Latin Trade (English Edition) - Jul/Aug 2011 by Latin Trade Group

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ALSO IN THIS ISSUE: CHALLENGED STAR HOSPITALITY BOOM OUTSOURCING 2.0

LATIN 500: LATIN AMERICA'S 500 LARGEST COMPANIES

THE REGION'S LARGEST COMPANIES

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J U LY/AUG UST 2011 V O L. 19 NO . 4

Features 19 The Latin 500

Strong Year for Latin America’s Companies Profits jumped in 2010 among the region’s largest companies. A look at this year’s highlights.

Petrobras: Meddling Weakens Value Government meddling is weakening the market value of the stateowned oil giant, the largest company in Latin America.

General Electric: Bullish on Brazil An interview with the CEO of GE Latin America, who has ambitious growth plans.

Goodyear: Solid Tracks The president of Goodyear Latin America sees opportunities among the growing middle classes.

54 Chile: Star with Challenges Long the darling of foreign investors, Chile has excellent growth prospects yet faces important challenges, particularly with respect to energy.

Walmart: Latin American Success The company has built the region’s largest and most successful retail business.

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JULY-AUGUST 2011

Copa: Small, but Strong CEO Pedro Heilbron says the outlook is bright for the carrier, the region’s last major independent airline.

Latin Trade’s annual ranking of the 500 largest companies in Latin America. 20

Chilean Champion

The Scene 8 Rio Real Estate

Opinion 14 The Contrarian John Price, managing director of Americas Market Intelligence, analyzes the high cost of crime on business and economic development.

16 The Bottom Line

Chile offers the best environment for doing business in Latin America and scores highly in other important measurements, according to an analysis from Latin Business Chronicle.

62 Hospitality: Room to Grow Brazil may attract the lion’s share of new hotel activity, but leading brands, investors and operators are expanding in key cities across the region.

68 Outsourcing 2.0 Providers of outsourced services, from call centers to IT, are growing thanks to global integration of the industry, the increased popularity of near-shoring and robust demand from in-region customers.

Alberto Bernal-Léon of Bulltick Capital Markets makes the case that responsible policy-making will pay off for governments and countries in the long term.

On the Road 82 São Paulo

Made In: Colombia 84 Coffee

Editor’s Note 4

The Education Challenge

WALMART: COURTESY OF WALMART BRAZIL; PIÑERA: PRESIDENCIA DE LA REPÚBLICA/ALEX IBAÑEZ; BRAZIL: FELLIPE ABREU.

CONTENTS

EDITOR’S NOTE

treasury and securities at J.P. Morgan. A large part of the problem is that Latin America’s education system has been so far behind other emerging markets, such as Asia. The average Brazilian 15-year-old has only 4.3 years of education, compared with 10.5 years in South Korea, according to The World Bank. Meanwhile, the OECD’s Program for International Student Assessment shows that Brazilian schoolchildren ended up in a dismal 46th place out of 51 in reading and an even worse 53rd place out of 55 in math. For years, the public schools and universities in Latin America have been weakened by a lack BETTER FUTURE? Latin American governments of resources, but also need to reform the education system to ensure that by a lack of quality. children like these from Colombia have a better Many teachers future. That would help boost prosperity and improve at the university level are simply the business climate. unqualified, teaching increasingly complaining about a deficit of an outdated curriculum. Many professors don’t even show up to classes. And for the skilled employees. vast majority of Latin Americans, private Executives across sectors mention schools and universities are too expensive. education as one of the key challenges As a result, companies have to spend for business in Latin America. The lack billions of reais, pesos and dollars to of available professional human resources train and retrain employees. Brazil’s oil and managerial talent could be a “show giant Petrobras, Latin America’s largest stopper,” warns Leonardo Rodriguez, company on the Latin 500, has spent Latin America president of Emerson. nearly one billion reais (around $600 The scarcity of well-skilled labor and million) since 2007 on education and low productivity limit Brazil’s potential training programs, according to Latin growth, argues Michael McKenzie, the Business Chronicle. Brazilian mining giant São Paulo-based managing director of Companies in Latin America had a great year in 2010, as the Latin 500 shows. Revenues were up 22 percent, while profits jumped 37 percent. However, with expanding demand and sales comes a new challenge — finding the right talent. From Brazil to Panama, companies are

LATIN TRADE JULY-AUGUST 2011

Vale is spending $100 million this year to train new mid- and senior-level project managers, a 50 percent increase from last year, according to The Wall Street Journal. Brazil’s economic boom is only making things worse, as demand for talent has jumped, while the supply is still lagging. As a result, the cost of hiring skilled talent is more expensive than ever. So what’s the solution? Governments in Latin America need to once and for all take the issue seriously. If they want to see their countries prosper, a radical overhaul of education is key. That means not only more resources to public education, but also reforms aimed at making sure the quality is on par with international benchmarks. With Latin America’s poor track record of public institutions, one very attractive solution is to privatize public education while providing subsidies for the poor students, as Peruvian journalist Alvaro Vargas Llosa argues in his excellent book Liberty for Latin America. To not do anything about the education problem in Latin America would only be a sign of ignorance.

Joachim Bamrud, Executive Editor jbamrud@latintrade.com

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The Education Challenge

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LATIN TRADE EXECUTIVE DIRECTORS ROSEMARY WINTERS rwinters@latintrade.com MARIA LOURDES GALLO mgallo@latintrade.com EXECUTIVE EDITOR JOACHIM BAMRUD jbamrud@latintrade.com MANAGING EDITOR MARY SUTTER msutter@latintrade.com ART & PRODUCTION DIRECTOR ELIZABETH CARLISLE ecarlisle@latintrade.com GRAPHIC DESIGNER SELVIN CHI schi@latintrade.com CONTRIBUTING EDITORS GABRIELA CALDERON (research), MARK LUDWIG CORRESPONDENTS Argentina: Charles Newberry • Brazil: Taylor Barnes, Vincent Bevins, Andrew Downie, Thierry Ogier 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, Stuart McMeeking, David Wisor EVENTS & CONFERENCES EDITORIAL DIRECTOR Jane Bussey, jbussey@latintrade.com EVENTS & SPECIAL PROJECTS MANAGER Ana Piñon, apinon@latintrade.com SALES & CIRCULATION SALES REPRESENTATIVES Miami/Pan-regional sales: Silvia Clarke, Senior Account Manager, sclarke@latintrade.com Mercedes Fernandez, Business Development Manager, mfernandez@latintrade.com Ana Berger, Special Projects Coordinator/Online, aberger@latintrade.com Colombia/Panama: María Cristina Restrepo, mscrestrep@etb.net.co India: Stephen Dioneda, stephen@bsacmena.com CIRCULATION COORDINATOR Claudia Banegas, cbanegas@latintrade.com LATIN BUSINESS CHRONICLE Rosemary Begg, Marketing Associate, rbegg@latintrade.com MANHATTAN MEDIA CHAIRMAN RICHARD BURNS CHIEF OPERATING OFFICER JOANNE HARRAS ACCOUNTS MANAGER KATHY POLLYEA, kpollyea@manhattanmedia.com LATIN TRADE GROUP IS A DIVISION OF MIAMI MEDIA, LLC, A SUBSIDIARY OF MANHATTAN MEDIA Executive, Editorial, Circulation and Advertising ofﬁces are located at Brickell Bay Ofﬁce Tower, 1001 Brickell Bay Drive, Suite 2700, Miami, Florida 33131, USA. CUSTOMER SERVICE AND SUBSCRIPTIONS: Please visit www.latintrade.com to order online or call +1 (305) 749-0880. Latin Trade (ISSN 1087-0857, USPS 016715) is published bimonthly by Miami Media, LLC. All rights reserved. Reproduction in whole or part of any text, photograph or illustration without written permission of the publisher is strictly prohibited.

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WHAT MATTERS TODAY

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THE SCENE Rio’s Favelas – A New Frontier?

It’s not just a debate for curious law students. As Rio’s famous hillside shantytowns beneﬁt from a much-touted policing program that has reduced crime and tentative infrastructure gains, such as cable cars to transport residents up steep inclines, many in Rio de Janeiro are asking: Are favelas the next frontier of the city’s skyrocketing real estate market? In the past ﬁve years, the average price of a four-bedroom home has shot up 200 percent to 380 percent in coveted South Zone (Zona Sul) neighborhoods such as Ipanema, Leblon and Botafogo. Most of the nearby favelas are considered squatter settlements whose legal status is fuzzy, the plain fact that keeps most outside investors on the sidelines, says Ruban Selvanayagam, a British developer who specializes in Rio de Janeiro’s low-income market. The Brazilian

LATIN TRADE JULY-AUGUST 2011

constitution protects a squatter’s right to stay on a parcel of land after occupying it for more than five years, but the state also can demolish an unregulated structure with only 24 hours’ notice. A handful of Rio de Janeiro favelas have gone through the legalization processes over the past 10 years, but they are the exception, not the rule. “The absence of this title hasn’t impeded the buying and selling of homes,” says Magalhães, who cites scattered cases of “mega-landlords” who buy homes in favelas such as Vidigal and Parque Royal, where drug traffickers are very much present. “In either case, you see a very strong housing market.” Developer Selvanayagam counters that Brazil’s housing market “just doesn’t work.” His Rio-based start-up, Exitus Construction, is pursing largescale, low-cost projects that are fully sanctioned and designed for the lowerincome market, where the demand is greatest. Rio de Janeiro’s two-year-old policing program, which places high concentrations of community patrols in certain favelas, also has raised questions of whether prized locations, such as the favela Cantagalo, immediately behind Ipanema, will attract greater interest and command higher prices. Leonardo Schneider, vice president of housing syndicate SECOVI-Rio, estimates that communities near newly “pacified” favelas already have experienced a 40 percent increase in property values. “It attracts people to live in favelas when you formalize a market that was informal,” Schneider says of outsiders moving into these districts. Urban expert Theresa Williamson, whose non-governmental organization Catalytic Communities works to integrate low-income neighborhoods into Rio society, takes a dimmer view. She foresees gentrification in the currently affordable areas of the South Zone. “You’re just going to end up creating [a situation] where the whole coast of Rio from Recreio [in the far south] to downtown is elite,” Williamson says.

— Taylor Barnes

Wine, Che Per capita consumption in 2010 of wine, in liters

Argentina .......................... 21.4 Uruguay ............................ 20.7 Chile ................................. 12.6 Brazil .................................. 1.7 Costa Rica ........................... 1.3 Mexico................................. 0.4 Source: Euromonitor International

Top Talent

Heidrick & Struggles Global Talent Index COUNTRY RANK United States ..............................1 Canada ......................................14 Argentina ..................................28 Chile .........................................31 Mexico ......................................38 Venezuela .................................39 Colombia...................................40 Brazil ........................................42 Peru ..........................................47 Ecuador ....................................50 Note: 2011 ranking of sixty countries based on analysis of quantitative and qualitative data. Source: Heidrick & Struggles International

CORRECTION In the May/June issue, the first name of Teobaldo Palacios, vice president for Latin American telecom operations for Samsung Electronics, was wrong. We apologize for the mistake.

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RIO DE JANEIRO — A gray-haired and skeptical student raises his hand to interrupt the Brazilian bar association course on slum property rights: “I hear there are gringos living in favelas!” His classmate chimes in: “I saw a report that [favela residents] have barely bought a house and they sell it again!” Professor Alex Magalhães smiles. “Favela residents are as capitalist as anyone else,” he says.

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THE SCENE Latin America: World-Class Potential

Raul Rivera, a Chilean native and former partner of Boston Consulting Group, talks to Latin Trade about his new book, Nuestra Hora (Pearson). Latin Trade: Some experts say Latin America will never be a developed region because of socio-cultural reasons. Rivera: That’s hogwash. … This is culturaldependency mythology, which has as much in common with reality as zero. People used to say [things like that] when I worked with [Mexican cement giant] Cemex when we bought, in Spain, two big cement companies and turned Cemex into a big multinational. The Mexicans, in two years, were able to make them into the best-run European cement

Fraunhofer, Europe’s leading R&D facility. Their Chilean unit is the first in the emerging world. And there are four others following. … So I think we’re in a situation where we can do innovation relevant for us, and leapfrog many of the industrial economies, by developing new energy sources. … There’s no reason why Latin America, with 600 million talented people, can’t be a huge hub for services for the United States, and that could add a huge boost and immediate connection to leading-edge activities.

company. From a business standpoint, [other examples of world-class companies include] InBev in beer, Embraer, Techint in steel. And we’re just getting started. We are probably one of most innovative regions in the world. …What was lacking for many years was the political and economic stability that could sustain a thriving scientific and applied community, so many scientists left the region. [Meanwhile] we remained oldfashioned [in] doing research [with] no value for their societies. … I think we are now in the process of turning that. In Chile, we opened up a big process for five centers of R&D excellence to open up. The first one to receive government funding was

Latin Trade: Why is Latin America so divided? Rivera: In Latin America you have four different projects going forward or going nowhere. The first one is the oldest one, the Brazilian project, which essentially has the same grounding as the United States. They view themselves as the natural leader of the South, the hemispheric power in South America. The embodiment of that vision is Mercosur. That hasn’t gone anywhere. It has an old-fashioned approach to integration based on customs union and building barriers to the world, as opposed to joining the world, which would be a serious competitive advantage. …

LATIN TRADE JULY-AUGUST 2011

Second, you have the Mexican project, which started in late 1980s. … They turned their back to Latin America and decided “our future belongs to the North,” joining the United States [through] free trade. A huge improvement over the previous situation… Now the United States is behaving like we used to do, printing money, financing debt with credits. …Then all of a sudden you wonder if you did the right thing. The other factor … is that Americans have not been interested in turning their eyes to the south. So there is a barrier they [Mexico] are hitting, and it’s unlikely they will cross any time soon. [Meanwhile], Latin America itself has turned around big-time. So Mexicans are a bit torn between Mesoamerica and Latin America. … [Mexico needs] to look both ways to be able to take a position of leadership. It deserves it. It’s a very large country. The only counterbalance to Brazilian dominance in Latin America, except the United States. The [third project] is the Chávez model, the populist challenge to free market; that model is going nowhere in a hurry. Across the region, it is unsavable and insignificant. It accounts for 20 percent of [Latin America’s] GDP and population if you include Argentina, which you should. …We need to [isolate] ourselves from that pronto. If not, it will be a problem. The fourth project, which the book espouses, is the path that Chile pioneered, Colombia and Peru have followed with great success and Mexico also has developed to a great extent: Open markets, entrepreneurial economy, moving to higher-valued services. This is obviously working. We created … a market of over 200 million consumers — that’s greater in size than Brazil, less choked by red tape [and a] discretionary bureaucracy. That’s the future. [It’s a model that] includes free trade with the United States, the European Union, China, India and whoever else we want to trade with. The more real free-trade agreements and not fake ones, the better it will be.

— Joachim Bamrud

THE SCENE

Although demographics in Latin America support luxury-goods consumption, in-region purchases of items such as men’s watches likely do not reﬂect the market potential, analysts and industry experts say. The Federation of the Swiss Watch Industry reports that the value in Swiss francs of all watch exports from Switzerland rose in 2010 by 16.5 percent to Mexico, 18.8 percent to Argentina, 7.8 percent to Brazil and 44 percent to Colombia. The statistics include men’s and women’s timepieces but not watches that might have been shipped via other European or Latin American countries or via the United States. Despite an increase in Swiss watch exports to Latin America, a key challenge for the manufacturers is market access, which is affected by duties, taxes and customs procedures, says Maurice Altermatt, head of the economic division of the Geneva-based trade group. “This is particularly true in Brazil, where 44 million CHF [U.S. $47 million] of exports [in 2010] obviously do not correspond to the real potential of the market,” Altermatt says. Argentina, with a fraction of the population of Brazil, imported 59 million CHF worth of Swiss watches in 2010. Mexico was the most important market last year, at 185 million CHF. Fast-growing Colombia imported 20

LATIN TRADE JULY-AUGUST 2011

million CHF in watches. But many Latin American buyers do not shop at home. “Everybody knows that it is nowadays very proﬁtable to seize the opportunity of a business or leisure trip to Buenos Aires or Miami to buy Swiss watches and thus get advantage of prices differentials,” Altermatt says. Yet one leading men’s watch brand reports an increase of more than 20 percent in unit sales in 2010 in Latin America versus 2009 and is planning to expand its presence. Tag Heuer is the No. 2 men’s watch brand in the region, behind only Rolex, says Stephanie Cariglio, marketing brand manager, LVMH watch and jewelry, for Latin America and the Caribbean. Tag Heuer is among several watch brands owned by LVMH, the luxurygoods conglomerate. “Argentina, Brazil and Mexico are the three strong markets … where the brand is already extremely strong and a leader in its segment,” Cariglio says. Brand awareness is high throughout the region, she adds. “We are capitalizing on this potential with the opening of several boutiques and shop-inshops in the region.” Tag Heuer opened its ﬁrst dedicated boutique in the region in Buenos Aires in June 2009, in partnership with local jewelry retailer Testorelli.

Colombia. The country now has investment-grade credit ratings from Fitch Ratings, Standard & Poor’s and Moody’s, making it even more attractive for investors (see page 17). Panama. Its two top ports, Colon and Balboa, managed to replace Santos in Brazil as Latin America’s largest container harbors, according to the latest ranking of the region’s Top 50 ports from Latin Business Chronicle. Pacific Rubiales. The fast-growing Colombian oil company — run by former executives of Venezuela’s state oil company PDVSA — posted the second-highest revenue growth on the Latin 500. Brazil Taxes. For the second year in a row, Brazil is at the bottom of the Latin Tax Index from Latin Business Chronicle. President Rousseff needs to fulfill her pledges to make the system more attractive and simpler. Venezuela. Thanks to the economic mess in the resource-rich country, three of the top five revenue losers on the Latin 500 are from Venezuela: Movistar, CANTV and General Motors. The Dominican Republic. The corporate tax rate has increased from 25 percent to 29 percent as part of a government reform aimed at reducing its fiscal deficit. The hike was widely criticized by local and foreign business leaders. Sources: Latin 500, Latin Business

Chronicle.

PHOTO: COURTESY OF LVMH

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THE CONTRARIAN

The Cost of Living Dangerously BY JOHN PRICE

Addressing the Global Travel & Tourism Summit in Las Vegas in May of this year, Mexican President Calderon quipped: “I saw thousands of spring-breakers in Mexico having fun. My understanding is the only shots they received were tequila shots — a lot of them.” His remark, no doubt innocently designed, was met with derision by the many people who have lost family and friends to Mexican violence. The comment is not simply a PR guffaw. It is reflective of a disconnect between an arms-guarded elite who play down the importance of violence in their societies and the majority of the population, which is exposed to the highest rates of violent crime of any continent in the world. With a few notable exceptions, such as Colombia and Peru, violence has steadily since the 1980s grown more prevalent across Latin America. Frustrated by implacable organized crime, most political leaders, and much of the business class, have grown to accept violence as part of their lives and have pressed forward with efforts to develop their companies and the economy as a whole. Few political leaders in Latin America grasp the extent to which violence impedes economic development. Latin America is no monolith when it comes to violence. It includes some of the most violent nations on earth, including El Salvador, Honduras, Jamaica, Guatemala and Venezuela¸ but also some of the safer destinations favored by travelers, such as Chile, Uruguay, Cuba and Argentina. In spite of the horrifying cartel violence reeling through northern Mexico, the country as a whole boasts a lower homicide rate (18 per 100,000 people) than Brazil (22) or even a much improved Colombia (35), according to the latest cited national statistics (2008 or 2009). Violence brings both direct and indirect costs to a developing economy. Direct costs are the ones typically included in any calculation of the cost of crime. The table estimates said costs

LATIN TRADE

JULY-AUGUST 2011

THE DIRECT COSTS OF CRIME COMPONENT

MEXICO

NOTES

GDP (2010) Health losses

US$1 trillion 1.90%

IMF cited figure Actual money spent on medical expenses and burials

Material losses Fighting crime

0.80% 4.90%

Security technology & installation expenditure Insurance

0.10% 0.20%

Ransoms Corruption (bribes paid to police and judicial authorities)

0.01% 0.10%

Total Direct Costs

8.00%

Includes private and public expenditure on security personnel, police, judicial and penal system

Personnel and business expenditure on theft, kidnapping and fraud insurance Payments to police and judicial system = 39% of weighted average of household bribery payments.

Sources: ICESI, EIU, Transparency International, Violencia Americas, Lodoño y Guerrero, ALAS, Reforma, InfoAmericas, ITO, AMI

in 2010 at 8 percent of GDP, or $80 billion. That was 3.2 times the estimated volume of inbound remittances ($25 billion), four times the level of estimated foreign direct investment ($20 billion), 3.33 times Mexican oil exports (est. $24 billion), and more than five times the volume of international tourism receipts (est. $15 billion). But the true cost of crime is more than double this figure. Violence prevents victims from working, scares tourists and investors away and drives the most educated and innovative citizens abroad, taking with them their savings, their ideas and their entrepreneurial drive. If violence costs Mexico 17.3 percent of its national income each year, the figure is even higher in most of Central America, parts of the Caribbean and in Venezuela. No other issue, not even underfunded education, weak

judiciary or poor infrastructure, can claim such a negative burden on a Latin American economy. Latin American governments expend huge efforts to promote tourism, export manufacturing and inbound foreign investment. Added together, these three sectors do not begin to match the negative economic impact of their nations’ violence. 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.

THE BOTTOM LINE

Responsible Policies Do Pay in the Long Term BY ALBERTO J. BERNAL-LEÓN

the upgrade was Colombia’s demonstrated significant ability to cope with internal and external shocks, evidenced by the government’s recent economic and financial performance and the long history of timely debt payments. In addition, the reduction of the threats posed by guerrillas and other criminal organizations points to the state’s capacity to face non-economic shocks in the future. Colombia’s institutional framework, which today appears to be well-positioned to deal with an expected increase in raw-materials revenues over the next few years, was another factor behind the improved credit rating. On this point, Moody’s highlights the fact that the government is working on a series of important structural reforms, which include a pending law on intertemporal fiscal stability, updating the tax code, and a constitutional amendment on royalties. The agency also cited Casa de Nariño official statistics indicating that the ratio of government debt to GDP declined by 10 upgrade finally came, and it is great news for percentage points from 2003 to 2007. It the poor people of Colombia. Colombia has currently stands steady at about 37 percent, gone from a foreign-currency issuer rating a level that Moody’s says compares favorably of Ba1 up to Baa3, with a stable outlook. with the average of countries with an investStandard & Poor’s gives Colombia a rating ment-grade rating of Baa3. And by Moody’s of BBB-, also with a stable outlook. In plain calculations, Colombia’s average economic English, two of three leading ratings agengrowth over the past decade also has been cies rate Colombian government debt as higher than the average for countries with investment-grade. the same credit rating. According to the ratings experts at The recent decisions by Moody’s, StanMoody’s, among the reasons supporting

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dard & Poor’s and Fitch regarding Colombia are a testament to the fact that serious policies pay off in the long term. Colombia’s recent history, like those of Peru, Brazil and Uruguay — just a few examples from Latin America — shows that responsible economic policymaking does generate dividends over the long term. Thanks to the excellent work of many of Colombia’s former administrations, especially that of Alvaro Uribe Velez, Colombia has managed to organize an economy that is growing enough and with low inflation. Clearly, this kind of growth is what really generates a positive change in the country’s social situation, not only today but also in the future. The alternative to responsible economic management is the socialism of the 21st century. This economic model results in the immediate redistribution of income, which helps redress the near-term suffering of disadvantaged citizens. However, 21stcentury socialism eliminates the possibility that future generations may have a decent quality of life because this anachronism (XXI Century Socialism) smothers entrepreneurialism. Like everything in life, “you trade something for something.” Better well-being today, but with greater poverty in the future. Alberto J. Bernal-León is head of research at Bulltick Capital Markets. Follow him on Twitter @ AlbertoBernalLe.

