Operating as Empleo Listo, the service made a big splash. Assured Labor next headed north, launching in Mexico in October 2010. “In Mexico, there were more known job services,” Reich says. “We had to do a lot of educating in the market … differentiating ourselves.”

Dilma Rousseff. The Brazilian president deserves praise for her staunch ﬁght against corrupt ofﬁcials despite the political cost it is having on her coalition.

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THE SCENE Brazil’s Homemade Drones

Drones from AGX, here represented by the Arara model, are being used by companies like Dow.

SÃO CARLOS, BRAZIL — The jeansclad engineers pace with youthful eagerness in this bungalow-turnedofﬁce in São Carlos, Brazil’s nascent response to Silicon Valley. Ask them which contemporary Brazilian challenges they are working on, and they’ll give a smattering of responses: illegal commercial sand extraction, lost persons at night in the jungle, and armadillo holes rooting up farmer’s crops. But this group is proposing one surprising solution for them all — their development of increasingly sophisticated drones (Unmanned Aerial Vehicles), replete with the colors of the Brazilian ﬂag and names such as Arara (parrot) and Tiriba (little parrot). “It ends up demystifying this equipment, to show that it’s not only restricted for military use but also something of daily use,” says AGX Tecnologia consultant Jen John Lee in the basement of these homey headquarters. Going against the trend of Latin American nations purchasing Isreali-made drones for drug-war policing and border patrolling, AGX uses only Brazilian technology developed at the nearby University of São Paulo and sees its target market in the nation’s growing agricultural industry and state “environmental police” forces

LATIN TRADE SEPTEMBER-OCTOBER 2011

tasked with monitoring illegal extraction of natural resources. Brazil’s Federal Police is indeed implementing a fleet of Israeli-made UAVs along its porous frontier to monitor drug trafficking. But the São Paulo Environmental Police has other objectives. They will be the first team in the state to regularly employ unarmed UAVs to monitor threats in rural areas, such as deforestation and illegal fishing. For example, AGX used a series of temporal images to record illegal extraction of sand from a bed in the river Mogi-Guaçu for the police, says Bianca Kancelkis, the company’s director for environmental projects. A piloted plane would both be more expensive because of skilled labor and need to have a take-off and landing strip often not found near the remote areas where environmental crimes occur. (AGX’s newest UAV has a wingspan of three meters and is launched simply by throwing it.) “Using this evaluation that was made by us, the police … found the people who were doing this illegal activity,” Kancelkis adds. But AGX, which began running successful unpiloted flights in 2005, has its base in Brazil’s growing agro-

businesses and extraction industries. Its clients now include Dow Agrosciences and Fundecitrus, a non-profit industry body that promotes healthy and environmentally friendly citrus crops in São Paulo. A UAV’s ability to fly lower than a pilot would be comfortable doing, and for hours in controlled patterns that would tire a human, gives farmers economical options to map their fields, Lee says. It also avoids the cloud cover that blocks satellite images. The basic AGX drone system — including training and intelligence programming, which could, for example, count the number of oranges expected in a citrus crop — costs 55,000 reais (about US$35,000). “There’s a series of advantages for being a national [all-Brazilian] business,” Lee says. “One of them certainly is the dominion of the technology. This allows us to not be dependent, technologically speaking. And another advantage of being 100 percent national is, given that we don’t have to import the technology, I end up having a competitive product, economically speaking. It’s cheap.” Onofre Trindade Jr. has spearheaded the Brazilian development of drones for more than a decade with the University of São Paulo. The professor of mathematics and computation says he has no attraction to the defense industry. “If there is a market in Brazil, it is the civil,” he says. He adds as an example that the lethal floods in hillside shantytowns that have become a yearly pattern in Brazil — January mudslides in Rio de Janeiro were the deadliest on record and took more than 900 lives — could be better predicted by drone technology than by manned flights in which pilots would be wary of flying in turbulent weather. “If you lose the equipment, you lose the equipment. But if you fulfill the mission, how many lives could have been saved in this case?” Trindade says.

—Taylor Barnes editorial@latintrade.com

COURTESY OF AGX

How AGX Tecnologia ﬁnds success developing and selling drones

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THE CONTRARIAN

Bet on the Hare, not the Turtle Why Latin America, not China, is the world’s most exciting market opportunity … in the short term. BY JOHN PRICE China may be the market of the future, but Latin America is the market of today. Demographics, economic policy and competition levels all favor Latin America as the market of choice for global companies in search of growth. In the end, it will be China, not Latin America, that prevails as the world’s largest economy. China, both culturally and politically, thinks long term by investing in its competitiveness, starting with education and infrastructure. China’s climb in the world competitiveness rankings in recent years contrasts the fall of most Latin American countries over the same period, including Chile, Peru, Colombia, Mexico and Brazil. Yet, present global conditions are kind to Latin America. Surging global demand (starting in China) for commodities favors Latin America, home to more than a quarter of the world’s mining investment, 10 percent of its oil reserves and close to 45 percent of the globe’s arable land. Latin bourses, dominated by its resource companies, have led global equity growth since 2003, when measured in dollars. With few exceptions, Latin American countries have taken an orthodox approach to managing their trade surpluses, enabling export and FDI earnings to strengthen currencies and recapitalize banking, unleashing historic consumption levels. In 2010, private consumption in Latin America was measured at $3.1 trillion, versus $2.2 trillion in China. Some predict that China will need until 2016 to outpace Latin American private consumption levels and even longer to overtake on consumer spending. In 2010, the average Latin American consumed more than three times the average Chinese citizen. Latin America boasts three times more than China the number of households earning above $15,000, considered the threshold at which families begin purchasing global brands.

LATIN TRADE

SEPTEMBER-OCTOBER 2011

Thanks to Latin America’s distorted income distribution, it has six times more households than China earning above $75,000 per annum. Part of China’s impressive story is owed to a demographic zenith it is currently experiencing, with more than 72 percent of its population of working age (15-64). Over the last 20 years, that statistic has grown from a level of 65 percent as the single-child policy reshaped household structures. Going forward, China’s population will rapidly age, bringing new burdens to households. China’s future growth will rely on the challenging task of integrating its rural masses into the urban economy. By contrast, Latin America is urbanized, a painful transition that it undertook from the ’50s to the ’80s. Latin America is just now entering its own working-age growth wave, thanks to more working women and fewer children. Over the next 20 years, the percentage of working-age Latin Americans will grow from 63 percent to 71 percent, boosting household consumption. The most compelling reason to focus on Latin America, however, is its weak but relatively fair competitive business environment vis-à-vis that of China. In all of Latin America, only one home-grown car assembler exists, a kit sports car maker in Mexico that sells exclusively to Europe. By contrast, in China’s burgeoning car market, more than 50 domestic brands compete with global brands. Competition helps explain why Ford Motor Co. struggles to make a profit in Asia ($1 million in Q2, 2011, with losses in China) while it flourishes in Latin America ($267 million profit in Q2, 2011). PepsiCo earns close to 20 percent of its global profits in Latin markets, but flounders in China. In 2010, Pepsi’s Beijing joint venture had a 0.1 percent profit margin, and its newly acquired Shenzhen operation reported a 1.5 percent net profit margin. By contrast, Pepsi LatAm Foods posted a 14.5 percent net profit

in 2010. In spite of having its largest operations based in Hong Kong, HSBC, a leading global bank, makes more profit ($1.8 billion in 2010) in Latin America than in mainland China ($215 million). For more-mature product categories, the contrast is even starker. Whirlpool, which markets its white-goods brands across 120 countries, tallies 24 percent of its global sales and about 40 percent of its profits in Latin America while barely selling 4 percent of its volume to Asian markets. Latin America is home to a handful of impressively competitive companies, but, by and large, domestic Latin brands do not compete effectively in most consumer and business categories. By contrast, Chinese companies are competitive, if not always for the right reasons. Both Latin America and China are challenging business environments where intellectual property can be stolen. However, in Latin America, U.S. and European companies can still apply diplomatic pressure to help enforce their IP rights. In China, the government often is the greatest perpetrator of IP theft — highspeed train technology “transfer” representing the most recent and tragic example. The proliferation of international trade agreements signed by Latin countries provides a legal framework for protecting investments and arbitrating disputes. Resolving disputes with powerful Chinese companies or the government is by comparison a far more daunting task. It is little wonder that experienced global firms are rethinking where to bet on growth. John Price is the managing director of Americas Market Intelligence and a 20-year veteran of Latin American competitive intelligence and strategy consulting. jprice@americasmi.com.

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THE BOTTOM LINE Argentina: Securing the Future BY ALBERTO J. BERNAL-LEÓN

LATIN TRADE

SEPTEMBER-OCTOBER 2011

The shopping centers along Calle Florida in Buenos Aires are bustling thanks to the economic boom. Argentina is lucky to abut a Brazil that was starting to grow (economically speaking) as well as to be one of the world’s most competitive countries in agribusiness. This turned Argentina into one of the biggest beneficiaries of China’s economic boom. High commodity prices and dramatically bigger harvests have enabled Argentina to increase the value of its exports from $25 billion in 2002 to an estimated $83 billion in 2011. Now, as my father would say, “it is a sin to tempt fate.” The economic model adopted earlier has brought about great improvements in social welfare. But the model is not sustainable over time. Here’s the main reason. It is impossible for Argentina’s central bank to continue to intervene the markets with a “negative interest rate” policy stance. According to a consensus of private estimates on the current level of inflation, prices are rising by an annual rate of 25 percent, year over year, while the BADLAR rate (on bonds issued by the central bank) is low, at 11.3 percent (the average in June). Clearly, if saving implies that every day you have fewer resources, there’s no other option but to consume. But like everything in life, “nothing comes for free,” and this strategy of promoting growth

to the point of monetary delusion will eventually collapse. Today, Argentina can choose to make difficult decisions in order to return to a strategy of sustainable growth. It needs to restore the credibility of the central bank and of monetary policy. It needs to encourage investment at the expense of consumption, even though political leaders will face a backlash. Investors need to be able to have some trust in the statistics reported by the government. As some of my clients have commented, “If we cannot believe the official data on inflation, how can we have confidence in the future business environment?” Whoever wins the next election faces an historic challenge. Build on what has already been built to ensure the future of the country’s children. Today you can. Before you could not. Alberto J. Bernal-León is head of research at Bulltick Capital Markets. Follow him on Twitter @AlbertoBernalLe.

PETER LANGER / DANITADELIMONT.COM “DANITA DELIMONT PHOTOGRAPHY ”/NEWSCOM

Argentina’s economy has changed radically over the last nine years. According to official statistics, the economic growth since the end of the crisis in 2002 — from the year 2003 through 2010 — reached an impressive rate of more than 7.5 percent year over year, a rate that was also one of the most interesting among emerging markets during that time. Clearly, the country went from living a period of total chaos (readers may recall the image of a Korean store owner crying as a mob looted his downtown Buenos Aires shop or those of desperate account holders gathered outside banks, trying to get their money out) to enjoy an economy functioning at a pace consistent with full employment. As readers who have had the pleasure of visiting Argentina recently know, the situation today is starkly different compared to a decade ago. Looking just at Buenos Aires, the shopping centers of the Calle Florida are bustling and the restaurants of Puerto Madero are packed with tourists and business people. Flights are full, and the Friday afternoon traffic from downtown to the airport is, frankly, ridiculous. These are all signs of great economic energy. The economic success of Argentina since 2003 is tied to a series of endogenous and exogenous factors. On the endogenous side, it is important to recognize the tenacity of the private sector and politicians to overcome the social chaos of 2001 and 2002. Adopting emergency social measures and deciding to impose a tax on exports enabled the government of Eduardo Duhalde to stabilize the country’s economic and social situation in 2002-2003. The administration of Nestor Kirchner was able to maintain stability by implementing a sufficiently responsible fiscal policy, one that helped Argentina avoid a total collapse amid hyperinflation. On the external side, it is quite clear that

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BRAVO BUSINESS AWARDS 17 The Latin Trade BRAVO Business Awards 2011 include honors for a president, four CEOs, an investor, a central bank governor, a cabinet minister and a non-proﬁt NGO leader. Together they are playing a key role in improving Latin America’s economy, business and education. On the following pages, we take a closer look at each of the winners. Leonel Fernandez, President of the Dominican Republic (Lifetime Achievement), page 30 Laurence Golborne, Minister of Public Works, Chile (Innovative Leader of the Year), page 32 Agustín Carstens, Governor, Bank of Mexico (Financier of the Year), page 34 Alberto Alemán Zubieta, CEO, Panama Canal Authority (Distinguished Service in the Hemisphere), page 36 Marcelo Odebrecht, CEO, Odebrecht, Brazil (CEO of the Year), page 38 Luis Carlos Sarmiento Gutiérrez, CEO, Grupo Aval, Colombia (Dynamic CEO of the Year), page 40 Martín Migoya, CEO, Globant, Argentina (Emerging CEO of the Year), page 42 Alex Behring, Co-founder and Managing Partner, 3G Capital, Brazil (Investor of the Year), page 44 Luanne Zurlo, President, Worldfund, USA (Humanitarian of the Year), page 46

SEPTEMBER-OCTOBER 2011 LATIN TRADE

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LIFETIME ACHIEVEMENT AWARD

LEONEL FERNANDEZ PRESIDENT OF THE DOMINICAN REPUBLIC

LATIN TRADE SEPTEMBER-OCTOBER 2011

BRAVO BUSINESS AWARDS 2011

LEONEL FERNANDEZ Building local and global links

CRISTOBAL MANUEL EL PAIS PHOTOS/NEWSCOM

BY JOACHIM BAMRUD

When Leonel Fernandez leaves the presidency of the Dominican Republic in August next year, he can do so with a high degree of pride. He has radically transformed the Caribbean nation of 9.2 million people. When Fernandez first assumed the presidency in 1996, he quickly set his stamp in three areas that would charactarize his three terms as the nation’s leader: Efficient economic management, major infrastructure works and strong international links. In addition to Fernandez’ first four-year term (1996-2000), he became president in 2004 and was re-elected in 2008 for another four-year term. Fernandez, 57, can best be characterized as a tropical mixture of Jack Kennedy and Bill Clinton. Like Kennedy, he has inspired and appealed to his nation’s best and brightest. Also, like Kennedy, he holds the honor of being his country’s youngest elected president. Like Clinton, Fernandez can boast of having presided — during his last term as president — over his country’s fastest economic growth in recent memory. Also, like Clinton, he is considered a brilliant orator with no need to read from written speeches. In 1996, the Dominican Republic had been going through several decades of international isolation, partly because of its own priorities. In stark contrast to his predecessors, Fernandez routinely made appearances at the UN General Assembly and took foreign trips that initially included places as far away as Japan and Singapore. Part of Fernandez’s international interest can be traced to his childhood. When he was 9 years old, his family moved to New York, where the future president picked up many ideas he would later import into the Dominican Republic, such as a Metro subway system. Today, Fernandez is one of the few presidents in the world who can boast cordial relations with a broad group of

contentious political leaders. It is no accident that Fernandez was instrumental in brokering a 2008 peace deal between Venezuelan president Hugo Chavez and his then-counterpart in Colombia, Alvaro Uribe, after Colombian troops had entered Ecuador to attack the base of a Colombian terrorist group and Ecuador ally Chavez had retaliated with threats of war. Fernandez not only maintained good relations with Chavez and Uribe at the same time, but has also in recent years managed to do so with then-presidents George W. Bush of the United States and Fidel Castro of Cuba. Fernandez’ recent proposal to halt speculation with international prices in foods and crude oil has been garnering support from prominent international leaders, including Prime Ministers David Cameron of the United Kingdom and Julia Gillard of Australia. Meanwhile, at home, Fernandez has been able to provide his citizens with two concrete results that have made life easier: A stable macroeconomic environment and extensive infrastructure projects. As late as 2004, when Fernandez regained the presidency after a four-year absence, he had to confront hyperinflation and a weak economy. The contrasts couldn’t be clearer: In 2004 the Dominican economy grew by a mere 1.3 percent. In 2005 — the first full year of Fernandez’s second term — it expanded by 9.3 percent. Inflation went from 51.5 percent in 2004 to 4.2 percent in 2005. In the years since, the GDP has grown at respectable-to-impressive levels, while inflation has been relatively small. Meanwhile, his generally pro-business policies have helped boost foreign investment. “According to the model for economic development that we envision, the private sector has the role of being the locomotive of the train of progress and the state the simple mechanic that puts it in motion on

the rails,” Fernandez said in his inaugural speech in August 2004. At a time when most of Latin America’s leaders have been criticized for spending too little on infrastructure, Fernandez has instead earned the nickname, “The Infrastructure President.” To best illustrate Fernandez’ vast infrastructure spending, a visitor can arrive in Santo Domingo, the Dominican capital, and, within minutes of leaving the airport, use a well-paved road linking it to Santo Domingo, then cross a floating bridge between the eastern and western parts of the city, then take a detour through the tunnel at the February 27 Avenue (one of the city’s major thoroughfares), then end up at a Metro station — all courtesy of the three presidencies of Fernandez. He also has initiated major road projects linking Santo Domingo with key tourist areas on the northern coast and eastern part of the country. Those roads benefit not just drivers and passengers, but also sectors ranging from ports to tourism and real estate. One challenge Fernandez has not been able to resolve is the Dominican Republic’s electricity problems (blackouts have been frequent long before Fernandez even entered politics). However, experts say there has been some progress under the three terms of Fernandez. After his presidential term ends in August 2012, Fernandez will likely keep busy with international projects as well as his own foundation, Funglode, which he founded in 2000 and has contributed world-class research to the Dominican Republic by many acclaimed international experts. Whatever he does, one thing is certain: Fernandez will continue to leave his mark inside and outside the Dominican Republic. jbamrud@latintrade.com

SEPTEMBER-OCTOBER 2011 LATIN TRADE

INNOVATIVE LEADER OF THE YEAR

LAURENCE GOLBORNE MINISTER OF PUBLIC WORKS, CHILE

LATIN TRADE SEPTEMBER-OCTOBER 2011

BRAVO BUSINESS AWARDS 2011

LAURENCE GOLBORNE Popular public face of Chile’s mining rescue

COURTESTY OF THE CHILEAN GOVERNMENT

BY GIDEON LONG

SANTIAGO — The rescue of the 33 miners in Chile’s Atacama Desert last year catapulted Laurence Golborne from relative obscurity to worldwide renown. As mining minister, he was the public face of the remarkable operation. He spent days at the San José mine, comforting the miners’ families during their ordeal and relaying information to them about their relatives below ground. With his easy-going manner, fluent English and film-star looks, he became a media celebrity. Before the accident, one poll showed that Golborne was the least-known member of the Chilean cabinet: Only 16 percent of the people knew who he was. By the time the miners had been hauled from the ground three months later, that figure had jumped to 87 percent. The months since then have been difficult for the Chilean government, but Golborne’s approval rating has remained high. A poll published in August, for example, showed that Chileans regard him as the most important figure in the ruling coalition, aside from President Sebastian Piñera himself. Golborne’s approval rating is 71 percent, way above that of anyone else in government. As a result, many observers view Golborne as a potential presidential candidate for elections due in late 2013. But he insists he is not interested. “I have never in my life suggested that I could be or have the intention of being president of the Republic, or of putting myself forward as a candidate,” he tells Latin Trade in an interview. “I came into the government of President Piñera to cooperate, to build a good government and to add my grain of sand in service to my country. But I’m not aiming for more than that.” Asked if he might change his mind nearer the election, Golborne says: “Life

takes many turns, and you can’t be sure of anything, but I have no aspirations to be president, and that’s the truth.” Unlike most of his fellow cabinet members, Golborne comes from a humble, middle-class family. The youngest of six siblings, he grew up in the Santiago suburb of Maipú, the son of an iron-monger. In the 1970s, he experienced firsthand the political strife that ripped Chile apart and culminated in the 1973 coup that brought General Augusto Pinochet to power. Golborne’s sister was a Communist who had to hastily burn her Marxist literature after the coup, and his brother was a right-wing extremist with ties to the paramilitary group Patria y Libertad (Fatherland and Freedom). Golborne considers himself lucky to have come from such a discordant background. “It teaches you how to live with different points of view. I think that as a result I have a very well-developed sense of tolerance. I’m open to different ideas,” he says. After studying civil engineering at Santiago’s prestigious Pontifical Catholic University, Golborne moved to the United States, where he studied business administration at Northwestern and Stanford universities. He returned to Chile and forged a successful career in the private sector, most notably between 2001 and 2009 at retail conglomerate Cencosud, where he rose to the post of CEO. During his reign, the group expanded into Argentina, Brazil, Peru and Colombia. On the basis of that business acumen, Golborne was given the job of mining minister when Piñera named his first cabinet in March 2010. In January this year, Golborne’s brief was expanded to include the energy ministry, in recognition of his successful handling of the miners’ rescue. Then, in July, he was moved to the Ministry of Public Works as part of a cabinet reshuffle.

