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CONTENTS JULY/AUGUST 2012 VOL. 20 NO. 4

Features 16 Latin American Companies Settle Into Post-Crisis Scenario.

A look at this year’s highlights.

18 Revenue/Profit Winners (and losers)

42

20 Top Companies by Countries 24 Latin America’s Top 500 ranking 42 Petrobras: Still On Top 48 Codelco: A State Giant On The Cusp Of Change 50 There is No Stopping Buenaventura 56 Grupo Bimbo: It all starts with understanding the consumer 62 EcoPetrol: King for a Day as Changes Reap Rewards

50

64 Latin America Keeps Telefonica Afloat 68 PDVSA´s Lost Decade...

72 Molinos: Looks to the Long-Term

Web Find us online at www.latintrade.com

THE

THE BIGGEST, THE BEST & THE BRIGHTEST IN LATIN AMERICA

• • • •

PETROBRAS ECOPETROL PDVSA BIMBO

• • • •

CODELCO BUENAVENTURA TELEFÓNICA MOLINOS

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JULY / AUGUST 2012

Cover: LATIN 500

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CONTENTS Editor’s Note 6

Latin America on a steady walk

10

The Scene 10 Innovation, according to WIPO

Opinion 12 The Contrarian: Why Multi-Latinas are Winning

By John Price

14 Latin-America’s New Breed of Corporate Leaders

By Esteban R. Brenes

Events 74 BRAVO Council Puerta Vallarta, Mexico

82

76 Trade Americas Expo Miami, Florida

80 CFO Mexico, D.F.

On the Road 82 San Jose, Costa Rica Executives offer tips on business travel in the Costa Rican capital.

83 Ask the Concierge Hotel Presidente Concierge, Johnatan Acuna offers suggestions to make the most of your visit to San Jose, Costa Rica

Spotlight: Chile 84 Chileno Becker Beer’s Talking Can

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84

EDITOR’S NOTE

etrobras has announced investments in Colombia; Avianca-Taca is buying Aerogal of Ecuador; Grupo Elektra of Mexico has bought the American company Advance America; Falabella is thinking about mobile telephone operations in Chile, Peru and Colombia; Bimbo has just purchased Sara Lee in the United States and the Iberian Peninsula… This is the new Latin American reality.

Although WIPO statistics show lackluster results in terms of productive innovation for Latin America, the region’s companies have grown, in both capital and maturity, and are expanding beyond their home countries to stimulate the regional economy too.

Today’s Latin American multinationals not only export, they invest in other emerging countries and in the developed world, and some are even quoted on U.S. stock exchanges. Their activities no longer respect borders. “(Carlos) Slim increases his holdings in the Dutch company KPN,” is the headline of one news agency. A collegue journalist adds, “This is Montezuma’s revenge,” the Latin American answer to the European military and economic conquest but five centuries later.

This expansion is also reflected in the Top 500 ranking, which helps trace the journey of Latin America’s major corporations. It highlights the sectors that are steaming ahead and those that lack fuel. And it offers unique insights into the powerful machinery behind the companies that are spurring regional growth. If Arcor, JBS or Codelco grow, their products are reaching more countries, and the boost in production not only translates into profits, but also new economic activity in the countries where they operate.

It’s true that globalization encourages this progress and that new technologies and logistics are also playing a part. But Latin America could have remained submerged, isolated, or held back by military governments. Instead, today’s political reality is also more dynamic and purposeful, marked by concern over education and sustainability. Latin American companies are exporting to the world, building plants in far-off countries, and sharing their culture and character in these places.

The same companies, as well as the smaller firms that hustle everyday to meet the challenges before them, are the ones fueling regional growth.

Luis Alberto Moreno, who has presided over the Inter-American Development Bank (IBD) since 2005, shares in the optimism. “This is the Latin American decade,” he says, noting that the average age of the region’s population is just 27 years, meaning they have much to offer.

Meanwhile, the gradual rise of per-capita incomes and the growth of the middle class in several countries harbors well for continued growth in the future.

The IBD’s statistics back up his theory: if the region maintains its current rate of growth, it will double its GDP in 14 years. This will mean a decrease in poverty from the current level of 32 percent to 10 percent, and will catapult Latin America once and for all beyond its status as a land of promise.

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LATIN TRADE JULY-AUGUST 2012

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LATIN AMERICA

Of course, others say this “promised land” still needs a few tweaks before it can become a magnet that dazzles and seduces investors from outside the region. But, as we heard at the Trade Americas forum organized by the Latin Trade Group, “the opportunity is now, when there is still much to do in the region. When the roads and infrastructure have been built, when crime rates have dropped to European levels, when corruption isn’t a problem and the universities produce as many PhDs as the United States, the opportunity for investment will have passed.”

The smaller businesses and multinationals that are excited about entering Latin America now are the ones that will gain the advantage.

The others will probably arrive too late.

Nothing ventured, nothing gained.

Elida Bustos Managing Editor ebustos@latintrade

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MANAGING EDITOR Elida Bustos ART & PRODUCTION DIRECTOR Manny Melo GRAPHIC DESIGNER Vincent Becchinelli CONTRIBUTING EDITORS Gabriela Calderon (research), Mark Ludwig COLUMNISTS Alberto J. Bernal-Leon, Esteban R. Brenes, John Price CORRESPONDENTS Argentina: Charles Newbery, Paula Ancery • Brazil: Thierry Ogier (São Paulo), Taylor Barnes (Rio de Janeiro) Chile: Gideon Long • China: Ruth Morris • Colombia: John Otis • France: Ilan Moss • Mexico: David Agren • Panama: Sean Mattson • Peru: Lisa K Wing • Spain: Sergio Manaut • US: Joseph Mann Jr. • Venezuela: Peter Wilson CONTRIBUTING PHOTOGRAPHERS Brazil: Paulo Fridman • Chile: Helen Hughes • Costa Rica: Juan Carlos Ulate • USA: Matthew Pace TRANSLATION: Valentin Farro, Ken Emmond COPY EDITOR: Ruth Morris PROOF EDITOR: Jude Webber EVENTS & CONFERENCES CONFERENCE PROGRAM DIRECTOR Alexia Sagemuller

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LATIN TRADE JULY-AUGUST 2012

THE SCENE

According to WIPO

T

he World Intellectual Property Organization (WIPO) has been measuring innovation, one of the pillars of growth and development for a company and for a nation, since 2007.

It uses a complicated index that takes into account 84 factors.

Latin America placed fifth among seven regions of the world on the index.

This is nothing to celebrate,

Top 10 of Latin America & the Caribbean Country Chile Brazil Costa Rica Colombia Uruguay Argentina Peru Mexico Belize Trinidad & Tobago 10

although considering disparities in GDP and income per capita among Latin American countries, it’s understandable.

There are also surprises in a few categories. For example, in Efficiency and Innovation, Paraguay finds itself in sixth place, just one spot behind Switzerland, while in Creativity, Chile placed 18th.

Overall, Chile has the

Human Capital & Research

Rank 39 58 60 65 67 70 75 79 80 81

LATIN TRADE JULY-AUGUST 2012

Country Argentina Trinidad & Tobago Jamaica Venezuela Uruguay

Business Sophistication Rank 58 63 68 69 74

Country Brazil Costa Rica Venezuela Guatemala Chile

Rank 42 44 48 54 57

institutions, human capital and research, infrastructure, market sophistication, business sophistication, knowledge and technology outputs, and creative production.

Innovation is defined as the implementation of a product (a good or a service) that is either new or significantly improved, a new process, a new marketing method, or a new way of organizing business practices, the workplace or external relations.

Those who want to dive deeper into the statistics and their analysis should go to www.wipo.int.

– Elida Bustos

ISTOCK

INNOVATION

best position in the region.

It leads Latin American nations in 39th place, (all the more deserving, considering Japan was no better than 25th). Far behind, the second Latin American country, Brazil, placed 58th. Costa Rica,surprisingly, occupies number 60 on the index.

The GII model (Global Index of Innovation) considers 141 economies, which represent 94.9 percent of the world population and 99.4 percent of the world economy as measured in United States dollars. It was developed by the French business school INSEAD. The authors themselves recognize that this is not the “last word,” noting that it remains difficult to measure “both the production of innovations and their impacts.” The objective is “to improve the path to better measurement and understanding of the concept of innovation, and to improve policies, best practices and other factors that lead to innovation.”

The 84 factors that are taken into account in the index are organized into the following categories:

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THE CONTRARIAN

WHY

WINNING

BY JOHN PRICE

IN 19999,

less than half of the largest 500 companies in Latin America were homegrown. By 2007, Latin American firms commanded three out of every four positions in the regional top 500. Today, multi-Latinas, armed with cash, are stepping out of their comfort zone and taking control of debt-laden firms in Europe and the United States.

Carlos Slim’s two acquisitions in May –a 28 percent stake in KPN, the ailing Dutch telecom, and all of California-based Simple Telecom– are telling examples.

What is behind the success of Latin America’s private sector? It is a vexing question for multinationals, anxious to deepen their footprint in the region but often stymied by local competition. Many multinationals fell asleep at the wheel between 2001 and 2007.

American firms retreated in the aftermath of the 9/11 attacks. European firms, burned by the Argentine crisis, also retreated. Globally, companies shifted their focus to China. While the world neglected Latin America, multiLatinas pulled off their Reconquista.

Most consumer-oriented multinationals have limited their focus to the ABC+ socioeconomic strata, or about 15 percent to 20 percent of the population in Latin America.

By contrast, several local firms pursued consumers at the base of the pyramid long before it was a trendy strategy. Natura, Brazil’s largest cosmetics firm and the seventh largest in the world, enjoys unrivaled penetration in its home market. Their products are sold to women in far-flung towns and villages across the country, not to mention the 40 cities in Brazil with more than 500,000 inhabitants. America Movil eclipsed many of its rivals by offering pre-paid cellphone cards to the millions of Latin Americans who had no credit history

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LATIN TRADE

JULY-AUGUST 2012

but yearned for a phone. Electra, the Mexican retailer, offered credit to the unbanked by taking car titles as collateral, and payment in the form of in-bound remittances so the working class could buy a stove, fridge or color TV. In its early growth phases, CEMEX offered single cement sacks to small builders and DIY home builders who constructed one room at a time because they lacked credit.

Meanwhile, many multinationals are daunted by the logistical and marketing challenges of distributing their products beyond the region’s large cities. One fixture in rural or small-town Mexico is the Bimbo delivery truck that brings fresh bread and confectionery to almost every community in the country.

Knowing that they could never build a national network like MultiPack’s in Mexico, FedEx decided to buy the company rather than compete with it.

Some of the largest players in the region like Vale in Brazil or CEMEX from Mexico were able to achieve monopoly-like status in their home markets, hoard cash and then break out and purchase assets abroad. The enviable negotiating position of Vale as the world’s largest iron-ore exporter enabled them to extract massive price hikes from a very fragmented Chinese steel industry.

CEMEX’s formidable profit margins, aided by the most sophisticated information technology infrastructure of any cement company, gave them the cash and equity capital positions to buy firms abroad. CEMEX was ahead of its peers when it began buying companies in other emerging markets outside Latin America, countries like Indonesia, the Philippines, Bangladesh, Poland, Hungary, Latvia and the United Arab Emirates. But some of Latin America’s most successful com-

panies are also accused of breaking the rules in their pursuit of growth. Telmex was slapped with a $1 billion fine in 2011 by Mexican regulators for allegedly charging uncompetitive interconnection rates. The Inter-American Development Bank has blacklisted dozens of Latin American firms for fraudulent and corrupt practices, a large portion of which are related to public sector bids. Many Latin American firms have devised ways to circumnavigate the region’s outdated and onerous labor laws. In several Latin American jurisdictions, full employee rights (including severance, paid holidays, health insurance and pension matching) do not kick in until a 90- to 180day trial period has been completed. In labor intensive sectors, local employers often oblige employees to sign temporary contracts that are torn up and rewritten just before the employee is eligible for full employment benefits. Some multinationals undoubtedly play these tricks too, but given the extra scrutiny they receive from regulators in-country as well as back home, they tend to be more compliant with both the letter and the spirit of labor laws.

In spite of some questionable practices still pursued by select multi-Latinas, their success offers many lessons to multinationals.

Multinationals have spent decades teaching Latin Americans their methods. The time has come for the teachers to start listening to their students.

John Price is the managing director of Americas Market Intelligence and a 20-year veteran of Latin American competitive intelligence and strategy consulting. jprice@americasmi.com

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LATIN AMERICA’S

NEW BREED OF CORPORATE

LEADERS

BY ESTEBAN R. BRENES

THE LEADERS of Latin America’s successful, 21st century companies represent a new kind of executive and this is having important repercussions across the board. Today these people are generally professionals –many of them hold MBAs– with a world view directed toward the sustainability of their business, their environment and their community.

They are knowledgeable about global trends and how these trends pertain to individual industries. They strive for a high quality, professional approach to human resource management, where their family’s principles and values form an integral part of their business management. And they are prepared to apply corporate governance of the first order.

These leaders understand that, unlike in the past, when just one person directed the destiny of an organization under a centralized system, they now must develop relationships both within and outside their organization. These relationships help them to influence others and delegate responsibilities, while sustaining long-term commercial ties. The modern leader is an unyielding orchestra conductor who seeks out the support of the best employees, while assuring they get great personal satisfaction from doing their job.

The modern leader has had the opportunity to live in times when education is both more accessible and of better quality than in the past.

The region’s first business schools emerged in the 1960s and were consolidated in the 1970s. These institutions have brought about an important change in the quality and leadership style of executives running companies today.

A more worldly perspective has formed new

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JULY-AUGUST 2012

The era of the permanent or “eternal” CEO of the Latin American firm has ended leaders who are more concerned about their environmental, social and economic surroundings.

This has fostered a sense of social responsibility and genuine concern for resource use that is prevalent in the best Latin American businesses.

One interesting example is that of Ramon Mendiola, CEO of Florida Ice & Farm, a Costa Rican brewery that has decreased its water consumption by 300 percent, thereby contributing to the sustainability of both the environment and the company itself. Another is Grupo Monge, a retailer operating in Central America and parts of the Andean region. It dedicates 5 percent of its profits to its family foundation, which supports the secondary education of thousands of students through scholarships.

These new leaders have travelled extensively and have a good understanding of key social, political and economic developments around the globe. They also study the major trends in their respective industries, the impact of social networks, and the technological, demographic and social changes that might affect their businesses. They are conscious of the need to establish an explicit strategy for their businesses.

Modern executives also show a greater appreciation for the importance of managing human development. Specifically, they encourage

executive performance evaluations and supply regular and objective feedback, so that those with potential can improve, and others can look for work elsewhere. The era of the permanent or “eternal” CEO of the Latin American firm has ended. It is satisfying to see that the leaders of successful companies tend to get personally involved in this area.

The vast majority of Latin American companies are family-owned. The leaders of successful companies have recognized that many people depend on them, especially in their own families. Some business partners from their family might even be fellow executives. For this reason, they often turn enthusiastically to the development of a protocol to establish clear rules that govern the relationship between the family and the company. These protocols often act as tools for “anticipating a family conflict” so that confrontations can be resolved before they provoke unnecessary problems.

This enables leaders to focus on company matters while keeping family harmony intact.

In the process, they are able to identify key issues that lend continuity to the company and to the family over the long haul. Some of these issues involve the principles and values of the family, the long-term vision for the family and the company, policies governing dividends and the reinvestment of profits, maximum levels of indebtedness, and desired corporate governance.

It is fundamental, for example, that the longterm vision of the family coincide with that of the business to ensure that the company can proceed peacefully, with strategies that lead to growth or consolidation, diversification, vertical integration or higher levels of risk.

Finally, these leaders seek the support and guidance of formal corporate governors. In the past this kind of support was non-existent. Today the ability of Latin America’s new corporate leaders to debate with these directors, but at the same time respond to and respect the decisions of the corporate governance system, is crucial to the success of their companies.

Esteban R. Brenes The Steve Aronson Professor of Strategy and Agribusiness, INCAE Business School President bac&asociados S.A. www.bacyasociados.com

ISTOCK

OPINION

LATIN

500

I

f any ranking provides a pulse for the region, undoubtedly it’s the Latin 500, prepared by Brazilian consulting firm Economática and published by Latin Trade for more than a decade.

The ranking is based on the income and sales of the 500 largest companies in Latin America over the calendar year.

The numbers for 2011 are surprising in their sharp contrast to the previous year. Total corporate revenues increased 8.3 percent compared with 2010, when growth hit 21.5 percent. Meanwhile, profits fell 8.9 percent compared with extraordinary growth of 37.3 percent in the prior year.

A quick analysis might attribute the decline to the 2009 economic crisis finally washing onto Latin American shores. Economists, however, have a different explanation.

“The main reason for such different numbers between 2010 and 2011 is related to the different basis for comparison,” said economist Jonathan Heath, of the National Statistics and Geographic Institute of Mexico.

“There was a sharp economic crisis in 2009 that led to a 6 percent fall in GDP in Latin America,” he said. “It is relatively easy for companies to grow a great deal after a recession, as it involves recovering part (but not all) of their sales and earnings from prior years.” This statistical rebound explains the fabulous growth in 2010. In this light, 8.3 percent new revenue in 2011 no longer seems like a weak result, but rather a strengthening of the companies’ performance as the situation stabilized.”

At the same time, Alberto J. Bernal-Leon, of Bulltick Capital Markets, indicates that the 2011 data shows “robust growth in internal markets in Latin America, with a strengthening of domestic demand.” However, the international market for raw materials, which make up a significant portion of the region’s production, did not flourish. “The fact that the propitious environment for commodities has diminished is 100 percent due to the European crisis and the collateral impact of that crisis,” he said.

THE RANKING Beyond the macroeconomic environment, the performance of the companies themselves suggests there were no significant changes to the regional corporate panorama.

The three largest oil companies in Latin America – Petrobras, PDVSA and Pemex, lead the Latin Trade ranking by a wide margin in terms of revenues. However, Petrobras and Pemex reported

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LATIN TRADE JULY-AUGUST 2012

LATIN

By Elida Bustos

LATIN

500 a significant drop in earnings. Petrobras posted a 2011 loss of 15.9 percent, while at Pemex, earnings plunged by 74.1 percent. PDVSA, on the other hand, billed 31.4 percent more and its earnings rose 43.1 percent.

By coming in at second place in this year’s ranking, PDVSA displaced five companies which maintained the same order as 2010: Pemex, Vale (formerly Cia. Vale do Rio Doce), America Movil, BR Distribuidora (of Brazil) and Telefonica of Spain. Brazil’s Odebrecht remained in eighth place and JBS, also from Brazil, moved down three slots but remained within the top 10.

It is worth underscoring that energy companies, specifically oil companies, continue to dominate the top 10 in the region by revenue, holding the first five places. Among these 10, there is only one food company – JBS. Brazil, the sixth largest economy in the world, continues to show its weight in the region and has five companies among the top 10. The remaining five are shared among Mexico, Colombia, Venezuela and the local unit of the Spanish telephone company.

There are more surprises in the Latin American technology index. It continues to be dominated by telephone companies in absolutely overwhelming numbers. Not until 18th place does a company from a new sector come up: NET (Brazil), a cable television company which also offers fixed line telephone service. The list is once again dominated by telephone companies until position 34, held

by Contax (Brazil), then resumes with more telephone companies.

In total, only 10 of 50 technology companies in the ranking do not belong to the telephone sector.

EARNINGS

LATIN AMERICAN COMPANIES SETTLE INTO POST-CRISIS SCENARIO

Once again, Brazil imposes its leadership: Vale and Petrobras lead by a wide margin and together with AmBev, are among the 10 companies that earned the most in Latin America in 2011.

Third place goes to Telefonica of Spain, followed by Colombia’s Ecopetrol and Ecuador’s Petroecuador.

However, in terms of growth, several companies showed a slowdown compared to 2010. This was the case for Petrobras, Telefonica, America Movil and Anglo American.

And once again, oil companies make their mark. There are four among the top 10 most profitable companies. editorial@latintrade.com

JULY-AUGUST 2012 LATIN TRADE

17

LATIN

500 WINNERS AND LOSERS IN % 2011 figures in millions of US dollars Rank

REVENUE WINNERS

1 2 3 4 5 6 7 8 9 10

Rank

PROFIT WINNERS

1 2 3 4 5 6 7 8 9 10

Rank

REVENUE LOSERS

1 2 3 4 5 6 7 8 9 10

Rank

PROFIT LOSERS

Sources: LBC 500, Economatica

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LATIN TRADE JULY-AUGUST 2012

1 2 3 4 5 6 7 8 9 10

500 Rank 394 172 47 160 422 320 459 28 15 455

Biomax, Colombia UAL, USA Viavarejo, Brazil Pacific Rubiales, Colombia Sid. Huachipato, Chile Vale Fertilizantes, Brazil Mirgor, Argentina EP Petroecuador, Ec. Copec, Chile Quickfood, Argentina

500 Rank 144 387 134 471 407 361 241 131 343 168

Company, Country Elektra, Mexico Raia, Brazil Gruma, Mexico CEB, Brazil Cemat, Brazil Ericsson Telecom., Brazil AG Telecom, Brazil Louis Dreyfus, Brazil Fasa, Chile BASF, Brazil

500 Rank 241 464 433 431 471 451 310 352 400 338

Company, Country AG Telecom, Brazil Springs, Brazil Coteminas, Brazil Wembley, Brazil CEB, Brazil Vulcabras, Brazil Gafisa, Brazil Const. OAS, Brazil Positivo Inf, Brazil Delta Const., Brazil

500 Rank 433 431 16 309 409 464 435 493 106 455

Company, Country

Company, Country

Coteminas, Brazil Wembley, Brazil CFE, Mexico Pampa Energia, Argentina GEUSA, Mexico Springs, Brazil M&G Polieste, Brazil Ideal, Mexico CSAV, Chile Quickfood, Argentina

% Ch.

Revenues

238.6 % 193.3 % 116.9 % 103.5 % 85.7 % 84.0 % 83.8 % 75.8 % 73.7 % 72.7 %

$1,156.3 $3,109.0 $11,204.1 $3,380.8 $994.8 $1,548.7 $780.9 $14,781.5 $21,124.6 $793.4

% Ch.

Profits

5,640.9 % 1,615.7 % 761.2 % 733.3 % 601.0 % 542.8 % 483.2 % 464.7 % 447.8 % 431.5 %

$2,153.4 $17.9 $377.9 $14.0 $78.3 $34.0 $460.5 $75.8 $16.8 $177.6

% Ch.

Revenues

-46.9 % -46.0 % -40.9 % -40.9 % -33.5 % -30.5 % -29.8 % -22.5 % -20.6 % -20.3 %

$2,138.0 $750.5 $927.1 $928.9 $734.4 $815.2 $1,567.6 $1,369.8 $1,109.5 $1,446.5

% Ch.