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I think the “certificate of good conduct” bestowed by the ratings agency Moody’s on the Colombian economy was a year late, at least. I say a year because, truth be told, prices in the financial markets have long reflected the expectation that Colombia would be upgraded by the rating agencies: The “spreads” on Colombian sovereign debt were comparable to those on debt issued by Mexico and Brazil, countries with better credit ratings than Colombia. The rating

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Latin LATIN AMERICA’S LARGEST COMPANIES

JULY-AUGUST 2011 LATIN TRADE

Latin 500 STRONG YEAR FOR LATIN AMERICA’S COMPANIES Proﬁts jump among the 500 largest companies in the region. BY JOACHIM BAMRUD

IF THERE is any doubt that Latin America is doing exceptionally well, a closer look at the Latin 500 should dispel that notion. The region’s 500 largest companies boosted revenues by 21.5 percent last year, to $2.2 trillion. That’s more than the total size of Brazil’s $2.1 trillion economy or twice as much as Mexico’s $1 trillion GDP. And it equals the combined economies of Mexico, Argentina, Venezuela, Colombia and Chile. Meanwhile, profits jumped 37.3 percent, to $222.5 billion, according to the Latin 500 from Latin Trade and Latin Business Chronicle. To put that figure in context: The combined profit of the 500 largest companies in the United States was $318 billion, according to the Fortune 500 ranking. The Latin 500 is based on information from market researcher Economatica and individual companies. TOP COMPANIES Brazilian state oil producer Petrobras remains the region’s top company, both in revenues and in profits. However, Brazilian mining giant Vale outperforms in revenue and profit growth. As a result, it jumped from fifth place to third place in the Latin 500. Mexico’s state oil giant Pemex remains the second-largest company in revenues, but also continues to struggle with profitability. It lost $3.8 billion. In contrast, Colombian state oil producer Ecopetrol posted $4.4 billion in profits despite having a fifth of Pemex’ revenues. Venezuelan state oil company PDVSA was not included, as its annual report had not been released in time for our research. The 2011 delay was the third consecutive delay of its annual report. BRAZIL Companies in Brazil dominate the ranking, accounting for $1.0 trillion, or 46.9 percent of the total revenue. That marked a 47.1 percent increase from 2009. Part of that growth is because 2009 was a crisis year, but 2010 also

marked a strong year for companies operating in Brazil. Except for telecom operator Telemar, all of Brazil’s top 10 companies posted double-digit revenue growth last year. In addition to Vale, other stars include meat company JBS (#7), retailer CBD (#15) and construction giant Odebrecht (#8). MEXICO Companies in Mexico accounted for $476.4 billion in revenues last year, or 21.3 percent of the total on the Latin 500. That also marked a 21.1 percent increase from 2009. Apart from Pemex, the top companies are telecom operator America Movil (#4 on the Latin 500), retailer Walmex (#9), state electricity company CFE (#14) and cement giant Cemex (#29). Among the top 10 companies in Mexico, Walmex posted the highest revenue growth last year (31.4 percent), while beverage company Femsa (#31) posted the highest profit increase (330 percent). Four of the top 10 companies are owned by mogul Carlos Slim, whom Forbes estimates has the biggest fortune in the world.

Latin 500 Table of Contents Walmart: Latin American Success ............................................................................................. page 24 Petrobras: Meddling Weakens Value ......................................................................................... page 28 General Electric: Bullish on Brazil.............................................................................................. page 32 Goodyear: Solid Tracks................................................................................................................. page 34 Copa: Small, But Strong............................................................................................................... page 38 Latin 500: The Ranking ................................................................................................................ page 40 20

LATIN TRADE JULY-AUGUST 2011

Latin 500 Country Breakdown

Country Leaders

COUNTRY

REVENUES

CHANGE

Brazil Mexico Chile Argentina Colombia Peru

$1,049.13 $476,362 $185,283 $83,354 $78,971 $34,440

47.1% 21.1% 23.9% 14.5% 32.3% 16.2%

Revenues vs. GDP

COUNTRY

COMPANY REVENUES

Brazil Mexico Chile Argentina Colombia Peru

Petrobras Pemex Codelco Techint Ecopetrol Petroperu

$128,000 1 $103,800 2 $16,066 24 $19,092 16 $22,468 12 $3,565 148

COMPANY/COUNTRY Peru GDP Petrobras, Brazil Pemex, Mexico Ecuador GDP Ecopetrol, Colombia El Salvador GDP Codelco, Chile Honduras GDP

REV/GDP $152,830 $128,000.0 $103,814.2 $58,910 $22,467.6 $21,700 $16,065.9 $15,347

NOTE: Revenue figures from 2010 in millions of U.S. dollars; Source: Latin 500

Source: Latin 500

GDP figures from 2010 in millions of U.S .dollars.

Note: All figures in millions of U.S. dollars

Sources: Latin 500, IMF, Latin Trade

CHILE Chile again shines. Despite having Latin America’s sixth-largest economy, companies in Chile ranked third on the Latin 500, after Brazil and Mexico. Companies in Chile accounted for $185.3 billion in revenues last year. That’s more than the revenues of companies in Argentina and Colombia combined. It also marks an improvement of 23.9 percent from 2009. Chile’s top company is state copper giant Codelco (#24), but the revenue growth leader among the country’s top 10 is shipping line CSAV (#96), thanks to an increase of 80 percent. ARGENTINA VS. COLOMBIA Companies in Argentina accounted for $83.4 billion of the revenues on the Latin 500, a 14.5 percent increase from 2009. That was the weakest result among the six countries analyzed (Venezuela was not included in our analysis). Holding company Techint (#16) is the top company in Argentina, but the revenue growth leader is its unit Ternium (#73), which grew by 49 percent last year. Oil company YPF (#43) saw the biggest jump in profits (59 percent). Meanwhile, thanks to a 32.3 percent increase, companies in Colombia accounted for total Latin 500 revenues of $79 billion. Colombia’s top company, Ecopetrol (#12), posted solid revenue and profit increases last year. Another Colombian oil company also did well: Pacific Rubiales (#286). It boosted its revenues by 160 percent, to $1.7 billion. That

was the second-highest revenue growth in percentage terms on the Latin 500. Only Brazil’s PDG Realty did better (176 percent growth). PERU AND VENEZUELA The state oil company Petroperu (#148) is the largest company in Peru, but the revenue growth winner is mining company Southern Peru (#160), which boosted revenues by 42 percent. Meanwhile, three companies in Venezuela were among the top five revenue losers: Movistar (a unit of Spain-based Telefonica), state telecom company CANTV and the Venezuela unit of U.S.-based auto giant General Motors. FOREIGN GIANTS Telefónica (#6) can take consolation in that it ranks as the largest foreign company on the Latin 500, thanks to Latin America revenues last year of $34.5 billion. Other leading foreign companies include French retailer Carrefour (#11), German carmaker Volkswagen (#18), Italian carmaker Fiat (#20) and Swiss food giant Nestlé (#21). The leading U.S. company is General Motors, at #25. On the following pages, we take a closer look at some of the companies that made a mark in 2010. They include Petrobras (#1), Walmart (Walmex ranks #10 and Walmart Brazil ranks #34), General Electric (#65), Goodyear (#227) and Copa Airlines (#326). jbamrud@latintrade.com

Please visit Latin Business Chronicle (latinbusinesschronicle.com) for full rankings, including top 10 proﬁt kings; top 10 revenue winners and losers; top 10 proﬁt winners and losers; top 10 by country; top 50 technology, energy and retail companies; and top 40 foreign companies.

JULY-AUGUST 2011 LATIN TRADE

Latin 500 WALMART: LATIN AMERICAN SUCCESS How Walmart has built Latin America’s largest and most successful retail business. BY DAVID AGREN AND THIERRY OGIER PHOTO BY MATTHEW PACE

MEXICO CITY — Taco stand owner Efrain García is a happy customer of Walmart in Mexico. “The quality of merchandise in Walmart is so much better,” says García, who shops in both Walmart Supercenter and Bodega Aurrera in suburban Ecatepec, where he buys basics and produce for his business. Customers like García have helped catapult U.S.-based Walmart into the largest retailer in Latin America. Walmart de Mexico (Walmex), its top unit in Latin America, last year boosted its revenues by 31.4 percent to $27.2 billion. That made it the third-largest company in Mexico and the tenth-largest firm in Latin America, according to the Latin 500 from Latin Trade and Latin Business Chronicle. Walmex 2010 revenues include Central America. However, Mexico and Central America are not the only Latin America markets where Walmart, the world’s largest retailer, has found success. Walmart Brasil grew 2010 revenues by 18.3 percent to $13.4 billion, ranking it as the 34th-largest company in Latin America on the Latin 500. Walmart also operates a major business in Chile after acquiring local retailer D&S in late 2009, and the company has a presence in Argentina. All in all, Walmart employs more than 341,000 people in Latin America, making it the largest employer in the region, according to a Latin Business Chronicle ranking of the top 100 employers. Just as in the United States, Walmart has played a key role in helping the region reduce inflation, thanks to the sheer volume of products it offers at low prices. “There’s no doubt that in Latin America … we’ve had an … impact … to reduce and control inflation,” Walmart Latin America CEO Eduardo Sol-

LATIN TRADE JULY-AUGUST 2011

orzano tells Latin Trade. “Our prices grow at a slower rate compared to the market.” Solorzano, who assumed his position in January 2010, previously headed up Walmex for five years. He’s credited with launching the successful “Everyday Low Prices” system in Mexico, while creating Banco Walmart, the world’s first Walmart bank, and the development of successful new formats, such as Bodega Aurrera Express. “Walmart’s impact on poverty reduction [in Latin America] is even greater in its ability to deliver great savings to struggling families than the wages that it pays,” argues John Price, managing director at Americas Market Intelligence and a Latin Trade columnist. He estimates that Walmart offers $60,000 in savings to customers for each $10,000 in wages paid to employees. Behind those low prices is a consistent strategy that includes cost-cutting at all levels. “Walmart has an almost puritanical approach to cost-cutting,” Price says. “I have never met a management team with as large a business to oversee and yet such a humble office environment and minimal operating budget. They are as tough on themselves when it comes to cost-cutting as they are on their suppliers.” Walmart goes much further than other retailers in cost-cutting, he points out. Company executives go to their suppliers and help them re-engineer their processes to cut costs and insist that most of that saving be passed on to the clients — i.e. neither the suppliers nor Walmart benefits much from the cost cutting, but rather the consumer. “As a result, no one can match the pricing of Walmart — especially in Mexico, where economies of scale offer other advantages,” Price says. Other global retailers, such as Carrefour,

have had mixed successes in Latin America and have not stayed the course the way that Walmart has. “That also helps explain Walmart’s predominance,” Price says. MEXICAN SUCCESS Although Walmex is the undisputed retail king in Mexico, it isn’t resting on its laurels. “We have much respect for our competitors,” Walmex CEO Scot Rank tells Latin Trade. “Our industry is highly competitive, and we need to constantly revisit the ways we do our job and generate greater efficiencies.” Walmex customers benefit from synergies between operations in Mexico and Central America, he adds. For example, Walmex is taking Mexico’s 11-year experience with “Everyday Low Prices” to Central America, which will translate into savings for its customers. On the other hand, Central America has shared with Mexico its experience in perishable goods and in programs that purchase directly from farmers. “We have a strong focus on results; we constantly search for efficiencies and synergies; we try to rapidly adapt to our customers’ changing needs; and we take a long-term view when taking our decisions,” Rank says. Walmart Stores entered Mexico with a single Sam’s Club outlet in 1991, opened through a partnership with Mexican retailer Grupo Cifra. The partnership flourished over the next six years, until Walmart purchased a controlling interest in Cifra, then the country’s largest retailer. “They were already a very well-run company before Walmart got involved,” says Eduardo García, publisher of the online financial site Sentido Común. Through the partnership, García adds, “[Walmart] learned the business,

Latin 500

Walmart Latin America CEO Eduardo Solorzano says he expects Mexico, Brazil and Argentina to drive future growth although he will continue to expand operations around the region.

JULY-AUGUST 2011 LATIN TRADE

then became full partners.” Walmart continued with its rapid growth, becoming the largest retailer and largest employer in the country, surpassing even the federal government. Walmex now operates more than 1,700 outlets in Mexico, ranging from Sam’s Club and Walmart stores to high-end Superama supermarkets in chic neighborhoods and lower-end Bodega Aurrera outlets in working-class areas. “Walmart has been successful beyond its dreams in Mexico because it entered relatively early and very quickly before the positive buzz about Mexican consumer growth was forming,” Price says. “They study new entry projects very carefully and look for resurgent

consumption growth as a positive timing issue to help them decide when to enter.” Walmart’s success in Mexico is also due to the fact that beyond its own brand stores, the company also owns other branded retailers, which enables Walmart to play in other segments of the fast-moving consumer good retail space, he adds. “Our multiformat structure allows our flexible formats to target different types of consumers and take advantage of different purchasing occasions,” Rank says. In some markets, regulators would not allow any one retailer to possess such high market share as Walmart does in Mexico — around 50 percent of the formal chain market — but it was able to do this by purchasing

Walmart Brazil, the number-three retailer in the country, recently introduced the “Everyday Low Prices” policy as part of its strategy to gain market share.

Retail Giant Walmart across Latin America COUNTRY

STORES

Argentina Brazil Chile Costa Rica El Salvador Guatemala Honduras Mexico Nicaragua TOTAL NOTE: All formats, as of April 2011. Source: Walmart

LATIN TRADE JULY-AUGUST 2011

64 480 285 182 78 176 55 1,767 61 3,148

other branded retailers first and then topping up its market share with its own Greenfield investments, Price says. The company courted some controversy along the way — just like in the United States. Some foreign journalists questioned why teenagers bagged groceries for tips in Walmart stores. Protesters, meanwhile, howled when Walmart opened Bodega Aurrera outlets near the culturally sensitive Teotihuacán Pyramids and Lago Pátzcuaro. Neither controversy seemed to generate much popular outrage in Mexico itself. In fact, Walmart sales continued to climb, and customers in San Juan Teotihuacán and

Pátzcuaro flocked to the new stores, which were built in areas that had not been served well by supermarkets. Guadalupe San Juan recalls something similar happening in her poor neighborhood on the northern outskirts of suburban Mexico City when a Bodega Aurrera store opened a few years ago: “All of the prices immediately dropped,” she says. San Juan now shops in newer and larger stores operated by competitors, explaining, “The selection of merchandise is bigger.” Walmart boasts that 87 percent of its merchandise sold in Mexican stores comes from national suppliers — companies such as Guadalajara-based Nopal Industrializado, which sells low-calorie and high-fiber tortillas, tostadas and totopos made from cactus flour under the “Señor Cactus” label. “What Walmart gives you is the ability to expand rapidly,” says Nopal CEO Gerardo Ibarra. Walmart also gave Nopal Industrializado — whose products Ibarra describes as “a bit elitist” — the chance to reach a moneyed and image-conscious clientele through its Superama supermarkets, which stock everything from fine wines and organic produce to gluten-free cookies and pretzels. “The merchandise that Walmart brings in is so much more attractive,” says Jorge Barron, a designer who shops “all the time” at a Superama outlet in Mexico City’s trendy Colonia Condesa. The small outlet near his apartment, he adds, “is so much better organized” than other nearby supermarkets. Some price-conscious shoppers, though, say better bargains can be found elsewhere. Marisela Cuevas, whose family sells barbacoa (lamb roasted in an earthen pit) on weekends, says she drives past Walmart and Sam’s Club outlets to the west of Mexico City to shop in a no-frills discount store with rock-bottom prices. “Walmart just seems kind of expensive,” she says. Walmex plans to grow further. “We see a universe of opportunities for growth in the six countries where we operate,” Rank says. “The demographics of these countries will increase the demand of goods in which we have an unparalleled price position. In addition, access to goods at low prices

PHOTO COURTESY OF WALMART BRASIL

Latin 500

PHOTO COURTESY OF WALMEX

continues to be limited to a few, and there are still hundreds of places where we could build a store.” Walmex plans to invest substantially more than the rest of the market to open new stores, improve its logistics network and remodel existing stores, Rank says. Meanwhile, the division plans to increase sales at a faster rate than the market by keeping the lowest cost structure in the market and offering consistently lower prices. It also plans to develop and attract talent into the organization, build a high-performance organization to be ready for future growth, and improve on its commitment to be a socially responsible company, Rank says. Walmex plans to open 445 new stores in Mexico and Central America this year. In Mexico, it is investing 14.1 billion pesos (U.S. $1.2 billion) to open 365 new stores and Price Clubs, generating 20,000 new permanent jobs and 40,000 indirect jobs during the construction of its stores. In Central America, Walmex plans to invest 4.9 billion pesos (U.S. $417 million) to open 80 news stores this year — nearly three times the 30 stores it opened last year. “This investment means thousands of new permanent jobs and new opportunities for suppliers to increase their production and sales,” Rank says. BRAZIL: BACK TO BASICS It took some time for Walmart to find its footing in Brazil, but the company’s expansion in recent years shows that it now feels at home in one of its key markets outside the United States. The Brazilian subsidiary has recently implemented “Everyday Low Prices” (EDLP) as a strategy to catch up with the local market leaders, Pão de Açucar and Carrefour. “It is the strategy that we have to develop the trust and the loyalty of our customers,” Walmart Brazil CEO Marcos Samaha tells Latin Trade. “This will naturally result in an increase in market share.” Walmart, which entered Brazil in 1995 through a short-lived joint venture with the local non-food retailer Lojas Americanas, became the third-largest retailing chain in the fast-growing Brazilian market thanks to two key acquisitions in the middle of the

past decade: one in the southern part of the country and the other in the northeast after Portugal’s Sonae and the Netherlands’ Royal Ahold decided to sell their Brazilian assets. “We have grown to be a very large player,” Samaha says. “Our geographical presence is very well-balanced between the three most important regions in the country.” Walmart operates five formats of stores in Brazil, targeting various segments of the population, as well as an electronic commerce division. Walmart is present in 18 states of the Brazilian federation, yet it is still absent from the northern region, which includes the Amazon forest. Walmart now needs to make a big step forward to take on the competition. Samaha, who was appointed CEO last September, is convinced that EDLP is the answer. “We have been opening and sharing our books with the suppliers, and having the suppliers to trust on this mechanism that allowed us to reduce prices of 10,000 items in the retail market in Brazil so far,” he says. “While everybody is in the business of making strong offers on one item that are valid for one day that make the customers go to the store to buy potatoes on Wednesdays and go back to store to buy meat on Fridays, or go to the store to buy beer because beer is cheaper on Saturdays … we want to build a relationship that is based on trust with our suppliers and with our customers. They can come to the store the day of their own convenience, and not the day we are promoting potatoes or meat or beer. ... That’s the biggest difference between what we do and what everybody else does.” Walmart intends to launch 300 new products of its own brand this year to support its EDLP policy. This compares with only 50 launches last year. Brazil has now definitely become “one of Walmart’s most important markets for its global growth,” says Samaha. OUTLOOK Walmart is expected to continue seeing good growth in Latin America. Solorzano expects that future growth will be driven by Brazil, Mexico and Argentina. “I think that Walmart will continue to grow aggressively, although at slower growth

Walmart de Mexico CEO Scot Rank says the company attracts a broad customer base with its multiformat structure.

percentages than in the past,” Price predicts. “The lowest-hanging fruit is picked.” Going forward, Walmart will rely on organic growth in markets like Mexico and Central America, but the retailer will need to resume acquisitions in South America, where its footprint is far less felt and more significant local competitors exist. “I believe that it is the regional Latin American competitors that most threaten Walmart — not the global retailers, some of whom are still smarting from losses in Latin America and others who are enamored with China,” Price says. However, Walmart faces several challenges beyond competition from rivals. Rising protectionism could damage the company’s ability to source from abroad, Price warns. “The resource-rich countries all have local manufacturing that cannot compete when their currencies appreciate as fast as they have,” he says. “They lobby their government for protection, and they are starting to receive it in the form of ‘extraordinary’ import tariffs, complicated non-tariff regulations, etc. Exporting to these countries will grow more complicated.” In the meantime, Walmart continues ringing up sales throughout Latin America, expanding operations and hiring more people, Solorzano says. — With additional reporting by Joachim Bamrud in Miami. editorial@latintrade.com

JULY-AUGUST 2011 LATIN TRADE

Latin 500

Deep-water exploration projects and other investments by Petrobras may turn Brazil into a global energy supplier on par with Russia or Kuwait.

PETROBRAS: MEDDLING WEAKENS VALUE Government meddling is weakening the market value of Petrobras, Latin America’s largest company.

SAO PAULO — Petrobras, the Brazilian state-owned oil company, has a topnotch technical team that will be leading one of the world’s largest deep-water exploration projects, with the potential to turn Brazil into a major oil exporter. In an economy that already is boom-

LATIN TRADE JULY-AUGUST 2011

ing, the company pulled off the largest share issuance in world history, raising $70 billion last year for investments that could turn Brazil into an energy power on par with Russia or Kuwait, and oil prices have been rising quickly this year. Meanwhile, it managed to boost prof-

its last year by 26.9 percent, to $21.1 billion, making it the most profitable company in Latin America, according to the Latin 500. (Brazilian mining giant Vale posted the second-highest profits: $18 billion). Petrobras is also the undisputed larg-

PETROBRAS

BY VINCENT BEVINS

Latin 500 est company in Latin America in revenues. Last year they grew 22 percent, to $128 billion. That compares with $103 billion for the second-largest company on the Latin 500, Mexican oil giant Pemex. However, Pemex doesn’t even remotely compete with Petrobras when it comes to profits. Last year Pemex posted losses of $3.8 billion. Despite the many positive factors, the Petrobras share price has dropped by 20 percent over the past year. Analysts say this can be attributed largely to uncertainty over how interventions from the Brazilian government might continue to affect Petrobras in the future. “The fall in the stock shows the market cares about these political interventions,” says Adriano Pires, director of the Brazilian Infrastructure Institute in Rio de Janeiro. “With such large reserves, enormous potential for deep-water explorations, and a high-quality team, their stock should be going up, not down.” The center-left administration of President Dilma Rousseff, who succeeded Luiz Inacio Lula da Silva, makes no bones about using Petrobras for political as well as economic purposes. Two incidents over the past year have made this clear, giving some investors pause. Most recently, Petrobras has been instructed not to increase prices at the pump, despite the global rise in the price of oil. And last year, some investors thought the company had manipulated the process of the record-breaking share issuance to dilute minority shareholders and increase government participation. “Petrobras is one of the cheapest companies in the universe I follow [in Latin America and Africa],” says Marcos Duarte, head of Polo Capital, a hedge fund based in Rio de Janeiro with $1.4 billion under management. “It’s a large company and very liquid, but because of the self-dealing process they undertook last year, in which they sold reserves to themselves, investors lost confidence, and the company has been punished.”

LATIN TRADE JULY-AUGUST 2011

Duarte, along with many other investors, last year complained that Petrobras and the government set the price per barrel of the public auction higher than the market would have done, and minority shareholders — who were not consulted — lost out to state buyers. More recently, Petrobras has avoided losing popularity with consumers by maintaining prices at the pump despite price jumps following the Arab Spring, a wave of demonstrations and protests. “One thing that affects revenues directly is that, right now, Petrobras is not passing high prices onto the consumer,” says Mônica Araújo, chief strategist at Ativa Corretora, a brokerage in Rio. “But the long-term effect on profits might be null, since prices are often above the international market price, as well.” Araújo agrees that Petrobras’ financial outlook is broadly very positive because of the reserves it has rights over, Brazil’s stability and growth prospects, and the quality of the company’s personnel. However, she sees political strategy manifesting itself most powerfully in the company’s investment and diversification strategy, which diverts from what a purely profit-oriented company would pursue. “The most profitable activities for Petrobras are local exploration and production, but we also have investments in distribution, supply lines and international energy,” she says. “And law demands we use local suppliers, the development of which is most likely Petrobras’ major challenge in the coming years.” It is not a good macroeconomic moment for the development of industrial capacity in Brazil. Brazil’s economy is booming — GDP grew at 7.6 percent last year, but this has been powered largely by commodity exports and internal consumption. High interest rates and an extremely high real, the Brazilian currency, incentivize imports rather than development

of local capacity. “At the moment, the development of local suppliers and supply lines is developing much slower than Petrobras’ need for it,” says Araújo, “and whether this changes will depend on the government more generally, not the company itself.” Pires says, though, that some of the developments that Petrobras itself undertakes are causing profits to take a hit. “Profits could be higher if you could construct privately or at market rates. Building refineries in Brazil, for example, is not a bad business,” he says. “Demand is growing quickly. But the government doesn’t allow Petrobras to use market rates. If Petrobras didn’t have to play a political role, you’d have a set of profitable private refineries.” But analysts agree that the potentially massive reserves awaiting Petrobras — the “pre-salt reserves,” so-called because they are trapped under a layer of salt and rock — present huge opportunities for the company, and it has the skills to make good use of them. “Petrobras has a very solid team,” says Duarte. “They have a history of producing very good talent and very good technical results. It’s probably one of the only major oil producers that has a huge pipeline going forward, as well.” According to Pires, Petrobras still has most of the cards stacked in its favor. “We’re in a democratic country with political and social stability,” he says. “Petrobras has one of the best, if not the best, technical teams in the world to undertake deep-water exploration. The company can turn itself into one of the biggest producers in the world. It can get credit abroad fairly easily.” But the wild card for this, as with the company’s financial future more generally, is political. “Whether all of this is taken advantage of depends on the government,” Pires says. editorial@latintrade.com

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Latin 500 GENERAL ELECTRIC: BULLISH ON BRAZIL Reinaldo Garcia, CEO and president of GE Latin America, tells Latin Trade about the company’s expansion and future outlook. BY JOACHIM BAMRUD

U.S.-based General Electric, the world’s biggest maker of power-generation equipment, locomotives, jet engines, medical- imaging equipment and related information technology systems, is expanding heavily in Latin America, especially Brazil, which replaced Mexico as GE’s top market in Latin America in 2008. Last year, GE posted Latin America revenues of $8.2 billion, an increase of 12 percent. GE, which has been in Latin America for 115 years, has 84 offices and 44 plants distributed in 31 countries in the region, employing more than 17,000 people. Its aggressive investment plans over the next few years will create thousands of new jobs, including 3,000 in Brazil alone in the next two years. Leading the expansion effort is Reinaldo Garcia, a Brazilian native and 26-year GE veteran who was appointed CEO and president of GE Latin America in January after heading up GE Healthcare in Europe, the Middle East and Africa. “It is great to be back to such an important region and one of the fastest-growing markets around the globe,” Garcia tells Latin Trade. “Latin America has been gaining incredible exposure in the international scenario, and it is an honor to be appointed to run such a significant operation for the company. I am really confident that GE is well-positioned to help the region fulfill its infrastructure bottlenecks, from airport traffic to healthcare access to industrial water reuse, etc. This region has given GE the possibility to develop high-technology solutions locally, and, in a second moment, we intend to export those innovations to fulfill other infrastructure bottlenecks around the globe — what we call reverse innovation concept. There is much to be done in the region, but Latin America has very skilled talent capable of partnering with GE to face these challenges.”