When Golborne talks about his time at the mining ministry, he tends to play down the San José saga, even though it captured the world’s imagination. He likes to highlight his other achievements. “It was a very fruitful year,” he recalls. “We brought in new legislation to increase mining royalties, a move that generated a lot of extra income for the country. We passed a law on closing disused mines in a bid to protect the environment. We dealt with the complex situation at the San José mine, but, more than that, we changed everything to do with mine safety.” Golborne was the architect of a draft law on mine safety that is currently before the Chilean congress. The government describes it as “the biggest legislative step forward in the mining sector in 30 years.” The minister says the number of inspectors at Chilean mines has doubled since the San José accident, and the number of fatalities has halved, although he accepts that there still is work to do. But now his focus is on public works and on overseeing reconstruction following the massive earthquake that hit Chile in February 2010. It is the sort of job that should suit him down to the ground. “The mining ministry is tremendously important for the country, but it’s very small in terms of the direct impact it has on people’s lives,” Golborne says. “The ministry of public works, in contrast, has a huge impact on people’s lives, through the construction of roads and the provision of drinking water in rural areas, for example.” When he is not at work, Golborne, 50, spends as much time as he can with his six children, the fruit of two marriages. He also plays guitar, although he says he finds little time to practice these days. editorial@latintrade.com

SEPTEMBER-OCTOBER 2011 LATIN TRADE

FINANCIER OF THE YEAR

AGUSTIN CARSTENS GOVERNOR OF THE BANK OF MEXICO

LATIN TRADE SEPTEMBER-OCTOBER 2011

BRAVO BUSINESS AWARDS 2011

AGUSTIN CARSTENS Mexico’s well-respected central banker

COURTESY OF BANCO DE MÉXICO

BY DAVID AGREN

MEXICO CITY — Bank of Mexico Governor Agustin Carstens vaulted to worldwide fame over the summer with his run for director-general of the International Monetary Fund. He called on the fund to break with the tradition of selecting a European — and instead select a candidate from an emerging economy. Carstens ultimately was unsuccessful, but he expresses no regrets. “I think it was a successful process ... it was positive that pretty much everywhere a Mexican was considered a creditable candidate for that position,” Carstens tells Latin Trade during an interview from his fifth floor of the Bank of Mexico office in the Mexico City’s Centro Historico. “We won by losing.” That a Mexican financial official would be considered for the top IMF job shows just how far Mexico has come since the peso crises and economic calamities of past decades. And Carstens’ candidacy won positive exposure for a country beset by drug-war violence in certain regions, but one that has emerged as an unlikely standard bearer of macroeconomic prudence. GDP growth in Mexico should measure 4.5 percent in 2011, the financial system is solid, the peso is stable, and exports are booming. Carstens’ candidacy also won exposure for an agenda of change in the IMF, which he considered necessary given the changing state of world economic affairs. Emerging economies have performed strongly, while those of the United States and Europe have sunk into debt and dysfunction. Electing a European, Carstens says, made little sense. “In a situation where Europe is in crisis … where Europe has lost a tremendous amount of weight in the world economy … Europe is overrepresented in the fund,” Carstens says. “My perception is that it ... undermines the legitimacy of the fund.” Carstens knows of what he speaks. An avid baseball fan with a Ph.D. in economics from the University of Chicago, he was a deputy managing director at the IMF before returning

to Mexico as finance secretary in late 2006 and moving to the central bank three years later. He started his career at Mexico’s central bank and learned the pain of a financial crisis and downgrade through experience: Mexico was considered so risky in the mid-1990s that it could issue only seven-day bonds. Carstens saw a crisis stirring again after returning to Mexico — and this time he got ready. Mexico approved a fiscal reform in 2007, made sure its banking system was sound and “took advantage” of low interest rates to refinance debt. The crisis hit Mexico hard as the peso dropped and the economy — made worse by the H1N1 viral outbreak — contracted nearly 7 percent in 2009. Carstens discovered the level of popular discontent when throwing out the first pitch at the World Baseball Classic that year in Mexico City, where he was booed. The actions have paid off, however. “We don’t have any of the structural macroeconomic problems [of other countries], and we have a strong base to start growing faster from today on,” Carstens says. The Mexican economy is expected to grow 4.5 percent in 2011 and 4 percent in 2012. The financial system is solid and banks are well capitalized, he says. Exports boomed, especially in the manufacturing and automotive sectors — something Carstens credits to solid finances in Mexico and external factors. “The adjustment the peso has had ... has hedged the economy against the important external shocks,” Carstens explains. After depreciating, “we have since seen an important appreciation [in the peso], but this appreciation has been moderate, been orderly, has helped us bring inflation down, and at the same time it has allowed our exports to continue growing at an extremely fast pace.” Rising wages in China, along with higher shipping costs and property-rights issues there, also have brought manufacturing back to Mexico. “Some sectors in the U.S. really needed to readdress their strategic decisions,

and to relocate production to Mexico has been part of the solution,” Carstens says. Mexico’s economic prospects in the coming years also appear to be better than regional rival Brazil and some of the so-called Bric countries. “Brazil is overheated,” Carstens says flatly, and needs to tighten monetary policy and fiscal policy. “They have experienced a very sharp appreciation of their currency … to the point where they have to impose capital controls and their industry is really being impacted by trade with China. The same thing is happening with China. China is in the process of putting on the brakes, of reducing credit. There is uncertainty that credit will be granted if all the states have solid finances.” Although Mexico is compared with other emerging economies, it depends heavily on the United States, where attention has focused on raising the debt ceiling. Carstens says, “I was not that concerned about the debt ceiling issue,” and he even seemed heartened by Congress actually debating a serious issue. “The main debate was not whether they should do it or not. The debate was how it should be done. I think this is a good step forward,” he says. Carstens sees some promising signs in the United States, too. “Corporations are still strong. The U.S. still has a strong capacity to grow, so I think that it will be a matter of time before the U.S. economy grows again,” he says. How the current problems in the U.S. economy affect Mexico remains to be seen. The Bank of Mexico is predicting growth of closer to 4.5 percent this year, instead of closer to 5 percent. Consumer confidence remains soft in Mexico, although it is moving upward. Violence continues flaring in some regions, and Carstens readily acknowledges that it likely has had an impact on foreign investment. But the overhaul picture remains positive, he says. “For the next two years, Mexico will be a very solid economy, and it will be noticed.” editorial@latintrade.com

SEPTEMBER-OCTOBER 2011 LATIN TRADE

DISTINGUISHED SERVICE IN THE HEMISPHERE

ALBERTO ALEMAN ZUBIETA, CEO PANAMA CANAL AUTHORITY

LATIN TRADE SEPTEMBER-OCTOBER 2011

ALBERTO ALEMAN ZUBIETA

BRAVO BUSINESS AWARDS 2011

Veteran hand steers canal through expansion

COURTESY OF THE PANAMA CANAL AUTHORITY

BY SEAN MATTSON

PANAMA CITY, Panama — Just before December 31, 1999 — the day the United States handed Panama control of one of the world’s main arteries of maritime trade — a reporter asked Panama Canal CEO Alberto Aleman what came next. “January 1, 2000,” he said, confidently trying to calm global concerns that a tiny country a decade removed from military dictatorship could be a worthy steward of the strategic waterway. Those were nervous times. Although the canal’s transfer proudly made Panama a sovereign, contiguous country — the 50-mile waterway and a 10-mile-wide buffer zone around it belonged to the United States — most bets were that Panama’s government would bungle the famous shortcut between the Pacific and Atlantic oceans. “In those days there was a lot of doubt externally, as well as internally, about the capacity of Panama running this very important waterway,” Aleman says in an interview with Latin Trade. “[It] was being transferred from the most powerful nation in the world to a very small country in Latin America. “People thought we were going to run this very badly,” he says. Time and Aleman proved the skeptics wrong. The Panama Canal transformed from a break-even U.S. military installation to the highly profitable bedrock of one of the most dynamic economies in Latin America. It is now undergoing a $5.25-billion expansion that Aleman says will be a “game changer” for maritime trade when completed in 2014. The massive infrastructure project already is sending ripples through the shipping industry as U.S. ports prepare to handle post-Panamax ships, vessels nearly three times the capacity of the largest that now transit the canal. Aleman, 60, is about one year removed from the end of his tenure as head of the Panama Canal Authority, or ACP for its initials in Spanish, and he looks back proudly on how far the canal has come. The Texas A&M-educated civil engineer first became involved with the canal in 1995 as the U.S. Army Corps of Engineers was

preparing the Panama Canal modernization before the handover. As the CEO of Panama’s top engineering firm, Constructora Urbana, Aleman handled Panama’s review of the Corps’ evaluation. Aside from a $700 million renovation of the waterway, the joint studies also showed that the canal was near capacity and needed to expand to avoid becoming obsolete, Aleman says. Soon after the review, Panama’s then-president, Ernesto Pérez Balladares, asked Aleman to make a serious career change: Relinquish the reins of his successful family business and run the sovereign canal. He would have to secure the canal’s much-needed expansion and turn the waterway into a service-oriented and competitive trade route — all while keeping Panama’s notoriously weak government institutions at arm’s length. Before the handover, the Panamanian government amended its constitution to guarantee the canal’s autonomy, and successive presidencies haven’t pressed the canal’s healthy finances. Last fiscal year, the Panama Canal produced almost $2 billion in revenue and generated $964 million in net income. “The separation [of the canal and central government] is very clear in the law itself,” Aleman says. “Part of the mandate ... is that the canal should be separated from party politics.” Aleman’s biggest challenge as canal boss — other than running a successful campaign for the referendum to permit the canal’s expansion — was turning the canal into a service-oriented and for-profit business, much to the chagrin of many in the shipping industry. “The mindset was important to change,” says Aleman, referring to clients and also to the canal’s employees, who now are 10,000 strong. Aleman’s office in the administration building offers a view of the Pacific entrance to the Panama Canal, and he uses it to illustrate how radically Panama has changed since taking charge of the waterway. An increasing number of airplanes buzz past the ACP building to land at Panama City’s expanding domestic airport, soaring over ever-higher mountains of containers, the port of Balboa and the Pacific terminus

of the rail line that crosses Panama adjacent to the canal. One of his favorite statistics is that in 1990, Panama’s ports moved fewer than 200,000 containers. Last year, Panama’s Atlantic and Pacific ports — Colón and Balboa — became the top two in the Latin America and Caribbean, handling about 5.56 million containers. The expanded canal should drive the upward trend even higher as maritime traders use Panama’s ports for increased regional hub activity, Alemán says. “[The expanded canal] will cement Panama as the most important transshipment and logistics hub of the Americas, and that creates jobs and that brings companies to use Panama as a platform,” Aleman says. “The success of the Panama Canal is actually a success of the Panamanian people.” As Aleman prepares to end this chapter in the almost-two-decade relationship with the Panama Canal, he reflects on a career of bold choices. Almost four decades ago, he left a wellpaying job at a cement company for a lesserpaid position as an assistant in the family construction firm’s inventory department. En route to becoming CEO there, he worked seven years in camps while building roads in Panama’s interior. He cites the advice of his mother for the career path he has taken. His next steps could include starting a new company, doing consultation work or writing a memoir of his place in Panama Canal history. “The only thing that no one can take away from you is what you know, so you should study and you should always be learning,” he says, recalling his mother’s advice to her children. “Every single day you should learn something new because no one is going to take that away from you.” As for the canal, a successful on-time and within-budget expansion is not enough. “The last thing you can do is be complacent,” Aleman says, adding that he hopes the canal eventually can begin exporting its knowledge and expertise. “The canal will need to continue to change in order to be successful.” editorial@latintrade.com

SEPTEMBER-OCTOBER 2011 LATIN TRADE

CEO OF THE YEAR

MARCELO ODEBRECHT CEO OF ODEBRECHT

LATIN TRADE SEPTEMBER-OCTOBER 2011

BRAVO BUSINESS AWARDS 2011

MARCELO ODEBRECHT Managing the managing of the business

COURTESTY OF ODEBRECHT

BY THIERRY OGIER

SÃO PAULO — The global economy may be grinding to a halt, but Odebrecht, one of Brazil’s largest conglomerates, is still experiencing some overheating. Business is brisk from infrastructure to petrochemical plants. And then there is new business, from oil rigs to soccer stadiums ahead of the 2014 World Cup. Marcelo Odebrecht, the 42-year-old CEO of the conglomerate, has a full plate before him. He hires 3,000 employees every month and still finds it hard to keep up with demand. Last year Odebrecht registered sales of $32.3 billion (net earnings of $1.7 billion), and double-digit growth is on the horizon again this year. Yet, Marcelo Odebrecht, who was promoted to the leadership of the holding company in 2008 after running the engineering company Construtora Norberto Odebrecht (CNO) for six years, would rather adopt a low profile. “I like to say that the CEO of Odebrecht is more like the Queen of England,” he tells Latin Trade during an interview on the 32nd floor of a modern business tower overlooking the Marginal Pinheiros in São Paulo. “My role is more related to the preservation of the culture of the group, and [to] make sure we have the right people in the right place.” Odebrecht is now involved in ethanol biofuels and large defense contracts, such as a new shipyard for submarines near Rio de Janeiro, in partnership with France’s DCNS; but also in retailing activities in Angola, at the request of the government there. “Diversification did not result from some strategic plan that was decided in some office in São Paulo,” Odebrecht says. “We are a very decentralized organization. Decisions are being taken by executives in every country.” The company is increasingly investing

directly in new projects. “In Peru, we have already invested more than $2 billion in public-private partnerships in various concessions in the past five years, as well as $1 billion in a road concession in Colombia, and more than $3 billion in a Braskem petrochemical plant in Mexico. In the U.S., we have become the leader in polypropylene following the acquisition of some of Dow’s assets [in August 2011],” Odebrecht says. “Our 30-year experience is enabling us to take advantage of the current situation to internationalize our business not only as a service provider, but also in our investment capacity.” Odebrecht, which was founded by Marcelo’s grandfather Norberto in 1945 and later run by his father, Emilio, became one the first multilatinas to internationalize its operations in the late 1970s. It has a large experience in conflict-ridden countries, as it started to operate in civil-war-afflicted Angola, in southern Africa, in the mid-1980s. But in Libya, where the company is in charge of the construction of two new airport terminals and a ring-road stretch in the capital, Tripoli, it was taken by surprise. When civil war broke out earlier this year, Odebrecht had to launch a large logistics operation to repatriate 200 Brazilian workers. “It was more a human drama rather than an economic one,” Odebrecht says, as Libya accounts for “less than 2 percent of sales of CNO.” “Economic losses were not relevant,” he says. But now, large infrastructure programs and oil and gas investment plans in Brazil have again captured Odebrecht’s attention. Its global business is being rebalanced. Brazil accounted for nearly 65 percent of the company’s gross sales last year. Engineering and infrastructure construction (which accounts

for about a third of its business) is the most internationalized business, but Brazil already accounts for about 40 percent of gross sales in this segment (it used to be 30 percent a few years ago), and the share will tend to grow in the coming years. Odebrecht won large infrastructure contracts that have been included in the government’s flagship growth acceleration program since 2007, such as the Santo Antonio dam on the Amazon River. Moreover, it also is currently responsible for the construction or modernization of four of the 12 soccer stadiums that will host the 2014 World Cup, including the legendary Maracanã in Rio. But Marcelo Odebrecht sometimes finds it hard to deal with the passion that surrounds the soccer environment in Brazil. “I would not have imagined that this would give us so much headache,” he says in reference to the controversial $500 million stadium being built in São Paulo. Odebrecht also is in charge of the soccer stadiums in Recife and Salvador, in northeastern Brazil — which, incidentally, is where Odebrecht’s origins lie. “I have always liked [soccer], but we cannot mix business with pleasure,” he says. “Building stadiums became a much greater challenge than we imagined. Dealing with such passion and the whole process to prepare the World Cup, the questioning ... We still have a kind of culture of mistrust here in Brazil. Often you are guilty until proved innocent. Some people are more concerned about the cost, whether it is expensive, than the deadline — is it going to be ready on time?” Indeed, it may be hard to get the ball rolling if stadiums are not available. And Marcelo Odebrecht knows that there will be no extra time to deliver. editorial@latintrade

SEPTEMBER-OCTOBER 2011 LATIN TRADE

DYNAMIC CEO OF THE YEAR

LUIS CARLOS SARMIENTO CEO OF GRUPO AVAL

LATIN TRADE SEPTEMBER-OCTOBER 2011

LUIS CARLOS SARMIENTO

BRAVO BUSINESS AWARDS 2011

Son brings new perspective to family company

COURTESY OF GRUPO AVAL

BY JOHN OTIS

BOGOTA, Colombia — As an executive with Procter & Gamble Co. in the early 1990s, Luis Carlos Sarmiento Gutiérrez felt at ease in the United States and with the American way of doing business. He had no plans to return to his native Colombia. But as an ambitious businessman, he also had a lot to learn. And who better to school him than his own father? Sarmiento Gutiérrez is the only son of Luis Carlos Sarmiento Angulo, who seems to possess a magic touch when it comes to making deals. Over the past half-century, Sarmiento Angulo put together Grupo Aval, the huge and very successful Bogota-based banking and construction holding company. Last year, Forbes ranked Sarmiento Angulo No. 135 on its list of the world’s billionaires. “I had met some very incredible executives in my time at Procter & Gamble. It took me a while, but I finally realized that I had one of those executives back home, and he was related to me,” Sarmiento Gutiérrez tells Latin Trade. “My father had put together such an interesting business. He could teach me a lot of things. So I decided to grab the opportunity.” The father-son team has taken Grupo Aval to new heights. Last year, Sarmiento Gutiérrez, who has served as Grupo Aval’s CEO since 2000, oversaw the most important acquisition in the company’s history: the $1.9 billion purchase of the Central American financial group BAC-Credomatic. It was by far the largestever foreign acquisition by a Colombian company. In addition, Grupo Aval has greatly expanded its presence in Colombia, with projects ranging from the construction of an 18-tower trade center in downtown Bogota to opening branches of the Bangladeshi-founded Grameen Bank, which provides microcredit to the poor. Grupo Aval also has cemented its reputation as a heavyweight in philanthropy through its Fundacion Luis Carlos Sarmiento Angulo. The Sarmiento partnership works not only because of the deep trust between father and

son but also because of their differences. They approach potential mergers and acquisitions from distinct angles but often arrive at the same conclusions. Besides belonging to different generations, they have different backgrounds. Sarmiento Angulo, Grupo Aval’s chairman, has spent nearly his entire life in Colombia, but his son has lived 19 of his 50 years in the United States. Sarmiento Gutierrez was born in Bogota but moved to Miami when he was a teenager for security reasons after one of his sisters and a cousin were kidnapped by Colombian guerrillas. He was a top student but also tossed around the idea of becoming a professional athlete. “I was a water skier,” Sarmiento Gutiérrez says. “But water skiing didn’t have a tremendous amount of professional possibilities in the world.” Instead, Sarmiento Gutiérrez earned a civil-engineering degree from the University of Miami and an MBA from Cornell University. He worked as a financial analyst and profit forecaster at Procter & Gamble in Cincinnati and spent several years at a New York bank owned by Grupo Aval. “I can’t say I feel like a gringo. But I understand the American business mentality, which is more strategically oriented and focused on long-term planning,” Sarmiento Gutiérrez says. “In Colombia, long-term can mean three to six months.” At Grupo Aval, Sarmiento Gutiérrez has pushed foreign acquisitions, in part, because the holding company has already amassed about 30 percent market share for assets and deposits in Colombian banking, and domestic growth prospects are limited. But Sarmiento Angulo, who along with his related companies owns more than 80 percent of Grupo Aval’s stock, has the final say. “I’m responsible for the day-to-day profitability of this group,” Sarmiento Gutiérrez says. “But my father is the man with the means,

so he gets to decide, especially on capital issues, what gets done and what doesn’t. Sometimes, when we don’t see eye-to-eye, I just have to say: ‘He’s the boss’.” The BAC-Credomatic deal provides a window into how the two Sarmientos operate. They meet every Friday morning to catch up and discuss possible deals. At one of those meetings, Sarmiento Gutiérrez proposed buying BAC-Credomatic, and his father gave him a tentative green light. While Sarmiento Gutiérrez was negotiating the purchase from majority owner GE Capital Global Banking in New York, he spoke by telephone with his father five times a day. As usual, the elder Sarmiento was probing the negatives. “Everybody tends to look at business proposals from the everything-will-go-all-right point of view,” Sarmiento Gutiérrez says. “But he always comes back and says: ‘What if everything goes wrong?’ That’s been a valuable lesson.” In the end, Sarmiento Angulo liked what he saw. Founded in Nicaragua, BAC-Credomatic is the second-leading regional bank in Central America, and it gives Grupo Aval a solid market share in both banking and credit cards in Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama. BAC-Credomatic issues one-third of all credit cards in Central America. Last year BAC-Credomatic made about $150 million in net profits, and that figure is expected to hit about $200 million this year. Besides business savvy, Sarmiento Gutiérrez has provided a second generation of stable family leadership at Grupo Aval. Now 78, Sarmiento Angulo is gradually ceding responsibilities to his son. “We share so many things … because we’ve worked side-by-side for 15 years,” Sarmiento Gutiérrez says. “We both know exactly where we want the company to go.” editorial@latintrade.com

SEPTEMBER-OCTOBER 2011 LATIN TRADE

EMERGING CEO OF THE YEAR

MARTIN MIGOYA CEO OF GLOBANT

LATIN TRADE SEPTEMBER-OCTOBER 2011

MARTIN MIGOYA

BRAVO BUSINESS AWARDS 2011

Passion for building a multinational

COURTESY OF GLOBANT

BY CHARLES NEWBERY

BUENOS AIRES — Martín Migoya is hard to track down — and this says a lot about how his business is faring. It’s on the rise. Migoya, 43, runs Globant, a company that combines design, ideas, innovation and technology to develop software for everything from cloud computing to data management, e-commerce and video games. Its revenue is on track to rise 68 percent to US$94 million this year from $56 million in 2010. Its worker count will climb to 3,000 from 2,500 over the same period as the Buenos Aires-based company makes a bigger push into the U.S. Globant acquired San Francisco-based mobile device and social software developer Nextive in August, helping expand a client roster already filled with such big names as Coca-Cola, Citi, LinkedIn and ad agency JWT. Now Globant is eyeing a U.S. IPO. Migoya is spearheading the climb as chief executive, traveling extensively to plot longterm goals, meet customers and keep on top of what’s going on in the fast-evolving IT industry. An electronics engineer with a master’s degree in business administration, Migoya is passionate about entrepreneurship and spending time with customers and employees. His motto: Define what you want, and do it. That might sound simple, but it is advice that he repeats in frequent talks to business students and entrepreneurs. “It’s all in your hands,” Migoya says. “First you have to understand what you want, and then you can start building. You have to think big, design the company to last, and build something that means more than just making money.” He and three friends have done just that. Globant rose out of the ashes of Argentina’s 2001-02 financial meltdown, when a $100 billion sovereign debt default and 70 percent currency devaluation pushed the country into a deep recession. Migoya at the time was a director of business development in Latin America for Origin, a Dutch consulting and technology services provider. His monthly salary plunged to $1,500 from $8,000, making it hard to get

by. With protest marches in the background and friends leaving the country, he and Guibert Englebienne, Néstor Nocetti and Martín Umaran met in a bar and came up with the plan for Globant. The idea was to emulate the fast-growing companies in India’s IT outsourcing industry. An attraction, Migoya remembered, was that these companies were creating opportunities for Indians to work at home, in contrast to Argentina’s brain drain. The secret he found was to import opportunities. They landed their first customer one day to the next, flying to London to pitch for a contract from the travel agency and e-tailer lastminute.com (now owned by Texas-based Sabre Holdings). They flew home and hired 15 people. Then came the next challenge: how to grow the company. Getting started is hard, but harnessing the momentum to build a growing business is even harder, Migoya says. Globant did, and surprisingly so. In 2006 it won a contract from Google, the searchengine giant. It was the first time Google had outsourced tasks from its team of engineers in Mountain View, California. “This was a seal of approval for getting future customers,” Migoya says. It also helped the company in 2007 to raise the first of a total of $32 million in private capital from the California-based investment firms Riverwood Capital and FTV Capital. Migoya says the funds and earnings are being used to build Globant further. They are reinvesting dividends for growth, with the aim of going public in the U.S. to gain access to the capital needed to make the company Latin America’s first global leader in software development. Other keys for growth are nimbleness and forward thinking to keep on top of the changes in the IT industry, he says. Globant has a track record of doing so. For years, software developers focused 80 percent of their time on engineering and 20 percent on user interface, he says. Then Apple, Google and other companies in the mid-2000s started

putting more emphasis on the front-end with design and innovation. Globant did, too. It now spends two-thirds of its time on interface and a one-third on engineering. “Engineering is not the core any longer,” Migoya says. “It is part of the process, along with innovation and design, for creating software that is a piece of art and easy to use.” He says that the capacity to keep on top of trends comes from understanding customers and motivating employees. Globant holds monthly parties and meetings that are open to the entire staff for brainstorming ideas, talking about problems, figuring how to do things better and setting goals. Migoya brings in inspiring speakers for chats with employees. “We visit customers and spend time with them and listen to them about what we are doing wrong and what we are doing right,” he says. “We invite everybody to say what is wrong and try to fix it. Instead of standing in the tribune and shouting, we are on the field playing the ball.” Migoya knows the business. In the same breath as speaking about mobile apps, gaming and cloud computing, he can mention the potential for science and technology to develop artificial brains and legs — and even to extend life. Maybe to create new life. “Technology is taking us to a totally different level,” he says. A proud achievement is the opening of an office in Resistencia. Yes, Resistencia. It is a city of 300,000 in Chaco in northern Argentina, as far off the high-tech map as Greenland. “Business is not just about making money,” Migoya says. “It is about being a citizen in your community. We have hundreds of people working in Chaco, and they are producing for global companies. This is priceless. You are making an impact on community by taking opportunities to the people.” Growth has brought buyout offers — plenty of them, Migoya says. So far he hasn’t bitten. “Building a multinational company is one of our big passions,” he says. “If we sell, we will be selling our dream.” editorial@latintrade.com