Profits

-10,753.8 % -2,507.8 % -1,978.8 % -1,756.3 % -1,577.2 % -1,554.7 % -1,552.8 % -1,007.4 % -831.6 % -595.1 %

-$138.5 -$24.8 -$1,230.9 -$215.5 -$33.7 -$218.5 -$35.7 -$29.4 -$1,249.8 -$35.6

LATIN

500 TOP COMPANIES BY COUNTRIES 2011 figures in millions of US dollars #

BRAZIL

1 2 3 4 5 6 7 8 9 10

#

MEXICO

500 Rank 1 4 6 8 10 12 13 14 19 20

500 Rank

1 2 3 4 5 6 7 8 9 10

3 5 11 16 30 35 37 50 55 56

#

CHILE

1 2 3 4 5 6 7 8 9 10

#

PERU

20

500 Rank 15 22 31 43 51 57 69 90 95 106

500 Rank

1 2 3 4 5 6 7 8 9 10

LATIN TRADE JULY-AUGUST 2012

110 124 167 191 210 233 302 304 306 315

Company

Revenues

% Ch.

Profits

% Ch.

Petrobras Vale BR Distribuidora Odebrecht JBS Grupo Ultra CBD Pet. Ipiranga Gerdau Braskem

$130,171.7 $55,014.1 $37,980.1 $33,585.7 $32,944.2 $25,941.6 $24,839.8 $22,509.8 $18,875.6 $17,686.4

1.7 % 10.1 % 0.4 % 19.1 % -0.3 % 1.7 % 29.0 % 2.8 % 0.2 % 15.6 %

$17,759.4 $20,158.7 $675.4 --$40.4 $452.5 $382.9 $540.7 $1,069.3 -$280.0

-15.9 % 11.7 % -19.9 % -77.8 % -1.5 % -11.7 % 12.0 % -16.8 % -124.6 %

Company

Revenues

% Ch.

Profits

% Ch.

Pemex América Móvil Wal-Mart de Mexico CFE Femsa Cemex Alfa Telcel Grupo Bimbo Grupo Mexico

$111,734.6 $47,700.1 $27,309.8 $20,930.5 $14,557.7 $13,546.2 $13,103.6 $10,947.5 $9,586.7 $9,296.4

7.6 % -3.1 % 0.4 % 1.6 % 5.9 % -6.2 % 18.6 % -8.7 % 1.0 % 11.7 %

Company

Revenues

% Ch.

Profits

% Ch.

Copec Codelco Cencosud Enersis ENAP Falabella Chile Minera Escondida Antofagasta PLC LAN CSAV

$21,124.6 $17,515.3 $14,515.4 $11,993.7 $10,834.8 $9,267.9 $7,419.5 $6,076.0 $5,585.4 $5,151.9

73.7 % 9.0 % 9.7 % -9.2 % 32.5 % 3.8 % -19.5 % 32.7 % 27.2 % -5.5 %

$932.7 $2,055.4 $548.3 $720.0 -$67.0 $811.3 $2,775.2 $1,236.6 $320.2 -$1,249.8

-8.1 % 9.5 % -13.4 % -30.7 % -195.5 % -8.1 % -36.0 % 17.6 % -23.7 % -831.6 %

Company

Revenues

% Ch.

Profits

% Ch.

Petroperu Ref. La Pampilla Southern Peru Telefónica del Peru Cerro Verde Falabella Peru Movistar Alicorp Grana y Montero Buenaventura

$5,047.1 $4,468.6 $3,179.6 $2,891.7 $2,520.1 $2,206.2 $1,590.9 $1,586.5 $1,577.9 $1,556.6

36.0 % 33.4 % 0.8 % 9.5 % 6.4 % 32.5 % 13.0 % 18.4 % 70.9 % 41.0 %

$153.1 $107.7 $1,078.1 $197.7 $1,078.4 $133.6 $240.8 $121.0 $107.5 $861.4

37.5 % 144.9 % -10.2 % -35.4 % 0.4 % 8.1 % -11.4 % 17.2 % 10.3 % 29.9 %

-$6,559.1 -74.1 % $5,940.3 -19.5 % $1,595.5 0.8 % -$1,230.9 -1,978.8 % $1,085.0 -66.7 % -$1,371.3 -2.5 % $373.2 -6.4 % --$382.1 -12.5 % $2,098.8 18.2 %

LATIN

TOP COMPANIES BY COUNTRIES 500 2011 figures in millions of US dollars #

ARGENTINA

1 2 3 4 5 6 7 8 9 10

#

COLOMBIA

1 2 3 4 5 6 7 8 9 10

500 Rank 36 53 58 127 140 148 162 173 175 188

500 Rank 9 93 123 125 150 151 160 189 203 204

Company

Revenues

% Ch.

Profits

% Ch.

YPF Tenaris Ternium Telecom Carrefour Arcos Dorados Petrobras Energia Molinos Rio Pan American Arcor

$13,124.3 $9,972.5 $9,157.2 $4,288.2 $3,896.2 $3,657.6 $3,305.1 $3,106.7 $3,067.5 $2,921.1

19.2 % 29.3 % 24.0 % 17.1 % -14.3 % 21.2 % -8.2 % 18.1 % 27.1 % 15.4 %

$1,225.9 $1,331.2 $649.9 $560.6 -$115.5 $163.0 $64.2 $754.7 $110.1

-15.1 % 18.1 % -16.6 % 23.5 % -9.0 % 7.2 % -31.6 % 43.3 % 5.4 %

Company

Revenues

% Ch.

Profits

% Ch.

Ecopetrol Grupo EPM Org. Terpel Exito Avianca-Taca Comcel Pacific Rubiales ExxonMobil Bavaria G. Nutresa

$33,194.6 $5,968.7 $4,470.5 $4,402.3 $3,636.6 $3,632.0 $3,380.8 $2,920.6 $2,615.9 $2,603.3

47.7 % 35.6 % 21.6 % 12.2 % 30.8 % 10.9 % 103.5 % 11.4 % 3.2 % 11.7 %

$7,952.0 $781.7 $88.3 $200.5 $104.1 $945.2 $554.3 $49.8 $523.4 $130.5

89.6 % 5.6 % -21.7 % 50.6 % 81.1 % 57.3 % 109.1 % 127.7 % 24.7 % -5.1 %

JULY-AUGUST 2012 LATIN TRADE

21

For eign mar ket s

DEM YST IFIE D. In today’s world, business has no borders.

Whether you are exploring new markets or expanding your presence in existing ones, you need a global insurance partner that knows local markets inside and out. With over 300 offices around the world, Chartis’ global reach extends to virtually everywhere its clients do business. To learn more, download our free briefing paper, How to Build a Multinational Program at www.chartisinsurance.com/multinational

Hoi An market Vietnam – Where Chartis insurers have done business since 2005

All products are written by insurance company subsidiaries or affiliates of Chartis Inc. Coverage may not be available in all jurisdictions and is subject to actual policy language.

For additional information, please visit our website at www.chartisinsurance.com.

SPECIAL ADVERTISING FEATURE

AS “MULTILATINAS” EXPAND, A NEW INSURANCE PARADIGM EMERGES

“A CMP is a great tool for risk managers looking for a consistent, compliant solution for coordinating multi-country exposures.”

Mark W. DeMartine, President of Global Markets, Chartis Global Commercial Insurance

M

odern technology provides business leaders with a cohesive view of decentralized operations and exposures that was not possible a decade ago. Evolving business climates and regulatory regimes make such centralized oversight prudent, if not mandatory. And parts of Latin America are enjoying an economic momentum that is the envy of Europe and America, setting the stage for continued growth. “Multilatinas” are jockeying to take full advantage of these favorable circumstances – and finding CMPs useful tools in the process.

A NEW PARADIGM In the past, “multilatinas” have generally chosen one of two insurance options: Multiple local insurance policies to cover risks in countries where they have exposures, or a single global insurance policy, issued in their home country, to cover exposures worldwide. Those gravitating to local policies typically had significant local exposures and needed compulsory local coverage or evidence of local insurance. They preferred to have insurance servicing performed locally. On the other hand, a global policy was favored by “multilatinas” more concerned with mitigating large losses centrally and greater uniformity in insurance for worldwide operations. Evidence of local insurance or local servicing was generally not an issue.

CMPs combine the best of both approaches.

“Multilatinas” can combine local policies where desired with a global policy in their home country. The global policy often functions as a “difference in conditions/difference in limits” policy, a pivotal distinction that makes it a backstop

Latin American-based multinational companies, “multilatinas,” are embracing a new phase of risk management, harnessing Controlled Master Programs (CMPs) to gain greater control of multinational risks. Why now? While CMPs are not new, their benefits are newly-amplified.

for all of the local policies. The global policy can respond if a claim is not covered under a local policy or if the local policy limit is exhausted (subject to the global policy’s terms, conditions and remaining limits). The worldwide scope of the global policy also ensures that it covers risks in countries where there is no local policy in place. This approach offers numerous advantages, including: Centralized control: “Multilatinas” work with one insurer (rather than multiple companies) to meet their global and local needs.

The “multilatina” shares its big picture objectives with the insurer, which can marshal a global network to provide local underwriting and claims-handling resources and expertise.

Consistent worldwide coverage: “Multilatinas” achieve greater certainty of coverage wherever they have operations, with uniform terms, conditions and limits facilitated by the link between the global policy and the local policies.

Local standard: Local policies are tailored to local industry practices and regulatory requirements, and are written in the local language.

Local claims handling and payment: “Multilatinas” can manage losses and claims locally, while maintaining centralized oversight.

Evidence of local insurance: Proof of local insurance can be provided, whether to meet regulatory requirements, fulfill contractual obligations – or provide local directors peace of mind.

DRIVEN BY YOUR STRATEGY ...

AND CHOICE Of course, one CMP does not fit all. At Chartis, we are scrupulous in structuring CMPs in

“As ‘multilatinas’ continue to develop more sophisticated business models and expand beyond their home borders, discussions about structuring multinational programs similarly evolve beyond local policy requirements to the type of comprehensive strategy embodied by a CMP.” Nelson E. Telemaco, Vice President, Client Management, Chartis Latin America Region

close collaboration with “multilatinas”. Each program is shaped by the client’s particular objectives, preferences, and business operations.

Notwithstanding the benefits a CMP provides, there may be reasons why a “multilatina” would prefer not to have a local policy in a given country, and instead rely on a global policy to cover its exposures there. We can make that happen. If a “multilatina” wants a local policy in every country with exposure, we can deliver it – through a robust network with geographical reach, experience and servicing capabilities that are truly incomparable.

All products are written and insured by subsidiaries or affiliates of Chartis Inc. Coverage may not be available in all jurisdictions and is subject to actual policy language.

For additional information, please visit our website at www.chartisinsurance.com.

LATIN

500 LATIN AMERICA’S TOP 500 2011 figures in millions of US dollars

Rank 2012 2011 1 1 2 -3 2 4 3 5 4 6 5 7 6 8 8 9 12 10 7 11 9 12 10 13 15 14 13 15 40 16 14 17 11 18 18 19 17 20 26 21 23 22 24 23 25 24 22 25 53 26 44 27 19 28 -29 20 30 31 31 35 32 27 33 39 34 32 35 29 36 43 37 42 38 34 39 30 40 33 41 41 42 46 43 36 44 21 45 50 46 38 47 100 48 65 49 49 50 37

Company, Country Petrobras, Brazil PDVSA, Venezuela Pemex, Mexico Vale, Brazil América Móvil, Mexico BR Distribuidora, Brazil Telefonica, Spain Odebrecht, Brazil Ecopetrol, Colombia JBS, Brazil Wal-Mart de Mexico Grupo Ultra, Brazil CBD, Brazil Pet. Ipiranga, Brazil Copec, Chile CFE, Mexico Carrefour, France Volkswagen, Germany Gerdau, Brazil Braskem, Brazil Eletrobrás, Brazil Codelco, Chile General Motors, USA Carrefour, Brazil Telefonica, Brazil Casino, France Telemar/Oi, Brazil EP Petroecuador, Ec. Fiat, Italy Femsa, Mexico Cencosud, Chile AmBev, Brazil AB InBev, Belgium BR Foods, Brazil Cemex, Mexico YPF, Argentina Alfa, Mexico Endesa, Spain Votorantim, Brazil Wal-Mart, Brazil AES, USA Cosan, Brazil Enersis, Chile Nestle, Switzerland Marfrig, Brazil Fiat, Brazil Viavarejo, Brazil General Electric, USA Ford, USA Telcel, Mexico

*

1 3

4

5 1

Sector

Revenues

% Ch.

Profits

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

Auto Tech

$130,171.7 $124,754.0 $111,734.6 $55,014.1 $47,700.1 $37,980.1 $37,832.7 $33,585.7 $33,194.6 $32,944.2 $27,309.8 $25,941.6 $24,839.8 $22,509.8 $21,124.6 $20,930.5 $19,516.1 $19,293.5 $18,875.6 $17,686.4 $17,625.2 $17,515.3 $16,877.0 $16,027.5 $15,528.7 $15,303.2 $14,877.4 $14,781.5 $14,619.6 $14,557.7 $14,515.4 $14,461.4 $14,228.0 $13,704.1 $13,546.2 $13,124.3 $13,103.6 $12,986.6 $12,612.8 $12,511.1 $12,356.0 $12,214.7 $11,993.7 $11,910.6 $11,667.0 $11,459.6 $11,204.1 $11,150.0 $10,976.0 $10,947.5

1.7 % 31.4 % 7.6 % 10.1 % -3.1 % 0.4 % 10.7 % 19.1 % 47.7 % -0.3 % 0.4 % 1.7 % 29.0 % 2.8 % 73.7 % 1.6 % 5.7 % 8.0 % 0.2 % 15.6 % -1.5 % 9.0 % 9.7 % -3.1 % 64.2 % 39.9 % -15.8 % 75.8 % 9.9 % 5.9 % 9.7 % -4.5 % 16.6 % 0.7 % -6.2 % 19.2 % 18.6 % -2.0 % 1.7 % -6.7 % 9.7 % 14.0 % -9.2 % -1.9 % 22.4 % -7.6 % 116.9 % 36.0 % 10.8 % -8.7 %

$17,759.4 $4,583.0 -$6,559.1 $20,158.7 $5,940.3 $675.4 $7,967.2 -$7,952.0 -$40.4 $1,595.5 $452.5 $382.9 $540.7 $932.7 -$1,230.9 --$1,069.3 -$280.0 $1,989.9 $2,055.4 --$2,321.8 -$68.5 $6,260.3 -$1,085.0 $548.3 $4,606.6 -$729.0 -$1,371.3 $1,225.9 $373.2 -$683.4 --$1,565.8 $720.0 --$397.7 $744.1 $48.2 -$861.0 --

* 1 Revenues don’t include Mexico; 3 Rebranded, includes the shares of former Telesp and Vivo; 4 Company started operations on April, 2010; 5 Former Globex.

24

LATIN TRADE JULY-AUGUST 2012

% Ch. -15.9 % 43.1 % -74.1 % 11.7 % -19.5 % -19.9 % -38.5 % -89.6 % 77.8 % 0.8 % -1.5 % -11.7 % 12.0 % -8.1 % -1,978.8 % ---16.8 % -124.6 % 47.5 % 9.5 % --61.3 % --94.0 % 78.1 % --66.7 % -13.4 % 1.5 % -51.1 % -2.5 % -15.1 % -6.4 % --63.9 % --335.3 % -30.7 % --573.0 % -23.3 % 227.2 % --14.8 % --

LATIN

LATIN AMERICA’S TOP 500 500 2011 figures in millions of US dollars Rank 2012 2011 51 66 52 60 53 69 54 51 55 52 56 63 57 56 58 73 59 58 60 48 61 62 62 57 63 59 64 64 65 87 66 68 67 55 68 72 69 54 70 70 71 85 72 83 73 84 74 77 75 71 76 75 77 98 78 80 79 101 80 76 81 92 82 78 83 79 84 81 85 106 86 122 87 88 88 67 89 119 90 114 91 82 92 105 93 120 94 74 95 121 96 104 97 111 98 90 99 124 100 103

Company, Country ENAP, Chile Cargill Agrícola, Brazil Tenaris, Argentina General Motors, Brazil Grupo Bimbo, Mexico Grupo Mexico, Mexico Falabella, Chile Ternium, Argentina TIM , Brazil Camargo Corrêa, Brazil Coca-Cola Femsa, Mexico Bodega Aurrerá, Mexico CSN, Brazil TIM Celular, Brazil Caterpillar, USA Cemig, Brazil Telmex, Mexico Anglo American, USA/UK Minera Escondida, Chile GN Fenosa, Spain Dow, USA SABMiller, UK Pepsico LAF, USA Telmex Intern., Mexico Org. Soriana , Mexico ECT, Brazil Ind. Peñoles , Mexico TAM, Brazil Southern Copper, USA CPFL, Brazil NII Holdings, USA Claro Telecom, Brazil Grupo Modelo, Mexico Embratel, Brazil Alpek, Mexico Schlumberger, USA Wal-Mart Superc.,Mx Usiminas, Brazil Met-Mex Peñoles, Mx Antofagasta PLC, Chile Sam’s Club, Mexico Copersucar, Brazil Grupo EPM, Colombia Nestlé, Brazil LAN, Chile Nokia, Finland American Airlines, USA Lojas Americanas, Brazil Iberdrola, Spain Oxxo, Mexico

*

2

2

Sector

Revenues

% Ch.

Profits

% Ch.

Energy Agri.

Steel Auto Food Mining Retail Steel Tech Holding Beverage Retail Steel Tech Manuf.

Energy Tech Mining Mining Energy Chemical Beverage Food Tech Retail Services Mining Transport Mining Energy Tech Tech Beverage Tech Energy Energy Retail Steel Mining Mining Retail Agri.

Holding Food Transport Tech Transport Retail Energy Retail

$10,834.8 $10,061.1 $9,972.5 $9,635.0 $9,586.7 $9,296.4 $9,267.9 $9,157.2 $9,108.6 $8,965.0 $8,941.7 $8,863.9 $8,806.7 $8,680.2 $8,673.0 $8,430.7 $8,034.8 $7,938.0 $7,419.5 $7,413.3 $7,246.0 $7,158.0 $7,156.0 $7,057.0 $7,045.1 $7,044.5 $6,944.9 $6,927.4 $6,818.7 $6,804.6 $6,719.3 $6,594.4 $6,539.0 $6,521.6 $6,501.1 $6,453.0 $6,452.9 $6,345.0 $6,167.4 $6,076.0 $6,003.8 $5,985.1 $5,968.7 $5,763.8 $5,585.4 $5,530.6 $5,460.0 $5,438.5 $5,403.5 $5,313.4

32.5 % 16.4 % 29.3 % 1.3 % 1.0 % 11.7 % 3.8 % 24.0 % 5.0 % -11.8 % 6.7 % 1.2 % 1.5 % 5.2 % 40.9 % 9.2 % -12.6 % 6.0 % -19.5 % -3.5 % 16.9 % 13.0 % 13.3 % -1.2 % -7.1 % -2.9 % 33.5 % 1.4 % 32.4 % -5.7 % 20.0 % -6.5 % -5.0 % -3.2 % 31.3 % 29.4 % 5.6 % -18.4 % 39.3 % 32.7 % -10.0 % 20.5 % 35.6 % -3.5 % 27.2 % 10.9 % 18.2 % -3.5 % 25.7 % 5.4 %

-$67.0 $119.1 $1,331.2 -$382.1 $2,098.8 $811.3 $649.9 $683.0 $460.7 $761.0 -$1,975.7 $727.4 -$1,287.7 $1,045.5 $3,245.0 $2,775.2 $997.7 -$1,617.0 $1,078.0 $267.9 $232.7 $470.6 $914.5 -$178.6 $2,336.4 $815.9 $198.8 -$131.2 $856.4 $208.6 $576.8 $1,072.0 -$124.3 $177.6 $1,236.6 -$54.7 $781.7 -$320.2 --$181.5 -$450.0

-195.5 % 115.0 % 18.1 % --12.5 % 18.2 % -8.1 % -16.6 % -48.5 % -38.4 % -4.1 % -30.8 % -46.0 % --5.0 % -16.1 % -5.0 % -36.0 % -11.2 % -16.2 % 7.4 % -32.9 % -10.1 % -4.3 % 74.2 % -146.7 % 50.3 % -11.6 % -41.7 % -114.9 % 6.4 % -51.9 % 49.4 % 32.7 % --86.8 % 73.0 % 17.6 % --74.4 % 5.6 % --23.7 % ---2.3 % -6.9 %

* 2 For the fiscal year ending on March 31, 2012.

JULY-AUGUST 2012 LATIN TRADE

25

LATIN

500 LATIN AMERICA’S TOP 500 2011 figures in millions of US dollars Rank 2012 2011 101 99 102 94 103 91 104 89 105 97 106 96 107 112 108 95 109 109 110 148 111 107 112 86 113 113 114 128 115 116 116 126 117 131 118 108 119 102 120 110 121 123 122 150 123 144 124 153 125 136 126 138 127 145 128 134 129 -130 127 131 -132 133 133 130 134 139 135 125 136 132 137 129 138 118 139 -140 115 141 135 142 158 143 141 144 142 145 137 146 154 147 162 148 166 149 149 150 178

Company, Country Grupo Carso, Mexico Sabesp, Brazil Embraer, Brazil Eletropaulo, Brazil Neoenergia, Brazil CSAV, Chile Avon, USA Globo Com., Brazil Whirlpool, USA Petroperu, Peru Wal-Mart, Chile Oi, Brazil Amil, Brazil CMPC, Chile Pepsico, Mexico Colgate, USA Coca-Cola, USA Votorantim Cimentos, Brazil Endesa, Chile Grupo Televisa, Mexico CGE, Chile CNO, Brazil Org. Terpel, Colombia Ref. La Pampilla, Peru Exito, Colombia Celulosa Arauco, Chile Telecom, Argentina Coppel, Mexico Cencosud, Argentina Liverpool, Mexico Louis Dreyfus, Brazil Rede Energia, Brazil Copel, Brazil Gruma, Mexico Grupo Chedraui, Mexico Furnas, Brazil GOL, Brazil Whirlpool, Brazil LF Telecom, Brazil Carrefour, Argentina Collahuasi SCM, Chile CANTV, Venezuela Samarco Min., Brazil Elektra, Mexico Light, Brazil Los Pelambres, Chile PDG Realty, Brazil Arcos Dorados, Argentina Itaipu Binacional, Br/Py Avianca-Taca, Colombia

* 6 Former Brasil Telecom.

26

LATIN TRADE JULY-AUGUST 2012

*

6

Sector

Revenues

% Ch.

Profits

Holding Water Transport Energy Energy Transport Manuf.

Media Manuf.

Energy Retail Tech Health Pulp Beverage Manuf.

Beverage Cement Energy Media Energy Constr.

Energy Energy Retail Pulp Tech Retail Retail Retail Agri.

Energy Energy Food Retail Energy Transport Manuf.

Telecom Retail Mining Tech Mining Retail Energy Mining Constr.