LATIN TRADE JULY-AUGUST 2011

Latin Trade: What is your key goal for the next few years as president of GE in Latin America? Garcia: We want to expand GE´s capabilities in the region, growing our portfolio of products and solutions. We established a very ambitious goal to sustain growth at a strong double-digit rate over the next five years. For Brazil, just to give you an example, we are targeting 35 percent organic growth this year. We are an infrastructure company with a high-technology portfolio capable of offering complete solutions for a number of different segments, such as energy, oil & gas, water, transportation, mining, aviation, healthcare, lighting, etc. We want to develop local solutions for local needs but also position Latin America as a hub to export technology worldwide. Latin Trade: How did GE perform in Latin America last year? Garcia: Overall, GE had a strong year in Latin America in 2010, with all the businesses and countries showing solid performance. Last year we saw the strongest performance in Brazil, Peru, Argentina and Venezuela. Brazil is our largest market in the region, followed by Mexico, but we are also seeing strong market performances in many other countries in the region, such as Colombia, Peru, Chile and Argentina. Latin Trade: How do you view the outlook for your overall business in Latin America this year and next year? Garcia: I am very enthusiastic about GE in Latin America and all the opportunities that we have to expand our businesses in the upcoming years. As one of the fastest-growing markets in the world, Latin America has given GE the opportunity to address innovation in a world-class level due to all infrastructure opportunities we have in front

of us. Our company is extremely well-positioned to help solve the infrastructure bottlenecks in the region and collaborate with the sustainability of the economy. Our portfolio contemplates key industries, such as energy, healthcare, oil & gas, aviation, transportation, power generation, water — all of them in need of quality solutions to keep sustainable growth, and GE has all of that. Our fifth Global Research Center, to be built in Rio, is an example of GE’s commitment to this market. The center has been designed to develop solutions to address the local needs. Latin Trade: What sectors of your business have been growing most in Latin America, and what sector do you expect will show the strongest growth the next two years? Garcia: All GE businesses grew in 2010 and will continue to consistently grow in the upcoming years. The energy sector has presented several opportunities, as well as oil & gas, water, healthcare, aviation and transportation. A very promising sector is healthcare, where we offer high-quality products, low-cost solutions and, most importantly, mobility. Latin Trade: How do you view the outlook for your business in Brazil? Garcia: Brazil is positioned as one of the top five markets for GE globally. GE arrived in Brazil in 1919 and faces today the most prosperous moment in more than 90 years. We are proud to say that we know Brazil and understand the local needs — and that is one of the strongest reasons why GE decided to build its fifth Global Research Center in Rio de Janeiro, emphasizing our commitment to develop technology in this country. Brazil presents real, strong opportunities for GE, especially considering FIFA World Cup in 2014, the 2016 Olympic Games and all technologies to be developed for oil explora-

Latin 500

PHOTO COURTESY OF GENERAL ELECTRIC

tion at the pre-salt layer. Thanks to all these opportunities, GE announced investments in Brazil of $550 million until 2013, including the construction of a Research Center and a Learning Center, to accelerate employee and client training. At this moment, we have 400 open positions, and, with these new investments, we will create another 1,000 jobs. GE sees opportunities in several business areas in Brazil, from lighting to aviation to power generation and healthcare, and we expect to grow 35 percent organically this year. Latin Trade: How do you view the outlook for your business in Mexico? Garcia: Mexico is a very strategic country for GE, and our presence in Mexico goes back 115 years. We have 18 manufacturing plants, 13 service shops and one engineering center, employing 11,000 people directly. Our engineering center in Queretaro is one of the largest private engineering centers in Mexico. Due to its proximity to the United States, Mexico was severely impacted by the global economic recession, but our operations in this market got back on track. Major industries for GE in Mexico are healthcare, energy, oil & gas, aviation and transportation, and we see strong opportunities for the upcoming years, and the company invested more than $50 million in 2010 to expand operations. GE has greatly contributed to infrastructure projects in Mexico: We generate 21 percent of the local energy, our more than 600 locomotives move 48 percent of the total rail traffic, one-third of the daily magnetic resonances are done with GE’s equipment and 61 percent of the Mexican commercial planes fly with our GE/CFM engines. Latin Trade: How do you view the outlook for your business in Colombia? Garcia: Colombia is a very fascinating country and has grown tremendously. GE has very positive expectations to expand operations in this country. Colombia, with a population of 45 million and strong economic growth, has demonstrated political and economic stability for the last decade, regaining recently investment-grade status, which it lost some years back. It’s open

#65

Reinaldo Garcia was named CEO and president of GE Latin America in January. He has set a goal of double-digit growth over the next ﬁve years.

and willing to receive [foreign direct investment] and technology, providing high security and protection to foreign investors. It has talented people, willing to prosper and make improvements in different areas where we have opportunities and knowhow. The oil and gas segment has shown strong activity. Energy generation, where Colombia is aiming to be positioned as a strong supplier, oil and gas, and infrastructure development, where the Colombian government is investing over $50 billion within the next 10 years, are the main areas of opportunity for GE. Therefore, we believe Colombia provides the right environment for companies like GE to prosper and at the same time help the country achieve its infrastructure and development goals. Latin Trade: How do you view the outlook for your business in Argentina, Chile and Peru? Garcia: GE … has a long-term commit-

ment to Argentina. Our presence in this country began in 1920. Our local executives have a deep understanding of the market and the operations. We are a solid company in this country, and energy, aviation and healthcare are key areas for GE. Chile has also been a solid market for GE. The company has good opportunities in the energy, mining, healthcare and aviation industries. It is an important, stable and high-growth country, and we want to leverage our presence there. We view Peru as a great opportunity in terms of growth, so we have plans to invest in our operations in this country. [In Peru] we expect strong sustainable growth in orders during the next few years as the country continues its private and public infrastructure investments, which are aligned with our portfolio of solutions, mostly in the power generation, water, oil and gas, healthcare and transportation sectors. jbamrud@latintrade.com

JULY-AUGUST 2011 LATIN TRADE

Latin 500 GOODYEAR: SOLID TRACKS Jaime Szulc, president of Goodyear Latin America, talks to Latin Trade about the outlook for the ﬁrm’s key markets. BY JOACHIM BAMRUD

tells Latin Trade. “The tire market is in high demand and presents many opportunities for growth. … Today, Latin America presents one of the largest and most exciting opportunities for doing business around the world. For a long time, the region was labeled ‘volatile’ and presented an opportunity for investors in a distant future. Now, Latin America is

#227

Goodyear Latin America President Jaime Szulc sees opportunities among the region’s growing middle classes with improved purchasing power.

LATIN TRADE JULY-AUGUST 2011

attracting a renewed wave of mid- and long-term investments, and it is no different for the tire industry. As more and more people emerge [into] the middle class, car manufacturers are increasing capacity at an unprecedented speed. All this brings a proliferation of new cars and a higher sense of consumer empowerment. This means more category

COURTESY OF GOODYEAR

U.S.-based Goodyear, one of the world’s largest tire companies, boosted its Latin America revenues by 19 percent last year to $2.2 billion. The growth was driven by a combination of improvements in volume and price/mix. “Latin America is ‘the place to be,’ and now is the time to be here,” Goodyear Latin America President Jaime Szulc

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Latin 500 complexity, and new emerging channels of distribution.” Brazilian native Szulc was appointed to his current position in September 2010 after serving as senior vice president and global chief marketing officer for the Levi’s brand at Levi Strauss & Co. His career also includes positions at Eastman Kodak, SC Johnson Inc., Procter & Gamble and Arthur Andersen LLP. “After so many years living and working abroad, it is great to be back,” Szulc says. Latin Trade: What are your top markets in Latin America? Which ones have grown most? Szulc: In terms of volume, Brazil, Mexico and Argentina are our top markets. We have seen tremendous growth in the number of vehicles in circulation in the last five years. For example, in Brazil they grew 47 percent in the last five years [from 45 million in 2006 vehicles to 66 million in 2010]. … We had growth in all the main markets of the region, especially in Brazil and Argentina. Besides, the fact that the economy is improving resulted in the growth of both the automotive industry and the consumer purchasing power. Latin Trade: How do you view the outlook for your overall business in Latin America? Szulc: We are very optimistic about our business outlook in Latin America because it is a region with real and enormous opportunities today. It’s a market where the size of the middle class has growth to roughly 200 million people (more than one-third of the population) and whose automotive industry estimates to receive investments of more than $50 billion by 2016. Latin Trade: How do you view the outlook for your business in Brazil? Szulc: The Brazilian market is one of the fastest-growing across the Latin American region, stimulated in large part by the sales of the automotive industry. At the moment, the country finds itself with a large

LATIN TRADE JULY-AUGUST 2011

entry of foreign investment, driven by a positive macroeconomic situation and by the appreciation of the real. The challenge of the local industry is to compete against imported goods that arrive to the country, competing primarily by offering a low price. That is where Goodyear sees a huge market opportunity. Latin Trade: How do you view the outlook for your business in Mexico? Szulc: Mexico’s GDP is expected to grow this year from 4 to 5 percent, and consumer confidence is growing. Regarding Mexico OEMs [original equipment manufacturers], the investments for new plants and expansions surpass $6.5 billion, which will definitely represent a growth opportunity for our replacement and OE segments. Vehicle production capacity represents 3.4 million vehicles per year, with 80 percent of that volume being exported, mainly to the U.S. market. Goodyear will continue investing in its footprint expansion, focusing on branded auto service stores. During the next two years we’ll be opening five additional Goodyear Authorized Retreaders and 26 new independent dealer stores. Also, Goodyear Mexico launched seven new product lines in 2010, and four more will be added in 2011. In summary, the outlook for Mexico is positive for 2011 and 2012. Latin Trade: How do you view the outlook for your business in Argentina? Szulc: Our business in Argentina has recovered from a challenging environment in 2009 driven by weaker economies and the ongoing implementation of non-automatic import licenses for tires. While the overall business environment remains challenging, we expect our business to continue to grow as we focus on expanding our market share in key targeted segments. Latin Trade: How do you view the outlook for your business in Colombia, Chile and Peru? Szulc: The outlook for Goodyear in Co-

lombia is optimistic due to the political stability and confidence the country offers foreign investors. In fact, the upgrade of the country’s debt ratings sends a positive signal that results in more investments with an even stronger currency. Additionally, Colombia has forecasted a GDP growth rate of 4.5 percent in 2011. The truck tire radialization to reach 70 percent by 2013 [and] the growing mining projects and infrastructure are big opportunities to grow in the MRT [medium radial truck] business, taking advantage of our service programs and local production. Chile has recovered the level of growth it had before the crisis and has overcome the impact of last year’s major earthquake. The country’s GDP growth is regaining momentum to go up to 6 percent or over, and its open economic model has been sustained, generating a very competitive automotive market. The number of vehicles in the country has grown and improved in its technological offerings, with more than 60 percent of those vehicles being less than two years old. Goodyear is well-positioned to take advantage of these technological advances with our innovative tires and high-tech services. We are investing in modernizing and increasing our production in Chile’s tire plant, which enables us to provide the latest-generation tires. For these reasons, our business outlook in Chile is very positive. Our outlook in Peru is also positive. This is based on the fact that the country’s GDP is estimated to grow by about 6 to 7 percent this year and about 5 to 6 percent next year. Also, new vehicle sales achieved an all-time record last year, and they are expected to grow at a double-digit rate over the next three years. We are confident that the country will continue to grow, and we want to take advantage of that, strengthening our leadership in the market with a product portfolio with the latest technology and providing the best postsales service. jbamrud@latintrade.com

Latin 500 COPA: SMALL, BUT STRONG Pedro Heilbron, CEO of Copa Airlines, talks to Latin Trade about the carrier’s bright outlook. BY JOACHIM BAMRUD

increase. Meanwhile, profits reached $212 million, or 15 percent of revenues. That compares with profit margins of 5.6 percent at Brazil-based TAM (Latin America’s top airline) or 9.6 percent at Chile-based LAN. Copa is Panama’s largest private employer, with 5,000 employees, which it expects to boost to 6,000 by the end of the year. Behind the success is Copa’s unique model of creating a hub in Panama for flights throughout Latin America as well as with other regions. Pedro Heilbron, who has been CEO of Copa for the past 20 years, recently talked to Latin Trade about the company’s outlook.

#326

In an industry marked by consolidation, Copa Airlines is able to remain independent, says CEO Pedro Heilbron.

LATIN TRADE JULY-AUGUST 2011

Latin Trade: After the planned merger of TAM and LAN and the merger of Avianca and TACA, Copa is the last major independent airline in Latin America. Will you merge with other groups or remain independent? Heilbron: We have the ability to remain independent. Our financial strength and our unique business model based on strategic location of Panama — both of those factors combined [allow us to] go alone as we have done. Having said that,

we would be irresponsible not to consider or not to entertain [a merger]. We always have to be aware of the game going on [and] to make the best move for shareholders, our employees and the country of Panama. Latin Trade: Why is Copa’s Panama traffic growing so fast? Heilbron: The economy has been doing well, but the growth is also due to that every flight leaves and lands in Panama. So when we grow, half of that growth will always be in Panama, the rest split between other cities. … We have a very balanced network. We serve every region in the Americas, we serve a lot of secondary cities. Latin Trade: How important has it been for Copa that Panama City’s international airport Tocumen has been expanding? Heilbron: It’s been critical. We were obviously very pleased that the airport in Panama is being expanded from 22 to 34 gates between September and October, when 12 new gates will be inaugurated and ready by the end of the year. … The government is already talking about a new bid for a new terminal [to] keep on adding gates. We could not keep growing without that investment. Latin Trade: How happy are you with the 2005 Aero República acquisition, and how do you view the outlook for Copa Colombia? Heilbron: We are happy; it brought us [recognition] from a market that we weren’t serving five years ago well enough. Copa Colombia has put together an ex-

PHOTO COURTESY OF COPA

Copa Airlines in Panama may be the smallest of the top airlines in Latin America, but it stands out as a shining star because of consistent strong growth and profitability. Last year it reached revenues of $1.4 billion, a 12.6 percent

Latin 500 tensive flight [connection] from Colombia to Panama and also internal destinations. It has met our expectations. … We see them fulfilling a strategic role in Copa Holding. Colombia has a bright future, and [Copa Colombia’s] future is even brighter, and we’re very excited about that. Copa Colombia is in a good strategic position [in regards to] what’s happening, how the country is developing.

in GDP growth for the next few years. Latin America will be one of the fastestgrowing in terms of air traffic passenger growth the next 20 years, one of the fastest GDP regions and also fastest-growing

passenger region. More people entering the middle class. We have a successful business model. ...We’re bullish. jbamrud@latintrade.com

Latin Trade: You have been listed on the New York Stock Exchange for five years. What has been the biggest benefit of listing there? Heilbron: If I was to highlight one benefit apart from access to new capital markets, which we haven’t yet needed, it’s been the discipline. We have to be very transparent in how we publish our financials, very disciplined in what we inform the market. That has forced us as an organization, from a financial and planning standpoint, to be world-class. And I think the market has recognized that in Copa, they get information they [look for], we fulfill our promises. That has forced us to be a better company. Latin Trade: Will you list more shares on NYSE? Heilbron: It’s hard to predict. It’s there, and it’s available. As we keep on expanding, there could be [a scenario] where we could access the market for additional [capital]. We have large institutional investors that are [supporting] our company. That’s kind of reassuring. Latin Trade: How do you view the outlook for Copa the next five years? Heilbron: I’m very bullish, I’m very positive. I’ve been in the company for many years, I’ve seen different [times], many good times, tougher times also. Our future is as bright as ever. … We’re running a solid airline, with world-class result indications in on-time performance. There are many opportunities in a region that is said to be among the fastest region

JULY-AUGUST 2011 LATIN TRADE

Latin 500 2010 figures in millions of US dollars. Rank

Company, Country

Sector

2010 Revenues

Annual % change

2010 Profits

Annual % change

Web site

Energy Energy Mining Tech Energy Tech Food Holding Retail Energy Retail Energy Energy Energy Retail Holding Steel Auto Tech Auto Food Retail Energy Mining Auto Chemical Beverage Tech Cement Holding Beverage Food Retail Energy Retail Energy Tech Auto Beverage Energy Energy Holding Energy Retail Tech Food Steel Holding

$128,000.0 $103,814.2 $49,949.0 $49,220.6 $37,815.2 $34,553.8 $33,042.7 $32,289.0 $27,195.8 $25,496.2 $23,337.5 $22,467.6 $21,896.2 $20,601.3 $19,260.4 $19,092.0 $18,841.2 $17,870.7 $17,663.9 $17,552.2 $17,479.1 $16,531.8 $16,456.1 $16,065.9 $15,379.0 $15,301.2 $15,144.2 $14,753.8 $14,434.5 $13,958.7 $13,741.5 $13,612.6 $13,404.2 $13,250.4 $13,236.3 $13,203.2 $12,757.9 $12,404.0 $12,200.0 $12,149.8 $11,503.0 $11,044.5 $11,013.0 $10,940.7 $10,866.6 $10,711.9 $10,180.6 $10,168.1

22.0% 24.5% 79.3% 13.9% 19.6% 4.9% 67.7% 38.3% 31.4% 23.0% 21.3% 23.9% 25.1% 22.3% 44.2% 7.3% 23.6% 29.8% 3.2% 25.0% 17.3% 23.7% 15.9% 29.8% 17.1% 74.7% 13.7% 22.9% -4.7% 20.8% 12.0% 49.0% 18.3% 9.4% 26.0% 10.2% 14.1% 9.6% 27.8% 22.2% 18.1% 24.8% 22.9% 16.3% 13.7% 40.3% 25.2% 13.4%

$21,119.5 -$3,843.3 $18,047.1 $7,354.2 $843.7 $12,898.8 -$181.7 $1,620.5 $1,583.1 $459.3 N/A $4,360.6 $482.7 $65.5 $433.6 N/A $1,285.9 N/A $1,140.5 N/A N/A N/A $1,532.2 $1,876.3 N/A $1,137.5 $4,572.8 N/A -$1,337.4 $2,922.8 $3,259.3 $482.6 N/A $2,140.3 $633.0 $1,038.9 $6,161.3 $970.5 $3,869.0 $1,013.8 N/A $398.9 $1,443.9 N/A $1,136.6 $471.2 $868.9 $748.3

26.9% 47.0% 206.6% 4.0% 1.1% 68.2% -344.4% 151.5% 23.1% 81.5% N/A 67.7% 45.3% -27.8% 27.6% N/A 99.% N/A 433.8% N/A N/A N/A 113.4% 59.8% N/A 115.9% 33.0% N/A -1,340.0% -17.4% 329.8% 597.8% N/A -6.2% 233.2% -20.2% 10.3% 2.4% 41.3% 75.9 N/A 158.0% 58.6% N/A 125.4% 28.7% -52.2% -23.8%

petrobras.com.br pemex.com vale.com americamovil.com br.com.br telefonica.es jbs.com.br odebrecht.com.br walmartmexico.com.mx ultra.com.br carrefour.com ecopetrol.com ipiranga.com.br cfe.gob.mx grupopaodeacucar.com.br techint.com gerdau.com.br volkswagen.com oi.com.br fiat.com nestle.com carrefour.com.br eletrobras.com codelco.cl gm.com braskem.com.br ambev.com.br telefonica.com.br cemex.com votorantim.com.br femsa.com perdigao.com.br walmartbrasil.com.br endesa.es cencosub.cl enersis.cl telcel.com fiat.com.br ab-inbev.com copec.cl aes.com alfa.com.mx ypf.com groupe-casino.fr vivo.com.br cosan.com.br arcelormittal.com/br camargocorrea.com.br

Auto Food Auto Food Tech Mining Tech Retail Retail Tech

$9,905.0 $9,529.7 $9,513.0 $9,487.2 $9,456.3 $9,211.5 $9,195.7 $8,930.2 $8,758.9 $8,676.9

24.6% 72.4% 15.2% 6.5% 4.2% 30.3% 0.9% 28.5% 19.2% 14.8%

$1,010.0 $84.1 N/A $436.8 $1,439.7 $4,338.2 $1,245.7 $883.2 N/A $1,327.4

32.0% -73.0% N/A -4.2% 13.7% 35.6% -20.5% 125.0% N/A 975.5%

ford.com marfrig.com.br gm.com.br grupobimbo.com.mx telefonica.com.br escondida.cl telmex.com/mx falabella.cl bodegaurrera.com.mx tim.com.br

2011 2010 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 43 44 45 46 47 48 49

1 2 5 4 -3 8 -7 6 9 10 11 14 24 13 16 22 12 21 19 23 20 27 -47 25 28 17 15 18 39 31 30 33 29 32 -36 34 35 46 44 37 38 --43 50

Petrobras, Brazil Pemex, Mexico Vale, Brazil América Móvil, Mexico BR Distribuidora, Brazil Telefónica, Spain JBS, Brazil Odebrecht, Brazil Walmart de Mexico Grupo Ultra, Brazil Carrefour, France Ecopetrol, Colombia Pet. Ipiranga, Brazil CFE, Mexico CBD, Brazil Techint, Argentina Gerdau, Brazil Volkswagen, Germany Telemar/Oi, Brazil Fiat, Italy Nestlé, Switzerland Carrefour, Brazil Eletrobrás, Brazil Codelco, Chile General Motors, USA1 Braskem, Brazil AmBev, Brazil Telefónica, Brazil Cemex, Mexico Grupo Votorantim, Brazil Femsa, Mexico BR Foods, Brazil Walmart, Brazil Endesa, Spain Cencosud, Chile Enersis, Chile Telcel, Mexico Fiat, Brazil AB InBev, Belgium Copec, Chile AES, USA Alfa, Mexico YPF, Argentina Casino, France Vivo, Brazil Cosan, Brazil ArcelorMittal, Brazil Camargo Corrêa, Brazil Ford, USA1

50 51 52 53 54 55 56 57 58

73 48 45 42 56 40 57 53 52

Marfrig, Brazil General Motors, Brazil Grupo Bimbo, Mexico Telesp, Brazil Minera Escondida, Chile Telmex, Mexico Falabella, Chile Bodega Aurrerá, Mexico TIM, Brazil

LATIN TRADE JULY-AUGUST 2011

Latin 500 Rank

Company, Country

Sector

2010 Revenues

Annual % change

2010 Profits

Annual % change

Web site

Steel Agri. Holding Beverage Mining Tech Manuf. Energy Steel Energy Steel Energy Retail Mining Steel Food Services Energy Tech Tech Beverage Transport Tech Retail Beverage Food Chemical Tech Manuf. Retail Energy Retail Transport Tech Energy Water Media Transport Energy Mining Holding Retail Mining Energy Retail Tech

$8,672.7 $8,646.0 $8,482.9 $8,377.3 $8,320.1 $8,247.9 $8,200.0 $8,179.9 $7,779.6 $7,720.2 $7,711.6 $7,694.7 $7,587.3 $7,492.0 $7,382.0 $7,355.1 $7,280.3 $7,216.3 $7,139.9 $7,052.1 $6,884.3 $6,829.1 $6,740.5 $6,670.3 $6,335.0 $6,315.0 $6,200.0 $6,159.7 $6,154.0 $6,113.6 $5,872.9 $5,634.7 $5,630.0 $5,601.3 $5,540.4 $5,540.2 $5,489.1 $5,452.3 $5,371.5 $5,202.7 $5,198.2 $5,165.1 $5,149.5 $5,123.7 $5,041.4 $4,985.2

37.6% 11.6% -1.1% 6.5% 65.7% -0.3% 7.0% 15.3% 24.0% 14.8% -5.4% 17.5% 11.8% 24.0% 48.9% 31.9% 15.5% 10.6% 3.2% 5.3% 9.9% 20.1% 10.7% 22.2% 7.3% 10.7% 19.2% -1.4% 57.7% 6.7% 25.6% 17.7% -9.3% 27.4% 4.6% 12.4% 30.4% 80.1% 34.3% 51.7% 19.6% 115.9% 37.9% 7.9% 23.0% 11.1%

$1,510.2 $55.4 $702.8 $793.6 $1,761.1 $1,346.6 N/A $70.1 $943.4 $1,355.2 $1,127.4 N/A $265.5 $3,416.0 $779.5 N/A $496.3 $923.2 $399.1 $878.6 $805.2 $382.6 $433.9 N/A N/A $1,004.0 N/A $1,182.9 N/A N/A $558.4 $185.8 $344.3 $341.1 $157.3 $978.5 $1,500.4 $170.8 $1,067.1 $525.1 $572.0 -$37.9 $1,554.1 $1,140.1 $421.1 N/A