SEPTEMBER-OCTOBER 2011 LATIN TRADE

INVESTOR OF THE YEAR

ALEX BEHRING, CO-FOUNDER AND MANAGING PARTNER 3G CAPITAL

LATIN TRADE SEPTEMBER-OCTOBER 2011

BRAVO BUSINESS AWARDS 2011

ALEX BEHRING

Veteran investor aims to turn around Burger King

BEN FINK SHAPIRO

BY THIERRY OGIER

SÃO PAULO — Alexandre Behring is one of the most prominent representatives of a new generation of aggressive financial investors and managers of consumer-oriented services. At 44, he already stands as a veteran private equity manager in Brazil after learning the ropes on a team led by billionaire Jorge Paulo Lemann at GP Investimentos, and later at 3G Capital. Seven years ago, Behring left provincial Curitiba, in southern Brazil, where he piloted a struggling railway toward a successful IPO, and headed toward New York to help Lemann and others found 3G Capital. There, Alexandre simply became “Alex.” Soon, 3G Capital allied itself with the activist Childen’s Investment Fund in 2008 to buy a chunk of the U.S. railway CSX, of which Behring was appointed director. Behring then became the main negotiator behind the surprise deal to buy out Burger King in late 2010. “Burger King was a perfect target for 3G Capital, which has a strong experience in retail and consumer brands,” he says, referring to the list of companies that had been conquered since the days of GP Investimentos, including Ambev, the brewer that led to the creation the global AB Inbev empire, and Lojas Americanas, a household name in non-food retailing in Brazil. Behring sees some similarities between the Latin American railway he helped turn around and the U.S.-headquartered fast-food chain. “They are very different industries, but both have very significant growth opportunities ahead of them. This is what we liked,” he explains. “They are good businesses that can grow for an extended period of time. So we decided to invest our capital, work on the potential to

improve operations and to grow.” But a turnaround for Burger King could take a while. “It’s still very early days in the Burger King investment. We feel there are important things to do to try and make Burger King more efficient,” says Behring, who is leading the way as chairman. He insists that the chain should “operate in a lean way” in order to improve the franchise worldwide. The U.S. market is one area of concern. “We have sought to improve our relationships with franchisees in the U.S. We have used a very upfront approach,” Behring says. He cites the hiring of Steve Wiborg, the former president and CEO of Heartland Food Corp., one of Burger King’s largest franchise operators, who brought 20 years of experience to the position of president of North America operations. Other appointments have proved shortlived. Greg Ryan, a former McDonald’s franchise owner in Brazil, was made president of Latin America and the Caribbean, only to be replaced a few months later by José Tomas, the top human resources officer who has been with Burger King since 2004. 3G Capital had surprised the industry and markets with its $4 billion (including debt) takeover offer for Burger King, yet Behring thinks it was money well spent. “We paid a fair price for Burger King. We financed the deal in very fair terms,” he says. “We have already seen some initial improvement, which will hopefully make it a very attractive business. We are only in the second year, and things are improving very fast.” In the second quarter of 2011, Burger King’s net income and revenues were still

down, by 14.4 percent and 4 percent, respectively, compared with the same period in 2010, but the company also reported net adjusted EBITDA of $150.6 million, an improvement of 29 percent. The Latin America region registered the strongest growth in comparable sales, up 6.8 percent in the second quarter, but Behring sounds a cautious note. “Latin America is one of the top three largest growth opportunities, alongside Asia and Russia/Eastern Europe,” he says. Burger King has a strong presence in Mexico, its largest market in the region, as well as Central America, but the fast-food chain is trying to beef up its presence in South America. Key deals have been secured in Brazil with BR Partners, in April, and with financial investors Vinci Partners, in June. “Vinci is a good example of how we can address the market,” Behring says. “The company made $400 million available to the joint venture with Vinci. We currently have around 100 restaurants in the country [Brazil]; we could have a lot more — many multiples of that.” On Wall Street, Alex Behring is not just another kid on the block. Being Brazilian in a crisis environment can be a plus, he reckons. “We grew up in Brazil. For decades we have had a very volatile environment,” he says. “This experience may prove fundamental. “The global economic crisis is not helpful to any business, but Burger King is part of one of the most resilient and least cyclical businesses. When there is a crisis atmosphere, there is a lot of pessimism in the air, and it is an opportunity to focus on reasonably attractive businesses.” editorial@latintrade.com

SEPTEMBER-OCTOBER 2011 LATIN TRADE

HUMANITARIAN OF THE YEAR

LUANNE ZURLO, FOUNDER AND PRESIDENT WORLDFUND

LATIN TRADE SEPTEMBER-OCTOBER 2011

BRAVO BUSINESS AWARDS 2011

LUANNE ZURLO

Committed advocate for education and educators

RICHARD G. SANDIFER

BY MARY SUTTER

Luanne Zurlo had a successful career on Wall Street as a respected analyst at top investment banks. But a national tragedy prompted her to revisit a deferred wish to have a hand in social development and to found an organization dedicated to improving education. The focus was not a stretch. Zurlo attributes her own success to a great education: private schools, Dartmouth College, Johns Hopkins School of Advanced International Studies and Columbia Business School. And she saw pressing needs. “It was so obvious to me that education was a key factor” behind the huge skills gap in Latin America, Zurlo says, based on her time covering companies in the region, one she had come to love. But “the job wasn’t making me happy after nine years. … I wanted to try to give back to the region.” The tragic events of 9-11 were a turning point. “It was the final push I needed to act on this,” she says. “Life is short.” Zurlo also cites deepening convictions with enabling her to make the move. “I don’t think I would have had the courage to leave if I didn’t have my strong faith,” she says. Unable to find an NGO or charitable organization whose primary purpose was education in Latin America, “I very naively decided I would try to create something,” Zurlo says. She left a position at Goldman Sachs in July of 2002; Worldfund was formed later that year — in her apartment. Zurlo honed in on teacher training. A former professor at her alma mater, Dartmouth, helped her connect with John Rassias, who had developed an innovative method for language instruction. “He didn’t hesitate when he was presented with the idea,” she says. That was the genesis of Worldfund’s flagship teacher training program, the Inter-

American Partnership for Education Teachers’ Collaborative, in partnership with the Rassias Center for World Languages and Cultures at Dartmouth. Mexican teachers travel to Hanover, New Hampshire, for an intensive course to improve their English-language instruction, followed by three years of mentoring back home. A newer in-country program reaches more teachers. Worldfund also started to offer scholarships to needy students and grants to needy schools. But the early years were very tough, Zurlo says. “The first three years, I didn’t take a paycheck. I lived off my savings,” Zurlo says. “You could say the seed funding was my sweat equity.” At one point, the group’s bank account had dwindled to $2,000 — not enough to make payroll, much less keep going. “I decided, ‘This could be it,’ ” Zurlo recalls. “Then we got a $100,000 grant. “I truly believe it was providential,” she says. Zurlo might have felt burned-out after an intense nine years on Wall Street, yet she credits the experience with equipping her with the skills needed to manage and run a business, albeit a nonprofit one. And former colleagues and contacts have provided crucial support for Worldfund, which depends on donations and fundraising. Zurlo has assembled an impressive board, led by Steven Schindler, chairman of NII Holdings, whose subsidiary Nextel de Mexico underwrites programs. Also on the board: Luiz Fraga, senior partner of Gavea Investimentos; Arcos Dorados CEO Woods Staton; and Nicolas Aguzin, CEO Latin America, J.P.

Morgan; among other regional heavyweights and representatives of financial institutions. “That has given us credibility,” Zurlo acknowledges. Mexican businessman Carlos Slim attended Worldfund’s inaugural gala in 2004 as honoree, which put the group on the map, she adds. By August 2009, Worldfund was able to launch two new programs. STEM Brasil, an 18-month training program for math and science teachers, debuted in Recife, Brazil, at three high schools. The following year, it expanded to 21 schools, and Worldfund hopes to take it statewide and then national. Also in 2009, Worldfund introduced an innovative program to train principals in two Mexican states. These programs require cooperation with government officials at the state and local levels, a delicate task. “Politics are challenging when working with the public sector, navigating [them] and ensuring that you can sustain your program past elections,” Zurlo says. Zurlo sounds equal parts proud and humbled by Worldfund’s impact. She describes being moved to tears by a new crop of teachers beginning training at the Dartmouth campus. “The 40 teachers, they were all expressing how they realize that they, themselves, have to make Mexico a better place,” Zurlo says. “It’s powerful stuff.” She says she wants to avoid the “revenue ceiling” that plagues many nonprofits and to ensure that Worldfund programs endure and reach more educators and students. “I would like to be working in more countries, deepening what we are doing in Mexico and Brazil,” Zurlo says of her future goals for Worldfund. “This is a noble cause.” editorial@latintrade.com

SEPTEMBER-OCTOBER 2011 LATIN TRADE

INDUSTRY REPORT

LATIN AMERICA’S TOP 100 BANKS Strong Growth, Good Outlook Latin Trade ranks the top 100 banks in Latin America and asks three leading bankers for their outlook. BY JOHN OTIS AND RUTH BRADLEY

BOGOTA — Carlos Raúl Yepes, president of Colombia’s top bank, Bancolombia, sees plenty of opportunities these days — and not just among big companies in the cities. In June, he visited one of Bancolombia’s newest branches — in the remote town of San Jose de Guaviare — in southeast Colombia. The size of the town? 45,573 inhabitants. “We are designing strategies to reach 14 million people who today don’t have access to the financial system, due to the high cost or their geographic location,” Yepes says. “We want to reach what we call la otra Colombia [“the other Colombia”], which means outlying areas like Amazonas and Guaviare departments.” Next up? A branch in Leticia, on Colombia’s southern border with Peru and Ecuador, by the end of the year. “You can’t just be where everything is profitable, where everything is fine, where there are no problems,” Yepes tells Latin Trade. “We have a strategy to be a universal bank and be in the most number of towns in Colombia.” Yepes, 46, took over as president of Bancolombia in February, replacing long-time president Jorge Londoño. Yepes previously served as vice president at Grupo Argos, a cement and energy company based in Medellin.

Bancolombia last year boosted its assets by 27.1 percent to $25.4 billion. Its net income grew 25.8 percent to $615.5 million. STRONG GROWTH However, it’s not the only bank doing particularly well in Latin America. The top 100 banks in the region increased their assets last year by an average of 29.7 percent. All in all, they reached assets of $3.3 trillion, according to Latin America’s Top 100 Banks list from Latin Trade. The performance of Latin America’s banks is striking in contrast to European institutions grappling with sovereign debt crises and the U.S. sector still dealing with a legacy of bad loans. The global recession that began in 2008 prompted ratings agency Moody’s to assign a negative outlook to the sector in Latin America. That outlook, based on the possibility of credit ratings downgrades, persisted into 2009, “but it was more an expression of the uncertainty,” says Celina Vansetti-Hutchins, managing director for Latin American bank ratings at Moody’s. By last year, Moody’s had revised the outlook to stable. “There’s very little legacy to the crisis,” Vansetti-Hutchins says. “Some systems are seeing a very good recovery.”

SEPTEMBER-OCTOBER 2011 LATIN TRADE

You can’t just be where everything is profitable, where everything is fine, where there are no problems. Carlos Raúl Yepes, president of Bancolombia

In Brazil, Peru and Colombia, in particular, “there’s a tremendous increase in credit this year compared to recent years,” she says. Even Mexico, whose economy is closely tied to the United States and therefore its GDP is growing at a slower pace compared with other countries, is moving along at a steady 3 percent to 4 percent rate, VansettiHutchins notes. “No spikes, no falls.” Latin America also has continued to stand out as a bright spot for global banks. Profits in Mexico, along with those in Turkey, are credited with offsetting a downturn in its home market for Spain’s BBVA. BBVA Bancomer, its Mexican subsidiary, was sixth in the ranking of Latin America’s top 100 banks, the same spot as last year. UK-based HSBC announced in August thousands of layoffs and the closure or divestiture of some businesses as part of a global restructuring. Although annual revenue was flat for the group in 2010, the bank highlighted double-digit revenue growth in Latin America. And while cutting jobs in Europe, HSBC will continue to hire in markets such as Brazil. HSBC Bank Brasil ranks eighth on the list, the same spot as last year. The Latin America banking markets

LATIN TRADE SEPTEMBER-OCTOBER 2011

that are growing most are Brazil, Colombia and Peru, Vansetti-Hutchins says. “Even Mexico, [although it’s] less than what it was at the peak, but more than what it has been recently,” she says. BRAZIL DOMINATES Brazil dominates the ranking of Latin America’s biggest banks. The top five banks, and seven of the top 10, are all from Brazil. All in all, 33 Brazilian banks make the list, accounting for $2.2 trillion in assets, or 67 percent of the total assets of the top 100 banks. Brazilian banks also performed better, with their assets growing at an average of 36.1 percent last year. State bank Banco do Brasil tops the ranking of Latin America’s biggest banks, with assets of $486.8 billion, an increase of 19.6 percent. Itaú Unibanco follows in second place, with assets of $453.2 billion, a 29.7 percent increase from 2009. Bradesco came in third, with $382.6 billion in assets, which was 31.6 percent higher than in 2009. However, BTG Pactual showed the strongest asset growth in Brazil last year — a whopping 251 percent to $44.2 billion. That was the third-highest asset growth in Latin America. As a result, the bank jumped 20

spots on the ranking — from 33rd place in 2009 to 13th place last year. Roberto Setúbal, CEO of Itaú Unibanco, says the overall macroeconomic environment is good, supporting ongoing growth. “We still have pretty much controlled the fiscal situation,” he says. “The public debt is low, below 45 percent of the gross domestic product. Inflation is under control. We have a high level of [foreign] reserves; external accounts are in good shape. This gives the whole country confidence that the growth that we are having today is pretty much sustainable when we look over the next few years.” Compared with nearly a decade ago, the CEO sees different challenges for Brazil. “Today we have a challenge of infrastructure. We have a lot to do in terms of infrastructure: airports, ports and improvements in roads, energy,” Setúbal says. “We need to do investments in infrastructure to keep the [macro] growth at this 4 to 5 percent level.” The bank’s loan portfolio expanded 20.5 percent in 2010, the same rate as the Brazilian credit market as a whole. The bank’s results already reflect government measures to rein in lending. Itaú Unibanco reported that new loans to consumers fell by more than 7 percent from November 2010, just before the measures were implemented, to March of this year. “We are the No. 1 private bank in terms of volumes of housing and real estate. It is a good opportunity,” Setúbal says. “In Brazil, the mortgage industry is still very small. In our case, it represents less than 3 or 4 percent of our balance sheet. So there are a lot of opportunities in that segment.” He predicts that the bank’s mortgage lending business will account for a greater share of lending activity when interest rates in Brazil come down. “Today the interest rates are still too high to make this financing attractive for homebuyers,” he says. In April, Itaú Unibanco acquired a 49 percent share in Banco Carrefour, the local consumer finance arm of French retailer Carrefour. The purchase fits into its longterm strategy of increasing its domestic business in Brazil. On the commercial lending side, Setúbal is focusing on projects related to commodities, such as metals and agricultural products, where he sees Brazil as having a competitive

COURTESY OF BANCOLOMBIA

INDUSTRY REPORT: BANKING

INDUSTRY REPORT: BANKING advantage. “Today the most attractive investments are not in manufacturing. It’s much more in those commodity-producing segments. We will have to reinforce the industries around those commodities and not try to compete with Chinese electronic products,” he says. “We have a lot of commodities projects, including the pre-salt oil production that, from our perspective, seems to be very, very feasible and will give good returns for the investors. For that reason, we are financing those projects. They are good projects.” Looking ahead over the next 10 years, Setúbal sees plenty of room for Itaú-Unibanco to grow at home. “We are in the market that is growing and a market that still has low levels of financial assets to GDP. Brazil has 46 or 47 percent of loans to GDP [ratio], which is low; we still have a lot of room to grow,” he says. “If you put 4 to 5 percent of GDP growth, plus a growth in this relation of financial assets to GDP, plus inflation, we are talking about a 15 percent to 20 percent on financial assets a

year. It is a lot.” Setúbal plans to continue to reinvest profits in Brazil, given the potential, while looking at opportunities around the region, though he emphasizes that he is in no rush. “We realize that even if I have a good position in many countries in Latin America, I would still be an 80 percent Brazilian bank, given the growth that we have in Brazil,” he says. Another Latin American market will be Itaú-Unibanco’s first step toward internationalization, a process Setúbal is approaching deliberately. “Today we are not prepared to be a global bank,” he says. “We still have to build a management structure of governance to become a global bank. We still lack a lot of things to achieve that level. “ “Over time we will build this governance, this process of becoming a global bank, and probably have a more intense presence outside of Brazil — probably in Latin America and the United States,” Setúbal says.

CHILE: SOLID Chile accounts for 10 of the top 100 banks in Latin America, and their combined assets reached $216.4 billion last year. On average they increased their assets by 13.2 percent. Banco Santander remains the top bank, with assets of $47.2 billion, an increase of 15.2 percent. Banco del Estado de Chile followed, with assets reaching $40.2 billion, a 20.7 percent increase. The local unit of Canada’s Scotiabank managed to outperform its rivals in Chile when it comes to profit growth. Last year the bank boosted net income by a whopping 289 percent to $154 million. That was the sixthhighest profit growth in Latin America, according to a Latin Trade analysis. Meanwhile, two other Chilean banks — Security and the local unit of Bilbao Vizcaya Argentaria — were among the top 10 asset and profit growth losers in Latin America last year. Security saw its assets fall 1.9 percent to $6.7 billion. Bilbao Vizcaya Argentaria posted a 23 percent fall in profits to $103 million.

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Mauricio Larraín, president of Banco Santander Chile, says the forecast is bright for his institution. “Last year our loan book increased 14 percent,” he says, adding that the growth rate in 2011 is on track for 16 percent to 17 percent. He predicts another 15 percent increase in 2012. “There is still a lot of room for growth in consumer lending,” Larraín says. “The ratio of consumer loans to GDP in the economy is 15 percent, including all players. The debt-servicing cost ratio is only 11 percent per household. Wages are growing, and unemployment is also falling,” he says. “At the same time, on the product side there are other indicators that reflect the strong growth potential of this segment. For example, the number of Chileans in the workforce with a checking account is less than 35 percent. The percentage of transactions done with a credit card is less than 25 percent.” The bank’s return on equity was 25.7

We are one of the most efficient banks in emerging markets. Mauricio Larraín, president of Banco Santander Chile

LATIN TRADE SEPTEMBER-OCTOBER 2011

percent in 2010, and, for the first five months of 2011, it achieved a 29.2 percent return. Larraín expects the rate to fall between 25 and 29 percent for the full year. “The ROEs are a reflection of our focus on retail banking activities. Roughly 65 percent of our loan book is lending to individuals and SMEs, the highest percentage among the top banks in Chile,” he notes. “At the same time, we are one of the most efficient banks in emerging markets. Our efficiency ratio or cost over income is 35 percent, and this is an important driver of our profitability.” Interest rates in Chile have been rising, but Larraín says the bank’s core deposit base, non-institutional clients, has been increasing at annual rate of more than 35 percent. He cites those deposits as the bank’s cheapest source of funding and they now account for 75 percent of total deposits. He adds that Banco Santander Chile has the highest credit rating in the region. “This has permitted us to obtain cheap long-term funding from the market,” Larraín says. “For

example, last year we issued the first corporate global Chilean peso bond abroad, the first short-date FRN in recent history from the region and the first Chilean bond issued in Swiss francs, all at very attractive rates.” Although consumer lending, mortgages and loans to small and mid-sized companies will fuel loan growth, Larraín says Chile is not likely to develop a consumer finance problem, akin to the United States. “The sub-prime problem was related to mortgage lending to people who had poor credit ratings,” he says. “This risk was dispersed among the global economy, and many banks also had poor capital levels.” Chilean markets have been rocked by the revelations of credit irregularities at retailer La Polar, which have triggered criminal and regulatory investigations. “In Chile, La Polar is a single case in which the risk is clearly identified only in that company and not system-wide,” Larraín emphasizes. “Banks in Chile are well regulated, all risk is on the balance sheet, and the banks are well-capitalized. The banks in Chile went through the 2009 recession and the 2010 earthquake, two very real stress tests, with minimal problems. This clearly reflects the strength of the local banking system.” Chile’s macroeconomic strengths should help protect the local banking industry from some of the risks associated with the global economy, Larraín says. Although the local regulatory environment is advanced, “future global banking regulations to a certain extent can be considered a risk factor, as there is still much uncertainty regarding what will be the final outcome of discussions regarding new capital and liquidity requirements for banks globally,” he says. Larraín emphasizes that Chile already has lived through a big banking crisis in the early 1980s that forced it to bring regulations up to date. “I was superintendent of banks during that period, so the impacts of that crisis on the banking sector are fresh on my mind as well as other persons working in this industry,” he says. Many regulations and standards under discussion in other markets around the world already are in place in Chile, says Larraín, who notes that Santander Chile exceeds minimal capital and core capital requirements.

COURTESY OF BANCO SANTANDER CHILE

INDUSTRY REPORT: BANKING

He counsels a conservative approach, regardless of the prospects of global macro-prudential regulations. “If you do a good job as a banker and stick to plain vanilla-brick and mortar banking activities while maintaining high levels of liquidity and ample capital, as we have done until now, in the end this should not pose a major risk to our strategy or growth potential,” Larraín says. COLOMBIA: STRONG POTENTIAL Colombia accounts for nine of the top 100 banks in Latin America, and their combined assets reached $105.0 billion in 2010. On average they increased their assets by 30.9 percent last year. Apart from Bancolombia, the country’s

We are the No. 1 private bank in terms of volumes of housing and real estate. Roberto Setúbal, CEO of Itaú Unibanco

top banks include Banco de Bogota, Davivienda, BBVA and Banco de Occidente. However, another bank led the way in asset growth last year: Helm Bank. Its assets grew by 60.3 percent to $5.1 billion. That was the seventh-highest asset growth in Latin America last year, according to the Latin Trade analysis. Despite the good growth at Bancolombia last year, bank president Yepes has high expectations for an even better performance this year. “This year will be better, partly because the Colombian economy is expected to [grow by] 5 percent,” he says. “Our portfolio in Colombia could grow by 15 percent or even more this year.” Bancolombia is aggressively pursuing new business, both retail and commercial.