Food Energy Transport

$5,303.8 $5,299.9 $5,255.4 $5,243.4 $5,208.9 $5,151.9 $5,116.0 $5,071.7 $5,062.0 $5,047.1 $4,994.6 $4,928.7 $4,802.7 $4,796.5 $4,782.0 $4,778.0 $4,690.0 $4,637.1 $4,578.4 $4,486.9 $4,475.4 $4,472.8 $4,470.5 $4,468.6 $4,402.3 $4,374.5 $4,288.2 $4,213.8 $4,211.1 $4,204.9 $4,185.6 $4,148.9 $4,145.5 $4,133.0 $4,121.6 $4,119.6 $4,019.2 $3,979.8 $3,908.0 $3,896.2 $3,837.1 $3,781.8 $3,763.2 $3,729.6 $3,702.3 $3,676.6 $3,666.4 $3,657.6 $3,652.2 $3,636.6

2.0 % -4.3 % -6.7 % -9.9 % -3.0 % -5.5 % 11.5 % -3.2 % 7.8 % 36.0 % 2.8 % -20.0 % 4.8 % 13.7 % 5.5 % 12.1 % 13.8 % -4.0 % -10.6 % -4.2 % 4.2 % 29.7 % 21.6 % 33.4 % 12.2 % 16.1 % 17.1 % 4.5 % 4.2 % -0.6 % 16.0 % 0.8 % 0.1 % 9.5 % 0.0 % 0.0 % -4.0 % -10.2 % -5.2 % -14.3 % -2.3 % 17.5 % 0.5 % 5.4 % -5.2 % 9.8 % 16.8 % 21.2 % 5.8 % 30.8 %

$328.4 $652.2 $83.3 $838.1 $827.2 -$1,249.8 $630.4 $1,155.7 $642.0 $153.1 $218.4 $536.2 $93.4 $492.1 -$1,414.0 $2,815.0 $483.8 $857.0 $564.0 -$27.2 $482.8 $88.3 $107.7 $200.5 $620.8 $560.6 $524.2 -$469.1 $75.8 -$366.8 $617.2 $377.9 $108.8 $138.5 -$400.6 $196.5 -$104.2 -$1,682.4 $460.7 $1,553.6 $2,153.4 $165.6 $1,809.5 $375.5 $115.5 $784.2 $104.1

% Ch. -39.9 % -33.3 % -75.8 % 3.6 % -22.5 % -831.6 % 4.3 % -29.8 % -3.9 % 37.5 % 145.2 % -54.7 % 22.6 % -22.8 % -9.2 % 17.0 % -70.7 % -24.8 % -14.5 % -121.2 % -32.4 % -21.7 % 144.9 % 50.6 % -11.4 % 23.5 % 12.1 % -12.4 % 464.7 % -65.7 % 4.1 % 761.2 % -5.9 % -63.7 % -411.6 % -47.2 % -210.2 % --17.8 % -17.7 % 15.2 % 5,640.9 % -52.0 % 7.3 % -20.8 % 9.0 % 68.1 % 81.1 %

at 25.42°N 90.15°W, ACE insures progress

Property & Casualty Accident & Health Life Personal Business Solutions

It takes the right people, a strong balance sheet, worldwide capabilities and a exible approach to address the complexities of marine insurance. These are the strengths of ACE. We take on the responsibility of your risks so that you can take on the responsibility of making things happen. We call this insuring progress.

Visit us at aceseguros.com Ĺ?Ä‘Ĺ? Ĺ?Ä‘Ĺ? Ĺ?Ä‘Ĺ? Ĺ?Ä‘Ĺ? Ĺ?Ä‘Ĺ? Ĺ?Ä‘Ĺ? Ĺ?Ä‘Ĺ? Ĺ?

Š 2012 ACE Group. Coverages underwritten by one or more of the ACE Group of Companies. Not all coverages available in all jurisdictions.

ACE, ACE Logo and insuring progress are registered trademarks of ACE Limited.

LATIN

500 LATIN AMERICA’S TOP 500 2011 figures in millions of US dollars Rank 2012 2011 151 155 152 -153 157 154 143 155 177 156 164 157 196 158 173 159 168 160 286 161 179 162 147 163 171 164 224 165 170 166 192 167 160 168 151 169 146 170 117 171 140 172 308 173 191 174 215 175 207 176 175 177 234 178 159 179 218 180 163 181 156 182 186 183 152 184 185 185 195 186 161 187 183 188 201 189 194 190 180 191 188 192 165 193 209 194 246 195 167 196 190 197 176 198 -199 187 200 184

Company, Country Comcel, Colombia Const. AG, Brazil NET, Brazil Wal-Mart Centroamerica Millicom, Luxembourg Movistar, Venezuela Nextel, Brazil Magazine Luiza, Brazil Mexichem, Mexico Pacific Rubiales, Colombia Grupo Casa Saba, Mexico Petrobras En. , Argentina Cyrela Realty, Brazil Arca Continental, Mx Nemak, Mexico Ericsson, Sweden Southern Peru BASF, Brazil Nestlé, Mexico Comercial Mexicana, Mexico Fibria, Brazil UAL, USA Molinos Rio, Argentina ANCAP, Uuguay Pan American, Argentina ICA, Mexico Cencosud, Brazil Paul F Luz, Brazil Halliburton, USA Natura, Brazil CHESF, Brazil Coamo, Brazil Souza Cruz, Brazil Sigma, Mexico Eletronorte, Brazil Makro Atacadista, Brazil AHMSA, Mexico Arcor, Argentina ExxonMobil, Colombia CNH, Netherlands Telefónica del Peru Energias do Brasil Siderar, Argentina CAP, Chile Transpetro, Brazil Weg, Brazil CCR Rodovias, Brazil Gerdau Açominas, Brazil Sodimac, Chile Grupo Sanborns, Mexico

*

7

8

Sector

Revenues

% Ch.

Profits

Tech Constr.

Tech Retail Tech Tech Tech Retail Chemical Energy Retail Energy Constr.

Beverage Manuf.

Tech Mining Chemical Food Retail Pulp Transport Food Energy Energy Constr.

Retail Energy Energy Manuf.

Energy Agri.

Manuf.

Food Energy Retail Steel Food Energy Auto Tech Energy Steel Steel Energy Manuf.

Transport Steel Retail Retail

$3,632.0 $3,570.7 $3,569.6 $3,561.4 $3,548.3 $3,478.3 $3,441.2 $3,422.2 $3,392.0 $3,380.8 $3,338.8 $3,305.1 $3,266.2 $3,211.8 $3,202.7 $3,189.5 $3,179.6 $3,170.7 $3,151.1 $3,138.6 $3,121.0 $3,109.0 $3,106.7 $3,069.9 $3,067.5 $3,066.4 $2,985.3 $2,982.7 $2,982.0 $2,980.8 $2,976.0 $2,959.0 $2,958.8 $2,945.1 $2,933.6 $2,932.0 $2,928.0 $2,921.1 $2,920.6 $2,906.0 $2,891.7 $2,879.7 $2,811.3 $2,787.0 $2,774.4 $2,766.5 $2,737.1 $2,689.3 $2,672.7 $2,655.9

10.9 % -3.0 % 10.0 % -4.9 % 17.7 % 13.1 % 32.8 % 18.6 % 14.9 % 103.5 % 20.4 % -8.2 % 11.3 % 46.6 % 8.7 % 21.3 % 0.8 % -4.4 % -1.6 % -7.1 % -17.2 % 193.3 % 18.1 % 24.3 % 27.1 % 8.3 % 64.6 % -7.3 % 33.8 % -3.3 % -8.7 % 11.3 % -10.7 % 9.9 % 5.3 % -7.0 % 8.4 % 15.4 % 11.4 % 8.5 % 9.5 % -4.7 % 18.0 % 39.8 % 2.8 % 5.0 % -2.1 % 3.1 % 0.8 % -1.4 %

$945.2 $211.3 $198.9 -$1,154.0 -$1,028.3 $6.2 $194.4 $554.3 $11.2 $163.0 $265.6 $323.4 $76.4 -$1,078.1 $177.6 -$88.6 -$465.2 -$64.2 -$94.4 $754.7 $106.1 -$327.0 $464.0 $443.0 $828.5 $197.0 $854.4 $59.6 $31.1 -$2.4 $140.0 $110.1 $49.8 -$197.7 $261.6 $310.5 $441.7 $335.6 $312.9 $479.5 -$43.3 $164.6 $190.5

* 7 Merger between Arca and Grupo Continental; 8 Merger between United and Continental Airlines.

28

LATIN TRADE JULY-AUGUST 2012

% Ch. 57.3 % -3.3 % 7.9 % -15.3 % -27.6 % -84.9 % -38.6 % 109.1 % 166.7 % 7.2 % -26.3 % 51.8 % 1.8 % --10.2 % 431.5 % -13.5 % -229.5 % --31.6 % -219.3 % 43.3 % 44.2 % --21.7 % 60.0 % -0.8 % -36.6 % 14.1 % 30.5 % -50.5 % -66.4 % -110.4 % 95.4 % 5.4 % 127.7 % --35.4 % -25.2 % -30.3 % -25.2 % 2.0 % 0.3 % 18.9 % 41.7 % -2.9 % -18.0 %

SPECIAL ADVERTISING FEATURE

Latin Americans are loyal to their brands and they also expect more from them.

These are just a few of the findings to come from Havas Media’s Global Survey, “Meaningful Brands”.

Alfonso Rodes, Deputy CEO of Havas & CEO of Havas Media

i

n early June, joined by clients and media representatives at the University of Miami’s School of Business, Havas Media International Miami gave a presentation on the primary results of “Meaningful Brands”. The company administered this worldwide survey for the second consecutive year with the purpose of understanding better the connection between brands and the value and wellbeing that they generate for people.

Led by their CEO, Alfonso Rodes Vila, and Chief Intelligence Officer Hernan Sanchez Neira, Havas Media presented the survey’s principal results and findings, focusing in particular on Latin America, a region of great importance to Havas Media’s global operations but also, without a doubt, to the global economy of today.

The thing is, Latin America is unique.

Despite the varied crises of the past and the present uncertainties in other parts of the world, Latin Americans are also highly optimistic about the future. A significant percentage feel that their current situations will continue to improve over the year.1 Latin Americans are also warm and sociable by nature. A glance at Comscore’s numbers is enough to show that, of the top 10 countries for time spent using Social Media around the world, five are in Latin America: Argentina, Chile, Peru, Colombia and Mexico.2 Likewise, the relationship between people and brands in Latin America is also unique.

The Meaningful Brands study demonstrates that, worldwide3, people feel that only 20% of brands make a significant contribution to their quality of life. Of the brands they know and use, 30% would matter to them should those brands cease to exist.

In Latin America, the story is very different; people feel that 30% of brands have a positive impact on their quality of life and would care about the disappearance of 53% of the brands they know and use.

1

Source: TGI Latina, Wave I & II 2011

2

Source: Comscore 2012

3

This speaks to a different kind of relationship, a greater loyalty to brands in Latin America. It also means that brands bear a greater responsibility.

The study shows that when deciding to purchase a product, Latin Americans care more about social and environmental issues. These values also demand new kinds of relationships with brands; people place a much greater trust in companies that exercise social and environmental responsibility and are even willing to pay more for a product manufactured according to those standards.

Data such as these force companies and their public relations agencies to challenge traditional marketing models while giving rise to the need for new ways to create brands with value in these times.

Based on the results of Meaningful Brands, Havas Media has assigned itself the task of generating a new work culture and a new vision for how to build and measure the value of a brand.

These days, it is not enough to speak of quality in products and services: these no longer represent a major difference to people. The manner in which companies create value for people is just as important as the products they provide.

People expect companies to behave ethically and transparently – regardless of the industry or country -but they also expect brands to take the lead in helping solve social and environmental problems.

Brands taken on more significance when they help people generate positive and lasting results that give them a sense of improvement in their personal and collective wellbeing.

These needs and expectations vary widely between countries and cultural contexts and it is precisely here that studies like Meaningful Brands help to understand these issues in depth, and identify the priority concerns for every brand in every country.

Considering the 14 countries where the study was conducted

To learn more about Meaningful Brands, download the document from the study presentation at www.havasmediamiami.com, or to request it by email sent to mauricio.montenegro@havasmedia.com.

The areas of wellbeing included in this analysis are likewise varied, depending on how people perceive them whether in the personal arena (physically, financially, intellectually, socially, emotionally) and as a group (community, environment, ethics, economy, among others).

One of the most noteworthy aspects of the study is the creation of a Meaningful Brand Index (MBI), which makes it possible to identify the perceived contribution each brand makes to people’s lives, both collectively and individually, in order to discover existing areas of opportunity and lay out a concrete path to strengthen their relationship with people.

The MBI formula is simple: the more a brand contributes to people’s individual and collective wellbeing, the more meaningful it will be considered and loyalty, then, will grow.

In the end, all of this allows brands to define the role they should play in the lives of their consumers, based on what is truly important to them, whether as a leader, facilitator, mentor, promoter or collaborator, depending on the nature of the brand and product/service.

The reward to brands is implicit: the Meaningful Brands shows that brands perceived as more significant are the ones with greater brand value and a better reputation. Therefore, they are some of the most likely to benefit from recommendations, repeat purchases and loyalty.

Meaningful Brands yields a great number of lessons and information which, when used appropriately as a diagnostic tool, generate a series opportunities and areas in which brands can reconnect with their consumers.

To this end, Havas Media has created a unique process to develop meaningful brands based on the study’s diagnosis; it makes way for generating ideas and communication plans and defining very strict measurement and tracking metrics.

LATIN

500 LATIN AMERICA’S TOP 500 2011 figures in millions of US dollars Rank 2012 2011 201 189 202 193 203 200 204 212 205 181 206 182 207 199 208 -209 198 210 210 211 243 212 233 213 227 214 245 215 242 216 229 217 169 218 213 219 253 220 223 221 225 222 249 223 202 224 220 225 255 226 204 227 232 228 263 229 208 230 206 231 219 232 217 233 329 234 203 235 254 236 303 237 236 238 -239 265 240 270 241 -242 272 243 264 244 250 245 239 246 247 247 211 248 240 249 221 250 231

32

Company, Country Coelba, Brazil Movistar, Argentina Bavaria, Colombia G. Nutresa, Colombia Suzano, Brazil Suzano Papel, Brazil Electrolux, Sweden Grupo Aeromexico, Mexico Xignux, Mexico Cerro Verde, Peru Anglo Am. Norte, Chile F. Heringer, Brazil Goodyear, USA Nokia, Brazil Aut. Canal de Panama Anglo American Sur, Chile Const. Cam. Corrêa, Brazil Entel, Chile Bunge Fertilizantes, Brazil Industrias CH, Mexico Avon, Brazil Praxair, USA Tractebel, Brazil Bayer, Brazil Grupo Clarin, Argentina B2W Varejo, Brazil Nextel, Mexico Grupo Isa, Colombia Cielo, Brazil Celesc, Brazil Spal, Brazil Randon, Brazil Falabella Peru Comgás, Brazil Paranapanema, Brazil Baker Hughes, USA Electrolux , Brazil Agrosuper, Chile SQM, Chile MRV, Brazil AG Telecom, Brazil AES Gener, Chile Sidgo Koppers, Chile Siemens, Brazil Minerva, Brazil Grupo Simec, Mexico Carb. del Cerrejón, Colombia Telefónica, Colombia Klabin, Brazil Carrefour, Colombia

LATIN TRADE JULY-AUGUST 2012

*

Sector

Revenues

% Ch.

Energy Tech Beverage Food Pulp Paper Manuf.

Transport Holding Mining Mining Chemical Manuf.

Tech Services Mining Constr.

Tech Agri.

Steel Chemical Chemical Energy Chemical Media Retail Tech Energy Services Energy Beverage Manuf.

Retail Energy Mining Energy Manuf.

Agri.

Chemical Constr.

Telecom Energy Constr.

Manuf.

Food Steel Mining Tech Pulp Retail

$2,648.1 $2,638.5 $2,615.9 $2,603.3 $2,586.8 $2,584.5 $2,584.2 $2,567.3 $2,562.3 $2,520.1 $2,515.1 $2,507.7 $2,472.0 $2,459.9 $2,367.9 $2,361.6 $2,360.5 $2,360.3 $2,331.3 $2,323.7 $2,316.3 $2,308.0 $2,306.7 $2,288.4 $2,257.5 $2,256.2 $2,249.4 $2,248.7 $2,243.7 $2,234.5 $2,222.0 $2,215.8 $2,206.2 $2,187.2 $2,184.9 $2,183.0 $2,151.0 $2,146.4 $2,145.3 $2,140.5 $2,138.0 $2,130.3 $2,127.8 $2,123.5 $2,120.1 $2,098.6 $2,085.5 $2,074.1 $2,073.3 $2,038.3

0.4 % 0.5 % 3.2 % 11.7 % -4.6 % -4.6 % 8.1 % 12.9 % -0.2 % 6.4 % 25.1 % 18.7 % 14.6 % 23.1 % 17.5 % 11.3 % -19.9 % 2.0 % 20.1 % 5.8 % 6.1 % 17.2 % -6.3 % 4.8 % 18.6 % -7.7 % 6.4 % 22.5 % -6.4 % -7.8 % 0.0 % -0.7 % 32.5 % -11.0 % 14.0 % 39.1 % 2.8 % 5.8 % 17.2 % 18.1 % -46.9 % 18.2 % 16.0 % 3.5 % 3.6 % 5.5 % 39.7 % 1.9 % -5.7 % -3.7 %

Profits $400.1 -$523.4 $130.5 $9.2 $15.9 $119.0 $149.2 $32.1 $1,078.4 $463.1 $34.1 $231.0 -$1,244.0 $797.9 $13.0 $346.7 -$71.8 $218.0 -$530.0 $771.7 $52.3 $120.9 -$47.5 $747.2 $173.4 $965.1 $172.7 $213.6 $143.5 $133.6 $125.9 -$25.4 $227.0 -$210.1 $545.8 $405.2 $460.5 $326.1 $285.6 $110.3 $24.2 $163.5 $518.4 -$361.4 $97.4 $23.3

% Ch. -29.5 % -24.7 % -5.1 % -93.4 % -96.6 % -14.9 % -21.0 % -3.3 % 0.4 % -15.3 % -8.1 % -30.0 % -24.5 % -11.4 % 17.7 % -6.1 % -4.4 % 412.9 % -16.7 % 6.1 % 229.9 % -9.2 % -335.6 % 0.3 % -3.5 % -12.1 % 5.2 % 1.1 % -4.2 % 8.1 % -63.8 % -189.0 % 206.8 % --10.2 % 42.8 % 6.4 % 483.2 % 92.1 % 152.8 % 91.8 % 93.1 % 81.8 % 48.5 % 13.1 % -71.0 % -47.8 %

LATIN

500 LATIN AMERICA’S TOP 500 2011 figures in millions of US dollars Rank 2012 2011 251 237 252 252 253 205 254 222 255 -256 244 257 248 258 228 259 278 260 -261 268 262 291 263 230 264 267 265 241 266 295 267 299 268 256 269 275 270 273 271 305 272 326 273 266 274 274 275 -276 325 277 285 278 257 279 284 280 260 281 258 282 -283 311 284 289 285 362 286 251 287 344 288 288 289 280 290 269 291 297 292 282 293 337 294 315 295 -296 304 297 277 298 -299 -300 293

34

Company, Country Ripley, Chile Drummond, Colombia Movistar, Mexico Ultragaz, Brazil Namisa, Brazil Ind. Bachoco , Mexico Brookfield, Brazil Chilectra, Chile ENAMI, Chile Minera Spence, Chile Olimpica, Colombia Praxair, Brazil Kimberly Clark, Mexico Grupo KUO, Mexico Elektro, Brazil Chevron, Colombia Argos, Colombia Emb. Andina, Chile Infraero, Brazil CCU, Chile General Motors , Colombia Copa, Panama Movistar, Chile Marcopolo, Brazil Sotreq, Brazil Gasco, Chile Du Pont Brasil Hypermarcas, Brazil Adidas, Germany Profarma, Brazil Ampla En., Brazil CBMM, Brazil Salfacorp, Chile Lojas Renner, Brazil General Motors, Argentina Copasa, Brazil Dow Brasil, Brazil ALL, Brazil Schincariol, Brazil Grupo Abril, Brazil Carvajal, Colombia Corp. Fragua, Mexico Patagonia, Argentina Rossi Res., Brazil Grupo Algar, Brazil Guararapes, Brazil Mega, Mexico Cooxupé, Brazil Grupo Martins, Brazil Telefónica de Argentina

LATIN TRADE JULY-AUGUST 2012

*

Sector

Revenues

% Ch.

Retail Mining Tech Energy Mining Food Constr.

Energy Mining Mining Retail Chemical Paper Manuf.

Tech Energy Cement Beverage Transport Beverage Auto Transport Tech Manuf.

Auto parts Energy Chemical Manuf.

Manuf.

Retail Energy Mining Constr.

Retail Auto Water Chemical Transport Beverage Media Print Retail Food Constr.

Holding Textile Retail Food Retail Tech

$2,037.1 $2,026.9 $2,014.8 $2,008.2 $2,008.1 $1,988.5 $1,987.0 $1,985.5 $1,966.9 $1,954.2 $1,948.4 $1,931.0 $1,916.6 $1,916.3 $1,900.0 $1,899.1 $1,888.4 $1,884.8 $1,882.5 $1,859.3 $1,858.1 $1,830.9 $1,803.2 $1,796.0 $1,790.2 $1,785.3 $1,782.7 $1,772.4 $1,771.5 $1,768.3 $1,765.8 $1,764.3 $1,728.7 $1,726.5 $1,723.0 $1,719.2 $1,697.9 $1,691.7 $1,684.1 $1,680.2 $1,671.2 $1,666.0 $1,648.2 $1,637.8 $1,626.6 $1,623.9 $1,622.6 $1,621.4 $1,603.4 $1,600.7

-2.2 % 4.4 % -17.1 % -8.6 % 13.9 % -0.6 % 0.8 % -7.3 % 14.3 % 28.9 % 6.9 % 17.8 % -9.6 % 5.1 % -6.0 % 18.8 % 19.6 % -0.7 % 7.9 % 3.9 % 19.2 % 29.4 % -1.2 % 0.9 % 14.8 % 24.4 % 7.0 % -6.5 % 3.9 % -6.0 % -6.7 % 1.3 % 14.3 % 4.6 % 41.8 % -11.5 % -1.8 % 2.4 % -1.7 % -7.5 % 4.9 % -2.7 % 21.6 % 9.3 % 2.9 % 3.7 % -5.7 % 49.4 % -9.9 % 1.6 %

Profits $106.0 $187.9 -$87.4 $1,105.3 $7.4 $174.2 $212.5 -$75.8 $694.4 $45.9 -$261.0 $9.3 $262.5 $123.9 $190.4 $186.1 $78.6 $235.4 $25.9 $310.4 $311.8 $182.9 $107.3 $63.9 $196.6 -$29.1 -$15.4 $112.1 $657.2 $30.6 $179.6 -$247.6 -$361.0 $130.6 -$41.6 $99.1 $17.4 $60.8 $39.3 $181.1 $106.8 $194.0 -$75.0 $14.6 --

% Ch. -0.7 % 82.4 % --22.8 % -5.8 % -95.4 % -20.2 % -34.1 % -578.4 % 26.8 % 18.2 % --23.7 % -77.3 % -2.9 % 37.7 % 26.2 % -15.9 % 329.7 % -0.4 % -67.3 % 28.8 % -26.8 % 2.8 % 30.1 % -41.0 % -32.9 % -118.5 % --25.4 % -13.6 % -4.3 % -35.2 % -2.9 % --38.4 % -209.0 % -11.5 % -241.9 % 0.6 % 129.4 % 2.7 % 34.8 % -13.7 % -3.7 % -4.3 % -60.1 % 203.5 % --

SPEND TIME BUILDING RELATIONSHIPS,

NOT LOOKING FOR THEM

LATIN TRADE DATABASE SERVICES Now available: Top 500 Companies & Top 100 Multilatinas

THE ULTIMATE WAY TO FIND CONNECTIONS IN LATIN AMERICA Have your e-campaigns sent to the most accurate and current databases

For more information contact: Tel: 305.755.4713 Email: rwinters@latintrade.com

LATIN

500 LATIN AMERICA’S TOP 500 2011 figures in millions of US dollars Rank 2012 2011 301 307 302 339 303 333 304 341 305 290 306 426 307 276 308 324 309 365 310 216 311 296 312 287 313 259 314 312 315 403 316 314 317 279 318 321 319 317 320 294 321 342 322 338 323 319 324 376 325 318 326 323 327 -328 306 329 313 330 351 331 298 332 -333 292 334 301 335 383 336 368 337 367 338 -339 346 340 309 341 345 342 331 343 281 344 391 345 401 346 320 347 359 348 283 349 310 350 398

36

Company, Country Lojas Riachuelo, Brazil Movistar, Peru Minera Candelaria, Chile Alicorp, Peru Duratex, Brazil Grana y Montero, Peru CESP, Brazil Contax, Brazil Pampa Energia, Argentina Gafisa, Brazil Homex , Mexico CBA, Brazil Vitro, Mexico Condumex, Mexico Buenaventura, Peru Localiza, Brazil Celpe, Brazil M. Dias Branco, Brazil Zaffari, Brazil Vale Fertilizantes, Brazil Iochpe-Maxion, Brazil CTEEP, Brazil UTE, Uuguay Dufry AG, Switzerland InterCement, Brazil Codensa, Colombia MRS Logística, Brazil Corp. Geo, Mexico Banmedica, Chile Empresas Navieras, Chile Alunorte, Brazil V&M, Brazil Liquigás Dist., Brazil Redecard, Brazil General Motors, Venezuela Barrick Misquichilca, Peru Drogasil, Brazil Delta Const., Brazil OHL Brasil Ford, Mexico Goodyear, Brazil C.Vale, Brazil Fasa, Chile Mastellone Hnos., Arg Ferreyros, Peru Prezunic Com, Brazil Claro, Ecuador Coelce, Brazil Sears, Mexico Minera Valparaiso, Chile

LATIN TRADE JULY-AUGUST 2012

*

Sector

Revenues

% Ch.