1.2% -70.4% 28.6% 21.7% 96.8% 567.1% N/A -65.0% 32.9% 26.8% -2.9% N/A 20.9% 47.9% 1.6% N/A 635.4% 25.0% -42.6% -11.8% 21.9% -50.4% -41.6% N/A N/A 11.1% N/A 280.3% N/A N/A 216.7% 112.8% -33.0% -10.6% -75.2% 13.0% 138.8% 125.5% 17.1% 32.0% 17.0% 79.1% 67.2% -7.8% 23.4% N/A

csn.com.br cargill.com.br andradegutierrez.com.br coca-colafemsa.com gmexico.com tim.com.br ge.com enap.cl usiminas.com cemig.com.br tenaris.com/Argentina portal.gasnatural.com soriana.com angloamerican.co.uk ternium.com nestle.com.br correios.com.br cpfl.com.br telmexinternacional.com claro.com.br gmodelo.com.mx tam.com.br embratel.com.br sams.com.mx sabmiller.com pepsico.com dow.com oi.com.br cat.com walmartmexico.com.mx aeseletropaulo.com.br americanas.com.br embraer.com nii.com refap.com.br sabesp.com.br globo.com csav.cl neoenergia.com penoles.com.mx gcarso.com.mx globex.com.br southerncoppercorp.com endesachile.cl oxxo.com nokia.com

Agri. Energy Retail Cement Manuf. Media Transport Manuf. Health Mining Retail Beverage

$4,966.6 $4,954.7 $4,864.6 $4,829.6 $4,694.0 $4,684.9 $4,619.0 $4,589.5 $4,582.5 $4,577.1 $4,546.0 $4,531.0

129.8% 20.3% 20.0% 16.0% 26.7% 16.9% 12.3% 11.9% 63.4% 54.5% 15.0% 41.2%

$213.4 $387.2 $89.2 $1,621.9 $668.0 $622.2 N/A $604.7 $76.2 $1,051.8 N/A N/A

14,794.9% 20.4% 201.9% 52.7% 84.0% 35.3% N/A -6.7% 18.6% 57.5% N/A N/A

copersucar.com.br alpek.com www.dys.cl votorantimcimientos.com.br whirlpoolcorp.com televisa.com aa.com avon.com amil.com.br antofagasta.co.uk carrefour.com.arg pepsico.com.mx

2011 2010 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 98 99 100 101 102 103 104 105

61 41 -51 80 --54 62 60 49 -59 68 81 72 -67 55 58 63 71 66 76 74 70 -64 99 69 84 82 65 86 -101 -130 97 117 79 154 -83 95 93 --

CSN, Brazil Cargill Agrícola, Brazil Andrade Gutierrez, Brazil Coca-Cola Femsa, Mexico Grupo Mexico, Mexico TIM Celular, Brazil General Electric, USA ENAP, Chile Usiminas, Brazil Cemig, Brazil Tenaris, Argentina GN Fenosa, Spain Org. Soriana, Mexico Anglo American, USA/UK Ternium, Argentina Nestlé, Brazil ECT, Brazil CPFL, Brazil Telmex Intern., Mexico Claro Telecom, Brazil Grupo Modelo, Mexico TAM, Brazil Embratel, Brazil Sam’s Club, Mexico SABMiller, UK2 Pepsico LAF, USA Dow, USA Brasil Telecom, Brazil Caterpillar, USA Walmart Superc.,Mx Eletropaulo, Brazil Lojas Americanas, Brazil Embraer, Brazil NII Holdings, USA Refap, Brazil Sabesp, Brazil Globo Com., Brazil CSAV, Chile Neoenergia, Brazil Ind. Peñoles, Mexico Grupo Carso, Mexico Globex, Brazil Southern Copper, USA Endesa, Chile Oxxo, Mexico Nokia, Finland Copersucar, Brazil2

106 107 108 109 110 111 112 113 114 115 116

91 85 90 105 96 92 94 139 133 98 122

Alpek, Mexico Walmart, Chile3 Votorantim Cimentos Whirlpool, USA Grupo Televisa, Mexico American Airlines, USA Avon, USA Amil, Brazil Antofagasta PLC, Chile Carrefour, Argentina Pepsico, Mexico

JULY-AUGUST 2011 LATIN TRADE

Latin 500 Rank

Company, Country

Sector

2010 Revenues

Annual % change

2010 Profits

Annual % change

Web site

Comercial Mexicana, Mexico Whirlpool, Brazil Met-Mex Peñoles, Mx Grupo EPM, Colombia LAN, Chile Schlumberger, USA CGE, Chile Iberdrola, Spain Grupo Chedraui, Mexico Colgate, USA Liverpool, Mexico CMPC, Chile GOL, Brazil Copel, Brazil Coca-Cola, USA Furnas, Brazil Rede Energia, Brazil Coppel, Mexico Collahuasi SCM, Chile Exito, Colombia Light, Brazil Celulosa Arauco, Chile Gruma, Mexico Fibria, Brazil Samarco Min., Brazil Elektra, Mexico Walmart Centroamérica Org. Terpel, Colombia Telecom, Argentina Nestlé, Mexico Petrobras En., Argentina Petroperu, Peru Itaipu Binacional, Br/Py CNO, Brazil BASF, Brazil Souza Cruz, Brazil Ref. La Pampilla, Peru Los Pelambres, Chile Comcel, Colombia CHESF, Brazil NET, Brazil CANTV, Venezuela Paul F Luz, Brazil Southern Peru Makro Atacadista, Brazil PDG Realty, Brazil Natura, Brazil Movistar, Venezuela Energias do Brasil Arcos Dorados, Argentina Transpetro, Brazil Mexichem, Mexico Const. Cam. Corrêa, Brazil Nemak, Mexico Cyrela Realty, Brazil Bradespar, Brazil Magazine Luiza, Brazil Quattor, Brazil

Retail Manuf. Mining Holding Transport Energy Energy Energy Retail Manuf. Retail Pulp Transport Energy Beverage Energy Energy Retail Mining Retail Energy Pulp Food Pulp Mining Retail Retail Energy Tech Food Energy Energy Energy Constr. Chemical Manuf. Energy Mining Tech Energy Tech Tech Energy Mining Retail Constr. Manuf. Tech Energy Food Energy Chemical Constr. Manuf. Constr. Energy Retail Chemical

$4,510.8 $4,432.2 $4,428.2 $4,402.4 $4,390.5 $4,320.9 $4,298.5 $4,298.0 $4,275.0 $4,261.0 $4,231.9 $4,219.2 $4,188.8 $4,141.8 $4,121.0 $4,118.0 $4,117.6 $4,033.6 $3,928.9 $3,922.3 $3,906.2 $3,788.4 $3,773.4 $3,771.1 $3,744.9 $3,726.3 $3,722.9 $3,674.9 $3,660.6 $3,620.2 $3,601.5 $3,565.3 $3,450.5 $3,449.8 $3,316.8 $3,312.3 $3,298.8 $3,285.8 $3,275.9 $3,260.7 $3,244.3 $3,217.5 $3,216.9 $3,153.5 $3,153.1 $3,138.8 $3,082.9 $3,075.8 $3,021.4 $3,018.1 $2,996.6 $2,953.7 $2,947.6 $2,946.6 $2,934.9 $2,899.6 $2,885.6 $2,831.9

7.4% 15.6% 52.9% 18.3% 24.8% 2.3% 20.3% 13.1% 16.6% -1.3% 18.2% 35.1% 21.0% 28.4% 6.2% 16.8% 42.1% 30.9% 22.5% 13.5% 25.2% 21.7% -2.3% 9.4% 131.8% 12.9% 13.1% 23.2% 14.7% 20.4% 15.2% 40.8% -0.9% 20.4% 10.3% -0.4% 28.9% 62.3% 13.2% 22.9% 22.4% -41.4% 17.2% 41.8% 18.7% 175.5% 26.5% -43.1% 13.8% 13.2% 15.3% 25.9% 3.9% 46.1% 25.0% 79.1% 49.9% 4.4%

$84.0 $372.3 $273.6 $740.1 $419.7 $723.2 $128.4 N/A $115.6 $1,295.0 $417.4 $637.5 $128.6 $592.9 $2,405.0 $381.4 -$221.4 $463.4 $2,047.9 $133.1 $345.2 $700.7 $41.9 $359.3 $1,348.8 $17.5 N/A $112.7 $454.1 N/A $152.1 $107.0 $466.5 $714.7 -$56.7 $654.9 $44.0 $1,646.7 $600.8 $1,306.7 $184.3 $560.0 $417.6 $1,208.0 $22.9 $473.9 $446.6 N/A $349.6 $106.0 $329.1 $299.1 $11.1 $75.0 $360.3 $1,056.2 $41.3 -$379.9

218.4% 78.5% 15.6% -5.0% 81.6% -4.0% -42.4% N/A 12.0% -4.8% 44.0% 144.6% -74.9% 0.6% 17.8% 85.3% -1,995.2% 43.6% 30.9% 82.5% -0.6% 130.1% -64.2% 12.1% 79.0% -95.4% N/A 14.5% 23.8% N/A -37.0% 15.3% -21.8% 40.4% -137.6% -23.2% -10.4% 72.2% 0.4% 151.2% -56.4% -43.5% 58.8% 70.9% -62.3% 144.0% 13.7% N/A -12.5% 32.5% 43.3% 32.4% -97.0% 138.8% -14.0% 93.0% 177.6% -175.5%

comercialmexicana.com whirlpoolcorp.com penoles.com.mx eeppm.com lan.com slb.com cge.cl iberdrola.es chedraui.com.mx colgate.com liverpool.com.mx cmpc.cl voe.gol.com.br copel.com coca-cola.com furnas.com.br gruporede.com.br coppel.com collahuasi.cl virtualexito.com light.com.br arauco.cl gruma.com fibria.com.br samarco.com.br elektra.com.mx walmart-centroamerica.com terpel.com telecom.com.ar nestle.com.mx petrobras.com.br petroperu.com.pe itaipu.com.br odebrecht.com basf.com.br souzacruz.com.br repsol.com pelambres.cl comcel.com chesf.gov.br netcombo.globo.com cantv.com.ve cpfl.com.br southerncoppercorp.com makro.com.br pdgrealty.com.br natura.net movistar.com.ve energiasdobrasil.com.br mcdonalds.com.ar transpetro.com.br mexichem.com camargocorrea.com.br nemak.com cyrela.com.br bradespar.com.br magazineluiza.com.br quattor.com.br

2011 2010 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174

89 103 136 104 111 88 107 --87 108 125 116 121 100 112 135 -123 114 127 128 102 115 -120 119 132 124 131 126 -113 -144 118 147 178 137 149 143 75 -167 -291 150 -142 106 -158 138 179 159 218 ---

LATIN TRADE JULY-AUGUST 2011

Descubre el Hilton Garden Inn.

Hilton Garden Inn Ă˘ Liberia, Costa Rica

Con diversas ubicaciones en AmĂŠrica Latina, incluyend en Costa Rica, el Hilton Garden Innâ&#x201E;˘ tiene la misiĂłn de ayudarte a alcanzar el ĂŠxito mientras viajas a travĂŠs del mundo. Ă˘ ,17(51(7 ,1$/Â&#x192;0%5,&2 ,1&/8','2 Ă˘ &(1752 '( 1(*2&,26 +25$6 ,1&/8,'2 Ă˘ *,01$6,2 ,1&/8,'2 Ă˘ 6(5,9,&,2 &203/(72 '( 5(67$85$17( < %$5 Ă˘ '(6$<812 35(3$5$'2 (1 (/ 020(172 Ă˘ &$0$ $-867$%/( *$5'(1 6/((3 6<67(0â&#x201E;˘ Ă˘ *$1$ 381726 +,/721 ++21256 325 78 (67$'Â?$ (1 &$'$ 812 '( 786 9,$-(6

UBICACIONES:

Aeropuerto de Liberia, Costa Rica Ă˘ 0RQWHUUH\ 0ÂŤ[LFR Ă˘ 7X[WOD *XWLÂŤUUH] 0ÂŤ[LFR $HURSXHUWR GH 6DQWLDJR &KLOH Ă˘ &HQWUR GH &LXGDG GH 3DQDPÂŁ 3DQDPÂŁ

+*, FRP 6ÂŻJXHQRV HQ )XHUD GH OD OÂŻQHD (( 88 * *Las llamadas serĂĄn cargadas en las tasas internacionales de marcado directo. ÂŠ2011 Hilton Worlwide.

Latin 500 Rank

Company, Country

Sector

2010 Revenues

Annual % change

2010 Profits

Annual % change

Web site

ICA, Mexico CCR Rodovias, Brazil Millicom, Luxembourg Avianca-TACA, Colombia Grupo Casa Saba, Mexico CNH, Netherlands Suzano, Brazil Suzano Papel, Brazil AHMSA, Mexico Grupo Sanborns, Mexico Sigma, Mexico Coamo, Brazil Sodimac, Chile Telef贸nica del Peru Coelba, Brazil Weg, Brazil Molinos Rio, Argentina Ericsson, Sweden Movistar, Argentina ExxonMobil, Colombia Eletronorte, Brazil Nextel, Brazil Recope, Costa Rica Xignux, Mexico Electrolux, Sweden Bavaria, Colombia Arcor, Argentina Tractebel, Brazil Comg谩s, Brazil B2W Varejo, Brazil Movistar, Mexico Celesc, Brazil Pan American, Argentina Cielo, Brazil Siderar, Argentina Cerro Verde, Peru Carb. del Cerrej贸n, Col G. Nutresa, Colombia4 Entel, Chile Costco, Mexico ANCAP, Uruguay Gafisa, Brazil Randon, Brazil Halliburton, USA Spal, Brazil Bayer, Brazil Klabin, Brazil Ultragaz, Brazil Industrias CH, Mexico Embotelladoras Arca, Mx Avon, Brazil ASA, Mexico Goodyear, USA Chilectra, Chile Anglo American Sur, Chile Kimberly Clark, Mexico Carrefour, Colombia Nextel, Mexico

Constr. Transport Tech Transport Retail Auto Pulp Paper Steel Retail Food Agri. Retail Tech Energy Manuf. Food Tech Tech Energy Energy Tech Energy Holding Manuf. Beverage Food Energy Energy Retail Tech Energy Energy Services Steel Mining Mining Food Tech Retail Energy Constr. Manuf. Energy Beverage Chemical Pulp Energy Steel Beverage Chemical Services Manuf. Energy Mining Paper Retail Tech

$2,831.3 $2,795.1 $2,789.8 $2,780.4 $2,772.9 $2,741.0 $2,712.6 $2,709.1 $2,700.2 $2,693.3 $2,679.5 $2,657.7 $2,651.7 $2,641.5 $2,637.3 $2,635.9 $2,629.5 $2,628.5 $2,625.9 $2,621.3 $2,594.5 $2,591.3 $2,567.1 $2,566.5 $2,539.5 $2,534.4 $2,530.6 $2,460.9 $2,457.9 $2,444.8 $2,430.9 $2,422.7 $2,413.0 $2,396.2 $2,382.5 $2,369.0 $2,336.3 $2,329.6 $2,315.3 $2,265.6 $2,250.9 $2,233.1 $2,232.0 $2,229.0 $2,223.0 $2,203.8 $2,198.6 $2,197.4 $2,194.3 $2,189.6 $2,182.8 $2,160.2 $2,158.0 $2,143.1 $2,122.5 $2,121.2 $2,116.2 $2,113.8

19.8% 57.5% 16.6% 60.8% 21.6% 56.5% 18.9% 19.3% 34.1% 15.2% 18.0% 10.0% 26.0% 4.8% 37.0% 9.0% 25.3% -5.8% 11.5% 8.2% 30.8% 49.4% 35.8% 21.3% 28.7% -1.5% 20.4% 22.5% 10.2% 12.2% 9.3% 15.3% 1.5% 21.1% 43.1% 34.8% -5.6% 2.6% 18.8% 16.2% -9.0% 28.7% 57.4% 2.2% 29.0% 7.3% 29.3% 11.2% 29.3% 18.1% 15.2% 27.9% 19.0% 2.4% 20.4% 12.2% 14.9% 13.5%

$73.6 $403.1 $1,374.7 $57.5 $21.9 N/A $140.3 $461.5 $52.3 $259.1 $120.3 $172.7 $169.6 $306.0 $567.6 $312.0 $93.8 N/A N/A $21.9 $83.9 $523.4 N/A $33.2 $158.8 $419.6 $104.5 $727.2 $348.1 $20.2 N/A $164.2 $526.5 $1,097.9 $445.8 $1,054.4 $534.2 $137.9 $369.6 $90.5 $72.2 $249.7 $149.7 $290.0 $211.3 -$40.3 $336.0 $113.2 $84.2 $212.4 N/A -$59.7 $330.0 $322.5 $900.3 $341.9 $44.7 $434.9

61.5% 10.6% 17.4% 494.5% 1.9% N/A 2.0% -8.5% -27.6% 10.2% 39.1% 3.8% 74.8% 8.8% 22.1% -1.0% 51.3% N/A N/A -21.5% -75.0% 77.7% N/A -37.4% 29.8% -44.2% 17.8% 11.6% 64.8% -26.3% N/A 124.6% -6.4% 24.6% 139.0% 48.8% -8.4% 30.7% 31.7% 22.6% -26.2% 103.6% 87.6% -19.2% 14.9% -268.4% 75.7% 17.6% 268.8% 13.2% N/A -358.6% 9.6% -19.6% 23.9% 7.6% -0.7% -0.2%

ica.com.mx grupoccr.com.br millicom.com avianca.com casasaba.com cnh.com suzano.com.br suzano.com.br ahmsa.com sanborns.com.mx sigma-alimentos.com coamo.com.br sodimac.cl telefonica.com.pe coelba.com.br weg.net/br molinos.com.arg ericsson.com movistar.com.ar mobil.com.co eln.gov.br nextel.com.br recope.go.cr xignux.com electrolux.com bavaria.com.co arcor.com.arg tractebelenergia.com.br comgas.com.br b2winc.com movistar.com.mex celesc.com.br panamericanenergy.com cielo.com.br terniumsiderar.com fcx.com cerrejoncoal.com chocolates.com.com entel.cl costco.com.mx ancap.com.uy gafisa.com.br randon-veiculos.com.br halliburton.com femsa.com.br bayer.com.br klabin.com.br ultragaz.com.br industriasch.com.mx e-arca.com.mx br.avon.com asa.gob.mx goodyear.com chilelectra.cl anglochile.cl kimberly-clark.com.mx carrefour.com.co nextel.com.mx

2011 2010 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232

156 200 155 207 161 -160 163 180 146 162 153 170 148 186 152 173 140 157 151 182 206 --177 145 172 181 165 169 166 171 141 -211 202 223 164 184 187 -205 250 168 -176 209 229 210 194 198 --174 201 190 195 193

LATIN TRADE JULY-AUGUST 2011

Latin 500 Rank

Company, Country

Sector

2010 Revenues

Annual % change

2010 Profits

Annual % change

Web site

F. Heringer, Brazil GBarbosa, Brazil Minas Pe帽oles, Mexico Electrolux, Brazil Ripley, Chile Const. OAS, Brazil Minerva, Brazil Telef贸nica, Colombia Elektro, Brazil Aut. Canal de Panama Anglo Am. Norte, Chile Ind. Bachoco, Mexico Nokia, Brazil CAP, Chile Grupo Simec, Mexico Brookfield, Brazil Praxair, USA Siemens Brasil Copasa, Brazil Drummond, Colombia Bunge Fertilizantes, Brazil Paranapanema, Brazil Grupo Clarin, Argentina Emb. Andina, Chile Hypermarcas, Brazil Ampla En., Brazil Vitro, Mexico Profarma, Brazil Minera Yanacocha, Peru VBC Energia, Brazil Grupo Isa, Colombia Sidgo Koppers, Chile SQM, Chile Movistar, Chile Grupo KUO, Mexico Olimpica, Colombia Grupo Abril, Brazil MRV, Brazil Entel PCS, Chile AES Gener, Chile CCU, Chile Marcopolo, Brazil Infraero, Brazil CESP, Brazil Mega, Mexico ENAMI, Chile Celpe, Brazil Schincariol, Brazil Fasa, Chile Corp. Fragua, Mexico Coelce, Brazil Adidas, Germany Du Pont Brasil Pacific Rubiales, Colombia CBA, Brazil ALL, Brazil Lojas Renner, Brazil Duratex, Brazil

Chemical Retail Mining Manuf. Retail Constr. Food Tech Tech Services Mining Food Tech Steel Steel Constr. Chemical Manuf. Water Mining Agri. Mining Media Beverage Manuf. Energy Manuf. Retail Mining Energy Energy Constr. Chemical Tech Manuf. Retail Media Constr. Tech Energy Beverage Manuf. Transport Energy Retail Mining Energy Beverage Health Retail Energy Manuf. Chemical Energy Steel Transport Retail Manuf.

$2,113.5 $2,101.3 $2,092.5 $2,091.9 $2,084.4 $2,068.6 $2,045.5 $2,035.0 $2,021.9 $2,014.8 $2,009.8 $2,001.3 $1,998.3 $1,993.6 $1,990.1 $1,971.0 $1,970.0 $1,957.8 $1,943.4 $1,942.0 $1,940.7 $1,915.7 $1,903.2 $1,898.9 $1,896.4 $1,893.4 $1,891.5 $1,880.2 $1,851.8 $1,845.1 $1,835.8 $1,833.8 $1,830.4 $1,824.5 $1,824.1 $1,823.2 $1,817.2 $1,813.1 $1,808.9 $1,802.0 $1,791.1 $1,779.2 $1,745.5 $1,743.7 $1,721.6 $1,721.1 $1,716.5 $1,713.4 $1,713.0 $1,712.8 $1,710.3 $1,705.1 $1,666.9 $1,661.5 $1,658.9 $1,652.6 $1,651.3 $1,645.5

15.3% 46.9% 50.3% 28.5% 19.0% 10.6% 36.9% 7.6% 32.2% 2.2% 71.0% 12.4% 4.6% 43.8% 35.2% 89.4% 19.8% 12.2% 3.5% 20.7% -36.1% 32.8% 9.1% 29.6% 63.0% 20.1% 3.0% 27.0% -10.9% 17.9% 12.2% 27.3% 27.4% 18.2% 22.7% 10.5% 18.7% 91.6% 22.6% 9.0% 17.0% 50.6% 23.3% 14.4% 6.3% 32.0% 19.5% 14.4% 4.4% 16.9% 39.1% 18.3% 20.5% 159.9% 20.8% 16.4% 21.6% 99.3%

$37.1 N/A $1,238.6 N/A $106.8 $30.0 $12.5 -$416.0 $270.3 $999.6 $550.5 $160.6 N/A $590.4 $73.2 $218.3 $454.0 $53.7 $402.0 $103.0 -$68.8 $28.5 $133.1 $221.4 $157.2 $129.7 -$111.3 $20.6 $591.2 $215.3 $179.7 $113.0 $382.1 $426.3 $41.0 $38.8 $98.5 $380.8 $265.3 $169.8 $236.5 $178.0 $18.3 $55.8 N/A $30.0 $269.0 $32.9 -$4.8 $59.2 $283.2 N/A $293.0 $216.3 $190.4 $147.6 $184.9 $265.3

8.5% N/A 64.1% N/A 727.5% -27.4% -66.8% 6.5% -3.1% -0.3% 84.3% 163.1% N/A 4,075.8% 396.0% 88.2% 29.7% 248.2% 33.2% 14.1% -157.3% -74.4% 75.7% 29.1% -12.7% 1.6% -84.8% -32.4% -17.1% -3.3% 15.3% 64.3% 16.8% 46.0% 7.3% 24.9% 11.8% 90.8% 6.6% -48.2% -6.3% 127.0% 52.4% -79.7% N/A -5.2% 7.6% -24.1% -139.9% 26.9% 47.5% N/A 18.8% 271.9% -43.1% 711.7% 69.8% 141.4%

heringer.com.br gbarbosa.com.br penoles.com.mx elextrolux.com.br ripley.cl oas.com minerva.ind.br telefonica.com.co elektro.com.br pancanal.com anglochile.cl bachoco.com.mx nokia.com.br cap.cl gsimec.com.mx br.brookfield.com praxair.com siemens.com/entry/br/pt/ copasa.com.br drummondco.com bunge.com.br paranapanema.com.br grupoclarin.com embotelladoraandina.com hypermarcas.com.br ampla.com vitro.com profarma.com.br yanacocha.com.pe camargocorrea.com.br isa.com.co sigdokoppers.cl sqm.com movistar.cl kuo.com.mx olimpica.com.co grupoabril.com.br mrv.com.br entel.cl gener.com ccu.cl marcopolo.com.br infraero.gov.br cesp.com.br gfmega.com enami.cl celpe.com.br schincariol.com.br fasa.cl fragua.com.mx coelce.com.br adidas.com dupont.com.br pacificrubiales.com aluminiocba.com.br all-logistica.com lojasrenner.com.br duratex.com.br

2011 2010 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290

197 -255 215 203 -234 189 231 183 282 199 188 256 239 305 --191 219 129 243 204 241 283 222 196 237 175 224 -248 246 226 232 --318 -212 227 280 251 233 217 265 247 -214 242 275 244 257 -269 249 261 348

LATIN TRADE JULY-AUGUST 2011

Latin 500 Rank

Company, Country

Sector

2010 Revenues

Annual % change

2010 Profits

Annual % change

Web site

Praxair, Brazil Liquig谩s Dist., Brazil Telef贸nica de Argentina Vale Fertilizantes, Brazil Chevron, Colombia Homex, Mexico Carvajal, Colombia Alunorte, Brazil Argos, Colombia Wembley, Brazil Redecard, Brazil Coteminas, Brazil Baker Hughes, USA Guararapes, Brazil General Motors, Colombia Corp. Geo, Mexico Lojas Riachuelo, Brazil Continental, USA Ford, Mexico Sears, Mexico Salfacorp, Chile Condumex, Mexico Banmedica, Chile Localiza, Brazil

Chemical Energy Tech Chemical Energy Constr. Print Aluminum Cement Textile Services Textile Energy Textile Auto Constr. Retail Transport Auto Retail Constr. Manuf. Health Transport

$1,639.0 $1,611.2 $1,606.7 $1,606.5 $1,598.3 $1,594.3 $1,592.9 $1,591.0 $1,579.5 $1,571.8 $1,571.4 $1,569.5 $1,569.0 $1,565.2 $1,558.4 $1,551.0 $1,542.8 $1,539.0 $1,537.0 $1,527.1 $1,513.6 $1,512.6 $1,509.9 $1,498.7

23.5% 11.1% 8.6% 13.7% 22.4% 19.2% 5.3% 0.7% -7.5% 2.6% 12.9% 2.5% 43.4% 24.8% 39.6% 14.4% 25.1% -16.2% 15.1% 14.3% 34.9% 43.7% 20.3% 43.3%

N/A $80.4 $101.7 $47.0 $90.0 $124.7 $7.6 $100.1 $150.9 $1.0 $840.2 $1.3 N/A $202.7 $79.1 $120.7 $89.0 N/A N/A N/A $47.3 $226.2 $94.6 $153.6

N/A 22.5% 3.1% 158.2% -3.1% 8.9% -26.4% -24.5% 45.4% -10.6% 4.9% -28.4% N/A 64.8% 350.6% 15.6% 357.7% N/A N/A N/A 227.4% 18.3% 70.4% 162.1%

praxair.com liquigas.com.br telefonica.com.ar fosfertil.com.br chevron.com homex.com.mx carvajal.com alunorte.net argos.com.co wembleysa.com.br services.redecard.com.br coteminas.com.br bakerhughes.com guararapes.ind.br chevrolet.com.co corporaciongeo.com riachuelo.com.br continental.com ford.com.mx sears.com.mx salfacorp.com condumex.com.mx banmedica.cl localiza.riweb.com.br

2011 2010 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314

--238 253 264 235 -221 208 --228 -270 327 240 -236 263 -292 254 268 303

Would you ever consider participating in a professional coaching relationship? Over 60 percent of people in Latin America would! Companies around the globe are achieving strategic business objectives through professional coaching. Documented return on investment includes: Improved Employee Retention, Increased Product Quality, Higher Employee Satisfaction, Leadership Development, Team Building and Conflict Reduction. See findings from the ICF Global Coaching Client Study and learn more about how professional coaching can assist your business at Coachfederation.org/value.