“We have a micro-credit program called Mi Negocio [“My Business”] in which we’ve loaned about 100 billion pesos [about $57 million],” he says of efforts to tap smaller businesses. “In our … pymes [SME] program, we have a portfolio of 7.8 trillion pesos in loans. We have a portfolio of 25.6 trillion pesos for large businesses.” Yepes notes that Bancolombia is second only to state-owned Banco Agrario in terms of branches. Its network of nearly 2,600 branches is complemented by 3,000 ATMs, the largest number of machines compared with any other Colombian institution, giving it a presence in 700 of Colombia’s 1,069 cities and townships. Bancolombia already is the market leader in credit cards. On the international front, Bancolombia purchased Banco Agricola in El Salvador in 2007. In July of this year, the bank’s parent company, Grupo Sura, announced its purchase of the Latin American insurance operations of ING, the Dutch giant. The deal, valued at nearly $4 billion, includes ING’s pension, life insurance and investment management operations in Colombia as well as in Mexico, Peru, Chile and Uruguay. “The Banco Agricola acquisition gave us one million clients, and 20 percent market share in El Salvador. Little by little, we have been expanding geographically,” Yepes says. The bank already has a presence in Miami, Puerto Rico, Panama, Peru and the Cayman Islands, and “we want to be very active in foreign acquisitions,” he says. Yepes, who has been affiliated with Bancolombia for 18 years and served on the board of directors with Londoño, says his plans are to build on the bank’s current foundations. “Rather than changes at Bancolombia, I would call them evolutions,” he says of his plans for the bank. “We are focusing on innovation, efficiency, international operations and inclusion — which means reaching more people not connected to the banking system.” MEXICO GROWS Mexico accounts for 15 of the banks on the rankings list, and their combined

LATIN TRADE SEPTEMBER-OCTOBER 2011

COURTESY OF ITAÚ UNIBANCO

INDUSTRY REPORT: BANKING

INDUSTRY REPORT: BANKING assets reached $405.7 billion in 2010. On average they increased their assets by 71.2 percent last year. BBVA Bancomer remains the top Mexican bank, followed by Banamex and Santander. BBVA Bancomer’s assets grew by 10.2 percent last year to $94.4 billion. Banamex assets grew somewhat slower — by 7.9 percent — to $90.1 billion, while Santander managed to outperform its two top rivals by boosting assets 22.1 percent to $55.1 billion. Among Mexico’s top five banks, HSBC also did well, increasing assets by 14.9 percent to $34.7 billion. But it was Barclays in Mexico that showed the strongest asset growth in percentage terms last year — a whopping 497.1 percent. That was the best performance in Latin America, according to a Latin Trade analysis. ING in Mexico also was among the region’s top five asset growth leaders last year, doubling assets to $9.9 billion. That catapulted ING to 45th place on

the ranking, up 32 spots from the previous year. Meanwhile, two banks in Mexico — the local unit of Germany’s Deutsche Bank and HSBC — were among the top 10 profit growth winners last year. Deutsche saw its profits jump 401 percent to $23.6 million, while HSBC noted a 237 percent increase in net income to $35.1 million. However, two Mexican banks also were among the top 10 profit losers. IXE saw net income fall 600 percent after posting a loss of $1.4 million. And Barclays (the asset growth winner), saw a 75 percent decline in net income to $3.5 million. VENEZUELA LOSES Venezuelan banks were the big losers on the Top 100 list. Venezuela accounted for six of the 10 worst performers in asset growth (all showing declines), while three banks from the South American country accounted for the five worst declines in the ranking.

Banco Occidental de Descuento in Venezuela led the way in asset declines, showing a 43.5 percent fall in assets to $6 billion. That resulted in drop of 37 spots in the rankings — from 38th place in 2009 to 75th place last year. Banesco followed, with a 39.5 percent drop to $12.1 billion. That resulted in a drop of 17 places in the rankings — from 20th place in 2009 to 37th last year. Banco Mercantil, Banco Provincial, Bicentenario and Banco de Venezuela followed, rounding out the six worst performers in Latin American asset growth last year. However, Bicentenario did manage to boost its profits by 604 percent to $20.8 million, the second-best performance in profit growth in Latin America last year. Otis reported from Bogota, and Bradley reported from Santiago. With additional reporting by Jane Bussey in São Paulo and Joachim Bamrud and Mary Sutter in Miami. editorial@latintrade.com

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SEPTEMBER-OCTOBER 2011 LATIN TRADE

INDUSTRY REPORT: BANKING

Latin America’s Top 100 Banks Ranked by assets in millions of U.S. dollars, as of December 31, 2010. RANK

‘10

‘09

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42

1 2 3 5 4 6 7 8 9 10 12 11 33 13 15 14 19 16 18 17 21 22 26 28 24 36 29 31 34 35 30 37 39 41 27 44 20 42 25 40 23 56

43 44 45 46

43 32 77 47

47 48 49 50

46 52 49 45

INSTITUTION

Banco do Brasil Banco Itaú Unibanco Bradesco Caixa Econômica Federal Banco Santander BBVA Bancomer Banamex HSBC Bank Brasil Banco Votorantim Santander Santander-Chile Banorte BTG Pactual Banco Safra Banco del Estado de Chile Banco de Chile Banco de la Nación Argentina HSBC Citibank Banco de Crédito e Inversiones Bancolombia Banco de Crédito del Perú Inbursa Banco de Bogotá Banrisul Deutsche Bank Scotiabank Bilbao Vizcaya Argentaria Corpbanca Davivienda HSBC Bank BNB Banco Continental Banco Volkswagen Banco de Venezuela BNP Paribas Banesco BBVA Banco Provincial Scotiabank Chile Banco Mercantil Bicbanco del Uruguay Banco de la República Bicentenario ING Banco de la Provincia de Buenos Aires Scotiabank Perú Banco de Occidente Banco Santander Río Banco General

LATIN TRADE SEPTEMBER-OCTOBER 2011

COUNTRY

ASSETS

Ch. ‘10/’09

NET INCOME

Ch. ‘10/’09

Brazil Brazil Brazil Brazil Brazil Mexico Mexico Brazil Brazil Mexico Chile Mexico Brazil Brazil Chile Chile Argentina Mexico Brazil Chile Colombia Peru Mexico Colombia Brazil Brazil Mexico Chile Chile Colombia Panama Brazil Peru Brazil Venezuela Brazil Venezuela Colombia Venezuela Chile Venezuela Brazil

$486,839.6 $453,194.3 $382,598.0 $240,435.4 $232,392.4 $94,414.2 $90,073.2 $73,267.5 $64,708.7 $55,101.3 $47,183.2 $44,982.1 $44,221.8 $44,000.4 $40,203.4 $39,008.2 $35,838.6 $34,747.7 $32,636.9 $28,264.5 $25,433.4 $23,898.5 $20,178.8 $19,521.5 $19,282.0 $18,598.8 $16,233.4 $15,826.5 $15,226.4 $14,753.0 $14,670.1 $14,274.2 $13,456.1 $12,426.5 $12,325.5 $12,265.2 $12,113.3 $11,538.8 $11,215.2 $10,904.0 $10,722.3 $10,254.7

19.6 % 29.7 % 31.6 % 22.7 % 18.2 % 10.2 % 7.9 % 27.4 % 32.9 % 22.3 % 15.2 % 9.6 % 251.4 % 16.3 % 20.7 % 13.3 % 53.9 % 14.9 % 37.2 % 9.0 % 27.1 % 30.7 % 30.7 % 38.2 % 15.4 % 56.0 % 17.2 % 17.9 % 21.0 % 21.8 % 5.9 % 29.8 % 29.4 % 30.0 % -20.1 % 49.9 % -39.5 % 24.6 % -30.3 % 6.7 % -36.8 % 56.6 %

$7,023.9 $7,996.0 $6,014.7 $2,259.3 $2,318.6 $1,825.2 $1,416.6 $649.5 $609.3 $1,043.3 $1,024.0 $488.7 $486.7 $629.0 $173.7 $808.8 $593.6 $35.1 $258.7 $474.5 $615.5 $430.7 $381.6 $408.5 $444.9 $46.3 $211.7 $103.2 $252.3 $269.9 $109.9 $188.2 $358.7 $164.8 $145.2 $128.6 $117.1 $219.6 $182.2 $153.6 $213.7 $209.3

20.5 % 38.3 % 30.7 % 31.1 % 123.6 % 29.3 % 26.7 % 67.8 % 32.3 % 21.9 % 19.0 % 24.4 % 34.7 % 20.2 % 46.0 % 59.0 % 85.7 % 236.9 % -76.9 % 49.7 % 25.8 % 34.6 % 3.5 % 14.2 % 43.2 % 212.3 % 35.7 % -23.1 % 50.3 % 20.9 % -11.4 % -28.6 % 11.8 % 351.2 % -14.4 % -10.6 % -21.8 % 22.9 % -46.5 % 289.0 % 18.1 % 14.5 %

Uruguay Venezuela Mexico Argentina

$10,177.8 $10,079.5 $9,897.8 $9,841.3

13.4 % -24.5 % 100.7 % 25.2 %

$144.5 $20.8 $61.6 $137.2

260.9 % 604.3 % -6.5 % 10,763.8 %

Peru Colombia Argentina Panama

$9,781.6 $9,175.3 $9,090.8 $8,419.3

23.1 % 32.7 % 18.8 % 2.9 %

$242.2 $203.5 $407.4 $199.6

9.9 % 15.4 % 31.7 % 3.8 %

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INDUSTRY REPORT: BANKING

RANK ‘10

INSTITUTION

COUNTRY

ASSETS

Ch. ‘10/’09

NET INCOME

Ch. ‘10/’09

Panama Brazil Argentina Colombia Argentina Brazil Peru Argentina Brazil Chile Peru Brazil Mexico Costa Rica Chile Brazil Colombia Mexico Brazil Panama Panama Mexico Mexico Brazil Venezuela Brazil Chile Ecuador Costa Rica Brazil Brazil Argentina Brazil Brazil Brazil Mexico Dominican Rep. Brazil Guatemala Colombia Colombia Panama Brazil Brazil Dominican Rep. Mexico Argentina

$8,408.7 $7,906.9 $7,829.8 $7,659.9 $7,646.6 $7,554.1 $7,537.4 $7,409.3 $7,338.5 $7,279.7 $6,895.2 $6,866.9 $6,789.9 $6,679.0 $6,674.0 $6,635.6 $6,603.2 $6,523.8 $6,456.2 $6,237.8 $6,139.9 $6,114.5 $6,053.0 $6,030.7 $5,954.2 $5,891.8 $5,842.0 $5,767.7 $5,759.0 $5,695.7 $5,685.2 $5,633.4 $5,491.9 $5,408.5 $5,403.6 $5,395.2 $5,367.6 $5,364.6 $5,233.4 $5,226.1 $5,132.0 $5,100.1 $5,078.6 $4,942.9 $4,784.9 $4,721.1 $4,500.1

9.5 % 18.8 % 20.8 % 24.6 % 18.0 % 43.8 % 7.8 % 20.8 % 76.3 % 21.2 % 23.2 % 16.6 % 23.5 % 13.1 % -1.9 % -9.6 % 24.4 % 18.1 % 65.3 % -2.3 % 0.2 % 19.0 % 267.6 % -11.3 % -43.5 % 39.1 % 8.8 % 21.0 % 25.3 % 10.9 % 25.9 % 28.3 % 36.9 % 34.4 % 28.0 % 9.7 % 9.7 % 32.3 % 15.9 % 24.7 % 60.3 % 31.5 % 13.3 % 23.5 % 10.8 % 18.6 % 26.2 %

$151.2 -$80.2 $257.1 $157.1 $119.4 $19.9 $136.0 $304.9 $66.1 $101.0 $177.2 $363.5 -$1.4 $59.8 $72.0 $95.7 $184.0 $83.7 $18.7 $127.0 $102.5 $68.0 $23.6 $2.2 $29.7 $121.4 $86.7 $79.1 $41.9 $100.2 $81.1 $77.4 $71.0 -$2.8 -$17.7 $50.3 $81.7 $164.9 $78.9 $97.3 $62.9 $43.2 $85.3 $61.2 $100.3 $18.3 $162.7

1.2 % -180.2 % 29.9 % -13.8 % 164.0 % 28.9 % 15.8 % 61.2 % 55.6 % 41.3 % 19.3 % 21.2 % -600.4 % 12.4 % 58.5 % 5.7 % 23.9 % 53.6 % 70.3 % 21.2 % 27.6 % 11.3 % 401.4 % -96.2 % -38.4 % 39.8 % 21.7 % 27.0 % 24.5 % 33.1 % 249.8 % 98.7 % 45.3 % 94.1 % -128.6 % 37.4 % 31.4 % 36.0 % 18.6 % 30.4 % 1.2 % -21.3 % 464.9 % 83.2 % 11.8 % 45.1 % 154.7 %

Mexico Brazil Uruguay

$4,482.6 $4,475.5 $4,418.8

497.1 % 22.9 % 16.6 %

$3.5 $117.7 $53.8

-74.5 % 7.6 % -8.3 %

‘09

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97

48 55 57 60 58 72 51 61 93 64 67 66 69 65 53 50 71 68 99 59 62 75 --54 38 90 70 81 83 74 84 88 96 95 91 78 79 94 85 92 ----86 97 89 98 ---

98 99 100

-------

BAC International Bank Panamericano Banco Macro Banagrario Banco de Galicia y Buenos Aires Sidecredi Banco de la Nación BBVA Banco Francés JP Morgan Itaú Chile Interbank BMG IXE Banco Nacional de Costa Rica Security Banco Alfa Banco Popular Banco del Bajío Bancoob Bancolombia Banco Nacional de Panamá Interacciones Deutsche Bank Banco Fibra Banco Occidental de Descuento ABC Brasil Bice Banco del Pichincha Banco de Costa Rica Banestes BMB HSBC Bank Banco Pine Banco Société Generale Banco Cruzeiro do Sul Banco Azteca Banco de Reservas Daycoval Banco Industrial Banco Colpatria Helm Bank Bladex BASA Radobank Banco Popular Dominicano Aﬁrme Banco de la Ciudad de Buenos Aires Barclays BRB Banco Santander

Sources: Austin Asis, Banking authorities of Argentina, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Mexico, Panama, Peru, Uruguay and Venezuela; Latin Trade.

LATIN TRADE SEPTEMBER-OCTOBER 2011

INDUSTRY REPORT: BANKING

Top Banks by Country Ranked by assets in millions of U.S. dollars, as of December 31, 2010. ARGENTINA RANK 1 2 3 4 5

INSTITUTION Banco de la Nación Argentina Banco de la Provincia de Buenos Aires Banco Santander Río Banco Macro Banco de Galicia y Buenos Aires

BRAZIL RANK 1 2 3 4 5

INSTITUTION Banco do Brasil Banco Itaú Unibanco Bradesco Caixa Econômica Federal Banco Santander

CHILE RANK 1 2 3 4 5

ASSETS $35,838.6 $9,841.3 $9,090.8 $7,829.8 $7,646.6

Ch. ‘10/’09 53.9 % 25.2 % 18.8 % 20.8 % 18.0 %

NET INCOME $593.6 $137.2 $407.4 $257.1 $119.4

Ch. ‘10/’09 85.7 % 10,763.8 % 31.7 % 29.9 % 164.0 %

ASSETS $486,839.6 $453,194.3 $382,598.0 $240,435.4 $232,392.4

Ch. ‘10/’09 19.6 % 29.7 % 31.6 % 22.7 % 18.2 %

NET INCOME $7,023.9 $7,996.0 $6,014.7 $2,259.3 $2,318.6

Ch. ‘10/’09 20.5 % 38.3 % 30.7 % 31.1 % 123.6 %

INSTITUTION Santander-Chile Banco del Estado de Chile Banco de Chile Banco de Crédito e Inversiones Bilbao Vizcaya Argentaria

ASSETS $47,183.2 $40,203.4 $39,008.2 $28,264.5 $15,826.5

Ch. ‘10/’09 15.2 % 20.7 % 13.3 % 9.0 % 17.9 %

NET INCOME $1,024.0 $173.7 $808.8 $474.5 $103.2

Ch. ‘10/’09 19.0 % 46.0 % 59.0 % 49.7 % -23.1 %

COLOMBIA RANK 1 2 3 4 5

INSTITUTION Bancolombia Banco de Bogotá Davivienda BBVA Banco de Occidente

ASSETS $25,433.4 $19,521.5 $14,753.0 $11,538.8 $9,175.3

Ch. ‘10/’09 27.1 % 38.2 % 21.8 % 24.6 % 32.7 %

NET INCOME $615.5 $408.5 $269.9 $219.6 $203.5

Ch. ‘10/’09 25.8 % 14.2 % 20.9 % 22.9 % 15.4 %

MEXICO RANK 1 2 3 4 5

INSTITUTION BBVA Bancomer Banamex Santander Banorte HSBC

ASSETS $94,414.2 $90,073.2 $55,101.3 $44,982.1 $34,747.7

Ch. ‘10/’09 10.2 % 7.9 % 22.3 % 9.6 % 14.9 %

NET INCOME $1,825.2 $1,416.6 $1,043.3 $488.7 $35.1

Ch. ‘10/’09 29.3 % 26.7 % 21.9 % 24.4 % 236.9 %

PERU RANK 1 2 3 4 5

INSTITUTION Banco de Crédito del Perú Banco Continental Scotiabank Perú Banco de la Nación Interbank

ASSETS $23,898.5 $13,456.1 $9,781.6 $7,537.4 $6,895.2

Ch. ‘10/’09 30.7 % 29.4 % 23.1 % 7.8 % 23.2 %

NET INCOME $430.7 $358.7 $242.2 $136.0 $177.2

Ch. ‘10/’09 34.6 % 11.8 % 9.9 % 15.8 % 19.3 %

VENEZUELA RANK 1 2 3 4 5

INSTITUTION Banco de Venezuela Banesco Banco Provincial Banco Mercantil Bicentenario

ASSETS $12,325.5 $12,113.3 $11,215.2 $10,722.3 $10,079.5

Ch. ‘10/’09 -20.1 % -39.5 % -30.3 % -36.8 % -24.5 %

NET INCOME $145.2 $117.1 $182.2 $213.7 $20.8

Ch. ‘10/’09 -14.4 % -21.8 % -46.5 % 18.1 % 604.3 %

Sources: Austin Asis; banking authorities of Argentina, Chile, Colombia, Mexico, Peru and Venezuela; Latin Trade

LATIN TRADE SEPTEMBER-OCTOBER 2011

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INDUSTRY REPORT: BANKING

Latin America’s Top 100 Banks: Winners and Losers

37 41 39 44 35 74 66 70 65

‘09 38 Banco Occidental Venezuela de Descuento 20 Banesco Venezuela 23 Banco Mercantil Venezuela 25 Banco Provincial Venezuela 32 Bicentenario Venezuela 27 Banco de Venezuela Venezuela 54 Banco Fibra Brazil 50 Banco Alfa Brazil 59 Bancolombia Panama 53 Security Chile

‘10 46

44 93 73 34 40 43

81 18 26

‘09 47 Banco de la Provincia de Buenos Aires 32 Bicentenario 86 BASA --- Deutsche Bank 41 Banco Volkswagen 40 Scotiabank Chile 43 Banco de la República del Uruguay 84 BMB 16 HSBC 36 Deutsche Bank

Argentina 10,763.8 %

$137.2

Venezuela Brazil Mexico Brazil Chile Uruguay

604.3 % 464.9 % 401.4 % 351.2 % 289.0 % 260.9 %

$20.8 $85.3 $23.6 $164.8 $153.6 $144.5

Brazil Mexico Brazil

249.8 % 236.9 % 212.3 %

$81.1 $35.1 $46.3

‘10 63 52 85 74 19 98 39 75 32 28

IN ST IT UT IO N

RA NK

IN CO M E NE T

Ch .‘ 10 /’0 9

LOSERS CO UN TR Y

WINNERS IN ST IT UT IO N

NET INCOME

RA NK

NET INCOME

‘09 69 IXE 55 Panamericano 91 Banco Cruzeiro do Sul 54 Banco Fibra 18 Citibank --- Barclays 25 Banco Provincial 38 Banco Occidental de Descuento 37 BNB 31 Bilbao Vizcaya Argentaria

Mexico Brazil Brazil

AS SE TS

Ch .‘ 10 /’0 9 -43.5 %

$5,954.2

-39.5 % -36.8 % -30.3 % -24.5 % -20.1 % -11.3 % -9.6 % -2.3 % -1.9 %

$12,113.3 $10,722.3 $11,215.2 $10,079.5 $12,325.5 $6,030.7 $6,635.6 $6,237.8 $6,674.0

IN CO M E

‘10 75

IN ST IT UT IO N

$4,482.6 $6,053.0 $44,221.8 $9,897.8 $7,338.5 $6,456.2 $5,132.0 $10,254.7 $18,598.8 $35,838.6

RA NK

497.1 % 267.6 % 251.4 % 100.7 % 76.3 % 65.3 % 60.3 % 56.6 % 56.0 % 53.9 %

NE T

Mexico Mexico Brazil Mexico Brazil Brazil Colombia Brazil Brazil Argentina

Ch .‘ 10 /’0 9

Barclays Deutsche Bank BTG Pactual ING JP Morgan Bancoob Helm Bank Bicbanco Deutsche Bank Banco de la Nación Argentina

CO UN TR Y

‘09 ----33 77 93 99 --56 36 19

AS SE TS

‘10 98 73 13 45 59 69 91 42 26 17

Ch .‘ 10 /’0 9

LOSERS CO UN TR Y

WINNERS IN ST IT UT IO N

ASSETS

RA NK

ASSETS

CO UN TR Y

Assets and net income in millions of U.S. dollars, as of December 31, 2010.

-600.4 % -180.2 % -128.6 %

-$1.4 -$80.2 -$17.7

Brazil Brazil Mexico Venezuela Venezuela

-96.2 % -76.9 % -74.5 % -46.5 % -38.4 %

$2.2 $258.7 $3.5 $182.2 $29.7

Brazil Chile

-28.6 % -23.1 %

$188.2 $103.2

Sources: Austin Asis, Banking authorities of Argentina, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Mexico, Panama, Peru, Uruguay, Venezuela, Latin Trade.