Retail Tech Mining Food Manuf.

Constr.

Energy Tech Energy Constr.

Constr.

Steel Manuf.

Manuf.

Mining Transport Energy Food Retail Chemical Manuf.

Energy Energy Retail Cement Energy Transport Constr.

Health Transport Aluminum Steel Energy Services Auto Mining Retail Constr.

Transport Auto Manuf.

Agri.

Health Retail Retail Retail Tech Energy Retail Mining

$1,600.0 $1,590.9 $1,588.0 $1,586.5 $1,583.5 $1,577.9 $1,576.7 $1,576.0 $1,568.2 $1,567.6 $1,566.8 $1,565.6 $1,565.5 $1,560.5 $1,556.6 $1,555.7 $1,553.5 $1,551.9 $1,551.3 $1,548.7 $1,548.7 $1,546.4 $1,545.1 $1,541.3 $1,538.0 $1,537.1 $1,526.0 $1,517.3 $1,509.9 $1,508.1 $1,507.9 $1,492.2 $1,479.7 $1,478.0 $1,472.0 $1,462.2 $1,455.1 $1,446.5 $1,445.8 $1,436.0 $1,433.8 $1,429.0 $1,426.1 $1,423.7 $1,422.9 $1,414.6 $1,403.0 $1,400.6 $1,397.0 $1,395.0

3.7 % 13.0 % 10.7 % 18.4 % -3.8 % 70.9 % -9.6 % 9.5 % 29.2 % -29.8 % -1.5 % -5.6 % -3.8 % 2.8 % 41.0 % 3.8 % -9.5 % 5.8 % 3.8 % 84.0 % 15.9 % 14.2 % -4.4 % 33.2 % 3.6 % 5.6 % 13.1 % -2.2 % 0.1 % 18.4 % -5.2 % -3.4 % -7.9 % -5.9 % 30.3 % 21.9 % 20.9 % -20.3 % 10.3 % -6.6 % 8.9 % 3.3 % -16.7 % 28.4 % 35.0 % -3.8 % 14.2 % -18.1 % -8.5 % 30.4 %

Profits $72.5 $240.8 $623.0 $121.0 $199.5 $107.5 $57.9 $11.2 -$215.5 -$503.7 $112.6 -$128.5 $27.6 $106.2 $861.4 $155.5 $151.1 $195.4 -$186.3 $119.1 $487.9 $142.4 $211.1 $224.4 $235.6 $277.7 $103.0 $83.1 -$23.1 -$34.5 $318.0 $56.3 $748.7 -$650.6 $36.6 $17.1 $215.6 --$27.2 $16.8 -$2.3 $70.5 -$773.0 $251.2 -$202.0

% Ch. -18.6 % -11.4 % 10.8 % 17.2 % -28.8 % 10.3 % 3.7 % -82.8 % -1,756.3 % -301.7 % -13.6 % -181.2 % 128.5 % -53.0 % 29.9 % 1.3 % -43.8 % -7.4 % -212.6 % 20.9 % 166.2 % -68.8 % 24.1 % 11.0 % -6.1 % 5.4 % -10.1 % -12.1 % -152.7 % -134.4 % -8.6 % -30.0 % -10.9 % -1.3 % -31.5 % -87.1 % 18.1 % --27.6 % 447.8 % -106.6 % 42.1 % -17.5 % -11.3 % --39.1 %

LATIN

500 LATIN AMERICA’S TOP 500 2011 figures in millions of US dollars Rank 2012 2011 351 340 352 238 353 316 354 322 355 390 356 404 357 407 358 347 359 369 360 400 361 435 362 356 363 379 364 352 365 349 366 336 367 354 368 361 369 358 370 397 371 386 372 -373 408 374 380 375 416 376 334 377 360 378 335 379 350 380 355 381 399 382 348 383 406 384 332 385 353 386 392 387 396 388 327 389 377 390 366 391 370 392 385 393 433 394 -395 388 396 473 397 421 398 382 399 415 400 328

38

Company, Country Alpargatas, Brazil Const. OAS, Brazil CTC , Chile CPFL Piratininga, Brazil Claro, Peru UCP Backus, Peru Colbún, Chile Molymet, Chile Minsur, Peru Emerson, USA Ericsson Telecom., Brazil Lojas Marisa, Brazil Alcoa Alumínio , Brazil Celpa, Brazil Energisa, Brazil Bandeirante Energia, Brazil Oxiteno, Brazil Julio Simoes, Brazil El Palacio de Hierro, Mx Alkosto, Colombia E-CL, Chile Pet. Manguinhos, Brazil Masisa, Chile Electricaribe, Colombia Volcan, Peru Magnesita, Brazil Cencosud, Peru CEG, Brazil RGE, Brazil Editora Abril, Brazil Aluar, Argentina CGE Dist., Chile Ultrafertil, Brazil OHL Mexico Atento, Brazil Metal Leve, Brazil Raia, Brazil Galvão Eng., Brazil Movistar, Colombia Desarr. Urbi , Mexico Ferromex, Mexico Tupy, Brazil Dasa, Brazil Biomax, Colombia Minera Zaldivar, Chile Shougang Hierro, Peru Sonda, Chile Novartis, Brazil Vitro Envases, Mexico Positivo Inf, Brazil

LATIN TRADE JULY-AUGUST 2012

*

Sector

Revenues

% Ch.

Textile Constr.

Tech Energy Tech Beverage Energy Chemical Mining Tech Tech Retail Aluminum Energy Energy Energy Energy Transport Retail Retail Energy Energy Manuf.

Energy Mining Mining Retail Energy Energy Media Manuf.

Energy Agri.

Transport Tech Manuf.

Retail Constr.

Tech Constr.

Transport Manuf.

Health Energy Mining Mining Tech Chemical Manuf.

Tech

$1,372.6 $1,369.8 $1,348.1 $1,345.6 $1,336.1 $1,333.0 $1,332.8 $1,330.3 $1,325.3 $1,319.0 $1,308.8 $1,306.3 $1,302.0 $1,297.5 $1,293.6 $1,285.1 $1,284.0 $1,283.8 $1,268.9 $1,266.3 $1,256.6 $1,255.8 $1,251.2 $1,240.9 $1,240.4 $1,236.2 $1,230.7 $1,228.3 $1,215.2 $1,213.8 $1,212.6 $1,212.0 $1,208.1 $1,203.7 $1,197.0 $1,192.4 $1,187.8 $1,185.8 $1,185.3 $1,170.7 $1,165.5 $1,165.1 $1,162.1 $1,156.3 $1,146.6 $1,139.6 $1,136.8 $1,114.2 $1,112.0 $1,109.5

2.1 % -22.5 % -9.8 % -8.0 % 19.6 % 16.4 % 30.1 % 2.5 % 10.8 % 23.8 % 27.0 % 4.9 % -4.6 % 2.4 % 0.1 % -5.2 % 2.7 % 5.5 % 2.8 % 17.6 % 12.2 % 56.9 % 23.0 % 8.4 % 27.4 % -9.5 % 0.4 % -9.6 % -4.7 % -2.7 % 13.8 % -6.3 % 17.4 % -12.6 % -5.2 % 9.0 % 10.4 % -15.7 % 2.4 % -3.5 % -2.4 % 3.7 % 28.9 % 238.6 % 2.1 % 57.2 % 19.5 % -6.8 % 13.8 % -20.6 %

Profits $163.9 $80.3 $130.4 $164.4 $620.8 $275.6 $5.2 $103.2 $295.2 -$34.0 $94.6 -$66.1 -$208.5 $113.0 $118.8 $82.5 $30.3 $74.3 $43.0 $178.6 -$11.8 $68.9 $40.0 $370.3 $52.2 -$134.2 $128.4 $143.0 $126.5 -$33.9 $65.9 $270.4 $64.8 $100.6 $17.9 $1.3 -$176.4 $122.8 $108.4 $77.5 $6.1 $488.7 $456.4 $77.9 $78.1 --$36.2

% Ch. -10.9 % 59.2 % -41.7 % -9.2 % 26.5 % 49.0 % -95.4 % 12.5 % -21.9 % -542.8 % -24.5 % 65.3 % -244.9 % -3.3 % -28.8 % 0.3 % -45.7 % 4.1 % 7.0 % -10.7 % 87.7 % -4.9 % -32.7 % 36.0 % -5.2 % --2.8 % -11.2 % 9.5 % -22.7 % -231.3 % 331.1 % 16.3 % -19.2 % 102.3 % 1,615.7 % -97.5 % -29.4 % -27.9 % 17.0 % 31.8 % 19.4 % -8.9 % 50.0 % 8.8 % -28.5 % --167.6 %

LATIN

LATIN AMERICA’S TOP 500 500 2011 figures in millions of US dollars Rank 2012 2011 401 419 402 364 403 394 404 387 405 384 406 -407 371 408 374 409 472 410 363 411 395 412 427 413 414 414 441 415 445 416 420 417 452 418 372 419 453 420 424 421 402 422 -423 412 424 440 425 409 426 450 427 428 428 -429 448 430 434 432 436 431 300 433 302 434 405 435 413 436 410 437 425 438 446 439 -440 461 441 431 442 443 443 429 444 423 445 463 446 -447 487 448 422 449 447 450 442

Company, Country Maseca, Mexico Grupo Famsa, Mexico CEEE, Brazil AES Sul, Brazil Minera El Abra, Chile Cerr. Zona Norte, Colombia Cemat, Brazil DMA Distribuidora, Brazil GEUSA, Mexico Roche, Brazil Equatorial, Brazil Kellogg, USA Lojas Cem, Brazil Superm. Peruanos, Peru Sodimac, Colombia CICSA, Mexico Cemar, Brazil Even, Brazil Min. Cerro Colorado, Chile Saraiva , Brazil AES Tietê, Brazil Sid. Huachipato, Chile Emgesa, Colombia Ecorodovias, Brazil Eletronuclear, Brazil Gloria, Peru Grupo Gigante, Mexico Min. Esperanza, Chile Interoceanica, Chile Ind. Saltillo, Mexico Sanepar, Brazil Wembley, Brazil Coteminas, Brazil Empresas Carozzi, Chile M&G Polieste, Brazil Americel, Brazil TV Azteca, Mexico Skanska, Sweden Confab, Brazil Isagen, Colombia Amazonas Energ., Brazil Tecnisa, Brazil Tiendas CM, Mexico Autometal, Brazil Minera El Tesoro, Chile Edenor, Argentina Saga Falabella, Peru Itautec, Brazil CIE, Mexico Inepar, Brazil

*

Sector

Revenues

% Ch.

Food Retail Energy Energy Mining Mining Energy Retail Beverage Chemical Energy Food Retail Retail Retail Constr.

Energy Constr.

Mining Retail Energy Steel Energy Transport Energy Food Retail Mining Transport Manuf.

Water Textile Textile Food Chemical Tech Media Auto Manuf.

Energy Energy Constr.

Retail Auto Mining Energy Retail Tech Leisure Constr.

$1,103.1 $1,096.6 $1,081.4 $1,081.1 $1,078.0 $1,073.6 $1,071.4 $1,071.2 $1,070.6 $1,059.1 $1,055.8 $1,049.0 $1,047.0 $1,036.2 $1,034.6 $1,028.8 $1,019.4 $1,017.4 $1,009.7 $1,007.0 $1,005.4 $994.8 $977.6 $974.2 $967.4 $954.1 $944.0 $939.3 $939.0 $929.2 $928.9 $928.9 $927.1 $920.1 $919.3 $887.1 $874.6 $873.6 $871.7 $866.2 $859.4 $850.9 $841.1 $833.1 $827.8 $825.2 $822.7 $822.2 $822.1 $819.1

14.6 % -9.7 % -0.7 % -3.5 % -4.3 % 27.4 % -8.8 % -7.5 % 53.7 % -12.8 % -2.2 % 13.7 % 6.9 % 21.0 % 22.5 % 9.2 % 25.4 % -13.3 % 24.7 % 7.2 % -4.5 % 85.7 % -0.8 % 13.7 % -3.6 % 16.6 % 2.4 % -- % 14.2 % 3.7 % 4.6 % -40.9 % -40.9 % -10.7 % -6.6 % -10.9 % -6.5 % 4.8 % 43.6 % 13.1 % -5.8 % 0.2 % -8.6 % -11.6 % 11.9 % 52.2 % 24.6 % -12.8 % 0.5 % -4.3 %

Profits

% Ch.

$105.3 49.7 % $15.0 -73.5 % -$108.2 14.5 % $131.3 9.7 % $428.8 -11.3 % $292.4 58.0 % $78.3 601.0 % ---$33.7 -1,577.2 % $60.5 -56.9 % $85.3 -24.7 % $176.0 15.0 % $102.0 28.6 % $13.9 -11.5 % $51.2 34.0 % $33.9 -13.7 % $131.9 -21.1 % $120.5 -20.5 % $237.9 3.3 % $34.6 -5.5 % $450.4 1.8 % -$30.3 57.2 % $343.7 15.0 % $204.2 -42.4 % $163.5 328.6 % $72.5 -10.2 % $23.5 -67.8 % $203.4 -- % -$78.7 -267.3 % $51.6 92.1 % $132.8 63.3 % -$24.8 -2,507.8 % -$138.5 -10,753.8 % $38.0 -37.6 % -$35.7 -1,552.8 % $13.5 -92.4 % $182.6 2.0 % $17.0 -59.3 % $134.8 135.0 % $246.6 15.2 % -$333.2 57.8 % $77.0 -35.9 % --$98.1 19.0 % $272.7 30.1 % -$100.8 -445.9 % $53.7 3.4 % $23.2 235.7 % -$4.6 65.5 % -$3.2 -112.1 %

JULY-AUGUST 2012 LATIN TRADE

39

LATIN

500 LATIN AMERICA’S TOP 500 2011 figures in millions of US dollars Rank 2012 2011 451 373 452 454 453 432 454 471 455 -456 418 457 430 458 437 459 -460 439 461 474 462 464 463 --464 330 465 462 466 449 467 460 468 486 469 -470 -471 -472 493 473 -474 456 475 489 476 455 477 499 478 483 479 468 481 484 480 -482 475 483 480 484 -485 -486 470 487 467 488 -489 457 490 478 491 485 492 -493 -494 496 495 497 496 477 497 459 498 -499 -500 --

Company, Country Vulcabras, Brazil Concha y Toro, Chile Escelsa, Brazil Tegma, Brazil Quickfood, Argentina Grendene, Brazil Bio Pappel, Mexico Elecmetal, Chile Mirgor, Argentina Axtel, Mexico Aceros Arequipa, Peru Alsea, Mexico Atlas Schindler, Brazil Springs, Brazil Aché, Brazil Sao Martinho, Brazil ETB, Colombia Ideias Net, Brazil Milpo, Peru Sofasa, Colombia CEB, Brazil Solvay Indupa, Argentina EEB, Colombia Farm. Benavides, Mexico Eletrosul, Brazil Holcim Brasil Cia. Hering, Brazil Prod. Familia, Colombia Dimed, Brazil CPFL Geracao, Brazil Cresud, Argentina Enersul, Brazil Ledesma, Argentina Loma Negra, Argentina Edelnor, Peru Aguas Andinas, Chile Herdez, Mexico Luz del Sur, Peru Promigas, Colombia Totvs, Brazil EAAB, Colombia Endesa Costanera, Argentina Ideal, Mexico Corp. San Luis, Mexico Solla, Colombia Votorantim Metais, Brazil Diebold, USA Corp. Lindley, Peru Anhanguera, Brazil Alupar, Brazil

Total

*

Sector

Revenues

% Ch.

Textile Beverage Energy Transport Food Textile Paper Steel Auto Tech Steel Food Tech Textile Pharm.

Agri.

Tech Tech Mining Auto Energy Chemical Energy Health Energy Cement Textile Food Retail Energy Agri.

Energy Agri.

Cement Energy Water Food Energy Energy Tech Water Energy Constr.

Manuf.

Food Mining Tech Beverage Education Energy

$815.2 $810.7 $809.3 $804.7 $793.4 $790.4 $789.2 $786.3 $780.9 $776.4 $769.1 $764.9 $752.9 $750.5 $747.0 $740.0 $739.5 $739.4 $737.9 $735.7 $734.4 $733.7 $731.8 $726.5 $725.2 $722.3 $721.4 $719.7 $717.4 $712.1 $712.1 $711.5 $706.5 $700.8 $698.8 $697.5 $695.3 $686.8 $686.0 $681.9 $681.4 $675.6 $672.0 $670.6 $670.6 $669.6 $662.8 $657.2 $656.9 $652.8

-30.5 % 1.5 % -10.3 % 14.9 % 72.7 % -17.9 % -13.9 % -10.4 % 83.8 % -10.0 % 10.6 % 5.6 % -4.9 % -46.0 % -1.7 % -10.0 % -3.5 % 14.5 % 25.8 % 17.2 % -33.5 % 18.6 % 50.2 % -6.9 % 13.3 % -8.8 % 18.6 % 10.1 % 0.4 % 9.5 % 35.9 % 2.5 % 14.6 % 19.7 % 9.8 % -0.7 % -3.2 % 11.6 % -11.5 % 0.6 % 5.3 % 22.3 % 61.5 % 8.7 % 9.7 % -2.9 % -14.0 % 19.6 % 9.0 % -18.1 %

$2,444,554

Sources: Economatica, individual companies. © Copyright Latin Business Chronicle/Latin Trade.

40

LATIN TRADE JULY-AUGUST 2012

Profits

% Ch.

-$168.5 $96.8 $55.4 $51.9 -$35.6 $162.8 -$5.2 $59.5 $18.8 -$146.5 $65.7 $14.6 $127.8 -$218.5 $203.0 $76.4 $110.8 -$4.6 $134.3 -$21.9 $14.0 -$11.8 $157.1 $14.9 $55.8 $19.8 $158.5 $42.2 $19.9 $376.5 $34.1 $80.9 $48.6 $95.7 $76.8 $213.8 $49.1 $111.3 $96.0 $90.0 $90.2 -$39.5 -$29.4 $61.4 $2.1 -$66.3 -$17.0 $22.5 $238.3

-332.1 % 8.2 % -48.3 % -23.0 % -595.1 % -13.2 % -116.6 % -58.1 % 145.1 % -489.1 % 22.5 % 19.3 % 7.4 % -1,554.7 % 1.7 % -15.9 % 74.2 % 75.7 % 3.6 % -175.4 % 733.3 % 41.1 % -72.5 % 111.6 % 37.6 % -64.6 % 24.6 % 28.2 % 7.7 % 169.6 % -9.2 % 57.9 % 22.2 % 103.3 % 7.6 % -3.6 % -25.1 % 6.4 % -30.7 % 8.8 % -16.4 % -271.7 % -1,007.4 % 120.2 % -86.9 % -10.2 % -26.8 % -69.5 % -11.5 %

8.3 % $195,679

-8.9 %

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PETROBRAS STILL ON TOP

BY THIERRY OGIER

Still, Petrobras still has a pretty good name in the market. Its brand is the only one from Latin American featured on the Top 100 chart issued annually by the Millward Brown consultancy. It also ranks as the fifth most valuable brand in the global oil industry.

While most of its assets are offshore, Petrobras’ physical presence on land is also an imposing one. Wherever you go in downtown Rio de Janeiro, the former Brazilian capital where the company was founded almost 60 years ago, Petrobras seems to be spreading its tentacles.

Next to the old company headquarters in Avenida da República do Chile, two new office towers are being completed. And Petrobras has just announced it intends to buy the nearby police headquarters to expand still further.

FINANCIAL AND INDUSTRIAL CHALLENGES

Platform P-56

S

ão Paulo - So, it is Petrobras time again. The undisputed champion in Latin America. But how long will the reign last? Brazil’s state-controlled energy giant is boosted by its oil business and by its findings in ultra-deep waters.

But the now-famous “pre-salt” oil represents a formidable challenge: it has to be extracted from great depths, under the ocean floor and a thick layer of salt.

This is no easy task. The company has to get enough rigs and platforms in place, and also invest large sums in a rather turbulent environment. Meanwhile, its oil output has been stagnating and gas prices have remained under government control. Governance issues have weighed on financial performance, and investors have severely punished the Petrobras stock. In mid-May, Petrobras’ market value ($123.8 billion) was briefly overtaken by Colombia’s Ecopetrol ($126.7 billion), according to Economatica, a São Paulo based consultancy.

A humbling experience … Between its peak in December 2009 and late May, Petrobras stock sank by more than 50 percent.

The profitability rate of the company has also declined. Economatica says the “return on equity of 9.7 percent during the first quarter of 2012 had not been that low since the last quar-

42

LATIN TRADE JULY-AUGUST 2012

ter of 1999.” The main issue is that government-set fuel prices remained artificially stable while crude oil prices were soaring. “This hurts the company’s margin,” as Petrobras still needs to import refined gas, says Eric Scott, oil and gas analyst at the SLW brokerage firm in São Paulo. Last year, Petrobras sales increased by 6 percent to 244.2 billion reais, but its profits fell by 5 percent to 33.3 billion reais (in local currency terms– IFRS standard).