JULY-AUGUST 2011 LATIN TRADE

Latin 500 Rank

Company, Country

Sector

2010 Revenues

Annual % change

2010 Profits

Annual % change

Web site

Rossi Res., Brazil CTC, Chile Zaffari, Brazil CC Cimentos, Brazil UTE, Uruguay Prezunic Sup., Brazil M. Dias Branco, Brazil CPFL Piratininga, Brazil Codensa, Colombia Contax, Brazil Gasco, Chile Copa, Panama Galv達o Eng., Brazil Positivo Inf, Brazil Falabella Peru Springs, Brazil C.Vale, Brazil OHL Mexico Minera Candelaria, Chile Magnesita, Brazil CEG, Brazil Bandeirante Energia, Brazil Patagonia, Argentina CTEEP, Brazil Movistar, Peru Alpargatas, Brazil Alicorp, Peru Iochpe-Maxion, Brazil CELG, Brazil Dow Brasil, Brazil Goodyear, Brazil OHL Brasil Molymet, Chile CGE Dist., Chile Energisa, Brazil RGE, Brazil Empresas Navieras, Chile Celpa, Brazil Atento, Brazil Oxiteno, Brazil Editora Abril, Brazil Lojas Marisa, Brazil Noble, Brazil El Palacio de Hierro, Mx Porta, Ecuador Cencosud, Peru Julio Simoes, Brazil General Motors, Argentina Roche, Brazil Grupo Famsa, Mexico Pampa Energia, Argentina Desarr. Urbi, Mexico Drogasil, Brazil Barrick Misquichilca, Peru Minsur, Peru Ferromex, Mexico Cemat, Brazil Even, Brazil

Constr. Tech Retail Cement Energy Retail Food Energy Energy Tech Energy Transport Constr. Tech Retail Textile Agri. Transport Mining Mining Energy Energy Retail/Food Energy Tech Textile Food Manuf. Energy Chemical Manuf. Transport Chemical Energy Energy Energy Transport Energy Tech Energy Media Retail Agri. Retail Tech Retail Transport Auto Chemical Retail Energy Constr. Retail Mining Mining Transport Energy Constr.

$1,497.9 $1,496.4 $1,494.4 $1,485.1 $1,473.7 $1,469.8 $1,466.8 $1,462.3 $1,456.2 $1,439.2 $1,435.8 $1,411.1 $1,406.7 $1,397.0 $1,390.6 $1,389.5 $1,384.0 $1,377.2 $1,375.9 $1,366.2 $1,358.6 $1,355.9 $1,355.4 $1,354.2 $1,352.8 $1,343.9 $1,340.1 $1,336.8 $1,326.6 $1,323.3 $1,316.4 $1,311.1 $1,298.2 $1,293.4 $1,293.0 $1,275.5 $1,273.9 $1,266.9 $1,262.0 $1,250.2 $1,247.4 $1,245.8 $1,244.7 $1,234.5 $1,228.0 $1,220.6 $1,217.4 $1,215.0 $1,214.2 $1,214.0 $1,213.7 $1,210.6 $1,203.5 $1,200.0 $1,196.0 $1,194.4 $1,174.3 $1,173.9

65.9% 9.7% 23.3% 9.4% 9.5% 21.8% 8.8% 18.0% 6.2% 16.0% 61.3% 12.6% 14.1% 12.0% 20.6% 0.5% 21.7% 59.2% 28.4% 23.5% 32.6% 12.8% 23.6% 42.3% 9.6% 16.7% 4.4% 76.7% 11.8% 0.4% 42.3% 92.0% 40.8% 3.6% 28.2% 20.6% 38.9% 56.6% 21.6% 13.6% 12.0% 44.8% 73.5% 16.4% 11.1% 21.5% 43.4% 52.1% 34.2% 6.1% 13.5% 15.5% 21.8% -5.5% 83.9% 26.8% 49.9% 75.0%

$209.9 $223.9 N/A $135.9 $416.2 N/A $211.0 $181.1 $251.0 $65.1 $108.3 $212.1 $50.3 $53.5 $127.2 -$13.2 $21.3 $232.4 $542.2 $55.1 $138.1 $167.0 $29.2 $183.3 $251.4 $183.9 $103.2 $98.5 -$378.4 -$117.9 N/A $109.6 $91.7 $25.9 $116.8 $144.6 $43.8 -$60.5 $80.3 $82.3 $130.6 $125.2 $33.8 $71.4 $655.0 N/A $55.8 N/A $140.5 $65.1 -$11.6 $152.0 $53.4 $621.3 $376.4 $170.4 $11.2 $151.5

67.6% 160.9% N/A -56.2% 261.7% N/A 6.1% 71.3% 0.0% -19.0% 44.7% -11.8% -69.4% -21.5% 68.9% -159.0% 23.5% 150.7% 52.9% 423.0% 6.0% 3.9% 67.5% -61.5% 9.7% 137.6% 36.3% 211.1% -232.7% -281.1% N/A 8.2% 35.6% -65.3% -18.5% 54.1% 359.7% -186.5% 23.1% 110.3% 81.0% 55.0% 141.2% 45.1% 17.8% N/A 54.4% N/A 79.2% 773.9% -120.7% 29.5% 24.7% -0.7% 60.1% 72.9% -88.4% 112.0%

rossiresidencial.com.br telefonicachile.cl zaffari.com.br cec.com.br ute.com.uy prezunic.com.br mdiasbranco.com.br cpfl.com.br codensa.com.co contax.com.br gasco.cl copaair.com galvaoengenharia.com.br positivo.com.br falabella.com.pe springs.com cvale.com.br ohlmexico.com.mx fcx.com grupomagnesita.com.br porta.gasnatural.com bandeirante.com.br laanonima.com.ar cteep.com.br movistar.com.pe alpargatas.com.br alicorp.com.pe iochpe-maxion.com.br celg.com.br dow.com/brasil goodyear.com.br ohlbrasil.com.br molymet.cl cgedistribucion.cl energisa.com.br rge-rs.com.br empresasnavieras.com redenergia.com atento.com.br oxiteno.com.br abril.com.br marisa.com.br noblecorp.com elpalaciodehierro.com.mx porta.net ewong.com juliosimoeslogistica.com.br chevrolet.com.ar roche.com.tw/portal/roche-brazil/inicio grupofamsa.com pampaenergia.com urbi.com.mx drogasil.com.br barricksudamerica.com minsur.com.pe ferromex.com.mx gruporede.com.br even.com.br

2011 2010 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372

329 260 -230 --262 -259 273 331 271 290 272 286 258 --293 295 308 -297 317 274 287 266 363 301 192 -379 320 -310 -322 353 306 296 289 337 -302 285 312 339 --288 300 313 314 267 389 -359 383

LATIN TRADE JULY-AUGUST 2011

Latin 500 Rank

Company, Country

Sector

2010 Revenues

Annual % change

2010 Profits

Annual % change

Web site

Vulcabras, Brazil DMA Distribuidora, Brazil Grupo Continental, Mexico Dufry AG, Switzerland Movistar, Colombia La Polar, Chile Alcoa Alumínio, Brazil Electricaribe, Colombia Quattor Pet., Brazil Novartis, Brazil General Motors, Venezuela Minera El Abra, Chile Tupy, Brazil ECL, Chile AES Sul, Brazil Minera Zaldivar, Chile Superama, Mexico Claro, Peru Mastellone Hnos., Arg Metal Leve, Brazil Yara, Brazil CEEE, Brazil Equatorial, Brazil Raia, Brazil

Textile Retail Beverage Retail Tech Retail Aluminum Energy Chemical Chemical Auto Mining Manuf. Energy Energy Mining Retail Tech Retail Manuf. Chemical Energy Energy Retail

$1,172.2 $1,158.5 $1,157.7 $1,157.3 $1,157.1 $1,154.2 $1,151.1 $1,144.3 $1,136.0 $1,132.6 $1,130.0 $1,126.1 $1,123.2 $1,121.1 $1,119.9 $1,119.4 $1,119.1 $1,115.4 $1,108.6 $1,094.3 $1,091.4 $1,088.9 $1,079.6 $1,076.6

27.8% 12.3% 11.7% 33.3% 17.9% 32.8% 21.6% 13.8% 34.9% 12.5% -38.3% 22.9% 59.8% 14.7% 36.1% 41.7% 10.5% 20.7% 26.2% 23.8% -9.3% 17.1% -25.0% 22.2%

$72.6 N/A $129.9 N/A N/A $63.6 -$190.6 $59.5 -$3.8 $103.2 N/A $483.3 $92.7 $200.2 $119.6 $529.2 N/A $499.3 $34.6 $49.7 $552.8 -$126.5 $113.4 $1.0

-7.7% N/A -3.3% N/A N/A -29.5% -282.6% -9.0% -103.9% 987.6% N/A 2.8% 3.0% -22.7% 32.7% 88.2% N/A 51.9% 141.4% 61.4% 28,806.1% -111.6% -4.8% 4,440.6%

vulcabras.com.br grupodma.com.br contal.com dufry.com movistar.co lapolar.cl alcoa.com co.electricaribe.unionfenosa.com quattor.com.br novartis.com.br chevrolet.com.ve fcx.com/operations tupy.com.br e-cl.cl aessul.com.br barricksudamerica.com superama.com.mx claro.com.pe laserenisima.com.ar mahle.com.br yarabrasil.com.br ceee.com.br equatorialenergia.com.br drogaraia.com.br

2011 2010 373 374 375 376 377 378 379 380 381 382 383 384 385 386 387 388 389 390 391 392 393 394 395 396

323 -307 --336 --341 311 -324 372 315 -357 309 352 335 333 279 319 245 --

DARDEN Executive Education

YO U. DA R D E N. R E A DY. Prepare to succeed in any environment. Apply the latest concepts and strategies that can help transform you into the extraordinary leader your enterprise needs. www.darden.virginia.edu/exed

UPCOMING PROGRAMS True Leadership: Leading With Meaning—NEW! September 19–23, 2011

Growth Catalysts: The Right Leadership, Culture, and Processes September 25–30, 2011

Management Development Program: Driving Vision, Action, and Results October 3–14, 2011

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JULY-AUGUST 2011 LATIN TRADE

Latin 500 Rank

Company, Country

Sector

2010 Revenues

Annual % change

2010 Profits

Annual % change

Web site

Alkosto, Colombia Minera Valparaiso, Chile Aluar, Argentina Emerson, USA Ferreyros, Peru AES Tietê, Brazil Buenaventura, Peru UCP Backus, Peru Empresas Carozzi, Chile Ultrafertil, Brazil Colbún, Chile Masisa, Chile Eletronuclear, Brazil Americel, Brazil Albrás, Brazil Emgesa, Colombia M&G Polieste, Brazil Lojas Cem, Brazil Vitro Envases, Mexico Volcan, Peru 521 Part., Brazil Grendene, Brazil Maseca, Mexico CICSA, Mexico Sonda, Chile Itautec, Brazil Autometal, Brazil Saraiva, Brazil TV Azteca, Mexico Grana y Montero, Peru Kellogg, USA Grupo Gigante, Mexico Tiendas CM, Mexico Bio Pappel, Mexico Amazonas Energ., Brazil Escelsa, Brazil Dasa, Brazil Ind. Saltillo, Mexico Ericsson Telecom., Brazil Sanepar, Brazil Elecmetal, Chile Dixie Toga, Brazil Axtel, Mexico Ecorodovias, Brazil Superm. Peruanos, Peru Inepar, Brazil Tecnisa, Brazil Vitro Vidrio Plano, Mx Sodimac, Colombia Skanska, Sweden CIE, Mexico Interoceanica, Chile Sao Martinho, Brazil Gloria, Peru Suburbia, Mexico Cemar, Brazil Min. Cerro Colorado, Chile Concha y Toro, Chile

Retail Mining Manuf. Tech Retail Energy Mining Beverage Food Agri. Energy Manuf. Energy Tech Aluminum Energy Chemical Retail Manuf. Mining Energy Textile Food Constr. Tech Tech Auto Retail Media Constr. Food Retail Retail Paper Energy Energy Health Manuf. Tech Water Steel Manuf. Tech Transport Retail Constr. Constr. Manuf. Retail Auto Leisure Transport Agri. Food Retail Energy Mining Beverage

$1,076.4 $1,069.8 $1,065.4 $1,065.0 $1,058.0 $1,052.9 $1,047.9 $1,033.4 $1,031.0 $1,029.4 $1,024.2 $1,017.3 $1,003.5 $996.1 $992.0 $985.8 $984.4 $979.9 $977.0 $973.3 $973.3 $963.0 $962.7 $958.5 $951.9 $943.1 $942.1 $939.2 $935.6 $923.2 $923.0 $922.1 $920.3 $917.7 $912.2 $902.3 $901.4 $896.1 $890.4 $888.4 $878.0 $868.5 $862.5 $856.8 $856.6 $855.6 $849.4 $846.0 $844.8 $833.6 $825.4 $822.5 $822.1 $817.0 $815.5 $812.7 $809.7 $799.2

29.4% -11.1% 28.5% 6.1% 38.1% 9.8% 27.9% 13.3% 15.3% 20.3% -11.6% 11.3% 11.1% -29.6% 22.3% 3.3% 36.9% 40.4% 6.9% 46.9% -40.1% 15.2% 21.6% 2.8% 29.0% 24.0% 28.8% 30.5% 22.6% 98.7% -4.2% 28.6% 3.5% 16.6% -17.2% 14.4% 13.1% 48.4% 9.5% 11.3% 30.9% 28.9% 2.7% 48.8% 20.2% 24.4% 108.1% 0.8% 23.1% -0.5% 16.2% 34.6% 30.7% -7.4% 21.0% 23.3% 47.9% 14.6%

$40.1 $331.8 $163.7 N/A $49.7 $442.5 $727.4 $186.3 $60.9 -$28.5 $112.3 $72.4 -$80.9 $178.8 -$22.7 $298.8 -$2.2 $79.3 N/A $272.2 $205.9 $187.5 $70.3 $39.3 $71.7 $6.9 $82.4 $36.6 $187.7 $105.9 $153.0 $70.1 N/A $53.1 -$789.0 $107.2 $58.8 $26.9 -$4.2 $81.3 $142.2 $47.8 -$23.2 $354.3 $19.0 $26.5 $120.1 N/A $38.2 $41.7 -$13.5 $47.0 $86.6 $75.8 N/A $167.2 $230.2 $89.6

47.9% -15.8% 4,130.7% N/A 43.2% -1.2% 10.8% 10.7% 42.5% 61.5% -52.1% 86.9% -164.5% -9.6% -128.4% 12.2% -61.0% 74.5% N/A 59.9% -25.5% 19.9% 4.2% -27.3% 15.3% -76.5% 30.3% 20.3% 75.1% 101.8% -14.5% 12.7% N/A -56.3% -509.5% 50.3% 22.1% -175.3% 50.8% 2.7% 309.8% 60.5% -271.6% 220.6% 41.1% -11.4% 89.1% N/A 73.9% 20.9% 78.2% 212.9% 43.0% 26.8% N/A 46.9% 68.8% 2.9%

alkosto.com.co minera.cl aluar.com.ar emerson.com ferreyros.com.pe aestiete.com.br buenaventura.com backus.com.pe carozzi.cl valefertilizantes.com colbun.cl masisa.com eletronuclear.gov.br americamovil.com albras.net emgesa.com.co rhodia-ster.com.br lojascem.com.br vitro.com volcan.com.pe N.A. grendene.com.br gimsa.com ccicsa.com.mx sonda.cl itautec.com.br autometal.com.br livrariasaraiva.com.br tvazteca.com gym.com.pe kelloggs.com gigante.com.mx comerica.com.mx biopappel.com amazonasenergia.gov.br edpescelsa.com.br diagnosticosdaamerica.com.br gis.com.mx ericsson.com sanepar.com.br elecmetal.cl dixietoga.com.br axtel.mx ecorodovias.com.br supermercadosperuanos.com.pe inepar.com.br tecnisa.com.br vitro.com sodimac.com skanska.com cie-mexico.com.mx ccni.cl saomartinho.ind.br grupogloria.com suburbia.com.mx cemar-ma.com.br bhpbilliton.com conchaytoro.cm

2011 2010 397 398 399 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 435 436 437 438 439 440 441 442 443 444 445 446 447 448 449 450 451 452 453 454

346 -347 -361 316 349 326 330 -284 325 328 252 351 -369 375 321 384 216 345 356 298 365 299 -368 362 438 -366 332 ---355 403 350 354 382 381 343 405 371 376 457 340 378 344 367 401 395 334 380 385 -374

LATIN TRADE JULY-AUGUST 2011

Latin 500 Rank

Company, Country

Sector

2010 Revenues

Annual % change

2010 Profits

Annual % change

Web site

Holcim Brasil Farm. Benavides, Mexico Promigas, Colombia Tenda, Brazil Diebold, USA ETB, Colombia Isagen, Colombia Aché, Brazil Minera El Tesoro, Chile Alsea, Mexico Emelsa, Chile AG Concessoes, Brazil Herdez, Mexico Dimed, Brazil Grupo Lamosa, Mexico Aguas Andinas, Chile Tegma, Brazil GEUSA, Mexico Shougang Hierro, Peru Aceros Arequipa, Peru Enersul, Brazil Cosern, Brazil Votorantim Metais Niquel Totvs, Brazil

Cement Health Energy Constr. Tech Tech Energy Pharm. Mining Food Energy Transport Food Retail Manuf. Water Transport Beverage Mining Steel Energy Energy Mining Tech

$792.3 $780.6 $774.8 $772.5 $770.7 $766.5 $765.6 $759.8 $737.5 $728.4 $723.0 $721.0 $718.3 $714.6 $710.0 $702.9 $700.5 $696.6 $696.3 $695.2 $694.4 $690.7 $689.9 $677.9

22.1% 1.5% 16.5% 36.1% 27.9% 7.8% 9.7% 10.6% 51.9% 10.8% -2.1% -40.4% 13.6% 15.8% 15.4% 8.9% 14.0% 7.4% 125.2% 20.8% 29.9% 40.6% 80.7% 19.4%

$55.8 $7.0 $138.5 $74.3 N/A $63.6 $214.1 $199.5 $213.3 $12.2 $29.1 $399.6 $64.0 $18.5 $40.7 $221.9 $67.4 -$2.0 $292.0 $53.6 $51.2 $152.2 -$31.2 $82.7

-38.1% -25.9% 36.8% 100.7% N/A -36.7% 12.2% 26.2% 51.7% 54.2% -31.0% 93.9% 12.1% 8.3% 68.5% -8.6% 53.4% -113.2% 456.1% -515.6% 13.4% 34.4% -483.8% 19.8%

holcim.com.br benavides.com.mx promigas.com tenda.com diebold.com etb.com.co isagen.com.co ache.com.br tesoro.cl alsea.com.mx emelsa.com andradegutierrez.com.br grupoherdez.com.mx dimed.com.br lamosa.com aguasandinas.cl tegma.com.br geusa.com.mx shougang.com.pe acerosarequipa.com redenergia.com cosern.com.br vmetais.com.br totvs.com

2011 2010 455 456 457 458 459 460 461 462 463 464 465 466 467 468 469 470 471 472 473 474 475 476 477 478

390 360 ---304 281 377 433 386 -277 394 399 400 392 388 391 -408 -432 -410

CLUB LOUNGE

Starwood announced recently that its global powerhouse, Sheraton Hotels, and its owners have MRZIWXIH QSVI XLER QMPPMSR MRXS YTKVEHMRK 'PYF 0SYRKIW EVSYRH XLI [SVPH MRGPYHMRK ¾EKWLMT properties throughout Latin America in such key cities as Mexico City, Panama, Bogota, Lima, Santiago, Buenos Aires, Montevideo, Sao Paulo and Rio. The enhancement to Sheraton Club Lounges — one of the most popular Sheraton signature amenities — is the latest phase of the brand’s recent $6 billion revitalization effort. Sheraton Club Lounges brand-wide will be open seven days a week in response to increased demand from premium corporate and leisure guests. The Club Floors are highly sought after by corporate travelers seeking additional personalized services and attention. Club guests also have special access to the Club Lounge which offers complimentary breakfast, snacks, evening hors d’oeuvres and a variety of beverage options. Sheraton is Starwood’s largest brand in Latin America with over 28 hotels in 10 countries. www.starwoodhotels.com

JULY-AUGUST 2011 LATIN TRADE

Latin 500 Rank

Company, Country

Sector

2010 Revenues

2011 2010 479 480 481 482 483 484 485 486 487 488 489 490 491 492 493 494 495 496 497 498 499 500