LATIN TRADE SEPTEMBER-OCTOBER 2011

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COUNTRY REPORT: DOMINICAN REPUBLIC

Dominican Republic Moves Ahead The tourism champion is increasingly boosting its other sectors, including mining, finance, telecommunications and infrastructure.

Marco De la Rosa is bullish. The CEO of the Dominican subsidiary of U.S.-based energy company AES expects the Caribbean country will post a solid economic performance the next two years. “I believe that the growth is sustainable, thanks to the investment that’s coming into the country,” he says. Apart from heading up one of the largest foreign firms in the Dominican Republic, De la Rosa also is president of the Association of Foreign Investors in the country (known by its Spanish acronym, Asiex). De la Rosa predicts that during the next five years, the Dominican Republic will see foreign direct investment of $10 billion, thanks to strong interest in the burgeoning mining sector and more traditional sectors, such as tourism, financial services and telecommunications. The country’s annual FDI levels as a percent of GDP compare favorably to countries such as Brazil and Mexico, he points out. Last year, FDI reached $1.6 billion, which was the equivalent of 3.2 percent of GDP. By comparison, the FDI-GDP rates of Brazil and Mexico were 2.3 percent and 1.7 percent, respectively, according to Latin Business Chronicle. With a GDP of $58 billion, the Domini-

LATIN TRADE SEPTEMBER-OCTOBER 2011

can Republic has Latin America’s ninthlargest economy. Its GDP barely trails Ecuador and ranks ahead of Guatemala, Uruguay and Panama. Claudio Castro, director of Brazilian construction giant Odebrecht, says political and economic stability are among the key benefits of doing business in the Dominican Republic. Odebrecht is involved in several major construction projects in the country. President Leonel Fernandez has been in office since August 2004 (after also serving as president from 1996 to 2000). He won’t be able to run for re-election in May of next year, but local and foreign investors expect continuity of macro-economic policies, whoever wins the election. The Dominican economy grew by 7.8 percent last year. On average it grew by 7.5 percent in the six-year period 2005 to 2010. That compares with 2.9 percent the previous five years (from 2000 to 2004), according to a Latin Trade analysis of data from the International Monetary Fund. “We’ve had sustained growth,” De la Rosa points out. Much of the credit goes to Fernandez and his widely-respected economic team, including Economy and Planning Minister Temistocles Montas and Central Bank Governor Hec-

tor Valdez Albizu. Key officials promoting investment, such as Eddy Martinez (minister for export and investment) and Andres van der Horst (minister and executive director of the National Competitiveness Council), also receive praise for their efforts. When Fernandez assumed office in 2004, he inherited an economy in tatters. The GDP had fallen 0.3 percent in 2003 and barely grew by 1.3 percent in 2004. Meanwhile, inflation had reached a record 51.5 percent in 2004 following a 27.5 percent change in 2003. Fernandez managed to tame it to 4.2 percent in 2005. On average it has been 6.1 percent during the past six years. Carlos Asilis, managing partner and chief investment officer at Glovista Investments and a former chief investment strategist with J.P. Morgan, sees Fernandez’ greatest legacy as the preservation of the Dominican peso’s purchasing power. “The macro-economic stability helps businesses make real projections and at the same time provides peace of mind and confidence in the performance of companies in the country,” says Oslvaldo Oller Bolaños, project director at real estate company Promotora Granada. Standard & Poor’s raised the country’s credit rating in June, in part on the prospects

COURTESY OF THE DOMINICAN REPUBLIC MINISTRY OF TOURISM

BY JOACHIM BAMRUD

COUNTRY REPORT

The azure waters of the Caribbean attract millions of visitors each year to the Dominican Republic, which is upgrading highways to open new areas for tourism development. The Casa de Campo resort, with its own marina (opposite page), is one of the most exclusive destinations.

of continued strong growth. “The Dominican Republic’s economy remains resilient,” S&P announced. “The upgrade reflects the country’s progress in gradually improving its debt structure and debt management, its stronger growth and export prospects.” FREE TRADE Local and foreign executives also point to the free trade pacts the Dominican Republic has as a major benefit. The Dominican Republic is one of only six countries in the world that has free trade agreements with the European Union and the United States at the same time, which translates into benefits when doing business, according to van der Horst from the National Competitiveness Council. “The free trade agreements with the main economic blocks — the U.S., the European Union, Central America and the Caribbean — provide major benefits for investors,” says Maribel Gassó, president of the Santo Domingo Chamber of Commerce and Production. “Companies that set up both in the local market and in the free zones can maximize these benefits and trade their goods and services at an advantage … using the geographic location and technology platform of the Dominican Republic.”

The Dominican Republic’s location also is singled out by Elena Viyella, president of Inter-Quimica, S.A., a chemicals importer and distributor. “Its strategic location in the Caribbean allows it to have ‘time to market’ for U.S. companies that require constant and reliable inventory fulfillment,” she says. The country “offers an advantage when it comes to reliability, cost and minimum ‘time to reorder’.” She also points to the labor environment as a major benefit. The Dominican Republic “has competitive labor costs and, above all, a labor force that is trainable, reliable and … a labor climate that is very favorable to investment.” INFRASTRUCTURE: LAYING THE GROUNDWORK Apart from a Metro in capital Santo Domingo (see sidebar, page 78), the Fernandez administration has been implementing a series of major infrastructure projects throughout the country. In fact, infrastructure improvements and construction have been so common during Fernandez’ three administrations that he often is referred to as “The Infrastructure President.” Among the key ones is the $272 million Coral Highway, which will link Santo

Domingo with the key tourist areas of Punta Cana, Cap Cana, Bavaro and La Romana. Odebrecht is building it in a joint venture with a local partner. Another major Odebrecht project is the $124 million construction of the Boulevard Turístico del Atlántico toll road, which will also make it easier to reach the tourist area of Samana from Santo Domingo. “We are implementing major investments to improve access to tourism,” van der Horst says. Odebrecht also is building the $400 million hydroelectric plant Palomino, the $71 million El Rio-Jarabacoa highway and other works within the city of Santo Domingo. Among recent infrastructure projects that have been completed is the modernization of the road linking Santo Domingo with Juan Dolio, a growing tourism and real estate center, that has cut the travel time from 80 minutes to 40. Local developer Group Metro is developing a $500 million luxury resort called Costablanca and has already successfully opened up several beachfront condominiums in the town. Meanwhile, private-sector investments also have made major improvements to infrastructure. Dubai World is investing $50 million to build a second terminal at its Caucedo

SEPTEMBER-OCTOBER 2011 LATIN TRADE

COUNTRY REPORT: DOMINICAN REPUBLIC

port near Santo Domingo. Thanks to Dubai World investments in the first terminal, it now is one of the fastest-growing container ports in Latin America. Last year it ranked ninth on the ranking of Latin America’s Top 50 Ports from Latin Business Chronicle, based on 2010 traffic. That compares with 13th place in 2008. Its traffic went from 736,879 TEUs (twenty-foot equivalent units) in 2008 to one million TEUs last year. Meanwhile, Grupo Punta Cana (which owns the Punta Cana tourism and residential complex) has made its airport the fastestgrowing international airport in Latin America, according to Latin Business Chronicle. Punta Cana in 2009 recorded 4 million passengers, an increase of 11.8 percent from 2008. That was the best performance among the region’s top 10 international airports. MINING RAMPS UP While the Dominican economy has traditionally relied on tourism, FDI inflows and, to a certain extent, remittance inflows, a new sector is emerging that will play a key role in future growth, says J.P. Morgan analyst Franco Uccelli. “Mining is expected to pick up significantly [and become] significant contributors to the economy and exports,” he says. The mining sector is ramping up, thanks to major investments by Canada-based Barrick Gold and Goldcorp and Switzerland-based Xstrata. Barrick and Goldcorp are developing

LATIN TRADE SEPTEMBER-OCTOBER 2011

a gold mine called Pueblo Viejo, some 100 kilometers (61 miles) northwest of the capital city of Santo Domingo. The two are investing more than $3.6 billion in the construction alone, which started in February 2008 and is scheduled to finish mid-year in 2012. That’s the largest foreign investment ever in the Dominican Republic. The construction created 8,500 jobs, and once the mine is open it will sustain 3,500 jobs. Meanwhile, Xstrata’s Falcondo unit restarted operations earlier this year at its nickel mine in the town of Bonao, 80 kilometers north of Santo Domingo. It had temporarily shut it down in August 2008 to conserve value because of a combination of low nickel prices and record high oil prices. The mine employs 975 people. FINANCE: HEALTHY BANKS The banking sector is seen as strong and stable — a far cry from 2003, when fraud at the second-largest private bank, Baninter, caused the government to intervene it and there was a widespread banking crisis. “The banking system improved after the crisis [and is now] well-regulated and wellsupervised,” says Uccelli. “There’s limited concern of a crisis.” While Banco Popular remains the top private bank, it is seeing competition from new entrants, such as Venezuela’s Banesco. Popular last year had assets of $4.8 billion, an

increase of 10.8 percent compared with 2009. Meanwhile, its profits grew 11.8 percent to $100.3 million. It ranked 95th on the ranking of Latin America’s 100 largest banks from Latin Trade (see page 49). Meanwhile, state-owned Banreservas saw its net income jump 31.4 percent to $81.7 million, while its assets grew 9.7 percent to $5.4 billion. It ranked 87th on the Top 100 ranking. TECHNOLOGY: DYNAMIC SECTOR The Dominican Republic has one of the most competitive wireless telecom markets in Latin America. Mexico-based América Móvil (and its Claro brand) leads the way, but it faces stiff competition from France-based Orange as well as several new entrants, including U.S.-based Trilogy (which entered the market in 2007 when it bought the assets of Centennial Corp) and uses the Viva brand. América Móvil entered the country in 2006 when it acquired U.S.-based Verizon’s business for $2.1 billion. The Dominican Republic last year had 8.9 million wireless subscribers, which translates into a market-penetration rate of nearly 90 percent. Meanwhile, the Dominican Republic is increasingly becoming a major call-center hub. There are currently more than 50 call centers, employing more than 18,000 people. They are mainly located in Santo Domingo or the free zones. Among callcenter companies that have set up are U.S.-based Stream Global Services, which opened its first site in country in 2005 and today has more than 1,400 employees. The call-center sector is expected to grow further in coming years, driven by its cost and talent attractiveness. Santo Domingo ranked as the best city for calling centers in Latin America on the Zagada Institute Nearshore City Location Ranking (see Latin Trade July/August 2011). In second place: Santiago, the second-largest city in the Dominican Republic. FISCAL REFORM However, not all is rosy in the Dominican Republic. Local and foreign investors complain of several major challenges, including rising taxes, weak institutions, an inefficient education system, corruption and, last but not

COURTESY OF BARRICK

Canadian mining companies Barrick Gold and Goldcorp are investing more than $3 billion in the Pueblo Viejo project.

COUNTRY REPORT: DOMINICAN REPUBLIC least, an electricity sector that is still plagued by too many blackouts. In June, the Dominican congress approved the government’s fiscal reform, which aimed at reducing the growing deficit caused in part by rising oil prices. It also ensured that the country was able to respect the main conditions of its stand-by agreement with the IMF. However, one part of the reform was criticized among business leaders: the increase of corporate taxes from 25 percent to 29 percent over the next two years. By comparison, the average in Latin America last year was 27.3 percent. “The tax burden now is high,” says Gassó from the Santo Domingo Chamber of Commerce and Production. Viyella agrees. “Our tax system has suffered from various reforms, increased taxes and [a negative] effect on the competitiveness of companies,” she says. Uccelli says the tax increase enabled the government to meet its obligations with the IMF. “Nobody was surprised when this happened, given the fact that the govern-

ment and the IMF underestimated the cost of oil this year,” he says. “Rather than say ‘we will increase revenues by hiking taxes,’ it [the government] committed to cut expenditures as well.” Executives such as Viyella, De la Rosa and Oller say the country needs a more comprehensive fiscal reform rather than stop-gap measures. “There should be a comprehensive fiscal reform with the goal of reducing, simplifying and universalizing taxes; continuing to strengthen the tax collecting agencies and rationalizing and streamlining public expenditures and investments,” Viyella urges. ENERGY: CONTINUED PROBLEMS One problem Fernandez inherited is the electricity system, which is plagued by frequent blackouts and expensive charges to companies and individuals. “The country’s energy sector is one of the world’s most inefficient,” complains Asilis. “The lack of a coherent energy policy aimed at addressing the sector’s deeprooted deficiencies … manifest themselves into outsized energy prices for the end consumers.”

The Dominican Republic ranks among the eight worst countries worldwide in electricity supply quality in an executive survey from the World Economic Forum. It ended up in 132nd place among 139 nations after getting an average of 1.7 points on a scale of 1 (worst) and 7 (best). That means it ranked even behind a country such as Zimbabwe. As a result, the Dominican Republic ranked last on the electricity subindex of the Latin Infrastructure Index from Latin Business Chronicle (in contrast to an impressive fifth place on the transport subindex). Electricity companies complain that the government is not doing enough to stop the widespread theft of power, which leads to losses and problems supplying electricity to paying customers. To compensate for the sector’s losses, the government pays subsidies to the companies. Officials acknowledge the problems and say they are working to solve them. “Despite major efforts by this government, we still have to drag on decades’ worth of deficiencies in energy services,” says van der Horst. “We

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96%

Cumplimos con las medidas de calidad nacionales.

COUNTRY REPORT: DOMINICAN REPUBLIC invest in [offsetting] the distribution losses and deficiencies in collecting [through] high amounts to subsidize it when these resources should instead go to other areas.” However, De la Rosa says there is some progress. “Although there’s still room for improvement, it has improved compared to five years ago,” he says. CORRUPTION: MAJOR CHALLENGE Corruption also is cited as a challenge by local and foreign investors. “As in many developing countries, corruption is present at various levels,” Oller says. According to the World Economic Forum’s Global Competitiveness Report for 2010, corruption was listed as the most problematic factor for doing business in the Dominican Republic, ahead of inefficient government bureaucracy, access to financing and tax rates and regulations. Meanwhile, the latest Corruption Perceptions Index from German corruption watchdog Transparency International shows that the Dominican Republic has a score of 2.9 on a scale of 0 (worst) and ten (best). The Latin American average is 3.5. “The elevated … levels of corruption should be forcefully attacked and eliminated,” says Viyella, a former leader of the national business council CONEP. “The justice system should punish those who violate the law, those who commit corrupt acts and those who think they can act with impunity.”

However, there has been some improvement in terms of government efforts through more transparency, Oller says. EDUCATION NEEDS TO IMPROVE Another key area of complaint is the education system. Its quality is the second-worst in Latin America, after Paraguay, according to an executive opinion survey from the World Economic Forum. The Dominican Republic ranks 133rd out of 139 nations worldwide. It does even worse when it comes to math and science, ranking 136 of 139 nations, making it the fourth-worst worldwide and the worst in Latin America. “The country’s dismal educational and health levels arguably represent the country’s medium- and long-term Achilles heels,” Glovista Investments’ Asilis says. Government officials such as Van der Horst, who works to improve competitiveness, echo similar concerns. “One of the main challenges of our country is to strengthen the education system, innovation and the culture of quality,” he says. “By strengthening education, we [would be] encouraging the creation of qualified human capital, in accordance with the demand from the current market, as well as creating the conditions for entrepreneurship so people can develop independently and generate wealth for themselves and the nation.”

The Macro Numbers GDP

Sources: IMF, Latin Business Chronicle

LATIN TRADE SEPTEMBER-OCTOBER 2011

Inﬂation

OUTLOOK With Fernandez leaving office in August 2012 after eight years, there is now increasing attention to possible changes in policies. The two leading contenders are Hipolito Mejia from the opposition PRD party and Danilo Medina from Fernandez’ PLD party. Most polls show Mejia with a comfortable lead. “The outgoing government as well as the prospective one share a common vision of maintaining macroeconomic stability,” says Oller. Uccelli agrees. “There seems to be a fair degree of consensus on pro-market policies,” he says. Mejia was president from 2000 to 2004, succeeding and preceding Fernandez. His administration, however, was tarnished by the banking and economic crises. Yet, Uccelli believes Mejia has learned the lesson. “When [Alan] Garcia was elected in Peru [in 2006], I was terrified he would go back to his wild old ways,” he says. “Guess what? He did not. Hopefully now is the time for the PRD to set the record straight and think about its legacy to the country.” Independent of who wins, Asilis expects some changes. “I expect the next administration to embrace a more assertive stance on the energy sector, the recomposition of public sector expenditure and the extension of incentive measures to the agriculture sector,” he says. While the Dominican Republic will clearly be affected by everything from global turmoil to high oil prices, most investors and experts predict continued growth at respectable levels. “In the absence of external shocks, the economy should be able to maintain an acceptable trend GDP growth rate,” Asilis says. “If this growth is accompanied by a suitable rebalancing between the economic roles of the government and private sectors, and lower fiscal pressure, we should expect to witness a good and conducive business environment over the next couple of years.” The Dominican economy is expected to grow by an average of 5.8 percent during the five-year period 2011-15, according to a Latin Trade analysis of IMF projections. By comparison, the Latin American average in the same period is expected to be 4.1 percent. “The economy has been booming and will continue to boom,” Uccelli says. jbamrud@latintrade.com

COUNTRY REPORT: DOMINICAN REPUBLIC

Latin American Tourism Champion

may rank as the ninth-largest economy in Latin America, but when it comes to tourism, the Dominican Republic is among the leaders. In real terms, its

LATIN TRADE SEPTEMBER-OCTOBER 2011

receipts of $4.2 billion last year were the fourth-highest. Only Mexico, Brazil and Argentina — all countries with considerably larger economies — had higher revenues. In fact, the Dominican revenues

were only slightly less than Argentina received. However, when measured as a percent of its GDP, the Dominican Republic is the champion. Its tourism receipts were the equivalent of 8.2 percent of its economy. No other country in Latin America had a higher receipt-GDP ratio, according to the Latin Tourism Index from Latin Business Chronicle. Meanwhile, the number of Dominican arrivals reached 4.1 million, which was the equivalent of 41.8 percent of its population of 9.9 million. Only Uruguay and Costa Rica can boast higher arrivalpopulation ratios. The success of the Dominican tourism sector is built on a combination of factors. The country shares attractive beaches, climate and location with its Caribbean neighbors, but it also offers unique benefits, such as nine international airports and a well-developed hospitality sector led by Spanish chains such as Barcelo. Some people would also argue that its main attraction is the easy smile of the average Dominican. While much of the tourism has been driven by traditional all-inclusive visitors, private sector executives and government tourism officials alike are actively trying to boost higher-revenue tourism through upscale all-inclusives and luxury resorts. The Dominican Republic already boasts several world-class upscale resorts, including Cap Cana, Casa de Campo and Punta Cana — all located in the eastern area of the country. Meanwhile, Group Metro is developing a new luxury resort, Costablanca, in Juan Dolio, a 40-minute drive from Santo Domingo. The new flock of upscale tourists will join existing full-time or sometimes residents, such as Julio Iglesias and Oscar de la Renta (both own property at Casa de Campo). The same resort also boasts guests that include such famous names as Bill Gates and Bill Clinton. —Joachim Bamrud

COUNTRY REPORT: DOMINICAN REPUBLIC

Santo Domingo Metro: Full Speed Ahead

tribution to road congestion is by measuring the number of passenger-car-equivalent (PCE) units a vehicle represents. A PCE measures a vehicle’s contribution to traffic relative to a private car — the base case. “Estimates … indicate that the Metro has potentially displaced 22 percent of the total PCEs on the road during the morning inbound peak hour, and a weighted average of almost 12 percent of PCEs across all time periods,” says a report from the United Nations Commission for Sustainable Development. Other benefits include reduced accidents and pollution, a local economic stimulus and transfer of technology, according to the report. “Santo Domingo will likely garner reductions in their current rate of 2,000+ accidents and 300+ road fatalities per year … simply for the fact that President less people will be using the roads,” the report Leonel says, quoting estimates from the official agency Fernandez in charge of the Metro, OPRET. takes the The first stage of the Metro cost $700 million driver’s seat and took three years to complete. “Although varifor a 2008 test ride on the ous sectors of Dominican society — most notably Santo Domingo members of the opposition PRD party — have Metro, the ﬁrst criticized the costs of the Metro project, many in subway transit the international community have applauded the system built Metro’s cost and fast timeline relative to other on a Caribbean island. systems,” says the UN report. OPRET credits factors such as inexpensive local labor, use of local materials (such as sand and gravel), and government ownership of the Maximo-Gómez right of way and land used for OPRET’s offices and the maintenance/control station. “A highly touted benefit of Metro construction in Santo Domingo is the employment of thousands of construction and ancillary services workers The reason for the popularity is simple: The cost is low, and from 2004-2008 and the new permanent jobs created on the passengers save considerable time compared with the public system,” the U.N. report points out. According to OPRET data, bus and taxi systems. Average Metro users save 11 pesos by about 1,800 contractors worked on the Metro project, employbuying the 20-peso ticket, and they save 49 minutes per trip, ing more than 3,000 people in direct construction jobs and providing more than 6,000 indirect jobs in supporting work. according to a United Nations report. The route of the Metro is helping boost revenues for many The cost of the 20-peso (US$0.57) ticket compares favorably with other cities in Latin America, even in relative terms. stores, restaurants and other businesses. Many of those benWhereas the fare in Santiago, Chile, represents 28 percent of eficiaries, though, also have seen increased rental costs as a the minimum wage there, in Santo Domingo it’s the equivalent result of the Metro. Meanwhile, consumers in the Dominican capital are looking of 25 percent. Meanwhile, drivers using roads also benefit, as congestion forward to the new expanded route, which will make the subgoes down. The standard way to measure a vehicle’s con- way even more attractive. —Joachim Bamrud

LATIN TRADE SEPTEMBER-OCTOBER 2011

ORLANDO BARRIA/EPA/NEWSCOM

thousands of Dominicans watched on live television, President Leonel Fernandez drove the Metro wagon forward, formally inaugurating the country’s first Metro system. Despite heavy initial resistance and opposition, many Dominicans cheered the February 2008 event and were even more enthusiastic when the Santo Domingo Metro formally opened to the public in January 2009. Today, an average of 65,000 passengers use the Metro every day, and that figure is expected to jump to more than 170,000 when the second line — linking even more areas of Santo Domingo — opens next year.

BUILDING A BETTER AIRLINE, NOT JUST A BIGGER ONE. With airline mergers constantly in the news, it’s easy to forget that size alone isn’t enough to lead this industry. No one who flies is waiting for a bigger airline; they’re waiting for one that’s committed to making flying better. To that end, we’ve taken a look at every part of the experience – from buying a ticket to getting your bags – and dedicated ourselves to constantly improving it. That’s an ambitious goal, especially at a time when air travel is under pressure from all sides, but the challenges of this industry have always been its fuel; that was true at Kitty Hawk, and it’s true today. So while we’re proud to offer over 5,500 flights a day, we won’t rest until each one of them is as convenient, comfortable, and hassle-free as possible.