PETROBRAS IS POISED TO PLAY A KEY ROLE IN EXPLORING THIS NEW OIL FRONTIER SOLID BRAND “The long term outlook is positive,” says Scott.

“But in the past two or three years, they have not hit their output targets.” Last year, Petrobras produced 2 million barrels per day on average. Worse, the company is unlikely to achieve its own target this year either, as production from the mature fields in the Campos basins is declining and new fields have not yet come on stream.

The “pre-salt” hurdle is enormous and some are even questioning whether Petrobras is up to the challenge. “The pre-salt will be a watershed. The investment volume is so huge, the managerial capacity to deal with such degree of complexity is so great, that the future of the company depends on how it is handled,” says Eduardo Bernini, from the Tempo Giusto energy consultancy in São Paulo. Some 100 billion barrels of crude oil may be trapped 6,000 meters below the sea bed, but pumping it up poses a Herculean task.

Petrobras is poised to play a key role in exploring this new oil frontier, but it will have to invest accordingly and acquire the right equipment in time– not a foregone conclusion. Its 2012-2016 investment plan was unveiled last June and set at $236.5 billion.

Take drills, oil rigs and platforms. Dozens of them are necessary to pump the oil to the surface, and then onto tankers. But to avoid ‘Dutch disease’ and the specter of deindustria-lization, the government has imposed stiff local content regulations (65 percent on average) and has vowed to revive local shipyards. Even if Petrobras cannot be held accountable for the strategic choices made by the government, its main shareholder, it has to suffer the consequences.

“Sometimes it does not only depend on Petrobras itself... Whether it will be able to get all the sophisticated equipment it needs –such as drills and floating platforms– in time for its production in high seas, is an open question,” says SLW’s Scott.

PHOTOS: COURTESY OF AGENCIA PETROBRAS DE NOTICIAS

BRAZIL

BRAZIL

Above: Transpetro receives João Candido, the first oil tanker built in Northeastern Brazil.

Right: Welcoming ceremony of oil ship Celso Furtado.

UPHILL BATTLE So far, the attempted revival of Brazilian shipyards has fallen flat. The João Candido ship that was built in the Estaleiro Atlântico Sul (South Atlantic shipyard, or EAS) was finally launched last May after a two-year delay. It had been launched in 2010 by former president Luiz Inacio Lula da Silva, but the ship had to go back to the shipyard for repairs immediately afterwards.

The episode highlighted two factors that may hamper Petrobras’ grand extraction plans: skills shortages and slack productivity. (To make things worse, Samsung, which was operating EAS, has since left the consortium.) A long list of ships and FPSOs will also suffer delays, according to Emerson Leite and André Sobreira from Credit Suisse.

Maria das Graças Foster, the former company’s gas and energy director, was promoted to Petrobras’ top job by President Dilma Rou-sseff earlier this year. She will have to tackle all these challenges and one more: the output target of 6.4 million barrels of oil equivalent per day by 2020.

Regardless of her competence, government interference in fuel prices and local content regulations represent two key issues that seem unlikely to be resolved in the short term. For one, rising fuel prices could trigger inflation, which is not welcome when the central bank lowers interest rates. Secondly, the government has vowed to avoid deindustrialization and intends to do all it can to prop up the local industrial base.

Until these issues are addressed, Petrobras will continue to perform under par. Adriano

Pires, a former director of the National Petroleum Agency turned consultant, has the final world: “The best business in the world is a

PETROBRAS IS POISED TO PLAY A KEY ROLE IN EXPLORING THIS NEW OIL FRONTIER, BUT IT WILL HAVE TO INVEST ACCORDINGLY AND ACQUIRE THE RIGHT EQUIPMENT IN TIME- NOT A FOREGONE CONCLUSION.

properly managed oil company. The second best business in the world is a poorly managed oil company. And the third one is Petrobras”.

JULY-AUGUST 2012 LATIN TRADE

43

A graduate in chemical engineering from the Federal Fluminense University (UFF), she holds a master’s degree in nuclear engineering from the Federal University of Rio de Janeiro (COPPE/UFRJ) and an MBA from the Getulio Vargas Foundation.

Foster, 58, is married for the third time and has two children. She credits support from her mother for making it easier for her to climb the corporate ladder at Petrobras.

Maria das Graças Foster, delivered her address at the opening session of the Rio+20 Sustainability Forum

PETROBRAS’ “IRON LADY” IN CHARGE MARIA DAS GRAÇAS FOSTER,The woman at the helm of Latin America’s largest company

BY JOACHIM BAMRUD

F

orbes calls her “The Iron Lady of Oil”.

As the only female CEO in a line-up of the world’s top ten oil companies (by 2011 revenues), Maria das Graças Foster is building a reputation as a driven leader at Brazil’s state oil giant Petrobras –the largest company on the Latin 500. But even before her appointment in February, Foster was one of the most prominent businesswomen in Latin America.

As director of oil and gas for Petrobras since 2007, she had already played a key role at the company. She was also the only woman on the seven-member executive board.

“Prejudice against women in the world of work is synonymous with professional weakness,” Foster told Brazilian newspaper O Globo in an interview last year. “I have no prejudice against men.” She also told the newspaper she is against quotas for women in the labor market.

PETROBRAS VETERAN The CEO job caps an impressive career for Foster, who started as an intern at Petrobras and gradually worked her way up through the ranks.

Before becoming director of the gas and

44

LATIN TRADE JULY-AUGUST 2012

energy business area in September 2007, she held various key positions, including president of Petrobras Química SA (Petroquisa) and executive manager for Petrochemicals and Fertilizers, connected to Petrobras’ Downstream Board. She also has private-sector experience, having served on the board of Braskem, Latin America’s biggest petrochemicals maker.

But perhaps one of the key factors that landed her the CEO job was her professional relationship with Dilma Rousseff, Brazil’s current president. The two worked together in 1998 and when Rousseff became Brazil’s Mines and Energy Minister in 2003, she appointed Foster as the ministry’s Secretary for Oil, Natural Gas, and Renewable Fuels, according to the BBC. Her rise in Petrobras is also impressive in light of Latin America’s low social mobility ratings. Foster grew up in a poor and violent slum in Rio de Janeiro.

“I lived in the Complexo do Alemão for 12 years, lived with domestic violence in childhood and faced difficulties in life,” she told O Globo. “I have always worked to help support my mother and my children and pay for my stu-dies. Willpower is everything for me. I was never afraid of work.”

IMPROVING PETROBRAS Many energy executives and investors are expecting a bright future for Petrobras under Graças Foster’s direction.

The company reached new heights under its previous CEO, Jose Sergio Gabrielli, including the discovery of pre-salt oil reserves and a record $70 billion share offering. But his tenure was seen as highly political. The administration of former President Luiz Inacio Lula da Silva was seen to pressure him, and his relationship with Rousseff grew tense after she became president in January of last year.

Experts say Foster’s technical expertise and her close relations with Rousseff may lead to more efficient management. Before joining Petrobras as CFO in 2003, Gabrielli was best known as a prominent academic and researcher.

By contrast, Foster has deep experience as an energy professional.

Like Rousseff, Foster has a reputation as a hard-driving boss who demands results and sticks to deadlines. She starts her day at 7:30 a.m. But she is not a typical office manager and doesn’t stand on ceremony. Often she will don a jumpsuit, gloves and protective glasses and personally inspect building sites.

Her loyalty to Petrobras is seen almost as a “religious devotion,” O Globo says. “I would die for Petrobras,” she told business magazine Exame in 2008.

–With additional reporting from Latin Business Chronicle

PHOTO: COURTESY OF AGENCIA PETROBRAS DE NOTICIAS

GRAÇAS FOSTER IS KNOWN AS A HARDDRIVING BOSS WHO DEMANDS RESULTS AND STICKS TO DEADLINES.

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PETROBRAS STRATEGIES ABROAD

BY PETER HOWARD WERTHEIM

RIO DE JANEIRO – Active in 27 foreign countries in five continents, Petrobras has offices in New York, London, Tokyo and Beijing and is currently exploring in the Gulf of Mexico, the west coast of Africa,

We design supply chain solutions…

46

Latin America and Australia.

Of its total Brazilian production last May, 1,993,222 barrels per day were oil, while natural gas production reached 56.163 million cubic meters per day. Abroad, the company’s average oil production reached 151,077 barrels per day and its natural gas production reached 17.4 million cubic meters per day. These figures reflect the fact that since 2007, when Petrobras announced massive pre-salt oil and gas discoveries, the company has drastically reduced its foreign investment.

In the Americas, Petrobras is present in Argentina, Bolivia, Chile, Colombia, Curaçao, the United States, Mexico, Paraguay, Peru, Uruguay and Venezuela. Petrobras produced 89,000 barrels per day of oil and 16.5 million

involving every supplier, every customer…

LATIN TRADE JULY-AUGUST 2012

and every other supply chain partner…

cubic meters per day of natural gas in 2011 from eight of these territories.

“In Argentina, Bolivia, Colombia, Peru, Uruguay and Venezuela Petrobras is involved in 75 exploration and production contracts, with the greatest concentration in Argentina and Colombia, in onshore areas. Of this total, we are operators for 39 contracts, more than half of which are in exploration,” Jorge Luiz Zelada, Petrobras’ international director, told Latin Trade.

“In Argentina, Petrobras production is 50 percent barrels of oil equivalent per day and 50 percent gas. In Peru and Colombia, we currently produce oil, though we have exploration areas focused on onshore and offshore gas production,” he said.

ADVANTAGES Petrobras generates just 6 percent of its daily production from international projects in the Gulf of Mexico, West Africa, South America, and Australia. The benefit of such international ventures comes through geological and technical knowledge gained from its partnerships with other companies, added Zelada.

then quantify the value…

execute the plan…

PHOTO: COURTESY OF AGENCIA PETROBRAS DE NOTICIAS

BRAZIL

lease the space, staff the facilities…

BRAZIL

Petrobras’ investment program, designed to reach the growth targets of its 2012-2016 business plan, adds up to $236.5 billion. Only $6 billion is destined for overseas activities, with a focus on the United States, Latin America and West Africa.

The company expects to produce 388,000 barrels per day abroad until 2020, Pedro Augusto Bastos, general manager for business development of Petrobras’ International Area told Latin Trade.

Jose Formigli, the new exploration and production director, recently told journalists that Petrobras is more of an energy conglomerate than an oil company. In addition to being the country’s dominant petroleum player, it has the eighth largest installed capacity in electric power generation in Brazil, and accounts for 22 percent of ethanol distribution, plus 100 percent of the biodiesel market.

“Clearly, the more intensely Petrobras pursues its strategy to consolidate its position as an energy company, with a strong participation in the biofuel business, the more crucial and influential its actions will be in the energy market,” he said.

GULF OF MEXICO On Feb. 25, Petrobras started production at its Cascade field in the Gulf of Mexico, using FPSO BW Pioneer –the first floating production, storage and offloading system in the Gulf.

The FPSO is connected to Cascade Well No. 4.

The well lies 155 miles from the Louisiana Gulf Coast, and as it is 1.5 miles below the surface, it’s cheaper to use shuttle tankers to get the oil ashore, as opposed to a pipeline. The vessel is capable of processing 80,000 barrels of oil and 17 million cubic feet of gas daily. The gas comes ashore via a pipeline.

Last April Brazilian President Dilma Rousseff and the new Petrobras president Maria das Graças Foster (a 32-year Petrobras veteran) visited the United States and strengthened ties towards future oil and gas cooperation.

President Obama made it clear the U.S. wants to invest in Brazil’s oil sector, particularly the pre-salt area. At present, the pre-salt is producing 180,000 bpd through long duration tests.

At a seminar last April, Investing in África: Opportunities, Challenges and Instruments for Economic Cooperation, in Rio de Janeiro,

Foster said that Africa is an “exceptional new market and a great opportunity not only for Petrobras but for other companies”. Foster highlighted success in petroleum operations, and important discoveries in Ghana and Uganda.

Petrobras is also active in other African countries, like Nigeria, and invests in biofuels in Mozambique. At present, it explores and produces in offshore Angola, Benin, Gabon, Libya, Namibia, Nigeria and Tanzania. In Nigeria, Petrobras produces around 58,000 barrels per day. In Angola produces 2,000 barrels per day and also is involved in biofuels and importation of natural gas.

Foster pointed out that “there is great geological similarity between the existing accumulations offshore Brazil with the accumulations being discovered in West Africa”.

Petrobras geologists believe these similarities came about when the single southern subcontinent, dubbed Gondwana, began to split into Africa and South America. The geological structures in the pre-salt generally have remained unchanged since this separation started some 165 million years ago, experts say.

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JULY-AUGUST 2012 LATIN TRADE

47

CODELCO A State Giant On The Cusp Of Change

BY GIDEON LONG

Thomas Keller

SANTIAGO - Thomas Keller could hardly have chosen a more challenging moment to take over as CEO of Chile’s Codelco.

The 55-year-old stepped into the job on June 1 after his predecessor Diego Hernandez quit due to tensions with the board. Keller’s first

48

LATIN TRADE JULY-AUGUST 2012

task is to oversee talks with Anglo American over the two companies’ disputed ownership of Anglo American Sur (AAS). The bitter row has been rumbling on for months, and the stakes are high: The assets in question are worth $22 billion. They include the Los Bronces mine in

central Chile, which has the potential to be the fifth largest copper mine in the world, and two untapped copper deposits high in the Andes mountains.

But that is not Keller’s only concern. Codelco, which is state owned, has embarked on an ambitious expansion plan at all its main divisions, designed to consolidate its position as the world’s largest copper mining company.

It is turning Chuquicamata, the biggest open pit copper mine in the world, into an underground operation. After a century of exploitation, this huge hole in the Atacama Desert, known affectionately as “Chuqui”, is proving ever less productive and needs a dramatic facelift. The upgrade won’t be complete until 2019.

A thousand kilometers further south, Codelco is starting the second phase of expansion at its Andina mine. Once completed –it is currently only at the feasibility stage– the mine is forecast to produce more than 600,000 tonnes of copper a year, well over twice its current total. It will become Codelco’s flagship project, with a working life extended to at least 2060, and it might well eclipse Escondida, in northern Chile, to become the most productive copper mine in the world.

Further south again, Codelco owns El Teniente, the world’s largest underground copper mine. It has been in production since 1904 and, like Chuqui, needs an overhaul. So Codelco is tunneling a second, lower level to the mine to extend its life and increase production.

In addition, the company will start production at a new mine, Ministro Hales, in the second half of next year. When it hits working capacity in 2014 it will produce 160,000 tonnes of refined copper and 300 tonnes of silver annually.

All of this, the company hopes, will cement Codelco’s leadership in the industry. It already produces 11 percent of the world’s copper and sits on millions of tonnes of reserves for future use.

Keller, the son of German immigrants, says Codelco also wants to expand outside Chile. It is reaching out to partners across Latin Ameri-

PHOTO: COURTESY OF CODELCO

CHILE

CHILE

PHOTO: BLOOMBERG VIA GETTY IMAGES

FOR NOW OUR PRINCIPAL FOCUS WILL CONTINUE TO BE LARGE COPPER DEPOSITS, BUT WE HAVEN’T RULED OUT INVESTMENT IN MEDIUM-SIZED MINES OR IN OTHER METALS

ca with the aim of tapping new deposits.

“The most significant progress we’ve made so far has been in Brazil and Ecuador, but in the medium term we plan to expand into Colombia and Mexico too,” he told Latin Trade.

“For now our principal focus will continue to be large copper deposits, but we haven’t ruled out investment in medium-sized mines or in other metals.”

The outcome of the dispute with Anglo could have major implications not only for Codelco but for investment in mining across Chile, which produces a third of the world’s copper.

The row started last October when Codelco said it would exercise a long-standing option to buy a 49 percent stake in AAS, and secured a $6.75 billion loan from Japan’s Mitsui to pay for it. But Anglo struck back, selling a 24.5 percent stake of AAS to Japanese trading house Mitsubishi and telling Codelco it would have to settle for a smaller share. Negotiations were still underway when this edition went to print.

Some observers have suggested Codelco was naïve to reveal its hand to Anglo as early as October, a charge Keller categorically refutes.

“Anyone who thinks that a deal like that can be done in secret doesn’t understand how the markets work,” he said. “Both Codelco and Mitsui were obliged to disclose the fact they’d signed a financing contract. What’s more,

Codelco was about to issue $1.15 billion in bonds, and failing to reveal that to the market would have damaged the trust we have with our bondholders.”

Last year, Codelco made $7.03 billion for the Chilean state, an increase of 21.2 percent from 2010. It was the third best result in its history. If it were a private company and paid tax on its earnings, it would have made a net profit of $5.25 billion, making it the most lucrative company in the country.

But that 21.2 percent gain was due mostly to lofty copper prices. Output increased only slightly, although at 1.735 million tonnes in 2011, it was still the best result in the company’s 36-year history. If world (and Chinese) economic growth slows in 2013 and the copper price drops, so will Codelco’s earnings.

With that in mind, the firm is on the lookout for new opportunities. Keller said that with the number of attractive exploration projects diminishing by the year, Codelco has not ruled out aquisitions, although he noted the company traditionally has shied away from them.

Like most copper miners, Codelco is suffering declining ore grades, which makes every tonne of copper more expensive to produce.

It lost another 22,000 tonnes to industrial action, and is likely to face further union combativeness in the future, particularly from its army of subcontracted workers, who are look-

ing for many of the benefits the company’s own employees enjoy.

Labor shortages are another potential hazard in the near term. Chile is operating at near full employment and many mining companies say they are struggling to find the skilled workers they need.

And, energy shortfalls are another issue that Keller will have to face. With virtually no oil or gas of its own, Chile has a chronic energy problem that is likely to get worse before it gets better. Keller says Codelco has signed a series of long-term contracts with suppliers to ensure that its mines receive the electricity they need to maintain uninterrupted output and expand as planned.

“We´ve guaranteed the supply of energy for our current operations and we have plans in place to meet the needs of our (future) operations whenever necessary”, Keller told Latin Trade. “Codelco has taken measures to ensure that none of its projects experiences delays due to a lack of energy”.

If there is one issue Keller won’t have to face, it’s privatisation. While there have been calls in the past for the Chilean state to sell off at least part of Codelco to make it more competitive, the Anglo dispute has turned local opinion, and even fueled calls for resource nationalization. The current mood in Chile, which has witnessed a wave of social unrest over the past year, is by no means conducive to privatisation.

“The ownership of the company is not an issue for the administrators but for the owners (i.e the Chilean state),” the executive said. “So it is not for us to comment on it. What I can say is that the current government has been very clear in saying that a change in Codelco’s ownership doesn´t figure into its plans.”

Codelco, then, will remain in state hands, just as socialist President Salvador Allende envisaged when he nationalized the industry back in 1971. Chileans refer to copper as “Chile’s salary” and they see Codelco as their main breadwinner. As things stand, they are not about to hand over this most quintisentially Chilean company to the private sector.

JULY-AUGUST 2012 LATIN TRADE

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Uchucchacua silver mine, in the Peruvian Andes

THERE IS NO STOPPING

BUENAVENTURA When Roque Benavides, CEO of Compañía Minera Buenaventura, Peru’s largest precious metals miner says, “We are a company on the move”, it’s easy to discern a tinge of pride in his voice.

After all, his company has brought four projects online in the last two years. That’s no easy feat for a mining company in Peru, where simmering social conflicts pose a constant threat to newly proposed projects as well as extraction operations that are already up and running.

A recent spate of disputes between mining companies and local communities include protests over pollution, water shortages and employee benefits and wages.

“Despite this context, Buenaventura is not

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only advancing projects but also increasing its exploration thanks to its favorable exploratory policies, reserves and relationship with the communities,” said Hector Collantes, mining analyst at Banco de Credito del Peru, the country’s largest bank.

Indeed, Buenaventura— which is engaged in the mining, processing, development and exploration of gold, silver and other metals— has been busy of late. Last year, Buenaventura initiated operations at its gold and silver openpit mine Coimolache, which is part of the Tantahuatay project, in which Buenaventura holds a 40 percent stake. And in 2010, Buenaventura brought online La Zanja, an open-pit gold and silver mine owned by Buenaventura (53 percent) and U.S.-based Newmont Mining (47 percent), after years of delays.

This year, Buenaventura is scheduled to start operations at its polymetallic project Mallay and its gold and silver mine, Breapampa.

Buenaventura currently operates 10 mines in

BY LISA K. WING

Peru and holds a minority stake of 43 percent in Yanacocha, one of the largest gold mines in Latin America, as well as a 19 percent stake in Cerro Verde, one of Peru’s most important copper producers. “It’s important to note that mining projects in Peru are getting developed— that there aren’t just confrontations,” says Benavides. “We have been able to launch four projects in the last 18 to 24 months, which goes to show that there are many (investment) opportunities in Peru.”

In addition to new projects, Buenaventura is looking to boost its current operations by preparing for expansions at La Zanja and its polymetallic project El Brocal, and also by building a manganese sulfate plant at Uchucchacua.

“Buenaventura’s continued investments, the diversification of their investments in projects that prioritize gold and copper, and high commodity prices have generated positive results,” said Pedro Martinez, President of Peru’s National Society of Mining, Petroleum and Energy.

PHOTOS: COURTESY OF BUENAVENTURA

PERU

PERU

WE WILL CONTINUE TO INVEST APPROPRIATELY IN WHAT WE KNOW BEST: PRECIOUS METALS Last year, the company reported revenues of $1.6 billion, a 40 percent jump from the previous year, and 30 percent growth in net income to $860 million. Although external factors like Peru’s growing economy and the increased global demand for gold (due to a weakened U.S. dollar and inflation risk) have lead to greater profitability, Buenaventura’s strong balance sheet— namely its strong cash position and broad portfolio of mining projects— has contributed greatly to its stellar performance, according to industry analysts.

“Buenaventura’s investment in Yanacocha, which is an important player in gold trading worldwide and a big generator of dividends, is one of its main strengths,” said Standard & Poor’s mining analyst Diego Ocampo. And with the price of gold expected to reach $2,000 an ounce by the end of 2012— Buenaventura expects to produce 1.05 million ounces of gold this year— the company’s profitability should remain stable well beyond 2012, he added.

COMMUNITY RELATIONS Economic factors aside, Benavides says the company’s relations with the communities where Buenaventura operates has been, and continues to be, a primary force behind the company’s enviable track record. Over the past few years, the company has channeled significant resources into infrastructure development, as well as social and environmental programs in the areas where it operates. These include water use, fish farming and the construction of roads and dams.

Despite these investments and the additional revenues that are channeled into regional governments via a 30 percent mining levy, Buenaventura’s projects— and that of other mining companies in the country— continue to encounter resistance from local communities. Illegal miners have also joined the protests, demanding that the government allow them to continue extracting minerals without a license.

The most recent brawl involves the stalled Minas Conga gold project. With a price tag of $4.8 billion, it is the largest private sector

investment in Peru.