Annual % change

2010 Profits

Annual % change

Web site

447 T. Quebrada Blanca, Chile Mining $676.9 55.6% $259.3 81.1% qblanca.cl 412 Ledesma, Argentina Agri. $660.4 20.2% $48.6 93.1% ledesma.com.ar 446 Battistella, Brazil Retail $658.6 50.5% -$2.0 91.4% battistella.com.br 398 Clariant, Brazil Tech $655.3 6.0% $46.9 1.2% atam.clariant.com -Productos Familia, Colombia Personal care $653.7 15.0% $32.9 11.2% grupo.familia.com.co -CPFL Geracao, Brazil Energy $650.1 29.1% $139.6 -28.1% cpfl.com.br -EAAB, Colombia Water $647.2 7.9% $107.9 -11.0% acueducto.com.co 435 Ideias Net, Brazil Tech $645.8 35.2% -$18.9 28.8% ideasnet.com.br 413 Saga Falabella, Peru Retail $643.8 17.1% $52.4 70.7% falabella.com.pe 421 TIVIT, Brazil Tech $641.8 21.4% $37.5 -4.4% tivit.com.br 455 Eletrosul, Brazil Energy $640.4 16.5% $40.5 -67.1% eletrosul.com.br 373 Cem. Chihuahua, Mexico Cement $631.0 -3.2% $3.2 -88.9% gcc.com 419 Embonor, Chile Beverage $629.0 17.7% $92.7 16.7% embonor.cl 428 Watts, Chile Food $624.6 24.0% $34.3 27.9% wattschile.com 418 Solvay Indupa, Argentina Chemical $618.7 14.5% -$20.0 58.3% solvayindupa.com 406 Cementos Bío Bío, Chile Cement $618.1 7.5% $10.8 34.9% cbb.cl -CCDI, Brazil Constr. $617.5 109.1% $85.9 158.0% ccdia.org 452 Corp. San Luis, Mexico Manuf. $617.1 47.7% $27.9 196.4% sanluisrassini.com 402 Solla, Colombia Food $611.1 0.0% $16.1 19.5% solla.com 404 Estacio, Brazil Education $609.9 5.3% $48.4 31.1% estacio.br 456 Cia. Hering, Brazil Textile $608.3 46.9% $127.2 93.4% ciahering.com.br 422 Megacable, Mexico Tech $608.2 15.3% $149.7 -1.5% megacable.com.mx Total $2,235,854 21.5% $222,472 37.3% NOTES: 1 Revenues don’t include Mexico. 2 For the fiscal year ending on March 31, 2011. 3 Former D&S. 4 Former Nacional de Chocolates. Sources: Economatica, individual companies. © Copyright Latin Trade Group

-VSSV^ \Z VU #FOMLA11

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LATIN TRADE JULY-AUGUST 2011

Organized by

LATIN TRADE SYMPOSIUM 2011 LATIN AMERICA ON THE GLOBAL STAGE: COMPETITIVENESS FROM THE GRASSROOTS UP Celso Amorim, Former Foreign Minister of Brazil

Pilar Nores de García, President, Work and Family Institute and Former First Lady of Peru

Álvaro Uribe, Former President of Colombia

Luciano Coutinho, President, BNDES

Song Dongsheng, Executive Vice President, Sinohydro Corporation Luis Alberto Moreno, President, IDB

The premier meeting of top CEOs, ﬁnanciers, leaders and social entrepreneurs in the Americas. Using Corporate Social Responsibility, Sustainability and Innovation Keeping Pace in the Global Race Asian and Latin American Connections Sustainable Communities Energy and Natural Resources

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COUNTRY REPORT

Chile: Star With Challenges Long the darling of foreign investors in Latin America, Chile has excellent growth prospects but also some important challenges, particularly as regards the supply and cost of energy. BY RUTH BRADLEY

LATIN TRADE JULY-AUGUST 2011

But, in a promise for future growth, investment rose 18.8 percent last year and, according to the Central Bank, will increase a further 13.9 percent this year, to about 30 percent of GDP. Seeking to boost this trend, the Piñera administration also has announced a series of measures to make life easier for businesses, particularly small and mid-sized enterprises (SMEs) and start-ups. According to the World Bank Group’s Doing Business 2011 survey, it takes 22 days to start a business in Chile, as compared with just six days in the United States, and the government’s aim is to reduce that to just one or two days. A new law, implemented in January to simplify local government and tax formalities, was a first step in this direction, and other promised measures would speed up export and import operations. But that is merely housekeeping, critics argue, pointing out that these measures build on the foundations laid over the previous 20 years by four consecutive governments of the center-left Concertación coalition, which largely maintained the free-market model introduced by the 1973-1990 dictatorship of General Augusto Pinochet and introduced the countercyclical fiscal policy that underpins Chile’s now-traditional prudent

macroeconomic management. But policy stability across governments is precisely one of the things that investors most like about Chile. “I envy Chile for Piñera but also for [his predecessors] Lagos and Bachelet,” says Argentine entrepreneur Wenceslao Casares. After founding and selling the Patagon financial services portal in the 1990s, Casares has made a number of investments in Chile. “It’s a country where you feel you can do things,” he says. SOLID FOUNDATIONS Policy stability in Chile was key for a public works concessions program in which, over the past 20 years, private companies, mostly from abroad, have invested about $11.5 billion, dramatically improving the country’s highways and airports. These are projects in which investors recover their outlays over periods of up to 30 years, making confidence in policy stability across administrations of different colors crucial, points out Luis Miguel de Pablo Ruiz, general manager in Chile for the concessions branch of Spain’s OHL construction group. “As a public-private partnership, the concessions system has been an extraordinary

SANTIAGO — Sebastián Piñera, Chile’s president since March 2010 and a former businessman, doesn’t like to let grass grow under his feet. And that is what he believes Chile had been doing before he was elected. “Chile was sleeping a siesta,” he says. After the country’s rapid expansion in the 1990s, economic growth cooled, and his campaign promise was to change that, delivering average annual growth of 6 percent over his fouryear term and leaving Chile poised to achieve developed-country status by 2018. And, so far so good. Recovering rapidly from the impact of the international recession and the earthquake of February 2010 in central-southern Chile, economic growth reached 5.2 percent last year — behind Brazil, Argentina and Mexico, but still one of the highest rates in the region — and, according to the International Monetary Fund (IMF), it will accelerate to almost 6 percent this year. That is partly a rebound — in 2009, GDP contracted 1.7 percent — and, with the monetary-policy interest rate rising but only now approaching a neutral level, consumer spending is booming. Combined with higher inflation and an economy back at full capacity, that has raised some concern about possible overheating.

Chileâ&#x20AC;&#x2122;s COUNTRY mining REPORT: sector alone MEXICO has attracted one third of foreign direct investment since 1974. Here miners for state-owned Codelco bring heavy equipment into an underground tunnel.

JULY-AUGUST 2011 LATIN TRADE

“Our investments in Chile have exceeded our expectations,” says Charlie Sartain, CEO of Xstrata Copper, a subsidiary of a Swiss mining group.

success,” he says. The experience of OHL, a partner in three of Chile’s main highways, has shown that “effectively, these infrastructure plans have transcended governments … and we intend to continue being an important player in the sector,” he reports. For a small country, Chile has, indeed, been very successful in attracting foreign direct investment (FDI). In 2009, FDI in Chile proved relatively resilient to the international crisis, and, in 2010, at $15.1 billion, it was the third-highest in Latin America, after Brazil and Mexico, according to the UN Economic Commission for Latin America and the Caribbean. “It’s a safe haven,” says Matías Mori, executive vice president of the Chilean government’s Foreign Investment Committee. For foreign investors, a key ingredient of the security Chile offers is the Foreign Investment Statute — commonly referred to as DL 600 — introduced in 1974 when, soon after its military coup, it was considered a high-risk country. Under DL 600, foreign investors sign a contract with the state of Chile that, among other guarantees, gives them an important degree of tax stability. It also helps that Chile has the world’s largest copper reserves. Since 1974, the mining sector has accounted for a third of total FDI in Chile.

LATIN TRADE JULY-AUGUST 2011

One of the more recent arrivals is the Switzerland-based Xstrata mining group. Its copper unit opened a business-development office in Santiago in 2005 and has since invested a total of $8 billion, mostly through its acquisition in 2006 of Falconbridge, whose assets in Chile included the Lomas Bayas mine and a 44 percent stake in the Collahuasi mine. “Our investments in Chile have exceeded our expectations,” says Charlie Sartain, CEO of Xstrata Copper. He expects that, over the next six years, it will commit a further $5 billion to Chile — or a quarter of its investment globally — mostly to the expansion of Collahuasi and Lomas Bayas. The mining industry wasn’t pleased last year when, despite the guarantees afforded by DL 600, the government increased a royalty tax as part of a package of measures to finance earthquake reconstruction. According to Sartain, confidence in legal security has, however, been restored. “We understood the increase as a one-off and have received a range of assurances from the government on that score,” he says. A SMALL COUNTRY For businesses, Chile does, however, have an important drawback. With a population of just 17 million — as compared with, for

example, Brazil’s 195 million, Colombia’s 46 million or Peru’s 29 million — it is a very small country. That explains why many of Chile’s companies, such as its retailers and LAN Airlines, have sought to expand regionally. Being small can be turned to an advantage, as the Foreign Investment Committee is attempting to do in its efforts to attract more investors from Asia. Just as Singapore serves as a steppingstone into Asia, Chile, with its stability and growth but also manageable size, is a good place for Asian companies to start in Latin America, suggests Mori. But it also deprives exporters of the advantage of a strong country brand name. “Chile has prestige internationally among decision-makers, but the average consumer knows little about it,” says Rafael Guilisasti, vice president of Concha y Toro, Chile’s largest winery. Last year’s mine accident, in which 33 miners were trapped for more than two months before being rescued, helped there. “It created a level of emotional contact that Chile had previously found difficult to establish,” says Guilisasti. Being a small country also means a constant risk of being overtaken by larger competitors. According to entrepreneur Casares, that is the case of Chile’s growing venture-capital industry. After its rapid growth in the past 10 years, there is now more venture capital in Chile than in the rest of Latin America combined, including Brazil, he says, and it has the potential to become a Latin American VC center. “But only if it keeps up its progress; otherwise, it will be overtaken by Brazil, with its larger market,” he warns. One problem for start-ups is having to fish in a small talent pool. Casares says that, in his experience, it can take six months to find the right person. At Concha y Toro, Guilisasti also reports a growing scarcity of both manual labor and the more-skilled workers that the wine industry increasingly requires as its mechanization increases. “Wages have risen, but, especially in rural areas, it can still be difficult to hire,” he says. With Chile’s unemployment running at

LUIS HIDALGO PARRA FOR LATIN TRADE

COUNTRY REPORT: CHILE

7.0 percent in April, down from 8.6 percent a year earlier, full employment is rapidly approaching. The challenge, says Guilisasti, is to incorporate more young people, among whom unemployment remains worryingly high, and women into the labor force. In line with a common call among businesspeople, he urges a reform of labor regulation. Protection is important, he says, but the law could be more flexible on matters such as shifts and part-time work which, he points out, is virtually non-existent in Chile. One of Chile’s strengths is its pool of mining expertise, counters Xstrata Copper’s Sartain, and a scarcity of labor is a problem also seen in other countries. “But, over the last couple of years, we’ve seen pressure on costs and availability, and it is an issue that could potentially restrict Chile’s growth,” he says. PRODUCTIVITY CHALLENGES According to Guilisasti, Chile’s challenges going forward can be summed up in one word: productivity. In the 1990s, it increased rapidly, boosted by structural reforms, but then stabilized and, between 2006 and 2009, actually slipped slightly. There is controversy about the reasons, with some people suggesting cyclical factors and others blaming an energy shortage triggered in 2004 when Argentina began to restrict its natural-gas exports. But reversing declining productivity has become more urgent because of the impact of currency

appreciation on the competitiveness of the exports that accounted for a high 35 percent of Chile’s GDP in 2010. The consolation, says Guilisasti, is that other southern hemisphere wine-exporting countries also have the same problem. Still, Chilean wine producers have been forced to increase their prices without knowing what that will do to demand. There also is broad consensus that the peso is unlikely to weaken as long as interest rates remain low in industrialized countries. In January, the Central Bank announced plans to acquire international reserves for $12 billion over the course of this year, and the government has made a small reduction in planned fiscal spending, but the exchange rate is, nonetheless, running at 465 pesos to the dollar, as compared with close to 550 pesos to the dollar in mid-2010. According to Guilisasti, Chile also needs to do better on R&D and innovation, which, over the past decade, different governments have sought to boost, but to little effect. The Piñera administration is looking at introducing more-flexible tax incentives for private R&D, but, in its recent acquisition of the California-based Fetzer Vineyards, Concha y Toro was seeking not only to increase its foothold in domestic wine sales in the United States, but also to learn from its culture of innovation, says Guilisasti. Energy supply and prices — twice as high as in neighboring countries and 50 percent higher than in industrialized countries, ac-

The Macro Numbers GDP and inﬂation in Chile

GDP

Inﬂation

cording to the government — are, however, the paramount concern for the competitiveness of Chilean businesses. “Energy availability is one of the critical potential constraints, not just for the mining industry but also for the Chilean economy generally,” says Sartain. “There are few other countries where energy is such a critical issue.” For the mining industry, that is also related to increasingly scarce water supply in northern Chile’s Atacama Desert, where most mines are located. As a result, the trend is for new projects to include sea-water desalination plants, but such plants are heavy on energy consumption. Local companies tend to blame slow environmental approval processes for delays in bringing new power plants on line, an area in which Xstrata Copper, with its proposed Energía Austral hydroelectric project, has experience. According to Sartain, a thorough review process ultimately benefits a project’s legitimacy, but the efficiency of the process could be improved. As recent protests against the proposed HidroAysén dams in Chilean Patagonia have shown, the future shape of Chile’s electricity matrix is a highly controversial issue. There also is public opposition to coal-fired plants, which have provided the bulk of recent new capacity, on the grounds of their emissions, and rejection of nuclear power, always a remote prospect, has soared in the wake of the Fukushima disaster in Japan. But that pending debate is, as Mining and Energy Minister Laurence Golborne has recently recognized, about more than energy supply. With important implications for the country’s businesses, it also is about where to strike a balance between the negative externalities of economic growth and its benefits. And, in a particular concern for the country’s exporters, it also is about the extent to which Chile, the most recent member of the Organization for Economic Development and Cooperation, can comply with international standards and consumer demands in areas such as greenhouse gas emissions when, after all, the country still has a per-capita income of only $12,000. editorial@latintrade.com

Sources: International Monetary Fund, Latin Business Chronicle

LATIN TRADE JULY-AUGUST 2011

COUNTRY REPORT: CHILE

Chilean Champion • Infrastructure level: Transport, technology penetration, access to water and quality of electricity supply. • Political environment: political freedom, political stability, political outlook, judicial independence, business policies of government, transparency and intellectual property rights. What sets Chile apart from all other Latin American nations is its superior corporate environment. Chile scores a whopping 7.02 points in that category, far outpacing the next best performers in corporate environment: Mexico (6.35) and Colombia (5.33). Chile has by far the best tax environment, the best labor environment, best access to capital for entrepreneurs and most economic freedom. But it ranks fourth in ease of doing business, including opening and closing a business, trailing Mexico, Peru and Colombia in that component of the corporate category. At 17 percent, Chile’s corporate tax rate is the second-lowest in Latin America (only Paraguay has a lower rate). Chile also boasts the lowest tax rate as a percent of proﬁts, and the number of tax payments and hours needed to comply with tax regulations are among the lowest in Latin America. Chile’s labor environment outperforms its neighbors, thanks to such factors as having no restrictions on night and holiday work, that it doesn’t pay premiums for such work and that it has one of the lowest-paid annual leaves, according to World Bank data. Chile has no minimum wage for an apprentice and has the region’s second-lowest severance pay for redundancy dismissal (12 weeks of salary), although regular

President Sebastián Piñera shows off a special jersey he received from Chilean professional soccer players, a gift that is just as apt for Chile as a country.

LATIN TRADE JULY-AUGUST 2011

dismissals cost more. Along with El Salvador, Chile receives the best marks from executives in Latin America when it comes to ﬂexibility of wage determination, and the country has the lowest “brain drain,” according to an executive opinion survey from the Swiss-based World Economic Forum. When it comes to technology, Chile can boast Latin America’s highest penetration of PCs and broadband Internet, according to the Latin Technology Index from Latin Business Chronicle. Chile also outperforms in its political environment. It is the least corrupt country in Latin America, according to German watchdog Transparency International. Meanwhile, Chile ranks as the freest economy in Latin America, according to the Heritage Foundation, and it is among the three freest countries in terms of civil rights and political liberties, according to Freedom House. Chile’s intellectual property rights are the best in Latin America and stronger than countries such as Spain and South Korea, according to the Intellectual Property Rights Index from the Property Rights Alliance.

Fast Facts Population: GDP: GDP per capita: GDP growth: Inﬂation: FDI: Exports: Imports:

17.1 million $203.3 billion $15,002 5.3% 1.5% $15.0 billion $71.0 billion $55.2 billion

Note: All ﬁgures for 2010. GDP per capita is based on purchasing power parity (PPP). Sources: International Monetary Fund, Central Bank of Chile, ECLAC, Population Reference Bureau, Latin Business Chronicle

PHOTO: PRESIDENCIA DE LA REPÚBLICA / ALEX IBAÑEZ

Although Brazil is the investor favorite in Latin America, Chile remains the country with the best business environment, according to the 2011 Latin Business Index from Latin Business Chronicle. The index broadly measures the climate for business in 18 countries in Latin America. It focuses on ﬁve categories, using a methodology revised from 2010. The categories and their components are: • Macro environment: Percent GDP growth in 2009, 2010, estimated 2011 and forecast 2012, and percent inﬂation for those years. • Corporate environment: taxes, labor environment, access to capital for entrepreneurs, ease of doing business and economic freedom. • Globalization and competitiveness: globalization, competitiveness, tariffs and security.

S PECIA L A D V ERTISIN G FEATU R E

IHG Eyes Growth in Latin America Hotel group continues to expand its portfolio in key cities within the region

Latin America becomes an important player in the world stage, InterContinental Hotels Group (IHG), the world’s largest hotel group by number of rooms, continues to expand its presence in the region while strengthening its position as a hotel leader.

With 77 hotels in 20 countries and territories, IHG’s portfolio continues to grow in nearly every key market throughout Latin America and the Caribbean. In Argentina, the InterContinental Nordelta Tigre - Buenos Aires Hotel, Residences & Spa recently opened its doors. Located in the exclusive community of Nordelta, the hotel is surrounded by restaurants, shops, a sports club and a world-class golf course. Guests can also enjoy a variety of watersports at the Lago Central, a marina with direct access to the Rio Lujan. Early this year, IHG celebrated the successful opening of the Holiday Inn San Jose Escazu in Costa Rica, which is its 23rd property in Central America.Two Holiday Inn properties are also in the process of opening in Colombia.The Holiday Inn Bogota-Airport, which opened early July, in the country’s capital and the Holiday Inn Cartagena Morros, which is slated to open in August, in charming Cartagena will increase IHG’s portfolio in Colombia to seven hotels and 1,665 rooms. Additionally, three Holiday Inn and Holiday Inn Express hotels are slated to open throughout the year in other key cities of South America, including Belém, Buenos Aires and Maceio.

InterContinental Santiago

InterContinental Nordelta Tigre - Buenos Aires Hotel, Residences & Spa

Holiday Inn San Jose Escazu

Besides a strong portfolio, IHG’s success in the region is also based on its brands global appeal, uncompromising standards and unmatched level of experience. Striving to cater to the needs of today’s travelers, the InterContinental Santiago in Chile recently unveiled its new Club InterContinental tower. The 16-story addition features 20 meeting rooms totaling 27,200 square feet of function space, making it one of the largest convention centers in the country. The hotel also boasts a 17,000 square foot green living wall in the west façade of the building, providing a beautiful visual statement to passersby. In Brazil, the InterContinental São Paulo concluded the initial phase of a multi-phase renovation of the property, with the lobby, restaurant and half of its guest rooms now completed. The face lift is part of a plan to fully renovate the 20-story hotel, which is currently celebrating its 15th anniversary. IHG, a leading international hotel company, has been serving Latin America and the Caribbean for 65 years with friendly service, exceptional value, and fabulous locations. For reservations and more information on IHG hotels, visit www.ihg.com.

InterContinental São Paulo

New hotel construction in Rio de Janeiro is concentrated in Barra da Tijuca, a southern district that is often compared to Miami for its high-rise luxury condominiums, shopping malls and long beach.

LATIN TRADE JULY-AUGUST 2011

INDUSTRY REPORT

ROOM TO

GROW Brazil may be attracting the lion’s share of new hotel activity, but leading brands, investors and operators are expanding in key cities across the region. BY TAYLOR BARNES PHOTO BY FELLIPE ABREU RIO DE JANEIRO – Pecking on a Blackberry during the Rio Investors Day conference at the beachside Copacabana Palace Hotel, New York financial mediarelations adviser Liz Cohen laughs when asked about her lodging options. “If one conference fills the hotel and doubles the prices of nearby ones, it means something,” Cohen says. When reserving for the event earlier this year, Cohen was limited to the most exclusive suites at the Copacabana Palace. She booked a room at another property. Visitors like Cohen are transforming the Rio hotel market. In a city known for sun and samba, business trips account for an estimated 50 percent of hotel stays — and half of the business visitors are from São Paulo. These travelers lend further support to expansion of the hospitality sector in Rio, which is preparing for two major sporting events. “The focus is on South America” for Latin American hotel investment and activity overall, says Scott Berman, principal and U.S. industry leader, hospitality & leisure, at PwC US, the assurance, tax and advisory services firm. “Eighty percent, maybe even more, is in Brazil, in advance of the World Cup [in 2014] and the Olympics [in 2016].” For the hospitality industry in Rio, the stakes are high.

“We understand that [these events] are a lever so that we can put Rio de Janeiro in the worldwide tourism scene in a more consistent way,” says Pedro de Lamare, president of SindRio, a syndicate of hotel, bars and restaurants. Tourism already has been on the rise, a trend de Lamare attributes in part to recent anti-crime initiatives by the city and state governments. “Security really affected this sector,” he acknowledges. He adds that the government’s “Choque de Ordem” program, which focuses on keeping beaches clean and regulating street vendors, has helped, too. Rio welcomed 1.6 million international visitors last year, according to government agency Riotur, which expects 2.3 million people by 2020, an increase of 50 percent. To stimulate hotel development, the Rio city government in December sanctioned a generous package of incentives that opened some residential areas, offered tax breaks for converting residential buildings and, in areas such as Copacabana, eased zoning restrictions. Rio already has about 25,000 hotel rooms that meet International Olympic Committee standards. The IOC requires that the host city have 28,000 rooms in place for the games, which begin August 5, 2016. By 2015, the hotel sector expects to have 34,000 rooms ready, according to SindRio.

But in less than two years, in June 2014, soccer fans will descend on Brazil for the FIFA World Cup, whose 32 matches will be played in 12 cities, including Rio, which also will host the international broadcast center. “My impression is that Rio will neither lack nor have excess hotels,” says Antônio Ruótolo, a real estate analyst with market research firm IBOPE Inteligência in São Paulo. “The hotel market is balanced and is going to stay balanced.” Securing a local partner has long been a big challenge for foreign hotel brands in Brazil, says PwC’s Berman, but it’s essential. “It’s hard if you are sitting in New York, London or Dubai without a stakeholder on the ground watching out for your investment,” he says. A number of recent deals suggest an evolution in Brazil on that point. And he sees potential in the mid-range segment, given the fragmented nature of the lodgings market. “Brazil is full of limited service one-star hotels and luxury and upscale hotels, which are concentrated in São Paulo and Rio,” Berman says. “There’s very little in the middle.” Some 17 new hotel projects in Rio have been approved by authorities; eight of them are under construction. France’s Accor, the leading international chain in Brazil, plans to add six more hotels

JULY-AUGUST 2011 LATIN TRADE

INDUSTRY REPORT: HOSPITALITY in Rio, where it currently has 10, from the luxury Sofitel to the budget ibis. The local Windsor chain, with 10 properties in Rio only, intends to open three more, says SindRio. Windsor also is investing in renovations: The upgraded Atlantica Windsor in Copacabana reopened in December, and, in April, the Windsor Miramar, also in Copacabana, closed for a two-year overhaul. Brazil Hospitality Group (BHG), which operates the Golden Tulip brand in South America, bought the Hotel InterContinental in São Conrado and plans to invest 25 million reais (nearly $16 million) to renovate the 418-room property and reflag it as a Royal Tulip. New hotel construction in Rio is concentrated in Barra da Tijuca, a heavily residential area often compared to Miami. The city’s first Hyatt, a 408-room Grand Hyatt Rio de Janeiro, is among the various projects there. But hotel industry representatives question the potential of Barra, given the lack of metro access. A trip to Copacabana by taxi can encounter delays in heavy traffic. However, soaring real estate prices are making construction increasingly difficult in popular districts such as Ipanema and Leblon, says Alexandre Sampaio, president of the Federação Brasileira de Hospedagem e Alimentação (Brazilian Federation of Hospitality and Food). He is optimistic that Rio will soon see improvements — and hotels — in its decrepit port zone, an area close to many downtown businesses that has been targeted for revitalization by the municipal government. “In a city where it’s difficult to build, everyone wants to build,” Sampaio says. Otavio Barros, president of a residents association in a favela in the Alto da Boa Vista, says his community has gotten informal warnings that developers are eyeing the land on which their unofficial homes sit. Areas around Rio have been targeted for redevelopment related to infrastructure improvements and urban renewal. PERU REDEFINED As in Brazil, tourism continues to propel Peru’s rapidly-growing hotel industry, and the country’s economic growth in recent years has created a robust market for business travel.