DELTA.COM

COMPANY REPORT Jaime Ardila heads up GM’s successful business in South America, a global star for the U.S. automaker.

How Brazil and South America are playing a key role in General Motor’s global business. BY THIERRY OGIER AND JOACHIM BAMRUD

LATIN TRADE SEPTEMBER-OCTOBER 2011

SÃO PAULO — Walter Lazzarini is a happy General Motors customer. The São Paulo taxi driver says his Chevrolet Corsa is reliable and maintenance costs are relatively low. As a taxi driver, he was able to purchase the car with 60 monthly installments (which is longer than usual credit, now down to 48 months). Last, but not least, it has good space. “It has more space at the back, which is good for baggage,” he says. Lazzarini is not alone. The Corsa is Brazil’s third-most-popular car. Meanwhile, General Motors also produces

the second-most-popular model on the market, the Chevrolet Celta, according to AutoInforme, a Brazilian news agency specializing in the local and international auto market. Celta also sells well on the second-hand market, which is something Brazilian consumers value, says Joel Leite, editor of AutoInforme. “One of the main criteria before purchase is how much I will be able to sell the car for later,” he says. “We have a survey that shows that the Celta is the car that depreciates the least in the market. This is good value to the consumers.”

COURTESY OF GENERAL MOTORS

South American Boost for General Motors

COMPANY REPORT

KEY MARKET FOR GM Brazil and South America have become key to GM’s overall success as traditional markets continue to lag. “South America today is the third-largest for GM outside the U.S. and China,” Jaime Ardila, president of GM South America, points out in an interview with Latin Trade. And unlike the meltdown in the United States in recent years, South America has been a bastion of strong results in recent years. “These have been operations that have been consistently profitable over the years,” Ardila says. “It remained profitable

during the major crises in 2008 and 2009. That provided significant financial support for GM globally.” South America is the second-fastestgrowing region for GM in unit sales. Last year, GM posted a 17.7 percent increase in auto sales in South America. That compares with 25.4 percent in GM’s international division (which includes China), a 5.7 percent increase in North America and a 0.4 percent decline in Europe. Meanwhile, South America is the region where GM has the highest market share worldwide. Its market share of 19.9 percent compares with 18.8 percent in the United States, 12.8 percent in China and 8.8 percent in Europe. And while GM is cutting its labor force worldwide, it’s boosting it in South America. The region had 31,000 employees as of year-end 2010, an increase of 10.7 percent from year-end 2009. By comparison, the global workforce declined 6 percent, while the number of U.S. workers fell 6.8 percent last year. It also fell in Europe and its international division. Meanwhile, the number of dealers remained largely intact last year despite significant cutbacks in the United States. As of year-end 2010, GM had 1,136 dealers in South America, a slight (2.6 percent) decline from 1,166 in 2009. That compares with a 19.9 percent cut in North America and a 6.7 percent decline in Europe. GM’s main strength in South America is its widespread knowledge of the market and the ability to hedge against currencies by using Korean/Mexican/European sourcing for imports, says Guido Voldozo, senior market analyst in charge of covering the automotive industry in Latin America for global consultancy IHS. Last year, South America revenues grew by 17.1 percent to $15.4 billion. That placed GM South America in 25th place on the Latin 500 ranking of Latin America’s top companies. It also made it the sixth-largest foreign firm in Latin America, according to the ranking from Latin Trade and Latin Business Chronicle. Earnings before interest and taxes (EBIT) reached $818 million in 2010. The South American auto market is expected to go from nearly 5 million units

last year to 6.2 million in 2014, according to a forecast from J.D. Power and Associates, the marketing information and research company. “The region has become particularly important because traditional markets [such as] USA, European Union and Japan ... have entered a phase of stagnation, whereas developing markets like Brazil present promising opportunities,” says Voldozo from IHS. “It becomes critical for players like GM, VW, Ford and Fiat.” GM VETERAN Ardila, 56, was named president of GM South America in July 2010 after having served as president and managing director of GM Mercosur since November 2007. He joined GM in 1984 as export manager at GM’s Colombia subsidiary Colmotores. Two years later, he was transferred to the New York treasurer’s office, marking Jaime Ardila heads up GM’s the start ofsuccessful a long international that businesscareer in South included fiAmerica, nance andatreasurer positions in global star for the Germany, US the automaker. United Kingdom, Mexico and Chile. In 1996, he returned to Colombia, becoming president of the local unit of Rothschild Bank of London. However, two years later he rejoined GM — as president of its Ecuador unit. A year later, he became president of Colmotores, the company he had joined 15 years earlier. In 2001, Ardila was promoted to oversee overall GM operations in Argentina, Uruguay and Paraguay. Argentina had traditionally been (and remains) a much larger market than Colombia. Two years later, he was again promoted — this time to the CFO position of GM’s extensive Latin America, Africa and Middle East (GM LAAM) division. As a result of GM’s restructuring, the division was closed at the end of 2009. Its South America business became a separate unit, while its other parts formed part of the company’s new International Operations division based in Shanghai, China. Ardila, who holds a master’s degree from the London School of Economics, also can boast experience from the public sector. Before joining GM, he was chief of the Economic Integration Division of Colombia’s well-respected National Planning

SEPTEMBER-OCTOBER 2011 LATIN TRADE

COMPANY REPORT: GENERAL MOTORS Department and was general secretary of the Ministry of Economic Development. Ardila’s team includes Grace Lieblein, who took over the Brazil operations in June after serving as head of GM Mexico since December 2008, and Brazilian native Denise Farinos, CFO of General Motors in South America. Farinos previously served as CFO of GM Colmotores in Colombia. Both have been named among Latin America’s Top 50 Businesswomen by Latin Business Chronicle. BRAZIL: GLOBAL STAR Brazil is GM’s third-largest market worldwide, after China and the United States. The U.S. automaker sells more than four times more cars in Brazil than in Mexico and more than in Canada and the United Kingdom combined. Meanwhile, Brazil is GM’s second-largest market worldwide for the Chevrolet brand. “We entered the Brazilian market in 1925, so we have been in Brazil for 86 years, and that makes Brazil one of the first overseas subsidiaries for GM,” Ardila says. GM’s five-year investment plan for Brazil in the 2008-12 period is $3.2 billion, which will be increased for the following five-year period. Brazil is by far the top auto market in South America. Last year it replaced Germany as the fourth-largest auto market in the world, behind China, the United States and Japan.

Sales of autos in Brazil grew by 9.3 percent last year to 3.4 million units, according to J.D. Power and Associates. “We are forecasting 3.7 million units in 2011,” Ardila says. “For the next two years our outlook is [that] growth will slow down in 2012, about 2 percent, but ... for 2013 [we are] forecasting more significant growth of 5-6 percent.” Leite also sees growth in the sector. “Sales [in Brazil] will grow but may fall short of targets set by the manufacturers,” Leite says. “The main reason is that just like they are planning on growth, you have companies like Honda, Hyundai, Toyota and Chery that are planning on gaining volume, too. As a result, it will be very competitive.” Ardila acknowledges the danger of Chinese imports. “The main challenge for local producers to Brazil is a strong local currency and a significant increase in labor costs the last two years,” Ardila says. “The combination of strong currency and strong labor costs is expensive for the industry, especially [in light] of growing competition from China.” Brazil’s currency, the real, appreciated by 40 percent compared with the dollar between year-end 2008 and year-end 2010. Meanwhile, inflation has been growing and is expected to reach 6.3 percent this year, its highest level since 2005, according to the International Monetary Fund. Cost of living has soared, making São Paulo among the 10 most expensive cities in the

world for expatriates alone, according to Mercer. While Chinese automakers still account for only a small percentage of the Brazilian market — 1.5 percent, according to Leite — they are expected to grow their share over the next two years as more consumers put more weight on their inexpensive prices than their reputation for bad quality. ECONOMY COOLS DOWN Meanwhile, auto vendors have started to suffer from a slowdown in sales. In June, economic activity in Brazil fell for the first time since December 2008, according to the central bank. Brazil’s economy is expected to expand by 4.5 percent this year compared with 7.5 percent last year, according to the IMF. “I only sold six cars this week, but I did manage to sell up to 10 in a single week in the past,” Carlos Queiroz, a salesman at the Chevrolet Absoluta car dealership in the booming city of Santos near São Paulo, said during a recent weekend. Nevertheless, he is confident that the market, which was booming up to the first half of 2011, will remain good. Yuri Silva, a sales supervisor at the same dealership, also says business used to be better. “This was thanks to [IPI] tax breaks [which expired in March 2010]. Now people expect another round of tax breaks, and sales have fallen a bit.” He says the outlook remains positive. “But if there is a credit crunch [as a result of the global

GM 2010 Sales

Growing Market Annual vehicle sales in South America, in millions

Vehicles sold, in thousands Sales

% change

Brazil

658

10.4%

Argentina

109

37.9%

Colombia

26.9%

Ecuador

32.5%

UNITS

7 6 5 4 3

Venezuela

4.10%

Others

N/A

Total S.A.

1,026

17.7%

2009

2010

2011

2012

2013 Source: General Motors

Notes: 2011 estimate; forecasts for 2012 and 2013. Source: JD Power and Associates

LATIN TRADE SEPTEMBER-OCTOBER 2011

COMPANY REPORT: GENERAL MOTORS financial crisis], things will get more difficult,” Silva predicts. GM also has struggled with complaints of a lack of new models. “We have become a bit tired,” Silva says, in reference to the models that are currently sold under the Chevrolet brand: Celta, Corsa, Meriva, Zafira (Captiva SUV imported from Mexico). “Nowadays, GM’s [vehicles] are out of date,” Leite says. “So far it has done well [in terms of sales] with what it has gotten. They are old cars, but they are efficient. If you take the Corsa Classic, it’s an old model, but people still trust it. The problem is having these old models when there are so many new models on the market. It’s like a new model almost every day — and the Chinese are bringing cheap models over here.” But within the next two years, GM is going to renew its range of vehicles and will launch new models. “It is going to be more exciting,” Silva says.

GM has prepared some new models, including the small-range Cobalt car, and the medium-range Cruise. “If this project is successfully completed, GM has a chance — not to gain market share but indeed to grow in terms of volumes in an expanding market,” Leite says. Ardila is more bullish. “Nine new product launches in Brazil ... makes us fairly bullish in holding and growing market share in a very competitive [market],” he says. GM holds an 18.7 percent share of the Brazilian car market. It sold 658,000 units last year, an increase of 10.4 percent from 2009. That means it outperformed its two top rivals, Italy-based Fiat and Germany-based Volkswagen, in growth. Fiat increased sales by 2.6 percent to 777,921 units, while Volkswagen grew 3.2 percent to 718,500 units, according to J.D. Power. ARGENTINA BOOMS Argentina, GM’s second-largest market in South America, was its star performer last

year. Sales jumped 37.9 percent to 109,000 units. That was the highest growth in South America and also compares favorably with GM’s growth in markets such as China, where sales increased 28.8 percent. GM boosted its market share in Argentina from 15.2 percent in 2009 to 16.3 percent last year. “Argentina has been surprisingly strong against the odds,” Ardila says. Total industry-wide sales of autos in Argentina reached 678,567 units last year, an increase of 42.2 percent, according to J.D. Power. Behind the sales boom is a combination of strong economic growth and a surge in credit. Last year, Argentina’s GDP expanded by 9.2 percent, the second-highest rate in Latin America. “The expectations this year are that it could be as high as 800,000 units, which would make it a historic record,” Ardila says. “It’s getting close to size of Mexico.” Sales in Mexico totaled 817,848 units last year, according to J.D. Power.

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COMPANY REPORT: GENERAL MOTORS The Chevrolet Celta, left, and Corsa are among Brazil’s top three best-selling cars.

COLOMBIA AND VENEZUELA: CONTRASTS Colombia, GM’s third-largest market in South America, also is a star. Sales grew by 26.9 percent last year to 85,000 units. GM holds a 33.6 percent market share in Colombia. Industry-wide sales grew by 44.2 percent last year to 252,822 units. “Colombia will likely end up around 340,000 units this year and growing to 350,000 next year,” Ardila says. “That’s a big growth.” As recently as 2009, Colombia’s auto sales were half that level — 175,346 units, according to J.D. Power. In contrast, GM sales in neighboring Venezuela grew by a mere 4.1 percent to 51,000 units. That was the weakest performance in South America. “Venezuela is a market that’s limited, not by demand — demand is very large — but availability of foreign exchange to buy components to assemble the cars,” Ardila says. In addition to currency restrictions, automakers have suffered from outright restrictions on car sales and several major devaluations of Venezuela’s currency, the bolivar.

LATIN TRADE SEPTEMBER-OCTOBER 2011

However, compared with the industry as a whole, GM has managed to do well. It actually increased its market share from 36.1 percent in 2009 to 40.6 percent last year. “Even within the environment of constraints for foreign exchange, we tend to do better than our competitors,” Ardila says. “Our brand is well-known.” While GM managed to grow sales, albeit at low levels, the industry as a whole saw a decline last year. Sales fell 4.1 percent to 117,125 units (the only major market to fall in Latin America). “This year [sales should be] around 125,000 to 130,000 units,” Ardila says. ECUADOR: FROM GREAT TO BAD After a strong performance last year, Ecuador is becoming another difficult market for GM and other automakers. GM sales jumped 32.5 percent last year to 53,000 units. Car sales as a whole jumped 77.6 percent last year to 135,177 units. GM boasts a 40.8 percent market share in Ecuador, its highest in Latin America and second highest worldwide. However, this year sales are expected to fall. “It’s less favorable [this year],” Ardila says. “The government has imposed quantitative restrictions on imports and [now] import duty on CKD.” CKD stands for “completely knockeddown,” a common practice in the export and import of cars. Whereas a fully

assembled car has import duties of 35 percent to 40 percent, a CKD car would be exempt from duty in Ecuador. However, in August, the government announced that it was slapping a 6 percent to 12 percent import duty on CKD cars unless they had national content and could earn a lower duty. “This will impact the industry,” Ardila says. “The industry will actually decline.” Total auto sales will likely drop by 7.7 percent to 124, 727 units, J.D. Power estimates. Ardila doesn’t expect the market to recover any time soon. He forecasts 2012 and 2013 to see sales around 130,000 units, which is lower than the 2010 sales.

GM Market share In 2010 Brazil Argentina Colombia Ecuador Venezuela Total SA USA China Europe Source: General Motors

18.7% 16.3% 33.6% 40.8% 40.6% 19.9% 18.8% 12.8% 8.8%

COURTESY OF GENERAL MOTORS

“Next year we are assuming more moderate growth,” Ardila says. “The forecast is that the market will stay around 830,000 units and a fairly small [increase] for 2013.”

COMPANY REPORT: GENERAL MOTORS

PERU: STRONG POTENTIAL Even though Peru’s economy is larger than Ecuador’s, it lags its neighbor in car sales. However, it has been a strong performer in recent years and is expected to remain so in the future. Sales of autos in Peru jumped 85 percent last year to 104,912 units and is expected to increase by another 7 percent this year to 112,287 units, J.D. Power predicts. “Peru has been a very positive surprise for our industry the last three years,” Ardila says. “This year Peru will exceed both Ecuador and Venezuela.” He expects that overall sales for the car industry could reach 150,000 units this year. “It could grow 5-6 percent a year the next three years, provided the government delivers on its promise of remaining moderate in macro policies and foreign investment.”

The sales growth in Peru is driven by a combination of factors. Last year, its economy increased 8.8 percent, and it could expand another 7.5 percent this year, the IMF estimates. Meanwhile, Peru has started to restrict imports of used cars, which helps boost new car sales, Ardila points out. MANUFACTURING AND DEVELOPMENT Apart from its strong sales performance in South America, General Motors is also a major manufacturer in the region. Last year its output in South America grew by 14.7 percent to 926,000 units. “South America is also important for product development,” Ardila points out. “It has developed technical expertise in developing products for emerging markets, especially in our tech center in Brazil.” GM’s São Caetano do Sul plant in São Paulo state was the company’s first Brazilian

Argentina . . . . . . . . . . . . . . .0810-999-8500 Aruba . . . . . . . . . . . . . . . . . . .297-58-55300 Bahamas . . . . . . . . . . . . . . . .242-377-8300 Belize . . . . . . . . . . . . . . . . . . . .501-207-1271 Brazil . . . . . . . . . . . . . . . . . .0800-701-0099 Chile . . . . . . . . . . . . . . . . . . . .56-57-575627 Costa Rica . . . . . . . . . . . . . . .506-257-3434

Curacao . . . . . . . . . . . . . . . .599-9461-3089 Dominican Rep. . . . . . . . . . .809-333-4000 El Salvador . . . . . . . . . . . . . .503-2339-7799 Grand Cayman . . . . . . . . .1-866-478-3421 Guatemala . . . . . . . . . . . . . .502-2277-9070 Honduras . . . . . . . . . . . . . . . .504-238-4726 Mexico . . . . . . . . . . . . . . . . .1800-021-2277

plant, starting production in October 1928. Earlier this year, GM added a third shift at the plant to boost output from 200,000 units a year to 250,000 units. The third shift added 1,500 new jobs to an existing labor force of 10,600. GM has two other plants in Brazil, located in São José dos Campos (also in the state of São Paulo) and Gravataí (in the state of Rio Grande do Sul). In addition, GM is building a new powertrain plant in Joinville (in the state of Santa Catarina), which is set to open late next year. OUTLOOK With a still-strong auto market in Brazil and fast growth in other markets, GM is optimistic about its outlook in South America. “We are clearly upbeat about Brazil and the rest of the region,” Ardila says. editorial@latintrade.com

Nicaragua . . . . . . . . . . . . . .505-2255-7981 Panama . . . . . . . . . . . . . . . . .507-204-9555 Puerto Rico . . . . . . . . . . . . . .787-253-2525 St. Lucia . . . . . . . . . . . . . . . . .758-451-6159 Turks & Caicos . . . . . . . . . . .649-946-4475 Uruguay . . . . . . . . . . . . . . . . . . .0800-8278

SEPTEMBER-OCTOBER 2011 LATIN TRADE

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A NATURAL DESTINATION FOR BUSINESS

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URUGUAY: A RELIABLE COUNTRY Uruguay has a long democratic tradition, distinguished by political and social stability that is among the strongest in Latin America. It has a pleasant climate — free of natural disasters — with plenty of water, the greatest asset of the future. It is considered one of the 25 least corrupt countries in the world. The level of education and civility of its people is one of the greatest assets of the country where school is mandatory, secular and free. Nearly 100% of the population is literate. Open to the world, a land of immigrants, Uruguay is governed by a constitution that guarantees freedom of religion and the absolute protection of private property. The country has approximately 3.5 million inhabitants, most of whom are descended from Spanish and Italian immigrants. Uruguay has the highest citizen safety index in the region. Traffic is manageable in all its cities, including the capital of Montevideo, where it is possible to get across town in minutes. Uruguay topped the list of Latin American countries with the best economic climate for the May-July 2011 period, according to the Economic Climate Index developed by German research institute Ifo with the Getulio Vargas Foundation (FGV) in Brazil.

INTERCONNECTED WITH THE WORLD U

RUGUAY is a member of Mercosur, a common market comprising Argentina, Brazil, Paraguay and Uruguay, with a GDP of more than US$2.45 trillion. The country also has free trade agreements (FTA) with Mexico, and with Israel and Egypt via Mercosur.

LATIN TRADE SEPTEMBER-OCTOBER 2011

Uruguay’s foreign trade has registered high rates of growth. In 2010, the value of goods exported from the country reached a new high at US$6.7 billion, a 23% increase over the previous year. The total rises to US$8 billion if exports from duty free zones

are taken into account. Uruguay has been able to diversify its export markets. Brazil is the leading destination but China, Argentina, Russia, the United States and various European countries are also priority markets.

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A Business Climate that Protects Investment

ruguay is particularly well positioned to attract investment. Distinguishing factors include its strategic location in the region, political and economic stability, first-rate infrastructure, a highly developed telecommunications system, the educational level of its people, the right legal framework and a level of security that is outstanding in the region. The Vice President of Uruguay, Danilo Astori, emphasizes Uruguay’s advantages as a safe place for investment, in “a business climate that the country has been building in recent years, which has three main components.” “First, Uruguay has achieved significant fiscal and financial equilibrium. Uruguay’s fiscal position is now very solid. At the same time, it has profoundly restructured

Danilo Astori Vice President of Uruguay

its finances. It has managed its debt very professionally while increasing its presence and reputation in international financial markets. This reality is reflected in the steady improvement of the country’s sovereign-debt ratings. Uruguay’s fiscal and financial achievements have been complemented by social programs that have successfully reduced poverty and homelessness, thereby achieving stability in important segments of society. This is the first very important component for creating a good business climate,” said Vice President Astori. “The second component of the business climate has been a significant modernization of institutions that have included new spheres that allow the country to look forward and progress in very important areas, such as the creation of the National Research and Innovation Agency,” he said. “The third component is the set of very important stimulus measures that Uruguay has in place to promote investment. At the same time, we set up a streamlined system to administer and implement those measures, including tax breaks that are consistent with national interests, such as: employment, technological innovation and decentralization. These measures also include special dutyfree port and airport zones. Uruguay is the only country on the South American Atlantic coast to offer such advantages. These economic stimulus measures together form a very important part of the business climate,” he said. Astori emphasized that Uruguay has other advantages that enhance its business climate. “Uruguay’s geographic location is absolutely strategic within the southern part of the continent as a gateway to the large expanded market represented by our neighbors, Brazil and Argentina. For this reason, Uruguay is in a privileged position to attract substantial investments from the logistics industry.”

The vice president added that Uruguay has other strengths compared to the rest of the region. “Human capital; public safety; the value that Uruguayan society places on freedom and democracy (first in the region); its position as the country with the lowest corruption index; a strong reputation for playing by the rules; and the predictability of its public policy all combine to foster confidence in investors. The country’s tradition of honoring the promises it makes, even during difficult times, is another factor worth considering. The 2002 crisis is one of the best examples. Uruguay faced extreme difficulties and still met one hundred percent of its obligations.” In recent years, with its economy on the rise, Uruguay has been able to successfully weather the global crises. In this regard, “in both the 2008-2009 international crisis and the current one, Uruguay has preserved its own level of liquidity while also maintaining contingent lines of credit in the international arena, [all of] which has allowed it to proceed calmly at times of major international instability,” the vice president said. “In addition, Uruguay has maintained a solid, well-founded fiscal policy and made very significant changes to its international integration. From the business perspective, the country now boasts a high level of diversity in its products, services and markets, with strong connections to areas of the world that are experiencing this crisis differently, particularly the Asia-Pacific region. So, for example, China is our second largest export market — something unheard of in Uruguay’s history. “It is clear that the business climate Uruguay has created, combined with its comparative advantages, generates investor confidence that is reflected in the numerous large investment projects that are coming to the country in diverse sectors of the economy,” said Vice President Astori.