According to Aldo Reggiardo, a partner at the Payet, Rey, Cauvi law firm who specializes in project financing and mining, failure to secure a green light from the government and local communities to move ahead with operations at the mine could have serious implications. “Conga could become a breaking point for the future development of mining projects in general, and mineral projects in particular, in Peru,” he said. “Undoubtedly, if the project is developed, it would erase existing fears regarding mining sector investments” This is particularly relevant in a country where mining makes up 60 percent of the country’s GDP and where the government is expecting well over $40 billion in mining investments over the next decade or so. Peru is the world’s top producer of silver, the second largest producer of copper and zinc, and the sixth largest producer of gold.

Work at Minas Conga –which is being developed by Yanacocha, where U.S.-based Newmont holds a majority stake– was suspended late last year after villagers protested over concerns the mine would dry up water supplies.

In April, the government laid down a series of measures the company must implement before the project can move forward. Recommended by international consultants; they include increasing water capacity, establishing a fund for social programs and providing large-scale employment.

With the slogan, “First the water, then the mine,” the company aims to show the local community its willingness to solve the waterrelated issues at hand.

“We cannot, and do not want to compete with farmers for the water, but instead work together to improve the current situation,” Benavides said. “We want to show that by bringing together agriculture and mining investments we can generate additional resources

to maintain water year round.”

As of print, Yanacocha was studying the consultants’ recommendations. “We hope to come up with a proposal that benefits the community and that is technically viable for us, so that the project remains profitable,” said Benavides. “Indeed, there is a possibility that the project might not proceed.”

LOOKING AHEAD Despite upcoming challenges like Conga, Benavides said Buenaventura will continue with its organic growth through exploration, improved operations and processes, and by looking at M&A opportunities. “We will continue to invest appropriately in what we know best: precious metals. As they say, a shoemaker should stick to making shoes.”

This strategy includes eyeing investment opportunities in Chile, Mexico and Colombia as a way to diversify the company’s portfolio and spread risk. “Our policy to diversify geographically has been in place for many years,” Benavides said. “Our exposure is still very concentrated in Peru because when we have looked outside for new opportunities, we have found more attractive projects in Peru— it is a country we know well and one that has a favorable investment environment.”

“We will continue to invest with caution,” he added, “searching for growth opportunities that add value to the company, as we are a marketoriented company. Our strong cash position allows us to consider major projects.”

Hopefully these investments will include Minas Conga— for the sake of Buenaventura and for the future of the country’s multibillion-dollar extractive industry.

JULY-AUGUST 2012 LATIN TRADE

51

LATIN TRADE SPECIAL SUPPLEMENT

AIR ALLIANCES

OFFER MULTIPLE BENEFITS

B

etter service, easier travel connections and broader reward programs are among the key benefits that airline alliances offer to Latin America’s business travelers. In turn, many airlines have embraced these relationships, which can strengthen customer loyalty, attract new customers and allow them to compete more effectively in the global marketplace.

For example, Avianca, TACA Airlines and Copa Airlines joined the Star Alliance network in June, adding 50 new airports to the network. That means passengers will now be able to connect seamlessly through the Copa Airlines hubs in Panama City and Bogota, as well as the Avianca, TACA Airlines hubs in Bogota, San Salvador (El Salvador), Lima and San Jose (Costa Rica).

“The addition of these quality aviation groups strengthens our presence in the rapidly growing Latin American market,” said Mark Schwab, CEO, Star Alliance, which is the largest global airline partnership. “With Avianca, TACA Airlines and Copa Airlines, our customers now enjoy increased con-

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JULY-AUGUST 2012

nectivity across the Americas by connecting through five new Star Alliance hubs right in the middle of the American continent.”

New members Avianca and TACA, subsidiaries of AviancaTaca Holding S.A., as well as Panama-based Copa Airlines, can now offer frequent travelers the ability to earn and redeem miles across airlines, the possibility of upgrades, access to VIP lounges worldwide, priority check in, and special air fares. “The integration of Avianca and TACA Airlines into the Star Alliance network is a milestone in the development of our own merged organization and the quality of our travel services,” said Fabio Villegas, CEO of AviancaTaca Holding.

Joining Star Alliance is an accomplishment for Copa Airlines as well, according to CEO Pedro Heilbron. “Now, Copa will provide frequent flyers around the world with more benefits and travel options throughout the Latin American region, making it easier for them to connect through Tocumen Airport and visit our country,” he said.

One of the Star Alliance’s largest members

is LATAM Airlines Group, created by the recent merger of Chile’s LAN Airlines and Brazil’s TAM Airlines. “The creation of this group of airlines is an opportunity to take South America to the world and to allow us to position ourselves to operate in an increasingly competitive environment due to the continuing consolidation of the global airline industry,” said Enrique Cueto, executive vice president-CEO of LATAM Airlines Group.

Among the benefits that passengers of both LAN and TAM will see over time are increased connectivity, improved routes and frequencies, and reduced connection times, he added. A consolidated frequent flyer program offers benefits like access to the VIP lounges of both airlines, preferential check-in and boarding and priority baggage service, in addition to miles and other rewards.

Being able to share frequent flyer miles and other rewards from multiple airlines is one of the biggest tangible benefits for travelers who want to take advantage of these alliances. That can include special incentives and offers for Latin American travelers – even from airlines

©ISTOCKPHOTO.COM/CENERI

TO TRAVELERS

Avianca, TACA Airlines and Copa Airlines have joined the Star Alliance network.

Avianca, TACA Airlines and Copa Airlines have joined Star Alliance, the world’s largest airline alliance with 27 member airlines. The addition of these three prestigious Latin American airlines is wonderful news for all your customers.

The combined network of the two airline groups provides your customers with access to a large range of new destinations and flights connecting through the Avianca, TACA Airlines and Copa Airlines hubs. Which means frequent travellers now have easy access to Central America, the Caribbean and the northern and western regions of South America, as well as additional direct connections between Latin America and cities in Europe.

At the same time, existing Avianca, TACA Airlines and Copa Airlines customers will be able to access the Star Alliance vast global network, offering a seamless connection to over 1,300 destinations worldwide, and enjoy the very best frequent flyer benefits such as lounge access and priority treatment across all our member airlines.

Plus, it’s never been easier to earn and burn miles on just one card.

Visit www.staralliance.com to find out more.

half the world away. For instance another of the “big three” air alliances – oneworld® – recently held a “double miles” promotion to cardholders of all its member airlines to mark the addition of airberlin, Germany’s second biggest airline, along with its group member Austria’s NIKI. That’s just one of the steps oneworld has taken in its quest to be the airline alliance of choice for the world’s frequent international travelers. Its global members include aviations leader like American Airlines, British Airways, Cathay Pacific, Iberia, LAN, with Malaysian Airlines on track to join later in 2012. Mexicana is an inactive member of the alliance.

SkyTeam, a global airline alliance whose members include by Aeroméxico, Air France and Delta Air Lines, announced initiatives to enrich the traveler’s experience following a June board meeting in Beijing. “As an alliance we can and must add value to our members’ businesses,” said Michael Wisbrun, managing director. “We do that by focusing on three clear priority areas; enriching our customer proposition, looking for new opportunities to expand and strengthen our global network, and finding synergies for our members.”

In 2012, SkyTeam rolled-out SkyPriority, a series of airport initiatives designed to help frequent flyers travel through the airport more quickly, from checking in, to security, boarding and picking up their bags. “We like to call it the red carpet treatment for our top customers,” said Wisbrun.

Another initiative is SkyTransfer, which focuses on seamless of passengers and their baggage from one member airline to another.With its SkyPort program, the alliance is also increasing the number of shared locations worldwide. In addition, Aerolíneas Argentinas is scheduled to join the alliance this August, strengthening the SkyTeam network in the southern hemisphere.

- Richard Westlund

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©ISTOCKPHOTO.COM/CENERI

LATIN TRADE SPECIAL SUPPLEMENT

MEXICO

GRUPO

BIMBO It all starts with understanding the consumer

Daniel Servitje, CEO Grupo Bimbo

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LATIN TRADE JULY-AUGUST 2012

PHOTOS: COURTESY OF GRUPO BIMBO

BY ELIDA BUSTOS

MEXICO

HOW DO YOU WIN A NEW MARKET IN THE BREAD-MAKING SECTOR, WHICH AT FIRST GLANCE APPEARS TO BE AN AREA CLOSELY TIED TO THE UNIQUE CHARACTER OF A COUNTRY? Bread is one of the products that make up part of the basic food basket of the majority of a population, so we think the challenge lies in finding a way to satisfy the palates of consumers, adapting our products to their tastes and trends, both at the local and world levels.

Some products can be successful in several markets. It all starts with understanding the consumer.

An ad from the ‘50s.

B

imbo S.A. was founded in Mexico in 1945, just as the world was starting to emerge from World War II. Today it boasts operations in 19 countries (including China), with 153 production plants (42 in Mexico, 111 abroad), 103 registered trademarks, and 127,000 full-time employees.

According to Latin Trade’s Latin 500 rankings, in 2011 Bimbo posted revenue of $9,586 billion and profits of $382.1 million.

Grupo Bimbo’s management sees 2011 as a year of great transformation, led by three strategic acquisitions to enhance its international position: it bought Sara Lee North American Fresh Bakery in the United States, and Sara Lee’s businesses in Spain and Portugal, as well as the traditional Argentine company, Fargo.

Daniel Servitje is CEO of Grupo Bimbo and a member of its founding family. In conversation with Latin Trade he explains how the family firm has arrived at the kitchen table of millions of people and become the successful multilatina it is today.

WHEN DID THE COMPANY DECIDE TO TAKE ITS OPERATIONS INTO THE INTERNATIONAL MARKET? The international expansion of Grupo Bimbo began in the 1980s, when we started exporting our products to the United States, to the Hispanic population of Mexican origin.Then we entered Latin America, which presents different challenges.

HOW DO YOU STUDY LOCAL TASTES IN DIFFERENT MARKETS BEFORE LAUNCHING NEW PRODUCTS? We consider global trends in nutrition, local tastes, as well as consumer preferences in general, through a series of studies. These include anthropology, population, preferences, which enables us to concentrate on offering alternatives to their daily needs.

HOW MUCH TIME DO YOU NEED TO DESIGN A NEW PRODUCT? It depends on the product, but generally it takes six months to one year. However, projects that involve new production processes can lengthen the time to two years or more.

WHAT IS THE SECRET OF SUCCESS FOR A NEW PRODUCT IN A FOREIGN MARKET? Mainly, it’s whatever pleases the consumer… good flavor that meets high standards of quality as well as expectations. One important factor is that it must represent a value offer for the consumer.

HOW HAS THE COMPANY ADAPTED THROUGH THE YEARS TO SHIFTING TRENDS IN EATING HABITS? FOR EXAMPLE, THE PROMOTION OF LOWCALORIE FOODS AND THE DEMONIZATION OF FLOUR IN SOME CIRCLES. We are in the vanguard of the new consumer trends. Specifically, we have worked intensely

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JULY-AUGUST 2012 LATIN TRADE

57

MEXICO

We are in the vanguard of the new consumer trends.

Specifically, we have worked intensely to improve the nutritional profiles of our products. ing production and productivity by as much as 50 percent by 2030. (NB: The B20 believes agricultural productivity must increase by 50 percent by this date to be able to respond to the challenges of nutritional security).

The increase in productivity must offer food and nutrition security for everyone in a way that is environmentally sustainable, ensures economic growth and improves the means of subsistence and revenue for producers.

The company history in three images. The effort to reach every Mexican town by road and river; and the vision of the founding fathers: R.Servitje, J.Jorba, L. Servitje, J. Sendra y J. Mata.

to improve the nutritional profiles of our products. In 2005, Grupo Bimbo launched a campaign to promote consumption of whole grains, offering enriched products which had the seal of approval of the Whole Grains Council, a non-profit consumer defense group that works to improve health by promoting consumption of grains.

FOOD SECURITY IS A NEW CONCEPT IN WHICH YOU ARE INVOLVED. Grupo Bimbo has stated its commitment regarding one of the most difficult issues that faces the world since the beginning of this century by joining forces with other global companies, including the large players, to analyze and find solutions through the Food and Nutrition Security Group of the B20 (*). The

recommendations of the Food and Nutrition Security Group have as a common goal to encourage the participation of the private sector and to achieve better coordination among all interested parties, to accelerate and apply national security programs in diet and nutrition.

EXACTLY WHAT DO THESE PROGRAMS DO? We have been working on this issue, analyzing causes and effects, since 2011. This year, as CEO of Grupo Bimbo, I was invited to be co-president of the B20’s Food and Nutritional Security Working Group. We have placed real commitments on the table through which the sectors represented by the working group plan to increase investments in agriculture and also help attain the objective of rais-

RETURNING TO THE MARKETS YOU’RE OPERATING IN, WHICH REGION OF THE WORLD DO YOU EXPECT WILL PROVIDE THE GREATEST SALES GROWTH IN THE MEDIUM TERM? In percentage terms, Latin America is the region that will provide the highest growth as a result of our initiatives to increase penetration and distribution, mainly through traditional channels. In Mexico we hope to continue the growth trend of the last two years. In the United States, the results will reflect the incorporation of recent acquisitions.

DO YOU ANTICIPATE MORE PURCHASES FOLLOWING THE BUYOUT OF SARA LEE IN THE UNITED STATES AND ITS OPERATIONS IN SPAIN AND PORTUGAL? WHICH MARKETS INTEREST YOU? We will focus more on the integration of

* B20 refers to the Business 20 conference that meets at the G20 summits. It promotes dialogue among business leaders and governments and has various working groups on issues like food security, ecology and the fight against corruption.

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En el futuro, hasta los negocios más pequeños serán internacionales.

Ya sea que negocies en Pesos, Euros o Yuanes, los mercados globales están abriendo sus puertas a todo el mundo. En HSBC podemos conectar tus negocios instantáneamente a nuevas oportunidades en 6 continentes, en más de 90 divisas.

Un nuevo mundo está emergiendo. Sé parte de él.

Conoce más sobre comercio internacional en www.hsbc.com.mx/pymes

HSBC y su logotipo son marcas registradas en México.

MEXICO

Bimbo began implementing advanced production facilities from the ‘70s –always with quality in mind.

Grupo Bimbo entered the Chinese market in May 2006.

“So far our efforts have been fruitful,” says Servitje.

Sara Lee over the next few years. We need to achieve the synergies that we’re anticipating from the new Bimbo Bakeries USA. We want to strengthen profits in the markets in which we currently have a presence.

WHAT IS BIMBO’S MANAGEMENT STRUCTURE IN THE DIFFERENT COUNTRIES WHERE YOU OPERATE? We operate through eight organizations, which are: Bimbo SA, Barcel SA, Bimbo Bakeries USA, El Globo, Latinoamerica Sur, Latinoamerica Centro, Bimbo Asia, and most recently Bimbo Iberia. The management committee of each country is made up of local and international teams.

WHAT SURPRISES DID YOU COME ACROSS IN THE CHINA OPERATION? Grupo Bimbo entered the Chinese market in May 2006. Our objective in that country consists of a long-term plan that represents a source of important growth for the group.

We are learning as quickly as we can how to influence Chinese consumers and convince them to try new products and consume them.

We want to become a relevant player for pack-

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aged bread in China, increasing per capita consumption and enhancing penetration of our products. So far our efforts have been fruitful.

WHAT WAS THE KEY TO ENTERING CHINA? Entering China was undoubtedly a huge challenge for our company. Right from the start we took into account the natural differences that exist between one country and the other, including language and culture, so as to adapt our ways of working.

Our long-term vision and openness to change were among the most important factors. We were firm in remaining faithful to our values and philosophy while being flexible in adapting to a new culture that we are constantly learning. The local leadership and talent have been essential to our development in that country. The mixing of, and interaction between, the two cultures has been a mutual learning process that enables us to understand the market and facilitate problem solving.

AND IN TERMS OF PROCESSES? In terms of processes and methods, we have followed the same plan we use in other re-

gions, adapting to the language and ways of communicating. I’m referring to the IT systems, enterprise resource planning, reports, crucial processes of methodology in marketing, operations and administration. We have been adapting while respecting the local standards and laws.

BIMBO HAS A PLAN TO GENERATE 100 PERCENT OF THE ENERGY IT CONSUMES IN MEXICO. HOW IS THIS PROJECT COMING ALONG? DO YOU HAVE SIMILAR PLANS IN OTHER COUNTRIES? We hope to start up operations at the Parque Eolico Piedra Larga (Piedra Larga Wind Park) in the second half of 2012, depending on climate conditions and the physical progress of the works. The park will comprise 45 wind generators with an installed wind potential of 90 MW. The wind energy we generate there will supply the annual electrical consumption of 65 Grupo Bimbo installations (production plants and other operating centers). It will be the highest conversion of renewable energy in the food industry in the world.

COLOMBIA

PHOTOS: BLOOMBERG VIA GETTY IMAGES

The Ecopetrol SA oil refinery in Cartagena, Colombia.

ECOPETROL KING FOR A DAY AS CHANGES REAP REWARDS

BY JOHN OTIS

BOGOTA – Ecopetrol has long stood as Colombia’s largest company. But for just a moment this spring, the state-controlled energy firm also emerged as Latin America’s biggest company – at least on paper.

In mid-May the total market value of Ecopetrol’s shares jumped to $127 billion, pushing past Brazil’s Petrobras which had a market capitalization of $124 billion.

In the real world, Petrobras dwarfs Ecopetrol. Indeed, Ecopetrol’s No. 1 status lasted all of 24 hours and was partly due to the strengthening Colombian peso and the weakening Brazilian real. Yet its time at the top, however brief, also reflected the many things Ecopetrol has done right over the years.

Following stock offers in 2007 and again last year, Ecopetrol changed its corporate structure and now behaves more like an agile private firm than a lumbering national oil company.

It has been partnering with foreign petroleum firms to boost production, moves that could soon place Colombia in the million-barrels-

per-day club of big-time oil nations.

All this has helped Ecopetrol rack up record production and profits in 2011, a trend that has continued this year. Profits jumped 28 percent in the first quarter compared to 2011, while hydrocarbon production reached a company record of 743,000 bpd –an 8 percent hike over the same period last year.

“In the past six or seven years, Ecopetrol has transformed from a very sleepy, bureaucratic company that was just tagging along, into a company that is now very profitable, very aggressive, and one that is providing attractive value to shareholders,” said Roger Tissot, director of Tissot and Associates, an energy advisory firm based in Canada.

“It now sets the benchmark in terms of other state oil companies in Latin America,” Tissot said. For investors “it is one of the darlings”.

The two stock offers that privatized 11.7 percent of the company, as well as Ecopetrol’s listing on the New York Stock Exchange in 2008, have brought in billions of dollars and

quadrupled the company’s market capitalization. But the move also opened the door to deep management reforms.

“You can split the history of the company in two: Before the IPO and the New York Stock Exchange listing and after,” Adriana Echeverri, Ecopetrol’s chief financial officer, told Latin Trade in an interview last year. “Since then, we have become more efficient and agile. Unlike a traditional national oil company, we are able to manage Ecopetrol with more of a commercial and profits criteria.”

That’s because if the Colombian government owns less than 90 percent equity, the nation’s public-private firms no longer require congressional approval of their budgets and, to a large degree, can make their own plans.

For instance, Ecopetrol has put together a decade-long $80 billion capital investment plan to build pipelines and expand the country’s refining capacity. Annual spending on such projects is 10 times what it was in the mid-2000s when political pressure and

Daniel Servitje Montull, General Director of Grupo Bimbo

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COLOMBIA

“Ecopetrol is a source of national pride”, says Heather Berkman analyst at Eurasia Group , in New York.

“Colombians want the company to succeed.”

the lack of cash held the company back.

Under the new rules, Ecopetrol can sidestep salary caps and other civil service regulations.

In the past, those rules made it difficult for the company to retain top executives who could command better salaries in the private sector.

Now, talented executives – like Ecopetrol’s current president, the highly regarded Javier Gutierrez – often stay put.

Ecopetrol’s new status also means it can borrow money independently of the government while lender requirements have forced the company to become more transparent. Finally, the stock offers in some ways democratized Ecopetrol by giving half a million Colombians –everyone from bankers to taxi drivers who bought its stock– a stake in the company’s future, according to Juan David Pineros, of the Colombian brokerage Interbolsa.

“Ecopetrol is a source of national pride,” added Heather Berkman, a Latin America analyst at the Eurasia Group in New York.

“Colombians want the company to succeed.”

Even so, Ecopetrol’s goal of nearly doubling production to 1.3 million barrels of oil equivalent per day by 2020 is no sure thing.

Amid Colombia’s oil boom, the country’s Marxist rebels have stepped up their attacks on tanker trucks, pipelines, and other infrastructure. The assaults are widely viewed as a tactic to divert government troops away from counterinsurgency operations and a way to pressure

oil companies and their contractors into making extortion payments to the guerrillas.

Rebels have bombed the Cano LimonCovenas pipeline, which is jointly operated by Occidental Petroleum and Ecopetrol, nearly two dozen times this year while rebels are still holding four Chinese oil workers of UK-based Emerald Energy, who were kidnapped in 2011 in southern Caqueta department.

In addition, contamination and other problems in communities located near production and pipeline areas have prompted the Colombian government to delay the granting of environmental permits to energy companies.

“Extractive companies may need to take a more proactive approach –and may see their operations beset by protests if they don’t adequately interact with local communities,” Berkman said. “Colombia has a nascent, largely localized, but growing environmental movement.”

A stark reminder of the industry risks came last December when a natural gas pipeline, managed by Ecopetrol, exploded near the city of Manizales, killing six people. The Colombian government’s inspector general blamed Ecopetrol for the blast, citing shoddy maintenance. The company claimed the pipeline’s rupture and explosion were caused by a landslide but agreed to pay $3.7 million to the families of the victims.

Either way, Alejandro Martinez, president

of the Colombian Oil Association, which is made up of petroleum companies, warned that permit delays are holding back production at Ecopetrol and other firms. He said the permit process used to take, on average, five months but now lasts a year. Cutting through the red tape, he said, would allow the country to quickly increase daily production by 60,000 barrels, he said.

But even if Ecopetrol, which produces about three-quarters of Colombia’s oil, reaches its production targets, it’s unclear whether they are sustainable. In the absence of new discoveries, current reserves will keep the country selfsufficient for seven or eight years. Recent finds have been relatively modest.

“Geologists are optimistic and say the country hasn’t been fully explored. But so far, the discoveries are not there,” Tissot said. “And if Colombia doesn’t have the oil potential to keep the country in the big leagues, investors can go elsewhere.”

With that in mind, Ecopetrol is expanding beyond Colombia and is now exploring in Peru, Brazil and the Gulf of Mexico. The government is also in talks with Caracas officials to allow Ecopetrol to explore for and produce oil in next-door Venezuela, home to the largest oil reserves in the world.

“So far, the Venezuela plans are just on paper,” Pineros said. “But that could be very significant in the future.”

A worker walks at Ecopetrol SA’s Barrancabermeja refinery, the country’s largest, in Barrancabermeja, Colombia

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REGION

LATIN AMERICA KEEPS

TELEFONICA MADRID – Telefonica may be forced to realize that its Latin American arm can loosen the noose around its neck.