LATIN TRADE JULY-AUGUST 2011

Investments geared to lure both sets of travelers are on the rise in Lima — most notably, the $130 million Westin Lima Hotel & Convention Center. The May opening of this five-star luxury hotel in the heart of the San Isidro business district was an important milestone for Starwood Hotels & Resorts Worldwide, the owner of the Westin brand, Peru’s Libertador group, the city and the hotel industry at large. Libertador, owned by the Brescia conglomerate, had previously partnered with Starwood on two luxury resort properties. “The introduction of hotels like the Westin helps raise the bar for the quality of hotel offerings and therefore the prices of rooms and the type of visitors,” says Jorge Melero, CEO of Libertador Hotels, Resorts & Spas. “It helps attract visitors with higher purchasing power and companies looking to organize conventions and other large international events.” The 301-room Westin is the chain’s first in South America. It is not only the city’s tallest building, at 30 floors, but the modern tower also houses the largest meeting and convention facilities in Peru and a restaurant headed by a renowned Peruvian chef, Rafael Piqueras, among other amenities. “The next hotel that enters the market is going to have to make a substantial investment, as our numbers are very hard to replicate,” Melero proclaims. “We have set off a revolution in Lima’s hotel sector.” The inauguration of high-end hotels like the Westin is an important first step to redefining Lima for business and leisure travel, says Joelma Galdós, co-general manager of Continental Travel, one of Peru’s largest travel agencies. “A modern city needs to lodge its visitors and also offer them facilities to carry out conferences, conventions and other large events. Travelers consistently demand better hotel services,” she says. Owners and operators are responding. Casa Andina, a leading national chain, has unveiled plans for the business-oriented Casa Andina Select. The first will open in Lima in November, according to Juan Stoessel, general manager of Casa Andina. Stoessel says that efforts to tap the business traveler are in part related to the restrictions that the Cultural Ministry has placed on daily visitors to Machu Picchu, rules that effectively cap tourism spending around

the popular historic site. “This has created a bottleneck in the leisure travel segment,” Stoessel explains. “On the other hand, corporate tourism is growing impressively, at about 15 percent year-over-year.” The business travel segment already generates 30 percent of Casa Andina’s total sales, he says. “Clearly, the demand for four- and fivestar hotels in Lima is on the rise. Peru is ‘in’; more and more people are coming here to conduct business or attend some regional event,” says Oscar Caipo, head of KPMG’s office in Peru and head of the firm’s advisory practice for Latin America. Caipo travels twice a month on average and welcomes foreign visitors about 20 times a year. “Although hotel options in Lima are increasing, if you compare Lima with other large cities in the region, we still have a long way to go,” he says. Travel agency professional Galdos concurs. “Available choices for the corporate traveler are still insufficient — demand continues to be greater than supply,” she says. More projects are in the pipeline, such as a Hilton Hotels & Resorts that is due to open next year in Miraflores, where Hilton already has a Doubletree. The hotel and tourism consulting group HVS calculates that Lima had fewer than 1,000 luxury and upscale hotel rooms at the end of 2010. The number of high-end rooms should double by 2014, bringing the Peruvian capital on par with cities such as Santiago and Bogota, according to HVS data. MEXICO ENDURES Nothing appears to keep the business hotel market down in Mexico. Not the global recession of 2009, nor the H1N1 flu epidemic of the same year, nor the negative publicity generated by drug trafficking violence far from business centers. “The impact of the violence has been only to shorten the stays of foreign business travelers,” says Roberto Zapata, chairman and chief executive of Hoteles Misión. “They are visiting Mexico just as frequently, but for less time.” Hoteles Misión has 35 hotels in Mexico, plus one in the United States. Zapata is preparing to open a hotel in Apodaca, the town closest to the international airport in greater

INDUSTRY REPORT: HOSPITALITY Monterrey, Mexico’s third-largest metro area and its leading industrial city. The resilience of the growth in hotels for the business traveler in Mexico is not hard to explain, says Richard J. Katzman, managing director of HVS in Mexico City: “Years of sound financial management, a growing middle class and [location] right next to the U.S. market.” A wave of development of Class A office space and high-end hotels in Mexico City tracked confidence in sustained foreign direct investment., which hit a near peak of $27 billion in 2007, then fell sharply in 2008 and 2009. FDI began to rebound last year, rising 16 percent to $17.7 billion. Government and independent analysts are predicting that FDI will reach $20 billion in 2011. Beyond the influx of new and renovated properties in the capital, the emergence of industrial and commercial centers in smaller cities has been important for the hotel industry, Katzman says. “Many of these places had no hotels that offered modern facilities for the business traveler,” he says. Unable to support a five-star property, Mexico’s secondary markets represent firstrate opportunities for mid-scale and limitedservice brands. “We saw a niche,” says Blanca Herrera, director of franchise services at City Express, a national chain. “You could find independent hotels at 500 pesos [just over $40] a night, and the business-class ones were charging about 1,100 pesos.” When the chain launched nearly a decade ago, the market was wide open, says Misión’s Zapata. “City Express has set the pace in the affordable segment of the individual business traveler, as distinct from conventions and the like,” he says. The chain today has 55 hotels nationwide and has diversified its portfolio to include City Junior, where prices are as low as $40 a night. City Junior attracts a significant proportion of the national business travel market, Herrera says. City Suites is a more upscale option of furnished apartments. Herrera says City Express keeps a close watch on the competition, which has been heating up. In 2010, IHG alone opened three new properties: the Holiday Inn Poza Rica Aeropuerto, in the state of Veracruz, and

both a Crowne Plaza and a Staybridge Suites in the bustling manufacturing city of Queretero, in central Mexico. Marriott is expanding its limited-service Courtyard brand. Projects include a 292room Courtyard Mexico City Airport that is due to open in early 2012. And more high-end hotels are coming. Starwood will open the Westin Guadalajara in October and its second W hotel in Mexico City next year. PANAMA TRANSFORMED Cranes are stacking floor after floor on the residential, office and hotel towers that continue to transform Panama City’s skyline. Boosted by the $5.25-billion expansion of the Panama Canal, foreign direct investment and government infrastructure spending, Panama’s economy expanded at 7.5 percent last year — a rate government and independent economists expect the country to maintain in the coming years — and one that has attracted significant investments in the hospitality sector. Based on projects under construction, the

Panamanian Hotel Association expects the country to end 2012 with 28,000 available rooms, an increase of 60 percent compared with 2009, with much of the expansion coming in the bustling capital. Some hotel industry executives wonder if the market has expanded too quickly, especially given a tight labor market and limitations on bringing in more visitors. Occupancy rates are currently at about 70 percent, up 5 percent so far in 2011, says association president Sara Pardo, who also is general manager of Le Méridien Panama, the 111-room luxury boutique hotel that debuted in late 2009. Association statistics showed that national occupancy rate growth had been flat the two previous years, reflecting the economic downturn and the increase in supply, Pardo says. The supply will keep expanding, with about 4,900 new rooms in 2011 alone. Mega-projects include the Hard Rock Hotel Panama Megapolis, a 66-floor tower that will boast 1,499 rooms, a spa, eight restaurants and bars when it opens by year-end. A casino is nearby.

TOP HOTEL CHAINS IN LATIN AMERICA RANK LATAM

RANK GLOBAL

HOTEL CHAIN

TOTAL ROOMS IN LATIN AMERICA

INTERCONTINENTAL HOTELS GROUP

31,7821

ACCOR HOSPITALITY

28,6345

SOL MELIÁ

22,0008,E

MARRIOTT INTERNATIONAL

17,0002, E

RIU HOTELS & RESORTS

14,6539

BARCELÓ HOTELS & RESORTS

14,353

WYNDHAM HOTEL GROUP

14,2003

STARWOOD HOTELS & RESORTS

12,7536

HILTON WORLDWIDE

9,1594

CARLSON HOTELS WORLDWIDE

6,9567

NOTAS: Ranked by total number of rooms in 2010. 1 Includes InterContinental, Crowne Plaza, Holiday Inn, Holiday InnExpress,HolidayInnClubVacat ons, Hotel Indigo, Staybridge Suites and CandlewoodSuites. 2 Includes Ritz-Carlton, Marriott, Renaissance, Courtyard, Fairﬁeld Inn, SpringHill Suite Residence Inn,TownePlace Suites and Marriott Executive Apartments. 3 Includes Wyndham, Ramada, Days Inn, Super 8, Wingate, Baymont Inn, Hawthorn, TRYP by Wyndham, Howard Johnson, Travelodge and Knights Inn. 4 Includes Waldorf Astoria, Conrad, Hilton, Doubletree, Embassy Suites, Hilton Garden Inn, Hampton, Homewood Suites and Hilton Grand Vacations. 5 Includes Soﬁtel, Pullman, Mgallery, Novotel, Mercure, Ibis, Formule1 and Coralia. 6 Includes Sheraton, Westin, Four Points, St. Regis, Luxury Collection, Le Méridien and W. 7 Includes Radisson, Country Inns & Suites, Park Inn and Park Plaza. 8 Includes Meliá, Paradisus Resorts, Me and Gran Meliá. 9 Includes ClubHotel Riu and Hotel Riu. E = Estimate Sources: Company reports, Latin Trade

JULY-AUGUST 2011 LATIN TRADE

Hard Rock executives are bullish. “Panama is the crown jewel of Central America,” Michael Shindler, executive vice president of hotels and casinos, says of Hard Rock’s inaugural hotel venture in Latin America. “There is an economic engine in Panama that doesn’t really exist in the rest of Central America at this moment.” Compared with other Latin American cities, Panama is principally a leisure market and one that still has potential for hoteliers, says Berman of PwC. “Panama seems to have absorbed [the rooms] it has,” he says. “It’s all about controlling development costs, which appear to be on the rise compared to four to five years ago.” In addition to competition for customers, hotel operators face the challenge of finding trained, English-speaking staff — the type of workers coveted by other sectors of the booming local economy. Once fully operational, the Hard Rock might need more than 2,000 employees. “The big players enter the market this

year, and this is where we’re going to see if we have to take other alternatives” to find skilled labor, Pardo says. “But, definitely, every day it is harder for us to find qualified bilingual people to work in hotels.” Another big player is the Trump Ocean Club International Hotel and Tower, a $400 million luxury development that has designated more than one-third of its 1,000 apartments as condo-hotel units. Doubts persist that all the buyers will close on the tower’s pricey units, payments the developer, Newland International Properties, needs to meet debt obligations, as noted by Fitch Ratings. Trump Ocean Club expects to close the sale of about 70 percent of the units, says Mark Stevenson, vice president and managing director. Stevenson says he has been surprised to find enough skilled people — including housekeepers conversant in English — in spite of bleak warnings. He credits the Trump name and brand to attracting staff.

The Trump Ocean Club International Hotel is one of the newest high-rise projects that have transformed the Panama City skyline and are fueling dramatic increases in the supply of hotel rooms.

But others foresee an increasingly tight and expensive labor market. “They will be able to find [employees], but they will have to pay them higher wages, which many of these hotels might not be able to (handle) because of the cost structure,” posits David Saied, an independent economist in Panama. “There is a shortage of people with hotel skills and even a larger shortage of people that speak English.” Current tourism programs are not entirely in English, an issue that needs addressing, Saied says. Another hurdle to filling thousands more hotel rooms is limited airline capacity. “Let’s say I want to bring 100 (people) on a tour — I cannot bring them through Copa,” says Saied, referring to the dominant carrier Copa Airlines. “I have to charter a plane.” Copa has positioned Panama as a regional hub, and its flights typically are packed with travelers en route to other destinations, he says. “The airlines do not have excess capacity.” Panama lags its regional neighbors on chartered flights, agrees Pardo of Le Méridien Panama. But she hopes that the expansion of the international airport and a government campaign to promote international tourism will attract more charter services. Tourism authorities are planning an airport in central Panama for charters to deliver tourists quickly to Pacific beaches. Panama also needs to entice visitors to extend their stays, Pardo says. She cites the Biomuseo, the new museum devoted to biodiversity designed by renowned architect Frank Gehry, as a high-potential attraction. Positioning Panama as a destination for conventions could generate another boost, she says. “Definitely, the coming years are going to be difficult unless we can take advantage of something new or have a new product that can increase volume,” Pardo says. “It’s a concerning situation.” With reporting by Lisa K. Wing in Lima, Ronald Buchanan in Mexico City, Sean Mattson in Panama City and Mary Sutter in Miami. editorial@latintrade.com

LATIN TRADE JULY-AUGUST 2011

PHOTO COURTESY OF TRUMP ORGANIZATION

INDUSTRY REPORT: HOSPITALITY

SPECIAL REPORT

OUTSOURCING 2.0 From the early days of call centers, outsourcing in Latin America has grown to include a broad range of business processing and IT services. Providers are thriving, thanks to a trio of trends: global integration of the industry, the increased popularity of near-shoring and robust demand from in-region customers. BY MARY SUTTER AND ADAM WILLIAMS

SAN JOSE, Costa Rica — From headquarters in the United States, Convergys runs a sprawling global operation of 70,000 employees in 68 call centers and other offices. Last October, the company opened its second center in Heredia, Costa Rica, outside the capital of San José. “Our clients value the high quality of bilingual attention that is offered by Costa Rica,” says Christine Timmins, senior vice president at Convergys. “The ability of our Costa Rican operations to meet this demand is precisely why we have expanded our growth here.” As of mid-2011, Convergys had increased staffing in Costa Rica from 1,200 employees at the end of last year to 1,900 and is looking to hire another 150 workers. Convergys is not alone in its expansion. Pacific West Site Services, which launched in Costa Rica in 2000 to provide maintenance, janitorial and other facilities-related services, inaugurated a shared-services center in San Jose in December that handles business processes, such as accounting, as well as technology services. Costa Rica has successfully carved out a niche in the outsourcing industry, largely based on these centers staffed by educated, bilingual locals. The Costa Rican Investment Promotion Agency estimates that call centers

LATIN TRADE JULY-AUGUST 2011

account for 40 percent of all jobs created by foreign direct investment. Costa Rica, ranked 19th on the 2011 A.T. Kearney Global Services Location Index, is one of just nine Latin American and Caribbean nations to make the consulting firm’s list of the top 50 markets worldwide. A.T. Kearney scores and ranks the countries on the basis of financial attractiveness, people skills and availability, and the business environment. “There is such a great value for human resources in Costa Rica, as well as such a strong commitment to the development of software and technologies,” says Pilar Portela, corporate manager of development for Pacific West, an affiliate of California-based SBM Site Services. Despite impressive growth in Costa Rica, Panama and the Dominican Republic, activity in Brazil, Mexico and Argentina overshadow levels in the smaller countries, particularly in the higher-value IT service sector. Uruguay’s position is disproportionate to its size, and Colombia is quickly emerging as another important center. A.T. Kearney expects Latin America to grow in importance. Although India and China led the firm’s latest ranking, Mexico led Latin America, at No. 6. A.T. Kearney attributes Mexico’s strong international

showing to a “decline in wages over the past year, the increased attractiveness of nearshoring and a well-developed talent pool.” On the index, Chile slipped from No. 8 to No. 10; Brazil held steady at No. 12 for a second consecutive year. “Ten to 15 years ago, India had 70 percent of the outsourcing market,” says Philip Peters, CEO of Zagada Markets, a specialist in analyzing the industry. “Today, India’s global share is about 44 percent. India is still growing, but, at the same time, the size of the pie has grown.” Clients from the United States and the United Kingdom drive demand — about 90 percent for outsourcing services worldwide, according to Peters. A shift to near-shoring has favored service providers in Latin America, Peters and other experts say. Companies that contract services to nearby countries do not have to travel as far to review, update or adjust systems. At the same time, the labor market for customer centers in countries such as the Philippines has gotten tighter and more expensive, especially for the Americasoriented night shifts, so offices in Latin America can be more competitive. “It’s the physical proximity to the biggest market, the United States,” says

SPECIAL REPORT: OUTSOURCING

COURTESY OF CONVERGYS

President Laura Chinchilla of Costa Rica greets Convergys employees at an event celebrating the opening of the American company’s second call center in the country.

Fabrizio Opertti, a trade and investment lead specialist at the Inter-American Development Bank, of the near-shoring trend. Beyond time zones and pricing is “the cultural affinity of Latin America with U.S. culture. … English is widely spoken with a neutral accent,” Opertti says. Plus, “one of the biggest Spanish-speaking markets in the world is the United States.” Countries such as Argentina and Uruguay also have a strong affinity with Europe, he notes. “They are serving Europe not just in Spanish but in Italian, German, French and other languages.” GLOBAL PLAYERS But business-process outsourcing (BPO) encompasses much more than call centers, industry experts and executives emphasize. It can include data entry, document filing and storage, accounting and more. Hewlett-Packard has set up its own BPO center in Medellin, Colombia, to handle internal back-office needs worldwide, Opertti says. The investments by companies such as HP highlight the fact that the wholly-owned

operations of multinationals and other big firms represent the largest contingent of service providers in Latin America, Opertti says. Global outsourcing specialists such as Infosys, Accenture and Tata Consulting Services all have offices and operations in Latin America. And over the last three years or so, Peters, of Zagada Markets, has observed major investments by private equity and outside firms in IT services as well as consolidation among smaller providers of business-processing services. Private equity firm Apax Partners last year agreed to pay about $1 billion for Tivit, a Brazilian IT outsourcing company. Capgemini, the European consulting and outsourcing giant, announced in September that it would acquire a 55 percent stake in Brazil’s CPM Braxis for 517 million reais (about $300 million). The investments reflect opportunities both near and far, industry executives say. Latin America is increasingly consuming services, not just providing them, says Blanca Treviño, CEO of Sofftek, which was founded in Monterrey, Mexico, in 1982 and today has offices on four continents.

“We now see companies in Latin America using services delivered from India or China, or anywhere else in the world. I guess that’s globalization working in every aspect of the industry,” Treviño says. And for that reason, she dismisses regional comparisons. “It’s not a matter of Latin America or India or China — it’s a matter of India and Mexico and Colombia and Brazil … each bringing unique ingredients for a more flavorful buffet,” Treviño says. Latin America cannot compete, on a volume basis, on projects that require hundreds of dedicated workers, maintains Claudio Muruzábal, CEO of Neoris, the IT consulting and services provider spun off from Mexican industrial conglomerate Cemex a decade ago. The company recently obtained global service partner status with business software developer SAP. Neoris promotes its ability to execute sophisticated, valueadded service that demands close collaboration with the customer — an area where Muruzábal says the company has an edge. “More advanced clients want the best talent at the best price,” he says.

JULY-AUGUST 2011 LATIN TRADE

L AT I N A M E R I C A N C I T I E S C O N F E R E N C E S Americas Society and Council of the Americas in partnership with Apex-Brasil

Brazil on the

Global Stage Tuesday, August 9, 2011 WTC Convention Center S達o Paulo, Brazil

Please visit us at:

www.as-coa.org/Brazil2011 for the agenda, bilingual coverage, webcast, and more. Follow us: @ASCOA #ASCOA_BR and facebook.com/ASCOA Event Information: Please contact Sophia Costa at scosta@as-coa.org or +1 212 277 8369 Corporate Sponsorship: Please contact Ana Gilligan at agilligan@as-coa.org or +1 212 277 8364 Registration: 8:30 a.m. to 9:00 a.m. Presentation: 9:00 a.m. to 1:30 p.m.

Press Inquiries: Please contact Alex Andrews at aandrews@as-coa.org or +1 212 277 8384

PAN-REGIONAL SPONSORS:

WITH THE SUPPORT OF:

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IN-REGION DEMAND Strong economic growth is fueling in-region demand for the IT providers, executives say. â&#x20AC;&#x153;We are experiencing double-digit growth in all our markets, including Mexico,â&#x20AC;? says MuruzĂĄbal. Softtekâ&#x20AC;&#x2122;s TreviĂąo says Mexico is growing for her company but that the supply of outsourcing capabilities is outpacing domestic demand, so it can be leveraged for export. â&#x20AC;&#x153;The largest IT service market in the world is still the United States, and the outsourcing segment in the United States is growing at a very attractive rate,â&#x20AC;? she says.

The financial services industry is the biggest client base for Softtek, which also is experiencing growing demand from retail, software and high-tech companies, TreviĂąo says. â&#x20AC;&#x153;The consumer product segment is an honorable mention.â&#x20AC;? Tata Consulting Services reports that its growth opportunities are concentrated in Mexico and Brazil and, among the smaller countries, Colombia and Peru. â&#x20AC;&#x153;The primary reason for this is that lots of local players in the region are expanding their global footprint, which in turn obliges them to increase their IT spend,â&#x20AC;? says Ankur Prakash, vice president and COO of Latin America for Tata. â&#x20AC;&#x153;In the same way, lots of global players

HOW CITIES RANK BY AGGREGATE SCORE

LOCATION

COST SCORE

TALENT SCORE

AGGREGATE SCORE

SANTO DOMINGO, DR

300

485

785

SANTIAGO, DR

400

380

780

BUENOS AIRES, ARG.

360

390

750

RIO DE JANEIRO, BRAZIL

260

470

735

KINGSTON, JAMAICA

270

460

730

LIMA, PERU

490

220

710

CORDOBA, ARGENTINA

450

250

700

SĂ&#x192;O PAULO, BRAZIL

190

490

680

GUATEMALA CITY, GUAT.

230

440

670

BOGOTA, COLOMBIA

310

350

660

BY COST

LOCATION

COST SCORE

AREQUIPA, PERU

495

LIMA, PERU

490

TUCUMAN, ARGENTINA

480

BELO HORIZONTE, BRAZIL

470

ROSARIO, ARGENTINA

460

BY TALENT

LOCATION

TALENT SCORE

MEXICO CITY, MEXICO

495

SĂ&#x192;O PAULO, BRAZIL

490

SANTO DOMINGO, DR

485

RIO DE JANEIRO, BRAZIL

470

KINGSTON, JAMAICA

460

Source: Zagada Institute Nearshore City Location Ranking Q1 2011

Coaching helps bottom line

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JULY-AUGUST 2011 LATIN TRADE

SPECIAL REPORT: OUTSOURCING

Uruguay: Dynamic Offshore Center Uruguay has been actively promoting its service sector, touting a superior business environment, resources, transparency and security versus other Latin American nations. “Despite being a small country, Uruguay has higher level human resources compared to the other countries in the region,” which supports IT, business processing and knowledge processing service centers, says Roberto Villamil, executive director of Uruguay XXI, the investments and exports promotion agency. A large percentage of the population speaks at least one foreign language, a plethora of free-trade zones and technology parks, and favorable investment, tax and legal — as well as immigration — regulations are among the factors that bolster Uruguay’s competitive position, he says. The Inter-American Development Bank estimates that the value of Uruguay’s offshoring services has reached about $1.5 billion, including free trade zones, or nearly 45 percent of total services exports. Offshoring is one of Uruguay’s most dynamic sectors, says Fabrizio Opertti, trade and investment lead specialist at the IDB. “Uruguayan exports of business, professional, and technical services grew at an annualized rate of 31 percent from 2004 to 2008, higher than any other country in Latin America” based on United Nations data. Villamil highlights the country’s software industry as a particular strength. Indeed, “on a per capita basis, [Uruguay] exports more computer and information services than much larger countries,” notes the IDB’s Opertti. But Uruguay is aiming for a larger role not just in offshoring but as a location for regional offices and research centers. Case in point is Sabre Holdings, which consolidated some operations in 2004 at a new global customer service center in Montevideo. Sabre operates the consumer website Travelocity but its main software and systems customers are travel agents, airlines, hotels and cruise operators. A multilingual populace was a big draw but the skilled talent pool has allowed Sabre to incorporate higher-level positions, says Jean Shaw, director of the Sabre Global Customer Service Center, which serves 59 countries in 10 languages. “We have 940 employees in 120 different jobs,” she says. The location also brought the company closer to an important customer base. “We have a 53 percent market share in Latin America,” Shaw says. “This solidified our footprint.” —Mary Sutter have a significant presence in these countries because of the huge volume this market represents, which also allows the service providers to bring in their global competence and customize it to the local requirements,” Prakash adds. Brazil’s booming economy has created huge opportunities in the domestic market for outsourcing providers, experts and industry executives say. Within the space of a few years, a Brazilian company may have gone from $300 million in revenue to $5 billion, Neoris’ Muruzábal says. “But it still has the infrastructure of a small company.” When announcing its purchase of CPM Braxis, Capgemini estimated that

LATIN TRADE JULY-AUGUST 2011

the annual growth rate of the Brazilian IT services market would exceed 10 percent through 2104. For Sofftek, Brazil is its second-biggest market, after the United States, Treviño says. WORKERS WANTED Like many other sectors in fast-growing Brazil, the outsourcing providers are struggling to find the type of educated specialists they need, a problem not limited to one country. “The IT industry on a global basis is facing a talent crunch,” says Muruzábal of Neoris. The outsourcing industry — both IT

and business processing — ultimately depends on people. “The challenge [in Latin America] is in human capital — to keep working on the supply,” says Opertti of the IDB. The bank is working on strategies for different countries so they can capture more outsourcing business, he says. Part of that is looking at ways to adapt practices from other regions. India is home to what Opertti characterizes as “finishing schools,” where graduates with technical degrees are given practical job training. The Philippines has similar programs for potential workers that often are publicprivate partnerships with educational institutions, he says. “We [in Latin America] need to promote the value of IT education,” Muruzábal says. Neoris’ own efforts include programs that target students who are still in high school. The company also looks to open centers in cities that are close to universities so it can attract more talent. These locations often offer a lower cost of living for employees who also might be reluctant to relocate, Muruzábal notes. Witness one of the region’s most vibrant centers for IT — Rosario in Argentina, which is home to a number of public and private universities and institutes. Neoris operates a center there, as does Argentina’s Globant, among others. However important technical education may be, Latin America must not overlook the competitive advantage of English, says Peters. India might graduate 1 million engineers every year, but “70 percent of them are not functional in English,” he says. “Speaking English is a huge economic weapon,” Peters says. “I am not sure that Latin American governments understand … but it is borne out in increased salaries.” English certainly is part of Costa Rica’s long-term strategy. The country already boasts Latin America’s highest literacy rate, at about 96 percent, and President Laura Chinchilla has set an ambitious goal: that 100 percent of high school graduates are proficient in English by 2017. Williams reported from San José and Sutter from Miami. editorial@latintrade.com