SEPTEMBER-OCTOBER 2011 LATIN TRADE

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DIGITAL NATION, INTERNET ACCESS

RUGUAY has one of the highest penetration rates of Internet, PCs and telephone lines in Latin America. It is the largest exporter of software services in Latin America, with annual sales of US$68 per capita. Approximately 12,000 people work in this sector, which is at full employment. Uruguay is seen as a model, as the first country in the world to implement the “One Laptop per Child” Program, through which every child enrolled in public school receives

a computer. The program is known in Uruguay as the “Ceibal Plan.” The program is extended to high schools throughout the country, and subsequently to private schools. Five years after its implementation, the Uruguayan model of free access to a laptop for every student is now being exported to other countries. The audiovisual industry is also gaining strength in Uruguay. This includes a “cluster” that consists of a production complex with film

production and other audiovisual companies at its core. There are over 100 production companies in the cluster. They are dedicated to content development and production services for the advertising, film, television, animation and video game industries. The audiovisual industry is experiencing growing demand from abroad. Numerous multinational campaigns have been filmed on location in Uruguay.

We aim to strengthen ties with Asia and the Middle East

ruguay maintains strong business ties with Latin America, the United States, China and Europe, but it is also seeking to build a presence in other

markets. “Our strategy seeks to strengthen ties with Asia and the Middle East, without neglecting the strong relationship we have with this region. As part of Mercosur, it is also our priority to negotiate an economic and business association deal with the European Union,” said Dr. Luis Almagro, the Minister of Foreign Affairs. Uruguay has demonstrated its interest in building a greater presence in these regions by opening new embassies in Southeast Asia and the Middle East. “Vietnam is a reference point in Asia and that is why we opened an embassy there. It is an extremely well-respected country that holds a lot of sway over the political and economic decisions made in its region,” Almagro said. Vietnam, Singapore and Hong Kong are

LATIN TRADE SEPTEMBER-OCTOBER 2011

Uruguay’s primary Asian markets, after China. Many investments in Uruguay started at the Uruguayan Embassies where the staff “guided” the projects to an advanced point. “While I was in China, contracts were signed for investments to be made in Uruguay by automakers Chery and Lifan, and discussions began on contracts with the BBCA Group biochemical company and other agricultural chemical companies,” said Minister Almagro, who served as Uruguay’s Ambassador to China and to Singapore from 20072010. Uruguay’s relationship with China has strengthened in recent years. The Asian country is now the second largest importer of Uruguayan products, a status symbolizing the market diversification that Uruguay has achieved. “Obviously, Uruguay is a country with 3.5 million inhabitants and must sell its products abroad. The greatest mistake would be for Uruguayan foreign trade to concentrate on a single market or region,” Minister Almagro cautioned.

An important part of Uruguay’s diversification strategy is the new commercial agreements Mercosur may finalize in addition to those already in place with Israel and Egypt. “Mercosur’s foreign agenda must become more dynamic. It is very important that negotiations with the European Union be completed successfully,” the minister said.

Luis Almagro Minister of Foreign Affairs

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URUGUAYAN ECONOMY GROWING AT A RECORD RATE

RUGUAY is one of the countries with the greatest economic growth rate in Latin America. In 2010, gross domestic product grew at a rate of 8.5%, a rate achieved by few other countries in the world. The economic bonanza is reflected in Uruguayans’ household income. Between 2005 and 2010, Uruguayans’ annual per

capita income more than doubled, increasing from US$5,300 to US$11,820. Record low unemployment also reflects the country’s economic wellbeing. Uruguay ended 2010 with an unemployment rate of 6.1% among its active population, the lowest rate in decades. The trend continued in 2011, and in June unemployment had fallen to 5.5%, close to the na-

tion’s historic low. The country’s industrial activity is supported by a very reliable electricity supply, most of which comes from renewable resources. In the first four months of 2011, the industrial activity index of physical volume rose 5.1%, maintaining the previous year’s trend.

Focus on Diversifying the Production Structure

“O

ver a period of six years, industrial activity has grown 40%,” according to Roberto Kreimerman, Minister of Industry, Energy and Mining. Kreimerman says that Uruguay’s industrial sector enjoys several advantages that have allowed it to export record amounts of goods and services, on the order of USD 11 billion per year. “Uruguay has achieved significant market diversification in comparison to the past. Brazil is our primary trading partner and imports 18% of Uruguayan exports,” according to the secretary of state. “Secondly, Uruguay has a diversified industrial production. Traditionally, most production activity was centered on meat production. There has been significant growth in agro-industrial activity led by grain production, the industrialization of dairy products and forest products,” the minister said. Over the last eight years, Uruguay has had an average growth rate of over 6%. To foster future growth, the country is looking to diversify the production base, by adding new areas and complementing existing sec-

tors with higher added-value products and services. “Policies have been implemented to encourage the development of industries such as information technology, which has become very international; pharmaceuticals, which is attracting large new investments; the automobile industry, which has grown as the result of an agreement signed with Brazil; and the logistics industry, which now boasts exports on the order of US$1 billion per year,” Kreimerman explained. “The goal is to increase businesses’ competitiveness by encouraging ‘clusters.’ Clusters have been developed in the naval, audiovisual and dairy industries, among others, which optimize the export chain and make the sector more competitive,” the minister said. Uruguay offers energy security and the goal for 2015 is to have a diversified matrix with 50% of power from renewable energy sources. The state-owned electric company UTE expects to reach installed wind-power capacity of 600 megawatts by purchasing from private companies. The country consumes an average of 1,100 megawatts of instant power, with usage peaks of 1750 megawatts. Biomass is also

being promoted as are biofuels (biodiesel and bioethanol) via the ANCAP oil company. “Regarding the non-renewable energy supply, the idea is to reduce dependence on oil by generating more natural gas. That way we can reduce import dependence, price volatility and greenhouse gasses,” Kreimerman said. “Over the next five years, the investment budget for government-owned companies in the energy industry will be on the order of US$2.3 billion over five years. Another US$2.5 billion is expected to be invested by the private sector,” the minister added.

Roberto Kreimerman Minister of Industry, Energy and Mining

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Uruguay is Well Positioned to Deal with Global Crises

Fernando Lorenzo Minister of the Economy and Finance

LATIN TRADE SEPTEMBER-OCTOBER 2011

A Strong Economy

332

500

416

1.000

0 2002

2003

2004

2005

liquid assets to cover its needs for at least two years,” Lorenzo noted. The results of Uruguay’s policies are clear. The growth that the country has experienced for more than five years is based on a significant increase in investments. “Between 2005 and 2010, foreign direct investment (FDI) in Uruguay totaled nearly 6% of GDP, each year, a very high percentage compared not only to the other countries in the region, but to the world as a whole,” the minister said. Uruguay established policies designed to attract new investments and to diversify the export matrix. “The forestry development plan is an example of Uruguay’s political and institutional continuity and stability. In 1987, all the parties passed the Forestry Act aimed at strengthening and boosting the industry within the national economy. Development of the forestry industry was promoted as a way to diversify the production matrix of the agricultural sector. As a result, the level of development achieved by the forestry sector over the last 25 years is very significant. It includes the largest private investment in the country’s history (UPM) for the manufacture of cellulose paste. At this time there is another enterprise, Montes del Plata, with Swiss and Chilean capital, which is building a second cellulose plant. The investment is on the order of USD 1.9 billion, even greater than that of UPM,” Minister Lorenzo said. Uruguayan exporters have done an ex-

2006

2007

2008 2009

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cellent job of expanding their client base in recent years. This diversification was a determining factor in successfully navigating the 2008-2009 crisis and in forming the strong foundations needed to withstand future global recessions. In 1991, 10% of all goods exported from Uruguay were destined for the United States. The European Union accounted for 27%; Asia, 9%, Mercosur, 35%; and other destinations, 19%. Twenty years later, the percentage breakdown is as follows: the United States, 3%; European Union, 23%; Asia, 9%; Mercosur, 30%; and other destinations, 35%. Uruguay is in a period of record economic growth. According to the latest findings of the Getulio Vargas Foundation of Brazil and the University of Munich’s Economic Research Institute (Ifo), Uruguay is ranked at the top as the country with the best economic climate in Latin America. “In order to sustain growth, we must strengthen the infrastructure to foster the development of new private enterprises. For this reason, Parliament passed the Public-Private Partnership Act (PPP) which will attract more investments to infrastructure projects to ensure the continued growth of Uruguay’s economy over the coming years. Some projects will be implemented starting next year, including improvements to the highways and port infrastructure, among others,” said Minister Lorenzo.

SOURCE: CENTRAL BANK OF URUGUAY

847

1.500

1.593

Significant Increase in FDI

1.329

1.493

2.000

2.106

2.500

2.326

Foreign Direct Investment (FDI) Flows in Uruguay (US$, in billions)

194

etween 2004 and 2010, the average real growth of Uruguay’s GDP was 6.3% annually, one of the highest rates in the region. Even in 2009, when the global financial crisis battered the region’s economies, Uruguay’s economy grew 2.6%. According to Fernando Lorenzo, Uruguay’s Minister of the Economy and Finance, the country is well positioned to handle the crisis that is affecting developing countries this year. “Short- and medium-term growth perspectives are excellent, and there is widespread agreement that the country will grow 4% in the coming years,” said the minister. An economist, Minister Lorenzo bases his statements on the fact that the government’s average debt maturity between 2012 and 2015 is very low, at about 1% of the GDP per year. Lorenzo added that the country has managed to strengthen an already solid fiscal position, which has allowed it to bring down the ratio of total government debt to GDP. “The gross debt of the entire public sector dropped from 80% of the GDP in 2005 to 57% in 2010, while the net dropped from 51% in 2005 to 31% at the end of last year,” the minister said. Lorenzo credits Uruguay’s macroeconomic stability to sustainable growth that has been based on controlling fiscal accounts and decreasing the government’s financial vulnerability through a strategy of “de-dollarizaton” of debt and continuous improvement of its profile. “The Uruguayan government has sufficient

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A COUNTRY TO VISIT AND TO LIVE IN U

RUGUAY is one of those countries where the sky is a brighter blue. Dusk hovers over quiet waters and fertile fields as though part of a picture where nature paints lovely landscapes. The variety of tourist attractions in Uruguay is vast. During the summer, 600 kilometers of coastline beckon with all kinds of seaside resorts and fishing towns. The famed peninsula of Punta del Este is a well-known celebrity getaway where glamour reigns. But just a short distance away visitors can discover small towns with long stretches of beach with few tourists.

On the northern shores of the Uruguay River, near the Argentine border, visitors can enjoy hot springs, immersing themselves in waters that bubble up temperatures between 38 and 45 degrees centrigrade. It is a unique and revitalizing experience, combining nature with firstclass hotels and service infrastructure. For those seeking rest, peace and harmony, they can get it all, along with a hearty dose of nature and fresh air. Dude ranches and ecotourism are other options that Uruguay offers its visitors. Montevideo, the capital city, is home to sporting events, theater

and other cultural activities, and is a regional conference and convention center. Foreign investment in the real estate sector is strongly linked to tourism, since often those who visit Uruguay decide to invest. Major investments in real estate come from Argentina, Brazil and Spain, among others. The top destinations are Punta del Este, José Ignacio and the resorts at Rocha, but foreigners are also buying property in Montevideo, Colonia and Carmelo. More Europeans and Americans are settling in those parts of Uruguay to enjoy a peaceful life and friendly climate.

been growing by 4% to 5% per year, reaching over 250,000 per year,” said Minister Lescano, Many of the visitors to Uruguay from outside the region come through the increasing number of cruise ships. From November to April, Uruguay today welcomes more than 200 cruise ships which dock at the ports of Montevideo and Punta del Este. From these ships, some 350,000 passengers come ashore and get a good first impression of Uruguay’s culinary arts, customs and natural beauty. Many of them return to spend more time enjoying its attractions and its people. Tourism’s impact on Uruguay’s economy is very important. The tourist industry creates 50,000 direct jobs and another 100,000 indirect ones. Tourism brings in nearly US$1.5 billion in foreign currency each year. By the end of 2011, this figure is expected to reach US$2 billion. “Since 2009, there has also been a Tourism Satellite Account which, using the

methodology developed by the World Tourism Organization, measures the industry’s economic impact. It reflects that impact at around 6% of the GDP,” said Minister Lescano, underscoring the industry’s importance.

Residents and tourists alike

ruguay ranks 5th in the world among countries with the most tourists relative to residents. With a population of 3,500,000 in 2010, Uruguay welcomed over 2,400,000 tourists and expects to reach 3 million by the end of 2011. The country implemented major infrastructure projects to provide greater comfort to visiting tourists. The new Carrasco International Airport and the Colonia river terminal represented significant investments. “Colonia alone receives 2 million passengers each year and their first impression is of a modern, comfortable terminal,” said Minister of Tourism and Sports Héctor Lescano. Historically, Argentines have accounted for most of the visitors arriving in Uruguay, at close to 65%, but the number of Brazilian tourists has increased significantly. “Tourism from outside the region has

Hector Lescano Minister of Tourism and Sports

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ARCHIVO FOTOGRAFICO | ZONAMERICA

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airport? puerto / zona franca (shipping containers)

INVESTMENT INCENTIVES U

RUGUAY provides an open and growing economy with an excellent legal framework for investments. It offers attractive free trade zones, free trade ports and airports and tax exemptions. Investment terms and conditions are the same for local and foreign investors alike. No prior authorization or registration is required and there are no restrictions on the transfer of capital or profits. Investment projects may be eligible for tax exemptions.

SYSTEMS- LAWS » Temporary Admission (similar to a drawback system): Allows companies to import supplies free of import taxes for up to 18 months, provided the supplies are incorporated into goods intended for export or are used in the process. » Free Trade Zones: Areas exempt from business income taxes and net worth taxes as well as any other tax created now or in the future. The introduction of goods into the free trade zones is exempt from

any import duties or fees. » Free Trade Ports and Airports: Tax-free transit of goods; inside the terminals, the goods are exempt from all import duties and fees. No authorizations or formal procedures are required. » Investment Promotion System: Income tax exemption subject to submission and inspection of the investment plan. This is applied based on various parameters such as the type of employment offered, innovation, clean technology, etc.

New Drive toward Private Investment

ruguay’s Parliament recently approved the Public-Private Partnership Act (PPP) which establishes a new kind of link between private entities and

the State. “This is a new tool that does not replace the prior regulatory framework for privatestate relationships, but does gives the investor added security,” said Adriana Rodríguez, President of the Corporación Nacional para el Desarrollo (CND). The CND is a public agency whose mission is to facilitate the implementation of development-friendly policies. The “PPP” Act assigned the CND the role of advisor, promoter and educator for all operational aspects of the submitted projects. “It was modeled on Spain. The decision was to make it a law because that way it provides greater security. It cannot be changed by a president or minister. Only Parliament can modify it, which offers a greater sense of validity,” Rodríguez noted. “Uruguay has an urgent need for new infrastructure, for instance, to support the

LATIN TRADE SEPTEMBER-OCTOBER 2011

growth of its production activities, and it lacks the resources to meet those needs in the short term. This tool allows commitments to be assumed that can be paid for in the mid and long term. This is a law to resolve the emergencies that we have today,” said Rodríguez. “Public agencies will not be the only ones who can submit projects within the PublicPrivate Partnership Act. The corporation can receive private initiatives. We are going to be a service window with promotion and consultation functions,” the CND president said. “At the moment, we are in the receiving phase for the infrastructure needs that all those public agencies (ministries, corporations and local governments) have in their files for the next years. These range from marine terminals, highways, hospitals, to any other need. Projects will be reviewed and decisions made as to whether they are covered by the Public-Private Partnership Act, the assignment channels or the traditional public works mechanism,” Rodríguez explained. Once the pre-feasibility study is approved,

a call to bid will be sent out to the private sector. The plan for how the work will be performed will come from the private side. The State does not submit a work plan and may or may not participate in the financing. This will vary by project and, based on analysis, the best option will be selected. “The current international situation is driving many global banks to seek safe places for their money; in the Public-Private Partnership Act they see an opportunity.We have had quite a few inquiries,” Rodríguez added.

Adriana Rodriguez President of the Corporación Nacional para el Desarrollo

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OFFSHORING & OUTSOURCING PLATFORM

RUGUAY has 11 free trade zones in operation and two free trade zones under construction. The focus of Uruguay’s free trade zones is offshoring global operations and services provided under the “outsourcing” or “captive” systems. The free trade zones center on Logistics, BPO (Business Process Offshoring), ITO, KPO (Knowledge Process Offshoring), BFSI (Banking, Financial Services & Insurances) and high value-added industrial activities.

The Executive Director of the Cámara de Zonas Francas del Uruguay (CZFUY), Engineer Juan Opertti, emphasized that, “Uruguay stands out as a competitive location for Offshoring & Outsourcing services and global operations, supported by a benchmark legal framework that remains unchanged since 1987.” According to Mr. Opertti, other key elements are: human resources capacity, competitive costs, infrastructure, telecommunications, a fluid public-private

relationship that makes it easier to set up and start up operations, and “after care” for the global operations and services performed. “The total tax exemption for user companies operating inside the free trade zones is another differential,” Opertti said. The impact that free trade zone activities have on the economy is substantial. They generate 3.66% of the GDP, export values upwards of US$1.2 billion and create 10,000 direct jobs.

Montevideo strengthens its position as a regional hub

s part of the strategy to position Uruguay as a regional logistics center, the Administración Nacional de Puertos (ANP) is seeking to attract more cargo by implementing projects that will double the space devoted to operations at the port of Montevideo, making it possible to establish specialized terminals (chips, grains and fishing) in the future, as well as building logistics nodes inside the country connected by rail to the primary marine terminal. “Punta de Sayago is a mid-term and priority project. The Port of Montevideo has a 100-hectare area in which to carry out operations and this project allows us to double the space. The idea is to attract companies that will use Uruguay to centralize their distribution to the region,” said ANP President Alberto Díaz, an engineer. The port of Montevideo moves 12 million tons of cargo per year, more than half of it in transit to Argentina, Brazil, Paraguay or Bolivia, among other destinations. The ter-

minal’s cargo volume is growing over 20% per year. Total investment in the Punta de Sayago project will exceed US$200 million, so private capital is needed. “The ANP has begun to execute the first stage of the work, which represents an investment of US$5 million and will allow the first 10 hectares of the project to be ready for operations, and the first companies to move in, during 2012.” explained Díaz. In the ANP president’s view, Montevideo should move cargo multiple ways, just as the port of Barcelona does. “One strategic project for Uruguay’s [plan] to be a regional hub is the dry port of Rivera, which links the city on the Brazilian border to the marine port at Montevideo, 500 kilometers away. The Rivera-Montevideo railway [connects] Brazil and the rest of Mercosur,” Díaz said. Montevideo mobilizes 830,000 teus (20-foot containers) per year and its growth for 2011 is projected to surpass

the recent annual average of 10%. Other initiatives will create more space for port activities. The building of a specialized fishing terminal will enable the port to repurpose its current location on the bay, creating more room for commercial activities. With private capital participation, specialized terminals are planned for bulk merchandise cargo such as cereals and wood chips.

Alberto Díaz President of the Administración de Puertos (ANP)

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WORLD-WIDE SERVICES S

TRATEGICALLY located at the center of the Santiago de Chile — Belo Horizonte corridor where 60% of South America’s GDP is concentrated, Uruguay is in an unbeatable situation to position itself as a regional logistics and business center. The port of Montevideo, on the Rio de la Plata, along with those at Nueva Palmira and Fray Bentos on Uruguay’s coast, create the green belt of the Paraná – Uruguay Waterway and serve as the entrance

and exit points not only for Uruguayan products, but also those from other countries in the region. Over 50% of the merchandise that enters the port of Montevideo is in transit, en route to southern Brazil, Argentina, Paraguay and Bolivia, among other destinations. The Carrasco International Airport is a symbol of good public-private relationships that work to sustain the country’s growth. The Uruguayan government has assigned concessions to private opera-

tors for a period of 20 years, beginning in 2003, with the possibility of a 10-year extension. Construction of the new airport, with an architectural design considered to be among the most beautiful and modern in the world, meant investing $200 million in a new passenger terminal and cargo area. The results of that project are apparent as international passenger air travel doubled over seven years, from 800,000 travelers in 2003 to 1,600,000 in 2010.

lion in exports per year. The international transportation logistics industry alone creates 30,000 jobs. “We realize that Uruguay is already a regional logistics center, but our goal is to strengthen it,” argued Tabacco. The government has already announced investments to optimize logistics services, with more than US$1.8 billion destined for infrastructure projects through 2015. These and other projects will not happen without the participation of private investors. Parliament recently approved the Public-Private Partnership Act (PPP). The act’s purpose is to open the door for private capital to, with the state, drive new projects in different areas of logistics, such as railroads, highways and port terminals. More ambitious projects could be brought under the new law, such as the deep water port, which would be located on Uruguay’s Atlantic coast. The goal of this project is to accommodate large ships

and it would represent an investment of more than US$1 billion. The Atlantic port project is in the study phase, and could be incorporated under Uruguay Logistics 2030.

Uruguay Logistics 2030

ruguay’s importance as a regional logistics center and the expectation that the sector will boost the economy led the government to establish the Uruguay Logistics 2030 project, run through the Ministry of Transportation and Public Works. “The goal is to define a set of actions with the consensus of the different political parties and the participation of business owners and workers,” said Beatriz Tabacco, the engineer who is president of the Instituto Nacional de Logística (Inalog). “The important thing is to generate an action plan that goes beyond the term of a single government. Everything is contained in a state policy that acknowledges logistics as a strategic industry,” Tabacco emphasized. The statistics support this view. Logistics services generate over US$1.5 bil-

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Beatriz Tabacco President of the Instituto Nacional de Logística

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Political and Social Stability URUGUAY IN SOUTH AMERICA

RANKING

Low Corruption (Transparency International 2010)

Democracy Index (The Economist Intelligence Unit 2010)

Economic Freedom (Heritage Foundation 2011)

Prosperity Index (Legatum Institute 2010)

Political Stability (World Bank [WGI] 2010)

Quality of Life (Mercer Eco-City Ranking 2010)

Low Cost of Living (Mercer Cost of Living City Ranking 2010)

A COUNTRY THAT SUPPORTS INVESTORS U

RUGUAY adopted measures aimed at encouraging private investment, providing a framework of security and promoting a policy that is particularly favorable to foreign investment. An investment law passed more than a decade ago established the judicial and legal foundation for investment initiatives in Uruguay. The law states that it is in the national interest to promote and protect local and foreign initiatives. Foreign investors can

pursue any type of activity under the same terms and conditions as local investors and the same taxes rules apply to both. Encouraging investments has yielded good results. Over the past years, Uruguay’s foreign direct investment (FDI) has multiplied eightfold. In 2010, Uruguay attracted FDI of US$1,627 million, representing a year-over-year increase of nearly 30%, according to the Economic Commission for Latin America (ECLAC).