The world’s sixth largest telecommunications company by market capitalization, the leading integrated operator in Europe, and the telecommunications company of reference in the Spanish and Portuguese-speaking market, Telefonica is experiencing up close the economic free fall in Spain– its country of origin and main market.

That infallible barometer of market moods, the country’s stock exchange, has fallen out of love with the “telco” that’s directed by Cesar Alierta. In the first five months of this year, Telefonica’s shares plummeted by 31.8 percent, from 13.66 euros each to 9.3 euros. Intense market turmoil is not even a new development for the company. Telefonica shares fell by 21

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percent in 2011. Is the market punishing the company’s management? Alierta and his team can rest easy on this point.

Market analysts concur that the downturn is a result of widespread declines in European markets on the back of the sovereign debt crisis, along with uncertainty over the financial stability of peripheral countries. But Spain’s bleak national outlook also is adding to the drama. Unemployment –now standing at about 25 percent– and Spaniards’ current fear of losing their jobs, along with a loss of purchasing power, are forcing customers to cut back on expenses, including telephone calls.

Today, Spaniards use cellular phones only when absolutely necessary.

To make matters worse, Telefonica’s Movistar cellular telephone subsidiary has been losing customers to virtual low-cost operators.

The same is true for Vodafone and Orange, two other big players in the Spanish market.

Telefonica isn’t accustomed to a shrinking user base; the company had doubled its customer base from 2005. And the reversal has not passed unnoticed by Standard & Poor’s.

On May 24, the American credit rating agency reduced the rating on Telefonica’s credit notes to BBB from BBB+.

But as the European and Spanish divisions of Telefonica suffer through a dismal economic climate, its business in Latin America has proved a locomotive powerful enough to pull the rest of the train. The numbers speak for themselves: Telefonica Latinoamerica now drives the group’s growth, accounting for 48.5 percent of its consolidated revenues of 15.511 billion euros (US$19.618 billion) in the first quarter of this year, even as the group’s net

ISTOCK

BY SERGIO MANAUT B

REGION

WITH EUROPEAN BUSINESS IN A NOSEDIVE, THE OPERATOR MAKES THE NUMBERS BALANCE WITH ITS LATIN AMERICAN OPERATIONS. BRAZIL WILL BE THE MOST IMPORTANT “TELCO” MARKET.

profit fell by 53.9 percent to 748 million euros (US$946 million). Another comparison, no less telling: Telefonica Latinoamerica increased year-over-year revenue growth by 8.3 percent at a time when revenues were falling by 6.6 percent in the company’s European operations, according to this year’s first quarter results.

The Latin American engine, with first quarter revenue of 7.519 billion euros (US$9.510 billion), posted a 7.8 percent increase in billing compared with the fourth quarter of 2011, showing clearly that it’s far from losing steam.

“With the data from the first quarter of 2012, Latin American is consolidating its role as the engine of growth for Grupo Telefonica,” said a highly-placed company source who requested anonymity. The source told Latin Trade that for the first time, Telefonica Latinoamerica represents more than 50 percent of

the group’s consolidated OIBDA (operating income before depreciation and amortization).

“Telefonica Latinoamerica’s customers add up to more than 206 million subscribers, 66 percent of the group’s total subscriber base, and what’s more, the company is leading in growth in the mobile market, and in the adoption of broadband services in Latin America. Our unique portfolio in Latin America is definitely a differentiating factor and a strong platform for future growth,” the source said.

Such a performance cannot be explained by the region’s “economic spring” alone. Money invested by Telefonica in the Latin American market has played a fundamental role. Accumulated investments since it entered the region total more than 110 billion euros (US$139.130 billion), split between acquisitions and infrastructure development, according to the com-

pany’s headquarters in Madrid. A closer look at investment policy reveals the central role Telefonica has assigned to Latin America: In 2011, a horrible year for its Spanish business, Telefonica invested 5.3 billion euros (US$6.703 billion) in the region, “including the acquisition of spectrum in Brazil, Costa Rica and Colombia,” said the source.

BRAZIL, THE CROWN JEWEL In Madrid there is no doubt: “Brazil is the main market for Telefonica in Latin America.”

There’s plenty of evidence to sustain this view: “That country generates half of the company’s revenues in Latin America and 23 percent of the group’s consolidated revenues,” the source said. In fact, he added, “In terms of revenues, its weight is almost the same as Spain’s in the group’s results, and it will soon become

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the company’s most important revenue source.”

The source also said Brazil accounts for almost 30 percent of Grupo Telefonica’s customers.

This translates into more than 90 million subscribers and makes the South American giant Grupo Telefonica’s biggest market in terms of the number of users.

Since 1998, when Telefonica started operations in Brazil, the company has invested 57.4 billion reales (US$27.9 billion) there.

“This figure will grow to a cumulative 82 billion reales (US$39.8 billion) by 2014, if we include the forecast made public last year when Telefonica announced the group’s investment plan for Brazil, which assumes a total of 24.3 million reales (US$11.8 billion) between 2011 and 2014,” the source said.

Asked how the company had become so successful in Brazil, he added: “Telefonica Brasil maintains its leadership in the Brazilian market thanks to the strength of its distinctive assets, the benefits derived from being an integrated operator, and its leadership in the highest-value segments.”

Then the source underscored the decision to commercialize all Telefonica Brasil products and services beginning April 15 under the umbrella of the Vivo brand, “which strengthens the company’s position in the country with an integrated offer of services.”

At the same time, Telefonica is leading a market transformation in Brazil by expanding 3G coverage to encourage customers to use mobile Internet, with a selective deployment of fiber optics that enable it to offer the highest speeds on fixed broadband.

How is all this reflected on the balance sheet? In the first quarter of this year, the net gain was 3.2 million subscriptions, contributing to an increase of 83 percent year-over-year, thanks to a level of new clients that stands at

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8.8 million– a figure that represents year-onyear growth of 31 percent.

ARGENTINA, TROUBLE SPOTS There is also plenty of good news from other Latin American markets where Telefonica operates, although there are a few trouble spots, especially in Argentina.

Telefonica’s Latin American operations and investments could be affected by risks related to economic, political and social conditions. For one, there is the risk of expropriation or the nationalization of assets. In this area, the example that strikes fear into investors’ hearts is that of YPF, seized by the Argentine government in May from the Spanish Repsol.

There are also concerns over Telefonica’s open television channel, Telefe, which may not meet the requirements outlined in the Law of Audiovisual Media. The law caps foreign capital at 30 percent for such entities, and doesn’t allow a public service company to hold a controlling interest in a media company.

Nor was the fine that the Argentine government levied on its subsidiary Movistar for an April 2 service blackout welcomed.

The sanction consisted of two parts: a flat fine of 6.75 million pesos (US$1.5 million at the official exchange rate) plus a compensation for clients equivalent to 10 pesos (US$2.21) per line. That added up to a record sum, the maximum allowed under law, according to Argentine analyst Enrique Carrier. Besides, there were differing viewpoints on the causes of the incident. “Upon reflecting on this difference relating to possible causes of the incident, at first glance it would seem the government’s decision was made hastily,” he said.

In Mexico, meanwhile, year-over-year mobile subscriptions declined by four percent, as the company introduced more restrictive criteria for both high- and low-end service

options. The Telefonica source explained that the new criteria resulted from the company’s strategy of securing a solid high-value customer base, with the aim “to improve their experience with us.”

BETTING ON INTELLIGENT MOBILES Telefonica also leads Latin America in the revolution of the mobile telephone data transmission business. The company source ties the explosion of this market to several factors, including the massive influx of intelligent devices, especially smartphones, “in an area that is enthusiastic for technology.”

During his participation in a round table at the World Mobile Congress, Telefonica Latinoamerica President Santiago Fernandez Valbuena highlighted the importance of being able to offer intelligent mobile telephones for less than $100 in markets like Latin America.

Market forecasts indicate that over the next five years, emerging countries will overtake developed ones in the proliferation of smartphones, and that IP traffic will multiply by a factor of seven in Latin America.

For Valbuena, Latin America offers huge commercial advantages compared to Europe, where the market is already reaching saturation.

Analysts say Telefonica still has many challenges before it, especially in the digital arena.

With the acquisition of Tuenti, the popular Spanish social network for adolescents, Telefonica is putting itself at the forefront of a business that will depend on the same young demographic to lead the way in expanding mobile Internet services.

“We see a future in which the users will be permanently connected. Soon we will have all the details,” Telefonica told Latin Trade.

We’ll be waiting and watching.

VENEZUELA

PDVSA´S LOST DECADE...

BY PETER WILSON

CARACAS – Rafael Ramirez, president of Petroleos de Venezuela SA (PDVSA), had plenty to smile about when he released the company’s 2011 results in April.

Revenue rose a full 31 percent to $124.8 billion during the year, while net income jumped 43 percent to $4.6 billion, Ramirez said. The results were good enough to put PDVSA in second place on Latin Trade’s list of the region’s largest companies, right behind Petrobras.

“Few companies in Latin America have this level of revenue,” boasted Ramirez, who is also the country’s oil minister.

PDVSA has one advantage that no energy company can beat: it has access to the world’s largest oil reserves. Venezuela’s proven oil reserves come in at nearly 300 billion barrels, surpassing even Saudi Arabia.

However, the company has been slow to develop these riches. And even though the

company’s top and bottom lines grew last year, the improvement was exclusively due to a 39 percent increase in the price of the country’s market basket of crude and oil products. If prices had stayed the same, or dipped, the company’s results would have been very different.

And therein lies the problem, analysts say.

“PDVSA is a company in crisis,” said Fernando Sanchez, vice president of the Society of Venezuelan Petroleum Engineers. “In the last ten years, they haven’t been able to grow production. Its refineries are operating at 69 percent capacity and there is a deficit in natural gas production.”

Although the company maintains that its output is 2.9 million barrels a day, most analysts and the Organization of Petroleum Exporting Countries (OPEC) disagree, pegging production at about 2.4 million barrels a day.

This is nearly a quarter less than the output

DESPITE RECORD OIL PRICES, VENEZUELA´S STATE OIL COMPANY CAN´T GROW OIL OUTPUT

level when President Hugo Chavez took office in 1999.

And declining or stagnant production has occurred in spite of a burgeoning payroll and financial debt. The company, whose production accounts for more than 90 percent of the country’s exports and whose revenues bankroll Chavez’s socialist revolution, now employs more than 121,000– a five-fold increase since a 2002-2003 strike.

Bank debt has also grown, to $32.5 billion, up nearly 10-fold since 2008.

“Rising oil prices have so far offset declining oil production,” said Pietro Pitts, who heads Caracas-based Latin Petroleum, an oil consulting firm. “The company seems to be content to be in a holding pattern right now.’’ Ramirez didn’t respond to repeated requests for an interview.

Critics say part of PDVSA’s problem is that Chavez has diverted much of the company’s resources to his social programs. PDVSA now manages and funds many of the country’s socalled social missions, sapping attention from the company’s core oil and natural gas businesses.

Last year, the company targeted $17.9 billion for oil and natural gas investments. However, that figure was dwarfed by the company’s donations of $4 billion to the government’s public housing program, $11.6 billion to social programs, and $14.5 billion to a non-transparent government development fund, which has been used to buy Russian fighter jets.

The company oversees many of Chavez’s pet projects, ranging from agriculture to lowincome housing to food imports. Nearly 15 percent of the company´s workforce is now employed in non-energy endeavors.

Daniel Servitje Montull, General Director of Grupo Bimbo

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PHOTO: AFP/GETTY IMAGES

Venezuela’s Minister of Energy and Petroleum and president of the stateowned company, Petroleos de Venezuela, Rafael Ramirez, presents PDVSA’s 2011 earnings report.

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Making matters worse, the company has neglected maintenance and upkeep of its physical plant, said Jose Bodas, secretary general of the FUTPV, one of PDVSA’s largest oil unions.

Outages continue to plague the company’s four main domestic refineries, resulting in production shortages, and forcing PDVSA to up its imports of gasoline and gasoline components from the United States, among other countries.

“The company isn’t investing enough in maintenance,” said Bodas, who claims that nearly 70 employees have died in industrial accidents since 2004. “New workers aren´t being properly trained or equipped.”

PDVSA plans to boost output to 4 million barrels a day by 2015, and 6 million by 2019, Ramirez said earlier this year. Much of the new production is slated to go to China, where PDVSA has announced plans to build up to three new refineries. Chinese refineries presently can’t process Venezuela’s heaviest crude, which makes up the bulk of its oil exports.

“They’ll be lucky if they can boost output to 4 million barrels a day by 2018,” Sanchez said.

“They had the same 6-million-barrel-a-day goal in 2006, and 2012.”

PDVSA’s main hope for growing production is in the Faja, a wide belt of extra-heavy oil that runs along the north bank of the Orinoco River. The Faja is estimated to hold up to 250 billion barrels of recoverable crude. The oil, which has the viscosity of tar, is easy to extract but must be refined to higher blends before being processed and exported.

“The Faja is the future of Venezuela,” says Pitts. “However, they aren’t moving quickly on its development, which seems to be at a standstill. Production there hasn’t increased at all.”

Compounding analysts’ concerns, Chavez nationalized four heavy oil ventures in 2007, leading ExxonMobil and ConocoPhillips to exit the country. Although other companies such as Chevron, Total SA and Repsol remain, Chavez has eschewed fresh investments from private companies in favor of agreements with state oil companies from China, Belarus, Vietnam, Cuba and Uruguay.

Many of these new partners don’t have heavy oil expertise and lack the necessary technology. In some cases, they lack the financial wherewithal to develop their tracts. Another stumbling block involves PDVSA’s need to build more upgraders, or refineries, to process its heavy crude and make it saleable. Each upgrader costs billions of dollars, and that’s money that PDVSA seemingly doesn’t have.

What’s more, the private companies that possess the needed financial muscle and expertise, like Repsol and Chevron, both have regional problems to contend with right now, distracting from their efforts, Pitts said.

“Repsol has its issues in Argentina, while Chevron has its problems in Brazil,” said Pitts.

“That means that they aren’t focusing as much as they could on Venezuela.”

Besides being slow to harness its rich heavy oil reserves, Venezuela has made little progress in developing its natural gas reserves, which are the largest in South America. The country continues to import natural gas from neighboring Colombia to meet a deficit of the fuel.

Meanwhile, cooking gas shortages persist in many parts of the country.

Taken together, these problems leave the company with little to celebrate, Sanchez said. He added, “The last ten years have been PDVSA’s lost decade.”

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San Benito Port

Lucchetti

MOLINOS

Looks to the long-term

Argentina’s largest food company has set itself up for long-term growth through diversification, a shopping spree and solid management.

But risks abound in the short term.

BY CHARLES NEWBERY BUENOS AIRES – Molinos Rio de La Plata, the largest food company in Argentina, is a favorite for stock analysts, who praise its solid management, its diversification into commodities and a slew of new acquisitions as reasons for a steady rise in sales over the past decade.

Now, with inflation and currency woes clouding the horizon, experts say these same policies –along with a proven capacity to increase sales– will keep the company on stable ground over the long-term.

Sales figures for the company’s Lucchetti brand serve as a case in point.

After years of conservatively marketing the pasta, rice and soup brand, Molinos worked with an advertising agency on a makeover that led to the launch of the Mama Lucchetti campaign in 2009.

The campaign features animated characters, funny skits and catchy jingles. Children

caught on quickly, enamored with Diana Arroz and other members of a bizarre family of short, big-eyed and nose-less characters.

The brand became so familiar to parents it may even rival the popularity of “Where’s the beef?” and “Milk does a body good” campaigns from the 1980s in Canada and the United States.

The new tack paid off. Lucchetti’s share of the dry pasta market surged to 14.2 percent in 2011 from 11.8 percent in 2008, while its share in the soup market nearly doubled to 14.9 percent over the same period, according to ACNielsen, a market-research firm.

The strength of Lucchetti and other brands like Don Vicente and Matarazzo helped the Victoria, Buenos Aires province-based company to increase overall sales in constant dollar terms by 12 percent in 2011, to $2.97 billion, up from $2.65 billion a year earlier.

BUT NOT ALL OF THE NEWS IS GOOD “Our forecast is that this will be a year that will have its complexities, above all because of the international situation”, said Molinos general manager and chief executive Amancio Oneto.

The home front also is complex. Argentina, a main production market for Molinos that also accounts for 30 percent of its sales, is becoming a more challenging environment, prompting uncertainties about the company’s short-term future.

Inflation is high and the economy is stagnating. Private estimates show that consumer prices rose more than 20 percent in 2011 and the trend is accelerating this year. The local currency, meanwhile, is expected to depreciate against the dollar at 13 percent to 14 percent this year, compared with 8.3 percent in 2011.

For Molinos, these economic troubles led to a 29 percent rise in costs in 2011 on the year,

Daniel Servitje Montull, General Director of Grupo Bimbo

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PHOTOS: COURTESY OF MOLINOS

ARGENTINA

ARGENTINA

as it was forced to pay more for everything from labor to ingredients to the fuel it needs for processing, packaging and distributing its foods. The firm’s profit narrowed 28 percent to 277.4 million pesos (about $64.5 million) in 2011. The decline continued in the first quarter of 2012, when it posted a loss of 32.3 million pesos.

“The big problem is that sales are losing dynamism in a very inflationary environment,” said Martina Gallardo, an analyst at Arpenta, a brokerage in Buenos Aires.

This is slowing overall sales in Argentina despite the strong performances by Lucchetti and other brands, she said.

The same factors also are hitting the company’s biggest business: its sale of biodiesel, grains, oilseeds and livestock.

Commodities account for about 70 percent of total sales, with 92 percent of that revenue generated in foreign markets.

The problem for Molinos is that much of its production is based in Argentina. While commodities prices are high –soybeans, for example, are at $515 per metric ton, far higher than $110 in 2001– costs at home are surging, Gallardo said. This in turn undermines price gains.

Argentina’s inflation has been in the double digits since 2007.

But in past years Molinos could pass along inflation hikes to its domestic and international consumers, since wages were rising at the same pace, on a robust economy. Argentina’s economy expanded an average of 8 percent a year between 2003 and 2011. This year, however, growth is expected to slow to 4 percent or less.

Economists warn that the economy could even enter a recession in the second half of this year. Not only will salaries rise more slowly this year—- at 15 percent to 20 percent, versus 30 percent to 35 percent last year– but consumer spending power and corporate costs are taking hits from higher utility costs, they say. The government this year started jacking up the prices of natural gas, power and water for companies and many households, hurting profit margins.

The higher costs, too, are making it harder for Argentina to compete in export markets.

“Inflation is eating up consumer spending power,” Gallardo said. “The commodities business is losing operating margins because of the high costs from inflation.”

Worse, the government this year started restricting the purchase of dollars, causing the peso to weaken by 30 percent on the black market compared with the central bankcontrolled exchange rate. This is pushing up devaluation expectations and as a consequence, businesses are raising prices, which is stoking still more inflation and dampening consumer spending, said Alejandro Bianchi, an analyst at InvertirOnline in Buenos Aires.

“High inflation is suffocating the company’s large earnings on the price of soy,” he said.

Even so, analysts say Molinos has been deft at laying the groundwork for long-term growth, a strategy that gained steam after the

entry of Argentina’s Perez Companc family into the business in 1999, led by Gregorio Perez Companc, the richest man in Argentina.

Gregorio, 78, and other family members, built up experience and fortunes in banking and the oil industry, and since the late 1990s and early 2000s they have sold out of those sectors to focus on Molinos.

As important, analysts say, Gregorio is a sharp businessman.

“He is very efficient,” said Federico MacDougall, a consultant and economist at the University of Belgrano in Buenos Aires. “He is not a businessman who runs a company into the ground. With Molinos, he took over a good management and made it even better.”

It was under the direction of Gregorio and other family members that the 110-year-old

Molinos expanded abroad and dived into the commodities business. It also entered new businesses like biodiesel and wine. The company, with 16 plants and seven distribution centers, now exports to more than 50 countries, making it one of the biggest food companies in South America.

The pace of acquisitions has remained steady as it pursues a two-pronged strategy of brand development and expansion in the oilseed market.

“Our vision always has been long term,” Oneto said.

This is even more the case now with the jittery global economy. “Our investment project clerly targets the long term and to continue generating syergies between our two areas of business: brands and commodities,” he said.

Last year Molinos also teamed up with Lucini Italia, a gourmet food maker based in Italy, to market olive oil, dressings, sauces, soups and organic foods in the United States, with an investment of $8.5 million for a 49 percent stake, plus an option to acquire 100 percent.

This followed a partnership with three companies in Argentina to invest in the expansion of a biodiesel plant in Buenos Aires province, with Molinos putting in $11 million.

Then, earlier this year, it bought a 25 percent interest in soy and sunflower lecithin producer Argentina’s Emulgrain for $2.5 million.

The company exports most of its lecithin as an emulsifier that is widely used in cooking and animal feed, as well as in paint, pharmaceutical and plastics industries.

Also this year, Molinos has completed a $21 million takeover of Chile’s Compania Alimenticia de los Andes from Chilean food giant Grupo Carozzi with the aim of expanding sales of Los Andes candies, chocolates and cookies in Argentina. To top it off, the company bought Chilean pork producer Sipco for $5 million with plans to expand exports on rising demand.

“Molinos is a well-positioned company for long-term growth,” said Gallardo. “It has bought a lot of small companies to build and diversify its business, and this will pay off in the long term.”

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BRAVO COUNCIL

PUERTO VALLARTA, MEXICO

2

4

3

5

1: Jaime Szulc, President, Goodyear Latin America; Richard Burns; Chairman, Latin Trade Group; Daniel Servitje Montull, CEO, Grupo Bimbo; Martin Senn, CEO, Zurich Latin America; 2: Luis Moreno, President, Inter-American Developmental Bank; Enrique Garcia, CEO, CAF; 3: Blanca Treviño, President and CEO, Softtek; 4: Daniel Servitje Montull, CEO, Grupo Bimbo; 5: BRAVO Council Event in Puerto Vallarta, Mexico

BREAKFAST WITH

A

BIMBO

s part of the World Economic Forum held in Puerto Vallarta in mid-April, Latin Trade Group invited business leaders to participate in a working breakfast and a face-to-face with Da-niel Servitje Montull, Chief Executive Officer of Grupo Bimbo.

Servitje Montull addressed the theme, “How to become a successful multi-Latina,” a topic he’s especially well versed in, given his company’s recent international expansion.

In 2011, Bimbo purchased Fargo in Argentina and Sara Lee operations in the United States and Spain and Portugal, consolidating its position as a leading bakery on the international stage.

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The April 18 breakfast took place in the Casamagna Marriot of Puerto Va-llarta, México, with 40 business leaders in attendance.

Participants included Luis Alberto Moreno, president of the Inter-American Development Bank; Enrique Garcia, executive president of the CAF – Latin American development Bank; Blanca Treviño, Chief Executive of Softtek, and Juan Carlos Parodi, president of Eastman Chemical for Latin America.

This was the 18th Bravo Council organized by Latin Trade Group.