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LT CFO EVENTS SÃO PAULO

PHOTO: NEWTON MEDEIROS

The

long-term outlook for Brazil is solid and strong, according to participants at the LT CFO event held April 19 in São Paulo, despite concerns about inflation and an overvalued currency. The post-crisis environment has been good to Brazilian companies, which are increasingly looking abroad. After Brazil’s gross domestic product grew 7.6 percent last year, J.P. Morgan estimates that the rate will slow to less than 4 percent in 2011. “Slowing to 3.8 percent growth will not be a dramatic deceleration,” said Fábio Akira, executive director and chief economist at J.P. Morgan Brazil, who noted that the rate is more consistent with Brazil’s growth potential without inflation. “On the contrary, corporate and consumer confidence will remain very high if this forecast is maintained.” Brazil continues to benefit from abundant natural resources, which are in high demand and command high prices, and the country has enjoyed a smooth political transition, Akira said. One of the biggest challenges facing President Dilma Rousseff is inflation, which is close to the central bank’s limit of 6.5 percent, he said. “Inflation in emerging markets is a demand-related problem and requires an adjustment in fiscal policies, and this is what we are seeing,” Akira said. “Brazil is now testing new tools to contain high inflation and avoid higher interest rates, but

across the emerging markets you are seeing governments trying to reduce inflationary pressures.” Some of the strategy is untested and perhaps risky, Akira said. However, he said he believes Rousseff will be pragmatic in her approach. Although economic circumstances in the United States and Europe — and, to a temporary effect, the disaster in Japan — have been drags on Brazil, the more negative consequence of the international economic environment is the overvalued real, driven in part by interest rate disparities, Akira said. Despite the Brazilian government’s efforts to wage a “currency war,” the long-term solution lies in an increase in interest rates in the United States, he said. “The problem of foreign exchange hurting some local manufacturing industries will not be resolved very quickly,” Akira said. Rogério Menezes, CFO at AkzoNobel Pulp & Paper Chemicals, and Luis Emilio Fortou, Business Leader with Visa’s Global Commercial expansion team, discussed techniques to control costs in manufacturing and in other sectors. The times demand thorough analysis, said Menezes, whose company developed software internally to do so. “Close the gaps, monitor your costs, identify all opportunities to reduce them,” he said. “The full command of all cost drivers makes the difference.” Fortou, of Visa, said many companies focused more closely on costs during the

economic crisis. He described how Visa’s technological solutions had helped clients understand and reduce costs. “During hard times is when we see how this system, how technology starts to help,” he said. With the country having recovered from the recession, many Brazilian companies are beginning to internationalize, and they have resources they can tap to do so. Apex Brazil, the Brazilian trade and investment promotion agency, works closely with Brazilian companies to help them extend their reach abroad, said Gutemberg Uchôa de Araújo, investment promotion general manager. The Brazilian development bank BNDES further supports international expansion by providing lines of credit, said Denise Rodrigues, advisor to the bank’s president. The program, aimed at promoting internationalization, has been in place since 2002. The idea is to “stimulate the spread and the strengthening of national capital in the international market,” she said. “We are working with a lot of companies but looking for more suppliers and more clients. We also have links with financial organizations outside Brazil, so we have trusted links to help look for external markets.” Most large Brazilian companies receive funding from BNDES for domestic and international operations, but the bank is seeking to help small and medium-size businesses as well, Rodrigues said.

— Vincent Bevins

JULY-AUGUST 2011 LATIN TRADE

LT CFO EVENTS SÃO PAULO 1

3 6

1. Gutemberg Uchôa de Araújo, Investment Promotion General Manager, Apex Brasil. 2. Denise Rodrigues, Senior Advisor to the President, Brazilian National Development Bank (BNDES). 3. Luciana Furtado, Vice President, Corporate Bank, J.P. Morgan; Paulo Giacomini, Executive Director — Treasury Services Advisory LATAM, J.P. Morgan; Jose Eduardo Boe, Treasury Manager Americas, Akzo Nobel Pulp and Paper Chemicals Brazil. 4. Fabio Akira, Executive Director and Chief Economist, J.P. Morgan. 5. William Calvache, CFO, Sun Chemical Latin America; Angela Nano, Product Manager, Visa; Emilio Fortou, Business Leader Global Commercial Expansion Team, Visa; Rogério Menezes, Finance Director, AkzoNobel. 6. Carsten Isensee, Vice President of Finance and Corporate Strategy, Volkswagen Brasil. 7. Mark Ludwig, Contributing Editor, Latin Trade Group. 8. Marcio Garotti, Finance Director, Newell Rubbermaid; William Calvache, Sun Chemical. 9. Latin Trade CFO Roundtable. 10. Sandro Freitas, CFO, Discovery; Peter Plöger, Finance Director, Boehringer Ingelheim do Brasil Quimica e Farmaceutica Ltda; Valeria Café, Vice President, Marketing, Communications & Corporate Responsibility, J. P. Morgan.

LATIN LATIN TRADE TRADEJULY-AUGUST JULY-AUGUST 20112011

PHOTOS: NEWTON MEDEIROS

SPECIAL ADVERTISING FEATURE

The Growing Need for Global Payment Solutions BY DIEGO RODRÍGUEZ

he Latin America and Caribbean region (LAC) is playing an increasingly important role in the global economy, thanks to the greater strength of its domestic markets, higher global demand for commodities, and a growing suite of countries ranked as investment grade, in conjunction with low interest rates and a higher appetite for risk in the world’s developed economies. In 2010, LAC became the destination that experienced the fastest growth in foreign direct investment (FDI) both in and out of the region, according to a United Nations report. This underscores the region’s growth potential and also solidifies the globalization trend our regional companies are experiencing. It is clear that our regional multinationals are increasingly becoming key players on the global stage.

Visa is committed to providing global payment products and services that deliver immediate financial results and provide the foundation for long-term sustainable growth. This business environment intensifies chief financial officers’ (CFOs) needs for global payment services and solutions that increase visibility, improve control and free up resources that can be reinvested in the business while minimizing risk exposure, providing a solid foundation for strategic growth. On a tactical level, many CFOs are giving their companies a competitive edge by implementing sophisticated tools to handle accounts payable and accounts receivable processes, while gaining better global visibility into these transactions. However, Visa’s 2010 Global Cash Management study indicates that a majority of large companies continue to use inefficient payment methods, such as checks, including 77 percent of Mexican companies and 60 percent of Brazilian companies. At the same time, Latin American banks are also moving forward in providing the right package of financial services for their corporate customers. Traditional services, such as local cash management and credit lines are expected. To-

day, companies are looking for banking partners who can help them grow internationally by offering local payments in multiple currencies, supply chain payment automation and financing services, international collection services and integrated treasury management operations. Recent studies show that 68 percent of companies surveyed in Brazil and 47 percent in Mexico plan to make significant changes in their financial services providers in the next 12-18 months. Many of those companies are also planning to make changes in their cash management practices. For example, about one-third of companies surveyed plan to migrate at least 40 percent of their check payments to commercial cards in the next year and a half. For Latin American banks Visa offers a complete suite of global payment solutions that allow them to speed up timeto-market and minimize up-front investments while satisfying their corporate customers’ needs to improve cash flow management and reduce processing costs. These products range from the traditional Visa Corporate, Purchasing and Fleet cards to more sophisticated industry-specific products, such as Visa Agro and Visa Cargo for B2B payments in the agribusiness and transportation segments respectively. On the supply chain side Syncada by Visa offers a global invoice processing, payment and supply chain financing solution. Visa also offers globally centralized, cloud-based solutions, such as IntelliLink Spend Management, and consulting and analytics tools that deliver immediate financial results and provide the foundation for long-term sustainable growth.

Diego Rodríguez is Head of Commercial Solutions for Visa Inc. Latin America Caribbean

LT CFO EVENTS MEXICO CITY

Emilio Fortou, Business Leader Global Commercial Expansion Team, Visa; Jane Bussey, Editorial Director, Latin Trade Group; CFO of the Year — Mexico honoree Carlos García Moreno, CFO, América Móvil S.A.; Mike McKenzie, Managing Director, Head of Treasury & Securities Services for Latin America, J.P. Morgan.

The

fundamentals of the Mexican economy are strong, but the country is contending with the impact of uncertainties elsewhere in the world, according to Luis Téllez, chairman and CEO of the Bolsa Mexicana de Valores. Téllez offered that assessment in his opening remarks to the LT CFO event in Mexico City on June 16. “The numbers show a strong economy,” he told senior financial executives at the Four Seasons Hotel. Those numbers include gross domestic product growth of 4.6 percent during the first quarter of 2011, an inflation rate of 3.25 percent thus far this year, a debt-to-GDP ratio of 30.3 percent and $125 billion in foreign reserves. “Exports have been the main drivers of employment and moving Mexico out of recession,” Téllez said. The rising costs of doing business in China have brought some business back to Mexico, too, he added. However, Mexico is affected by factors from abroad, Téllez said, citing the debt crisis in Greece, uncertainty over the U.S. debt ceiling, rising commodity prices, unrest in the Middle East, the aftermath of the earthquake in Japan and economic overheating in Brazil, India and China. “What’s driving the market is not Mexican fundamentals,” he said. Negative perceptions hurt, too. Téllez described Mexico as lacking excitement — something he hears frequently when abroad.

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JULY-AUGUST 2011

Mexico is a very important, he said, but “If we don’t open up [the energy sector], we won’t be an exciting economy.” Another issue is crime, which “we’ll have to live with for some time,” he acknowledged. J.P. Morgan Chief Mexico Economist Gabriel Casillas told the CFO forum that he foresees ongoing violence related to organized crime over the near term. He predicts that the level of violence will reach a turning point in the next six to eight months and then begin to decline. Unfortunately, the lead-up to that point “is the ugliest phase,” Casillas said, explaining, “There’s a strong increase in urban crime,” such as kidnapping and extortion. He said he is basing his projections on what happened in Colombia. Bright spots in the Mexican economy included greater international tourism, a reinvigorated automotive sector and improving domestic demand, Casillas said, while stagnant wages could prove problematic. One company growing despite the challenges has been wireless operator América Móvil, which last year successfully merged with sister companies Carso Global Telecom and Telmex International. At the LT CFO event, América Móvil CFO Carlos García Moreno received Latin Trade’s inaugural CFO of the Year – Mexico award for his role in managing the merger. América Móvil required $10 billion in financing for acquisitions in 2010 alone. Gar-

cía Moreno said he tapped sources in Europe and other parts of Latin America. “Local markets have developed quite significantly,” he said. “You should not underestimate them.” Driving the acquisitions was the need to secure the fiber-optics infrastructure to carry data traffic, and to have a platform for services such as pay TV, García Moreno said. Convincing skeptical investors and analysts was another matter. “We were very convinced of the merits. Not everyone out there, the shareholders, felt the same because they didn’t have the same understanding,” García Moreno said. “The CFO has to be the link between the company and the market.” Carlos Césarman, CFO of Promotora y Operadora de Infraestructura (PINFRA), offered a more piquant description of the job. “The CFO is a dancer who has to dance with the ugliest partner,” he said. “You have to dance with the midday devil,” referring to the task of finding adequate financing. Césarman began working with PINFRA, then known as Grupo Tribasa, when the company was in bankruptcy. His presentation focused on liquidity, a long-vexing challenge in Mexico, where companies depend heavily on suppliers instead of banks for financing. CFOs can minimize problems by knowing their business well, adhering to austerity principles, keeping things simple and “not growing more than you can,” Césarman advised. Burger King is applying many of those principles, company finance director José Manuel Carrillo said during his presentation. The quick-service restaurant chain has opened smaller outlets, such as kiosks and stands within food courts. They require less start-up capital, so Burger King could realize a faster return on the investment. The 2009 outbreak of the H1N1 virus took a big bite out of revenue, as many Mexicans avoided malls, plazas and other public places. Burger King focused on reining in costs and formed teams that focus on finding ways to “do more with less,” Carrillo said. Laura Maydón, senior business leader, commercial solutions, for Visa, addressed the issue of companies improving their working capital through the increased usage of cards and automatic payments for accounts payable. A survey by First Annapolis found automated payments to be convenient and the “least painful” option for companies, but acceptance has been low in Mexico, especially among smaller businesses, Maydón said. — David Agren

LT CFO EVENTS MEXICO CITY 1

1. Gabriel Casillas, Vice President and Chief Mexico Economist, J.P. Morgan. 2. Carlos García Moreno, América Móvil. 3. Carlos Césarman, CFO, PINFRA. 4. Luis Téllez, Chairman and CEO, Bolsa Mexicana de Valores. 5. José Manuel Carrillo, Finance Director, Burger King. 6. Laura Maydón, Senior Business Leader Commercial Solutions, Visa. 7. Latin Trade CFO Roundtable. 8. Eduardo Viniegra, Manager Country Products, Mexico, Visa; Mauricio Braverman, Senior Business Leader Country Products, Mexico, Visa; Rene de Anda, Assistant Vice President Treasury Services, J.P. Morgan; Monica Espínola, Treasury Services, J.P. Morgan. 9. Juan Carlos Becerra Posada, Finance Director, Ica Fluor Daniel, S. De R.L DE C.V.; Ramon Guemez, Director of Investor Relations, Bolsa Mexicana de Valores; Eduardo Sein Rueda, CFO, Microsoft Mexico.

JULY-AUGUST 2011 LATIN TRADE

SÃO PAULO

First-hand tips for visiting Brazil’s business hub. Insights and advice from Jose Antonio Rios, chairman of Global Crossing, Latin America, and David Berger, managing director, Latin America & Caribbean, NAI Global. Latin Trade: What do you like most about traveling to São Paulo? Rios: Over the last 39 years, my wife has documented that I have gone to São Paulo over 300 times. … São Paulo is a major business center, so meetings are, more times than not, of critical importance and with intelligent and well-prepared people. Great people, great conversations, open and global concepts, plus great food and good hotels, make a positive difference. More and more regional business is done every day in São Paulo. Berger: What I like most in São Paulo is the people. Brazilians, from my experience, tend to have a joie de vivre and friendliness that I have only encountered in Italy. Second, and in a tight race, is the quality and the variety of the food. And the coffee. I have never had consistently great coffee anywhere else, even in meetings!

LATIN TRADE

LT: What do you like least? Rios: Least I like the traffic and the length of time it takes to go from one place to another, so it takes great strategic planning for each visit and move, plus the prioritization and sequence of the events in order to make the days useful and productive. … In addition, São Paulo has become one of the most expensive cities in the world. Berger: Wow, that is difficult for me. I am a glass-half-full type of person. Oh, yes, the traffic during the day. There are few places on earth that suffer that inconvenience more than São Paulo. LT: What are your preferred hotels? Rios: Renaissance and Hyatt are tops for me, for their integral quality plus wonderful locations. In addition, Unique may be the best in São Paulo, even if it is not considered a top executive hotel. Their rooftop bar, with the infinity pool and the view of the city, makes it an outstanding Brazilian place. Berger: My preference for hotels revolves around the proximity to our São Paulo office that is located along Avenida das Nações

JULY-AUGUST 2011

Unidas in Berrini. The priority hotel in that area is the Hilton São Paulo Morumbi, primarily for one reason — it has a fully equipped gym and swimming pool. Of course, it is also a very comfortable hotel, with a staff that tends to understand the traveling business person’s needs. LT: What restaurants do you recommend? Rios: Rubayat Figueira is one of my favorite restaurants worldwide. Gero in São Paulo (and Rio) are outstanding, with some of the best Italian food anywhere. Their polenta-based dishes are out of this world. Berger: I generally like to explore and find local ones to experiment. But one I particularly like is the Terraço Itália in the city center. It does serve good cuisine; however, its location is unparalleled. It sits on the penthouse floor of a highrise office building and offers a spectacular view of the city. From there, one can appreciate the urban expanse and the “forest” of condo towers. When eating at a churrasqueria, the Fogo de Chão is generally consistently good. For Italian food, Due Cuochi Cucina. LT: What practical advice would you give to someone who is visiting São Paulo for the first time on business? Rios: I would say that good preparation is key and getting the

right advice from local Paulistas, ranging from where to stay and eat all the way to the most important logistical sequence matched to the traffic and distances. That is obviously in addition to understanding well who you are meeting with, what are your and their expectations and having clear goals with a reasonable timeline and process — not the U.S. or European style, but modern Brazilian and Paulista style. If you can, extend your trip to a weekend where you can tour, visit, learn from Brazil and São Paulo. Learn or try to learn as many Portuguese words and expressions as you can, as well as learning about their foods and traditions. It will not be time wasted, but perhaps the time that will give you added ammunition to be successful long term in your business venture. Berger: Given the heavy daily traffic, plan the meetings with enough time between them. Do not stress about arriving a bit late to meetings; no one better than the Paulistanos understand that time trap. Bring all the mobile devices in the car when driving between meetings to use the downtime well. And, if riding with local colleagues, have meetings in the car. Always have a driver or someone else drive. If possible, try to bunch the meetings geographically as much as possible, and ask locals to advise regarding the traffic patterns to facilitate travel between meetings. Suit and tie are generally standard business attire, but the code is becoming more relaxed, especially during the warmer humid months. Calling prior to a meeting to ask [about] the dress code is acceptable. Be prepared to be presented with a lot of food, and a large variety of it. A churrasqueria is a never-ending smorgasbord of culinary options. If you indulge, pace yourself. Caipirinihas — a local bar drink — if you drink alcohol it is not to be missed, but drink cautiously. If you want to work out, “gym” translates as “Academia.” —Joachim Bamrud

EMBRATUR

ON THE ROAD

LT GUIDE: SÃO PAULO Caesar Park São Paulo Faria Lima Rua das Olimpiadas, 205 Vila Olimpia Tel: (55) 11-2163-6622 caesar-park.com Fasano Hotel Rua Vittorio Fasano 88 Jardim Paulista Tel: (55) 11-3896-4000 fasano.com.br Gran Melia São Paulo Rua Joao Cachoeira, 107 Itaim Tel: (55) 11-3702-9600 solmelia.com Grand Hyatt São Paulo Av. da Nacões Unidas 13301 Marginal Pinheiros/Berrini Tel: (55) 11-2838-1234 saopaulo.grand.hyatt.com Hilton São Paulo Morumbi Avenida da Nacões Unidas 12901 Marginal Pinheiros/Berrini Tel: (55) 11-2845-0000 www1.hilton.com Holiday Inn Parque Anhembi Rua Prof. Milton Rodrigues 100 Tel: (55) 11-2107-8844 holidayinn.com

ASK THE CONCIERGE The Hilton São Paulo Morumbi was ranked as the No. 1 hotel in the city in Latin Trade’s 2011 business travel survey. Interview with chief concierge Caio Vega. I have 24 hours in Sao Paulo. What itinerary would you recommend in order to impress a client? I would begin with a visit to the Museu do Ipiranga, also known as the Museu Paulista, an art and history museum built on the spot where Brazil’s first emperor claimed independence from Portugal. The museum has amazing gardens inspired by the palace of Versailles in France. Afterwards, have lunch at one our famous churrascarias (steak houses) or try a traditional feijoada, a hearty stew of meats and black bean. Try to see a soccer match at the charming Pacaembu Stadium, which also houses a soccer museum. End the day with caipirinha cocktail in one of

the many bars in the Vila Madalena neighborhood and enjoy the nightlife with live Brazilian music. Can you suggest one or two places to shop? The Shopping Cidade Jardim, on Avenida Magalhães de Castro in Morumbi, is one of the most luxurious malls in the city. Rua Oscar Freire, in the Jardim Paulista district, is lined with Brazilian and international boutiques as well as many cafes and restaurants. What are the must-buys in São Paulo? Havaianas sandals. They are widely available but you will likely find the most extensive selection at Espaço

Havaianas, the concept store at Rua Oscar Freire 1116. What safety measures do you recommend people take when they visit Sao Paulo? When taking a taxi, store your laptop in the trunk of the car and not on the back seat. I have many meetings in the city. What is the best way to get around? Reserve an executive car at your hotel to stay with you during the day. What is the appropriate amount to tip a taxi or other driver and in restaurants? Ten percent. In restaurants that amount usually is already included when they bring you the bill.

Hotel Emiliano Rua Oscar Freire 384 Jardim Paulista Tel: (55) 11-3068-4393 emiliano.com.br Hotel Unique Av. Brigadero Luis Antonio 4700 Jardim Paulista Tel: (55) 11-3055-4710 hotelunique.com.br InterContinental São Paulo Alameda Santos 1123 Jardim Paulista Tel: (55) 11-3179-2600 ichotelsgroup.com Renaissance São Paulo Hotel Alameda Santos 2233 Jardim Paulista Tel: (55) 11-3069-2233 marriott.com/hotels Sheraton São Paulo WTC Hotel Av. da Nacões Unidas 12559 Brooklin Novo Tel: (55) 11-3055-8000 starwoodhotels.com/sheraton/ Sofitel São Paulo Rua Sena Madureira 1355 Bloco 1 Ibirapuera Tel.: (55) 11-3201-0800 sofitel.com

JULY-AUGUST 2011 LATIN TRADE

MADE IN Colombia uan Valdez may be middle age, but he’s adept at social media — and he’s in demand. The fictional spokesman for the Colombian Coffee Growers Federation has 850,000 followers on Facebook, more than any other Latin American brand, according to federation spokeswoman Martha Sanchez. Conceived by the U.S. ad agency DDB in 1959, Juan Valdez, representing the Colombian coffee farmer, debuted the following year and has enjoyed nearly 51 years of uninterrupted service as one of the world’s most powerful and enduring icons of advertising. The Valdez name and image also are used in a chain of cafes, with outlets in Colombia, Spain, Chile, Ecuador and the United States. The Juan Valdez icon has furthered the federation’s efforts to market Colombian coffee as a high-quality product and is widely recognized by consumers in the United States, the top destination for Colombian coffee exports. Indeed, coffee drinkers don’t appear to be willing to give up their mild Arabica, the high-quality bean for which Colombia is renowned (it is the world’s second source of the variety, after Brazil). Arabica prices have reached record levels in 2011, reflecting

higher demand worldwide and low levels of inventory. The International Coffee Organization, a London-based intergovernmental group, expects coffee supplies to remain tight, even though production has increased in eight of the 10 countries, including Colombia, that generate 86 percent of global coffee exports. The high prices have kept the exporters busy. During the six months ended March 2011, global coffee exports hit record levels, according to the ICO, which calculated that Colombia’s exports rose by 36.8 percent, compared with the same period a year earlier. The high prices have not translated into a financial windfall, however. “The depreciation of the U.S. dollar reduced export earnings of many exporting countries, in particular Brazil, Colombia,” among others, the ICO reports. Colombia’s production is recovering after erratic weather conditions wreaked havoc on harvests and output for three consecutive years. Given persistent issues, the Federación Nacional de Cafeteros, which represents 553,000 producers, is cautiously optimistic about prospects for the rest of 2011. “Colombia has experienced an unusually extreme rainy season over the last few months, which has resulted in a higher incidence of coffee leaf rust,” Sanchez says. The federation — Colombia’s largest coffee exporter, with a 27 percent share — is working with its members to restore infected plantations or to replace coffee trees with varieties more resistant to rust, a damaging fungus. Colombian producers are investing in their plantations to increase productivity for the growing demand, she adds. And global demand exhibits no signs of abating as coffee gains new fans in countries such as China and India. —Mary Sutter

Annual Exports

Top Markets

Colombian Coffee Exports

Top Markets for Colombia Coffee

Year 2006 2007 2008 2009 2010

Country 1. United States 2. Japan 3. Belgium 4. Canada 5. Germany

Value* $1.68 billion $1.9 billion $2.16 billion $1.7 billion $2.2 billion

*U.S. dollars Source: Colombian Coffee Growers Federation

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JULY-AUGUST 2011

Exports $869.7 million $396.5 million $161.6 million $161.3 million $94.8 million

Top Producers

World’s Top Coffee Producers Change 26% 42% 43% 54% -4%

Note: Value of 2010 exports of 60 kilo bags of green coffee equivalent, calculated again year-end totals in U.S. dollar. The volume of exports to the United States and Germany declined in 2010 versus 2009. Source: Colombian Coffee Growers Federation

Country Brazil Vietnam Colombia India Indonesia

Volume* Change** 18,291 18.9% 8,575 11.6% 4,987 36.8% 2,895 65.5% 2,645 -25.8%

*Thousands of 60 kilo bags of green coffee equivalent bags, for the six-month period ended March 2011. **Compared to the six-month period a year earlier. Source: International Coffee Organization

PHOTO COURTESY OF CAFE DE COLOMBIA

Coffee

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EUROPE

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