Uruguay is viewed as a platform for regional business

lmost all of the foreign companies that invest in Uruguay have a clear focus on exports and use the country as a platform for their regional

expansion. For economist Roberto Villamil, executive director of Uruguay XXI, “interest in Uruguay as a destination for foreign investment is growing, above all from the perspective that it is an excellent center from which to operate in the region and even beyond.” Uruguay XXI is the first point of contact for foreign investors. It is the agency that promotes the country’s investments and exports. Uruguay XXI guides, advises and provides up-to-date and detailed information to business people interested in investing in Uruguay. “We try to fill the role of companion to the foreign investor during their process of solidifying business, which means helping the investor define matters from the geographic location for their enterprise — in the case of an industry, where the plant will be located- to the end markets which the investor might serve from Uruguay,” said Villamil. Uruguay XXI reports an increasing number of inquiries every year. In the first half of 2011, more than 150 foreign businesses have visited the agency’s offices or made

specific investment inquiries, an increase of 12% over the first half of 2010. “We help investors set up their to-do lists in order to identify local counterparts or potential suppliers for their work processes, set up interviews with the competent national authorities or chambers of commerce for each project, and bring together all of the necessary contacts in the value chain identified by the company, whether industrial, services or commercial,” explained Villamil. Foreign direct investment (FDI) in Uruguay exceeds 5% of its GDP, a high level compared to other countries in Latin America. FDI is channeled into almost every economic activity. The country attracted major investments in projects tied to cellulose paste production, industrial manufacturing, agro-industrial, services, logistics, tourism and real estate. Uruguay has succeeded in diversifying the origin of these foreign investments.Traditionally, investments came from regional neighbors (Brazil, Argentina and, to a lesser extent, Chile), Europe and the United States. Today, Uruguay receives direct investments from China, India, Japan, and other Asian nations. “Several Asian countries are watching Latin America with interest. We try to attract that flow of investors who seek to do

Ec. Roberto Villamil Executive Director of Uruguay XXI

business in industries that are priorities for Uruguay,” emphasized Villamil. Foreign investment fostered the development of several industries in Uruguay, such as agriculture. “Hand-in-hand with foreign investment come new technologies and more modern business management models,” he added. “In a turbulent international environment, more investment may be directed to emerging economies. Primarily, toward those which have maintained stable growth, showed themselves to be streamlined in terms of taxes and debt management and diversified their commercial credit, and are not overly dependent on the countries currently in crisis,” Villamil said.

SEPTEMBER-OCTOBER 2011 LATIN TRADE

ON THE ROAD World Trade Center rises behind the Polyforum Cultural Siqueiros.

Chapultepec park with the Mexico city skyline

Mexico City Firsthand tips for visiting Mexico’s capital.

MEXICO SKYLINE: ISTOCKPHOTO; WORLD TRADE CENTER: MEXICO TOURISM BOARD

Insights and advice from Carlos D. Garcia, Latin American regional head for Novartis, and Laura McMahon, co-chair of Latin America Practice of Fulbright & Jaworski. Latin Trade: What do you like most about traveling to Mexico City? Garcia: No doubt my favorite part of going to Mexico City is reconnecting with old friends and indulging in the food. McMahon: For me, traveling from Houston, it’s only a two-hour flight, so it’s easy to get there. The new international terminal is very nice; clearing immigration is easy. The climate is wonderful. Except for the rainy season, the temperature is good. The restaurants are great. I have not been in a bad restaurant in Mexico City. Latin Trade: What do you like least? Garcia: Heading back to the hotel, at rush hour, stuck in

Periferico o Viaducto. It rolls in the morning (we start early, when the city starts late), but is gridlock in the evening. McMahon: Traffic. I was there recently during a demonstration at Paseo de la Reforma [one of the city’s main thoroughfares]. You had to spend double the time getting around. The flipside of that is that people are flexible about arriving late for appointments. Latin Trade: What restaurants do you recommend? Garcia: My favorite Mexican meal is breakfast (chilaquiles, huevos rancheros or machaca). The buffet at the Nikko is excellent, and the selection at the Four Seasons is, too. Regarding tacos, if you have the stomach for it, Copacabana, in Tlalpan by the Estadio Azteca, is a must. If you are going for the first time and want to experience some “safe” Mexican food, go to La Valentina, Hacienda de los Morales or San Angel Inn.

McMahon: There are three I like to go to: Izote. The food there is so interesting; it’s run by a woman [Patricia Quintana]. Pujol. They are very different. Estoril in Polanco. The service is great; it’s really close for business purposes and an easy restaurant to go to. All three have that Mexican [feel]. I like to go to restaurants with local origin. Latin Trade: What are your preferred hotels when you are there on business? Garcia: All the Polanco Hotels are fine, but my favorite is the Four Seasons (excellent value for money), and the GM is an old friend from his days in Miami. McMahon: I am a bit of a fan of the Four Seasons or the JW Marriott. Four Seasons has a beautiful courtyard, and the restaurant is great for breakfast meetings. Security is good. At the JW Marriott as well. They are in different locations, so depending on what I have to do, those are the favorites.

Latin Trade: What practical advice would you give to someone who is visiting Mexico City for the first time on business? Garcia: Stay in Polanco, go easy on the salsa verde, and never hail a cab in the street. McMahon: I would encourage people to take a few hours to see something [of the city]. There’s so much there, and it helps to get to know the culture and people. … The museums are wonderful, [as is] the old part of the city. It’s easy to get a driver who is also knowledgeable to take you around. I know there are security issues that have gotten worse the past two years, but like any city, be careful. I take the advice of my clients and colleagues and get a car from the hotel. If you’re not from there and look like you’re not from there, why take a chance? It’s a little expensive, but worth it. — Joachim Bamrud jbamrud@latintrade.com

SEPTEMBER-OCTOBER 2011 LATIN TRADE

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LT GUIDE: MEXICO CITY Camino Real Polanco Mariano Escobedo 700, Colonia Azures Tel. (55) 5227-7200 caminoreal.com

Las Alcobas Mexico DF Presidente Masaryk 390A, Col. Polanco Tel. (52) 55-3300-3900 lasalcobas.com

Embassy Suites Mexico City – Reforma Paseo de la Reforma #69, Col. Tabacalera Tel. (52) 55-5061-3000 embassysuites1.hilton.com

Mexico City Marriott Reforma Paseo de la Reforma 276, Col. Juarez Tel. (52) 55-2482-2400 marriott.com

Fiesta Americana Grand Chapultepec Mariano Escobedo 756, Col. Anzures Tel. (52) 55 2581 1500 Fiestamericanagrand.com

Presidente InterContinental Mexico City Campos Eliseos 218, Col. Polanco Tel. (52) 55-5237-7730 intercontinentalmexico.com

Four Seasons Hotel Paseo de la Reforma 500, Colonia Juarez Tel. (52) 55-5230-1818 fourseasons.com/mexico Hilton Mexico City Reforma Avenida Juarez 70, Col. Centro Tel. (52) 55-5130-5300 www1.hilton.com Hotel Habita Av. Presidente Masaryk 201, Col. Polanco Tel. (52) 55-5282-3100 hotelhabita.com Hotel Nikko México Campos Elíseos No. 20S, Colonia Polanco Tel. (52) 55-5283-8700 hotelnikkomexico.com

Sheraton Maria Isabel Hotel and Towers Paseo de la Reforma 325, Col. Cuauhtemoc Tel. (52) 55-5242 5555 starwoodhotels.com/ sheraton St. Regis Mexico City Paseo de la Reforma 439, Col. Cuauhtemoc Tel. (52) 55-5228-1818 starwoodhotels.com/stregis W Mexico City Campos Eliseos 252, Col. Polanco Tel. (52) 55-9138-1800 starwoodhotels.com/whotel

JW Marriott Hotel Mexico City Andres Bello 29, Colonia Polanco Tel. (52) 55-5999-0000 marriott.com

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ASK THE CONCIERGE Concierge Agnes Ignacio at the Four Seasons Hotel, ranked as Mexico City’s top hotel for business by participants in Latin Trade’s annual travel survey, offers her advice and tips for visiting the Mexican metropolis. What restaurant would you recommend for a professional lunch or dinner? Dulce Patria (Tel. 52-55-33003999) in Colonia Polanco is an ideal place for a business lunch or dinner. Its exquisite, contemporary Mexican cuisine is complemented by personalized but discreet service, and the tables are placed at a comfortable distance from each other.

tional methods to create modern designs. Her products are carried at the Palacio de Hierro department stores and a number of museum stores. Tane, which has a boutique here in the hotel, among other locations, carries finequality silver jewelry, cutlery and art objects. Arroz con Leche (Tel. 52-55-5281-4038) in Colonia Polanco features modern Mexican designs in children’s clothing.

I have 24 hours in Mexico City. What itinerary would you recommend? Begin with breakfast on the hotel patio at one of our restaurants. Head to the Centro Historico along the Paseo de la Reforma with a driver and guide who can point out landmarks along the way. Once in the center, visit the Aztec ruins of the Templo Mayor, the Metropolitan Cathedral, the oldest and largest in Latin America, and the National Palace, which houses some of Diego Rivera’s most important murals. Have lunch at a traditional Mexican restaurant, such as Fonda El Refugio in the Zona Rosa. In the afternoon, go to the National Museum of Anthropology, concentrating on galleries such as those dedicated to the Aztec and Maya cultures and to the site of Teotihuacan. From there, visit the Casa Luis Barragan, the former home and studio of Mexico’s most influential 20th-century architect. Return to the hotel to rest and enjoy a pre-Hispanic massage before dinner.

What are the must-buys in Mexico City, if I were to bring something home? Talavera ceramics; silver products; embroidered textiles, such as rebozos; alebrijes, a folk art in the form of fantastical creatures painted in vivid colors; Olinalá jewelry boxes; and some local sweets.

Can you suggest one or two places to shop? Maggie Galton Artesanal Design produces high-quality textiles and handicrafts, using tradi-

What safety measures do you recommend? Dress down while exploring the city. Evening walks are great, but only on familiar grounds. Use an ATM within hotel premises to get cash, but only carry the cash that you need. Finally, use the transportation service recommended by your hotel. I have many meetings in the city. What is the best way to get around? Having a recommended driver at one’s disposal may be costlier, but it is the most convenient way to get around. Delays are avoided, and safety is guaranteed. What is the appropriate amount to tip a taxi or other driver and in restaurants? A gratuity of 10 percent of the transportation cost or the consumption at a restaurant is an appreciated gesture.

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TECH TRENDS

Copa Pioneers Mobile Check-in Mercedes Morris Garcia, director of external relations at copper miner Minera Panama, has been a paperless traveler for years. When she checked in at Panama’s Tocumen airport, she would typically show counter agents flight information from emails on her BlackBerry. She is now benefiting from a new service from Panama’s airline Copa that allows passengers to generate electronic boarding passes for smart phones and other portable devices — the first of its kind in Latin America, Copa says. “I’ve traveled on Copa six times in the past five weeks and am thrilled with the new service,” Garcia says. “To have a mobile site enabled just for this, with all flight data quickly available, as well as an electronic scannable code on my screen instead of the thermal printout for the gate check, is convenient and travelerfriendly.” Although the functions on m.copaair. com are limited compared with the regular website, copair.com, the service has been a hit, airline executives say. “It’s had a much better reception than we expected,” says Frank Kardonski, the carrier’s distribution director. Roughly 200,000 visitors have used the mobile site, and about 25,000 have used the site to check in for a flight. Other features include real-time flight status updates, contacts for Copa offices and reservations, and travel policies and procedures. At launch time, the e-boarding passes were valid only at Copa’s home base and hub, Tocumen International Airport in Panama City. Since then, two more Latin American airports have come aboard: Comodor Arturo Merino Benítez International Airport in Santiago, Chile,

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and Carrasco International Airport in Montevideo, Uruguay. Other regional airports considering adopting e-boarding pass technology have approached Copa for advice on doing so, according to Diana Mizrachi-Kopel, customer experience director for Copa Airlines. Airport authorities “are very supportive of the idea. It’s less paper — a seamless experience,” she says. “There are plans to roll it out to more countries.” Copa has found that some travelers log into the regular website from a computer and then send electronic boarding passes to their smart phones. Such a user might be a business traveler who uses a laptop in a hotel room and then visits the mobile site for updates before heading to the airport. Before the year is out, Copa plans to introduce more functions to the mobile site. Those additions likely will include the ability to manage reservations, from booking and buying a ticket to changing seat assignments. “We’re focusing on complementing the experience and making it as easy as possible,” Kardonski says. Although some analysts predict mobile could overtake regular connectivity, Copa executives see room for both. “We are also investing in improving copa.com,” Mizrachi-Kopel adds. Key upgrades involve expanded payment options, such as a proveedor de servicios electrónicos (PSE) program in Colombia, that enables travelers to pay via bank debit cards in local currency. A similar program, Boleto Bancario, has been introduced in Brazil, where customers can pay for tickets at branches and ATMs and by fund transfers. And Copa is relaunching its portal

in Venezuela to allow for payments in bolivares fuertes. “This is something our customers have been clamoring for,” Kardonski says. In other online initiatives this year, visitors to the Facebook page of Copa Airlines Colombia (formerly Aero República) can make reservations and buy tickets there — the first airline in the region to add that function to the popular social networking site. Introduced in February, “the basic idea is we want to go where the customers are,” Mizrachi-Kopel says. “There is an important domestic market in Colombia.” The Facebook page is customized with deals and offers designed to appeal to the Colombian market. As yet, there are no plans to expand the Facebook connection. “We want to focus on doing it right,” Mizrachi-Kopel says. —Mary Sutter, with additional reporting by Joachim Bamrud

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LT CFO EVENTS SÃO PAULO

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4 million barrels per day by 2015, which would be equivalent to the current output of ExxonMobil, and of 6.4 million barrels per day by 2020. In order to achieve those goals, Petrobras has had to mobilize numerous suppliers along an extended supply chain. It has helped set up a special program with six large retail banks in Brazil for its suppliers. “They can have access to credit and benefit from the visibility of Petrobras receivables” and lower their costs, Barbassa said. The CFO of Copersucar, Luis Felipe Schiriak, received an award for dynamic growth, as the sugar and ethanol producer has reported huge increases in revenue and profits.

Copersucar is investing in expanding its storage capacity and plans to double its export capacity from the port of Santos to 10 million tons, Schiriak said. The company also owns a 20 percent stake in an ethanol pipeline project whose partners include Petrobras, Odebrecht, Cosan and Camargo Correa. Copersucar further aims to boost its 18 percent share of the Brazilian sugar cane market to 30 percent within five years. Although an initial public offering has been put on hold, Schiriak said he will resume efforts to list Copersucar on the São Paulo stock exchange when market conditions improve. — Thierry Ogier

Latin Trade Group honored CFOs in Brazil with awards presented to Almir Barbassa of Petrobras, left, and Luis Felipe Schiriak of Copersucar.

NEWTON MEDEIROS FOR LATIN TRADE

The

LT CFO event in São Paulo took place on July 28, against a backdrop of extreme volatility around the world. More than 50 corporate finance professionals participated in the event, during which the Latin Trade Group presented CFO awards to Almir Barbassa of Petrobras and Luiz Felipe Schiriak of Copersucar. The domestic economy is “growing beyond its potential and inflation is rising. Meanwhile, there is a perception that the currency is very expensive, so traditional policy tools such as interest rates to contain inflation have a limited impact,” said Fábio Akira, executive director and chief economist at J.P. Morgan Brazil. J.P. Morgan is forecasting a deceleration in Brazil’s GDP, from a growth rate of 7.5 percent in 2010 to 4 percent in 2011 and 3.8 percent in 2012. Despite inflation, domestic consumption will continue to outpace the rest of the economy, he said. Europe’s evolving sovereign debt crisis and the risk — since averted — of a U.S. debt default have clouded the global economic outlook. Brazil is nonetheless likely to benefit from strong, ongoing foreign investments, Akira added. CFO award honoree Barbassa was lauded in the category of expansion. A few days prior to the event, Petrobras had unveiled a five-year investment plan and Barbassa said the company is investing $200 million every work day. Petrobras has set a production target of

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LT CFO EVENTS SÃO PAULO 2

1. Mark Ludwig, Contributing Editor, LT CFO Events, Latin Trade Group; CFO award honoree (expansion) Almir Barbassa, CFO, Petrobras; Patricia Moraes, Managing Director, J.P. Morgan. 2. CFO award honoree (dynamic growth) Luis Felipe Schiriak, CFO, Copersucar; Diego Rodriguez, head of LAC Commercial Products, Visa; Eduardo Leonidas, Executive Director, Corporate Banking, J.P. Morgan. 3. Sergio P. Sousa, Managing Director & CFO Latin American Operations, NALCO Brasil Ltda.; Telma Silveira, Regional Treasury Manager, Astrazeneca. 4. Paulo Giacomini, Executive Director — Treasury Services Advisory LATAM, J.P. Morgan Brazil. 5. LT CFO roundtable at the Hotel Unique. 6. Fabio Akira Hashizume, Executive Director & Chief Economist, J.P. Morgan Brazil. 7. Tércio Garcia, Finance DirectorSouthern Cone, Kodak — Brasil; Edward Wundheiler, Finance Director, Avaya. 8. Rogerio Marchini Santos, Finance Director, Embraer; Claiton Camargo, Finance Director, Lexmark. 9. Josias Jiacomini, Finance Director, Masisa do Brasil Ltda.; Jayme Fonseca, CFO, Odebrecht.

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NEWTON MEDEIROS FOR LATIN TRADE

TOP BUSINESSWOMEN 2

The editorial staff of Latin Business Chronicle, the Latin Trade Group’s premium digital news service, selected 50 women who are making a mark in Latin America’s business sectors. The 2011 edition is the second annual list that highlights executives — both natives of Latin American and foreigners — who are having a significant impact on the region. They work at companies that are among the top taxpayers and employers in several countries. Latin Trade Group executives personally presented certificates to five honorees who are based in Miami. (1) Rosemary Winters, executive director, Latin Trade Group; Adriana Cisneros, vice chairman and director of strategy, Cisneros Group of Companies; Joachim Bamrud, executive editor, Latin Trade Group. (2) Romaine Seguin, president, Americas, UPS; Joachim Bamrud. (3) Batya Brykman, vice president for Latin America and director of operations for Mexico & Central America, Starwood Hotels & Resorts; Joachim Bamrud; (4) Joachim Bamrud; Carmen GonzalezSanfeliu, regional vice president, Latin America & Caribbean, Intelsat, USA. (5) Joachim Bamrud; Marta Clark, area vice president, Latin America & Caribbean, Adobe Systems, USA. Executives from companies such as General Motors, Kimberly Clark, Microsoft, Pepsico and Petrobras as well as from leading financial institutions Bank of America, HSBC and Scotiabank are also on the 2011 list of Latin America’s Top Businesswomen. For the complete list and to read about this year’s honorees, visit latinbusinesschronicle.com.

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PHOTO 1 : DIXON GONZALEZ MESTRE/VENEVISION; PHOTO 2: DANIEL MARIN/UPS; PHOTOS 3, 4, 5 : ANA BERGER FOR LATIN TRADE

MADE IN Ecuador

cuador may not produce the most bananas in the world — India holds that distinction — but it is the leading exporter of the popular tropical fruit. Even though the sector experienced some setbacks last year, the Association of Banana Exporters of Ecuador (AEBE), which represents the leading growers, says it is on track for a strong performance for 2011, particularly with respect to Eastern European markets. The industry in Ecuador has long faced stiff competition for global market share from countries such as Colombia, Costa Rica and Guatemala as well as the Philippines and some African nations. Latin American growers as a whole benefited when, in late 2009, the European Union — a leading destination for bananas — ended a 16-year trade fight and agreed to lower tariffs on Latin American bananas. Since 1993, former European colonies, such as the Ivory Coast and Belize, had enjoyed preferential treatment for their bananas. But in 2010, Ecuador’s banana industry hit some snags. “Shipments of Ecuadorian bananas to the markets of the United States, European Union and Russia fell in 2010 compared to 2009, among other reasons because of severe weather in the second half of the year that affected the fruit’s development,” explains Eduardo Ledesma, president of the AEBE. At the same time, “production recovered in other exporting countries like Costa Rica and Honduras and a significant percentage of that fruit ended up in the United States market.” The United States, the European Union and Russia have been, and continue to be, the most important markets for bananas from Ecuador, Ledesma says. Demand in Russia took a hit in the wake of the economic crisis that began in 2008, and consumers turned to other fruits, such as oranges, apples and pears.

Annual Exports

In 2010

Year 2010 2009 2008 2007 2006

Region North Sea/ Baltic region United States Russia Medit. EU Eastern Europe

*U.S. dollars Source: Central Bank of Ecuador

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—Mary Sutter

Top Destinations

Ecuadorean Banana Exports

Value* $1.95 billion $1.92 billion $1.59 billion $1.35 billion $1.15 billion

“Added to this were the problems of divisions in its internal distribution chain and the number of buyers in 2010 increased compared to 2009,” Ledesma says. But also in 2010, Ecuador celebrated the launch of Maersk’s ECUBEX shipping service, which brings bananas and other products from Guayaquil to St. Petersburg, with stops in Europe in Balboa and Rotterdam, in just 22 days. That new service is paying dividends in 2011, as Russian imports of bananas have hit record levels. Part of this increase can be attributed to high prices for other fruits, such as apples. Even so, “this service, by guaranteeing the banana shipments over greater distances without damaging the quality of the fruit, has created a greater dynamism in this market [Russia] and beyond, to all the countries that used to be members of the Soviet Union, whose imports have increased,” Ledesma says. In northern European countries, Ledesma says, Ecuador is getting a lift from retail chains, such as U.K.-based Tesco, pursuing a strategy of buying fruit directly from producers. Ledesma emphasizes that the global market remains highly competitive. “We have additional costs, such as the Panama Canal passage, as well as a higher tariff to get our bananas into the European Union,” he says, noting that the EU tariffs affect Turkey as well. He says countries such as Argentina are increasing their output and a number of producing countries are seeking trade protection against bananas from other countries. Those challenges are ongoing, as are the efforts to meet them, Ledesma says. “For that reason we continue to be the leading exporter country of this fruit in the world.”

Top Exporters In 2010

Volume* 59,366,999

Change 11.42%

56,206,029 53,354,952 50,929,639 11,279,957

-5.11% -4.82% -14.49% -0.90%

*In boxes. Source: Association of Banana Exporters of Ecuador

SEPTEMBER-OCTOBER 2011

ISTOCKPHOTO

Bananas

Company Volume* Change Unión de Bananeros 33,710,062 -9.56% Ecuatorianos (UBESA - Dole) Bananera Continental 24,361,052 -4.65% Brundicorpi (Chiquita)** 20,693,052 54.96% Bonanza Fruit 18,190,154 -18.40% Rey Banano del Pacifico 16,913,848 -7.25% *Boxes of bananas. ** Chiquita increased sourcing in Ecuador in 2010 to compensate for a reduction in Guatemala. Source: Association of Banana Exporters of Ecuador

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