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TRADE AMERICAS

MIAMI, FLORIDA, USA

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1: Central America panel: Elida Bustos, Managing Editor, Latin Trade; Luis Fernando David, Executive Director, Invest in Guatemala; Mario Jaramillo, Panamanian ambassador to the US; Victor Vial, Senior Vice-President and CFO, Copa Holdings, S.A. 2: Silvia Clarke, Senior Account Manager, Latin Trade Group; Alberto J. Bernal-Leon, Head of Research, Bulltick Capital Markets; Fabrizio Opertti, Head of Trade and Investment Unit, InterAmerican Development Bank (IDB); Stephen Keppel, Economics Editor and Financial Content Director, Univision. 3: Romaine Seguin, President, UPS Latin America; Diego Rodriguez, Head of Commercial Services LAC, VISA. 4: Cesar Bueno, Commissioner, ProMexico; Rosemary Winters, Chief Executive, Latin Trade Group; Maria Luisa Cravo Wittenberg, Investments Manager, ApexBrasil; Eduardo Andre de Brito Celino, General Coordinator for Investments, Ministry of Development, Industry and Foreign Trade of Brazil.

GENERATING

people and government delegates from North, Central and South America.

A running theme was Latin America’s economic rise. “While the U.S economy is sluggish, the Latin American region is growing and is increasingly appetizing for companies that want to cross the border,” said Richard Burns, chairman of Latin Trade Group, kicking off the event. “Latin America has growth of up to 6 percent, something we are envious of in the United States,” he added.

Bernardo Guillamon, head of the IDB Strategic Alliances Office, concurred. “People who used to look for opportunity in the North are now finding it in

NORTH-SOUTH

BUSINESS B

usiness people, investors and government officials from across the continent met for two days in Miami on June 12th and 13th to explore commercial and investment possibilities in Latin America.

The symposium was convened by Latin Trade Group in association with the Inter-American Development Bank (IDB), and led to several bilateral meetings between North American business

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the South,” he said, summing up an impressive list of macro-economic data for the region.

In 2010, Latin America grew at a rate of 5.9 percent, becoming the second most dynamic region in the world. But this was not the first year of upbeat numbers. Between 2003 and 2007, average growth in the region hit 5 percent. This economic progress helped 40 million people join the middle class, which in turn helped move the wheel of consumption that powered the entire region.

This dynamism isn’t restricted to individual countries, but transcends borders and even reaches other parts of the globe, often driven by multilatinas – multinational companies headquartered in Latin America– Guillamon told the auditorium.

“If you’ve eaten a steak or a hamburger lately, you are probably a customer of

ALEX GORT PRODUCTIONS

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MIAMI, FLORIDA, USA

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5: Alberto Aleman Zubieta, CEO, Panama Canal Authority. 6: Jorge Lopez Perez, Director of Investments, ProMexico; Randy Avon, CEO, Asian Pacific Development Corporation; Miguel Oliva, Vice-President of Public Relations, HBO Latin America; Elida Bustos, Managing Editor, Latin Trade. 7: Hon. Douglas Orane, Chairman, GraceKennedy Limited. 8: Carlos Corominas, Business Leader, Visa LAC; Pamela Cordova, Sales Manager SE USA, Copa Airlines; Clara Rangel, Sales Executive Southeastern USA, Copa Airlines; Fiorella Q. Ullom, Sales Executive, Copa Airlines. 9: Yehuda Brener, Director of Sales, InterContinental Hotels Group; Tery Soriano, Market Sales Director, Southeast, US Sales Team, InterContinental Hotels Group; David Tingley, Manufacturer Representative, Patriot Solar Group. 10: Lic. Hannelore Götzl, Manager of Trade Promotion and International Fairs, REDIEX; Raef Israel, International Business Development Manager, Dyno Merchandise. 11: Rodrigo Arboleda, President, One Lap Top One Child; Cecilia Maria Velez, Former Minister of Education, Colombia; Alexandre Fernandes Oliveira, Head of Education Division, International Finance Corporation (IFC).

JBS, a Brazilian conglo-merate that owns Swift and has quickly become the world’s biggest meat processor. Your bread today probably is made by Bimbo, and your coffee, from Juan Valdez (in Colombia).

Also if you played with your kids on the PlayStation FIFA 2010, you used software developed by Globant, an Argentine IT multilatina. Or if you called for computer assistance, you were answered by an engineer based in Uruguay...”

FROM A COMPANY VIEWPOINT This globalization process also gave to the dozens of small- and medium-sized North American companies attending the symposium a glimpse into the business opportunities currently on offer in Latin America.

Another key component of the two-

day meeting was a raft of panel discussions involving businesses leaders who are already active in the region, either through investment or commercial activities. They shared their experiences and responded to questions.

Randy Avon, CEO of Asian Pacific Corp Panama S.A, with businesses in Mexico and other Latin American countries, recounted how his investment originated in the north of the region. He met President Felipe Calderon at a Latin Trade event a few years ago and from there began to lay the foundation for the multi-million-dollar investments he currently holds in Mexico.

In an especially well-received presentation, Douglas Orane, Executive Chairman of GraceKennedy Limited conglomerate, spoke of his company experience.

He traced the evolution of GraceKennedy Limited, which was founded by three young people in 1922 in Kingston, Jamaica, and grew from these humble beginnings into a business that billed $678 million in 2011, with a presence in 60 countries and a listing on the Jamaican and Trinidadian Stock Exchanges.

GraceKennedy Limited was developed with the mission of “taking the taste of Caribbean and Jamaican food to the world” but later expanded to include other businesses, such as financing and insurance, and is now a conglomerate that transcends the Caribbean.

For his part, Sean Killen, Caribbean regional director for Research in Motion (RIM), the company that developed the popular Blackberry, was extremely bullish about Latin America’s future, and not just

JULY-AUGUST 2012 LATIN TRADE

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MIAMI, FLORIDA, USA

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12: Horacio Navarrete, Director, Lanco Manufacturing Corp; Alberto Pescatore, President, Altamar Food Corporation; Enrique Ortiz, Business Development Regional Manager for Latin America, Hewlett Packard; Juan Carlos Gonzalez, Vice-President of Foreign Investment, Proexport.

13: Business matchmaking session in ProExport booth. 14: Florida Small Business Development Center (SBDC). 15: Diego Rodriguez, Head of Commercial Services LAC, VISA; Richard Burns, Chairman, Latin Trade Group; Bernardo Guillamon, Manager, Office of Outreach and Partnerships, Inter-American Development Bank (IDB). 16: Diego Duhour, Investment Development and Trade Promotion Manager, Consulate General of Argentina in Miami; Pablo Ignacio Garcia, Director, Productive Investment Opportunities Database (BaPIP), Undersecretariat of Investment Development and Trade Promotion, Ministry of Foreign Affairs of Argentina; Claudio Cid, CEO, Kaymanta. 17: Consulate General of Canada in Miami.

18: Participants taking notes during Mercosur panel. 19: Mexico panel: Elida Bustos, Managing Editor, Latin Trade; Miguel Oliva, Vice-President of Public Relations, HBO Latin America; Jorge Lopez Perez, Director of Investments, ProMexico; Randy Avon, CEO, Asian Pacific Development Corporation.

as relates to his product. He said working in the region had been an excellent lesson in adaptability for his company, because each country is “incredibly different in terms of culture, education, etc.”

FRANCHISING Horacio Navarrete, director of Lanco Ma-nufacturing Corporation, spoke about his experience as an investor in Colombia and offered a panoramic view of franchises in that country. “They doubled in 10 years,” he explained, detailing several areas, including fast food, hotels and messaging services.

He also said there is still a broad spectrum of businesses to be developed.

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And he noted that Colombian sales have surged to the point where more than 400 companies now have franchises in the country– a volume that puts Colombia in fourth place in the region. “The Colombian brand is a premium brand now,” he said.

On the promotions agency side, the government representatives outlined the macro figures of their countries and the specific areas in which investments were welcomed.

To crown each of the two-day event, bilateral meetings were held between business people and members of government trade promotion agencies, with promising results for the majority of

the participants.

Burns said he was pleased with the results. “The feedback from the companies and sponsors and countries represented could not have been better for an inaugural launch,” he said.

“There is clearly a need for smalland medium-sized companies to have a venue and network that enables them to explore opportunities in Latin America and the Caribbean– often for the first time. And for the investment and trade agencies these were completely new prospects that they would otherwise never have known about. From all that we’ve experienced here, we only see Trade Americas growing in size and scope.”

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MEXICO D.F.

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n July 1st, Mexico’s eleccions returned the once long-ruling Institutional Revolutionary Party (PRI) to the presidency after a 12-year hiatus. But Gabriel Casillas, chief economist for J.P. Morgan Mexico, forecast to participants at the May 24 Latin Trade CFO forum in Mexico City this outcome would not make waves in financial markets, or dampen investor enthusiasm for Mexico, “The markets won’t move much,” Casillas said.

Mexico approached its federal elections with solid macroeconomic finances –highlighted by low inflation and low interest rates– but surrounded by political and economic uncertainty in other regions of the world. These include Europe and, increasingly, China. Drug violence continues to flare in some parts of Mexico, too, further complicating investment decisions.

Casillas outlined a scenario for the CFOs in which the situation in Europe and China “could have an impact on Mexico.” The extent of that impact is uncertain, however, as Greece threatens to leave the euro zone and Spain, a major investor in Mexico, sinks deeper into economic crisis.

Mexico exports 80 percent of its products to the United States, 6 percent to Europe and just 1 percent to China. Oil comprises one third of Mexico’s exports to Europe, with demand proving fairly “inelastic,” according to Casillas.

Many European firms will stick with their investments in Mexico due to high

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levels of profitability, Casillas says. And in the banking sector, where Spanish-owned BBVA Bancomer and Santander Serfin are major players, the problems back home should have little impact on Mexican operations.

Also working in Mexico’s favor –but causing some concern –is the declining peso.

Casillas said the peso is heavily traded and considered by many investors to be an easy way to gain exposure to emerging markets.

“Some of the money that would have gone to Brazil is now coming here,” he said.

J.P. Morgan predicts Mexico will grow by 3.8 percent this year. With structural reforms to make labor markets more flexible, improve legal stability, overhaul the social security and tax systems and open up the oil industry to private investment, growth would be three percentage points higher, J.P. Morgan estimates.

Meanwhile, macroeconomic stability has made it easier to do business in Mexico, although the country still faces challenges, including cash management.

Visa noted it has developed card solutions to help CFOs and corporate travel managers cut costs, improve transparency and save time.

Implementing a system of cards for travel and entertainment expenses reduces the need for cash advances, cuts down on paper usage and saves money, said Luis Emilio Fortou, head of LAC Multinational Program at Visa. Another advantage is the

ability to monitor travel trends, like which airlines and hotels employees are patronizing.

Rodrigo Perez Morales, international finance planning manager for Mexican cinema chain Cinepolis, said working capital also can be tricky to manage.

Cinepolis, which operates in 11 countries including India, collects 80 percent of its box office revenues in cash at home in Mexico, while cards account for the remainder.

But the opposite is true in its U.S. cinemas.

The session ended with CFOs offering their experiences using shared services — a term that refers to relying on a single or regional center for back-office financial and supply-chain services.

Ana Maria Ortega, Finance Director of PepsiCo Bebidas Mexico, said her company now handles accounts payable and receivable in Mexico City, rather than distributing the tasks among offices in different countries where Pepsi operates.

This has boosted efficiency in the first year, she said, but it also means less control for individual business units and less flexibility for directors. Far-flung time zones can also be an issue, so that shared solutions work best for functions like accounting that don’t require constant communication.

Still, the results are positive for PepsiCo. “You have more things to win than to lose,” she said.

—David Agren

PHOTOS: RAMON GONZALEZ S., VISUAL ONLINE

MEXICO ON THE MOVE O

MEXICO D.F.

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Mexico approached its federal elections with solid macroeconomic finances –highlighted by low inflation and low interest rates– but surrounded by political and economic uncertainty in other regions.

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1: LT CFO event in Mexico D.F.; 2: Gabriel Casillas, Executive Director and Chief Mexico Economist, J.P. Morgan.; 3: Enrique Breton, Credit Director, Polyrafia SA de CV; Rodrigo Llop, SAS Mexico; Rogelio Flores, Finance Director, SAS Latin America North; 4: Ana Maria Ortega, Finance Director, PepsiCo Bebidas Mexico; Edgar Shaadi, CFO, Premium Restaurant Brands; Andrew Barker, CFO, Blue Label Mexico; Rodrigo E. Perez Morales, International Finance Planning Manager, Cinepolis; Marcel Gay Soto,VP Finance & Treasury, Grupo Herdez, S.A.B. de C.V., Pedro Medina, Finance Director, Newell Rubbermaid Servicios de Mexico, S de RL de CV; 5: Gabriel Casillas, Executive Director and Chief Mexico Economist, J.P. Morgan.; Mark Ludwig, LT CFO Contributing Editor, Latin Trade Group; Diego Rodriguez, Head Commercial Solutions LAC, Visa; Gerardo Guerrero, Finance Planning Manager, PepsiCo Bebidas Mexico; Philippe Schrader, VP, CFO & Strategy, Walmart Latin America; 6: Rodrigo E. Perez Morales, International Finance Planning Manager, Cinepolis; 7: Victor Rodea, Finance Director, Kuehne + Nagel; Emilio Fortou, Head of LAC Multinational Program, VISA; Alejandro Cortes Cruz, Global Corporate Controller, Neoris Mexico; Federico Flossbach, Senior Executive, Private Sector CAF; 8: Andrew Barker, CFO, Blue Label Mexico; Federico Bove, Executive Vice President, Datarisk Global.

CONNECTING LATIN AMERICA’S CFO COMMUNITY JULY-AUGUST 2012 LATIN TRADE

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ON THE ROAD

SAN JOSE, COSTA RICA

Costa Rica: Executives offer tips on business travel in the Costa Rican capital.

ISTOCK

Information and advice supplied

by Claude Alcaras, SMAM Mutuelle delegate, Osa Peninsula Costa Rica; Julio Gamero, vice president of Avianca TACA Regional Airlines and executive president of AeroGal in Ecuador; Jose Luis Lopez, president of Comercio Europeo CESA S.A. of Madrid.

San Jose, Costa Rica

Latin Trade: What do you like best about

LT: What are your favorite hotels

traveling to San Jose de Costa Rica?

for business travel?

Claude Alcaras: The National Theatre, the Children’s Museum, the Jade Museum, the Pre-Colombian Gold Museum and the Central Market.

Julio Gamero: I really like the people.

They are polite and very kind to tourists, no matter where you come from.

Jose Luis Lopez: If you are asking specifically about the capital San Jose, I would say it is Costa Rica’s least charming place. I really feel the most beautiful and attractive places are outside the capital. My favorite part of San Jose, however, is the area around Central Avenue– the crowds milling about and the street life, as well as the Theatre Plaza and the theatre itself.

Alcaras: The Hotel Presidente. I have been going there since 1997. The staff is excellent and it’s like my second home.

Gamero: San Jose has a wide range of hotels for people traveling on business including big hotels like the InterContinental, Marriott, Holiday Inn, Radisson and the Hilton’s Doubletree. It also has small boutique hotels with just a few rooms and very personalized service, like the Hotel Grano de Oro and the Gran Hotel Costa Rica, which evokes other eras in the capital.

Lopez: I don’t use hotels in San Jose, since I stay with family when I’m visiting.

LT: What do you like the least?

Alcaras: Just the pollution.

Gamero: It’s hard to think of drawbacks in a particular city because I have learned that some traits that might not seem attractive to one person’s eyes can still have their charm. San Jose is a city that has the same problems as any big Latin American city, like traffic and pollution, among other things. However, this doesn’t make it any less attractive or make its people any less hospitable.

Lopez: The street crime.

Alcaras: The Balcon de Europa, near Hotel Presidente. The food is very good.

Gamero: Costa Rica’s capital offers a broad range of international and regional cuisine. I have been in Italian, Japanese, Chinese, French and Spanish restaurants that have nothing to envy restaurants in those countries. Latin American cuisine is also very well represented with excellent Peruvian, Argentine, Brazilian and Colombian restaurants.

Lopez: Without a doubt there are two standouts. One is La Esquina de Buenos

LT: What restaurants do you

recommend?

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Aires and the other is Le Monaster in Escazu, which has a lot of charm. But in truth, there are many interesting places to eat.

LT: What practical advice would you

offer to someone who is visiting San Jose on business for the first time?

Alcaras: In my case, it’s good to be in contact with the French–Costa Rican Chamber of Commerce and Industry. The chamber can orient investors and offer the best solutions when needed. The Costa Rican Chamber of Commerce also provides similar services.

Gamero: I really enjoy museums, like the Pre-Colombian Gold Museum, the Jade Museum, the Contemporary Art Museum and the National Museum, which is housed in a building that served as a military barracks during the 1948 Revolution. For nature-lovers, I recommend they do some adventure tourism in the Central Valley, like the “canopy tour” in the Tres Rios area– a two-and-a-half hour journey high up in the trees, using a zip line system. There are also coffee tours, where you can learn the art of coffee tasting, and even, why not, an excursion to a river to experience the adrenaline rush that comes with river rafting Lopez: Patience and precaution.

—Mark Chesnut

SAN JOSE, COSTA RICA

ON THE ROAD

ISTOCK

Ask the Concierge Located in downtown San Jose, Costa Rica, the four-star Hotel Presidente is close to restaurants, shops, offices and cultural sites. There are five categories of rooms, including junior suites measuring 1600 to 2100 square feet and grand spa suites of 2150 square feet.

Concierge Johnatan Acuna offers suggestions to make the most of your visit to this Central American city.

What restaurant would you recommend for a lunch or dinner meeting?

It depends on the food and the atmosphere you’re looking for…

• Local food: La Casona Tipica • Meat: La Esquina de Buenos Aires • Italian: La Casa Italia, en Los Yoses • Asian: Tin Jo • International and cafe style: Cafe Mundo y Cafe Kalu I will be in San Jose for 24 hours.

What do you suggest I see?

I would recommend a city tour where you can see museums, theaters, the Cathedral, the Amon barrio (where the early coffee families settled) and the Central Market. You can take your own tour or contract a guide for a walking tour: www.chepecletas.com Can you suggest one or two places to go shopping?

If you are looking for souvenirs I would recommend La Casona or the Mercado de las Artesanias (the Artisan’s Market) located in Plaza de la Democracia. A new artisan’s market is being built on Calle 5 with Avenida 4 and the artisans sell their products directly to customers.

As for coffee, you can buy whole coffee beans or you can ask a shop assistant to ground up a blend using different beans, with different degrees of roasting. The Gold Museum sells jewelry that replicates pieces in their exhibits, based on figures designed by indigenous groups before the conquest.

What are some must-buys or food -taste on my shopping trip?

In the Central Market: coffee and a cloth filter to prepare your coffee in the traditional Costa Rican style, a sorbet in the Heladeria Lolo Mora (an original family recipe passed down five generations) or an “olla de carne” (a meat stew with vegetables).

What security measures do you recommend taking?

Our hotel has written up a security guide for its guests complete with drawings. We developed this awareness campaign because Costa Rica is a country renowned for its peace and democracy, and early on tourists didn’t think to exercise caution. We shouldn’t confuse peace and democracy with phenomena that are present around the world like poverty and petty crime. Costa Rica

is not a country where you need to be alarmed, but you do have to be alert.

If I have many meetings in the city, what is the best way to get around?

The best way is to walk, as the distances are very short. Taxi fares will range between $2 and $8 in downtown.

What is the appropriate amount to tip a taxi driver or a chauffeur, or to leave in a restaurant?

Costa Ricans do not tip taxi drives and in restaurants there is already an obligatory 10 percent tip included in the bill .

What authentic dishes and drinks do you recommend?

Typical Costa Rican dishes include: Gallo pinto, casados and olla de carne.

Costa Rican cooking has meso-American roots (corn, tortillas, corn pancakes) and then was infused with Spanish flavors after the conquest, when rice and farm animals were introduced. The national cuisine also was influenced by Afro-Caribbean populations that began to arrive in the 1870s to build a railway to the Atlantic.

–Mark Chesnut

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PHOTOS: COURTESY OF OGILVY CHILE

SPOTLIGHT CHILE

Chileno Becker Beer’s Talking

BY PAULA ANCERY

“T

his can will self-destruct in four, three, two, one…” goes the countdown until the voice explodes into laughter: “I’m Raul Roberto! Get me out of here!”

The cans are Becker beer cans, a brand from the Chilean group CCH, which also has Stella Artois and Brahma in its stable of products, and Raul Roberto is the personality created by the Ogilvy agency to introduce this speakingcan innovation.

The system consists of a photosensitive trigger that plays a pre-recorded message once the cans are opened, exposing the system to light. “It was discovered by the Becker people,” said Francisco Camacho Martino, creative director of Ogilvy Chile. They researched it and showed it to us.”

Thanks to this novel approach, the company has packaged its advertising message right into the can. In each six-pack, eight-pack and twelvepack there might be a talking can, which may be exchanged for more cans.

“Those cans contain this system and a little bit of liquid inside. They weigh the same as a normal can, to create the feeling they have beer inside and so fool the consumer,” added Camacho. In all, there are 10,000 cans, each with one of five different Raul Roberto messages.

But who or what exactly is Raul Roberto?

The agency created him as a tiny figure to fill out the campaign.

In a series of television ads, he’s so small he fits inside a dice cup, and creates a stir by helping friends roll perfect scores at generala. Or he jumps onto a foosball table to hug a miniature player that just scored a goal. In the same spot, he falls off the shoulder of a friend who works at the Becker plant, lands in a beer can, and accidentally gets sealed inside— which is how he

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Can

JULY-AUGUST 2012

gets trapped in a talking can.

If there’s one trait that defines Raul Roberto, besides being small, it’s his unconditional friendship. “We had a talking can and decided to invent a lost person inside it. That’s how we came to create a little personality small enough to fit in the container,” said Camacho.

“Once we answered the question of why the can talks, we let a story unfold that appeals to unshakeable friendship.” The story even features the soundtrack of “Friends Will be Friends,” Queen’s ode to friendship.

In the television ad titled “Polola” (girlfriend), a pretty girl recognizes that Raul Roberto is “a lot of man” for her, but she loves him anyway.

Another ad depicts football players passing out team shirts until a tiny one appear– the one that belongs to Raul Roberto, whose number is the top scoring 10.

Another piece, called “Vidente”, first appeared online. “We also use radio and traditional print media, but the heavy lifting is done on the social networks,” said Camacho.

The company rolled out the campaign on April 17 and the public response was immediate. “Raul Roberto’s Facebook quickly arrived at the limit for receiving friends,” said Camacho.

“People didn’t stop posting and participating.”

“Those who got the Raul can put up videos, photos, etc.,” said the creative director. “They talked about it on the street and the clips got lots of visits on Youtube.”

The campaign also brought strong results in terms of sales. “Welcome to what others can’t see,” is the message that ends all the commercials featuring this diminutive figure. And suddenly, a traditional and well-known brand, though not the market leader, has discovered a way to differentiate itself from the crowd.

TECHNICAL CREDITS

Creative General Director: Cesar Agost Carreno Creative Director: Francisco Camacho Martino Editor: Juan Pablo Tyrer Art Director: Juan Pablo Alvarez Audiovisual Production: Jenny Saavedra Account Director: Valeria Haddad Production House: Cine 3 Director: Pablo Guarnaccia Executive producer: Fernanda Sala Post-production house: Sastre

Intelligent and relevant.

THEN • NOW • ALWAYS cnn.com/international

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