Latin Trade (English Edition) - Jan/Feb 2013 by Latin Trade Group

LATIN TRADE

FORECAST: REVENUES OF TOP LATIN AMERICAN COMPANIES IN 2013

BEST OF TRAVEL ISSUE

HOTELS AIRLINES RENTAL CARS DESTINATIONS

JANUARY / FEBRUARY 2013

ALSO INSIDE: • DEALS

OF THE YEAR

• WILL

PANAMA GROW AFTER THE CANAL?

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JANUARY/FEBRUARY 2013

TAMBO DEL INKA, A LUXURY COLLECTION RESORT & SPA, VALLE SAGRADO, PERU

SHERATON SAO PAULO WTC HOTEL, BRAZIL

HOTELS & RESORTS IN LATIN AMERICA

Don’t just travel, treat yourselff

ALOFT BOGOTA AIRPORT, COLOMBIA

THE WESTIN PANAMA

Feel the energy of Latin America in your choice of more than 70 hotels, each reﬂective of one of nine brands that are part of Starwood Hotels & Resorts. A selection of 42 unique destinations in 13 countries throughout the region. Each hotel provides the essential elements for an unforgettable stay. To learn more, visit STARWOODLATINAMERICA.COM 2013 Openings: The Westin Panama; Sheraton da Bahia Hotel, Salvador; Sheraton Tucuman Hotel; Four Points by Sheraton Miraﬂores; Palacio del Inka Libertador, a Luxury Collection Hotel, Cusco; Aloft Panama; Four Points by Sheraton Cancun and the just opened Le Meridien Mexico City.

Best Business Hotel Chain in Latin America by the readers of Business Traveler magazine ©2013 Starwood Hotels & Resorts Worldwide, Inc. All Rights Reserved.Preferred Guest, SPG, Aloft, Element, Four Points, Le Méridien, Sheraton, St. Regis, The Luxury Collection, W, Westin and their logos are the trademarks of Starwood Hotels & Resorts Worldwide, Inc., or its afﬁliates.

Reducing energy consumption and environmental impact while improving quality. Sounds impossible? Not for McDonald â&#x20AC;&#x2122;s.

As the manager of McDonaldâ&#x20AC;&#x2122;s restaurants throughout Latin America and the Caribbean, Arcos Dorados is planning for the future by making our restaurants more environmentally sustainable. Doing so has a positive impact on our business, the environment and the communities in which we operate. In January 0F'RQDOGÂˇV RSHQHG LWV Ă&#x20AC;IWK HFR IULHQGO\ UHVWDXUDQW LQ 3OD]D *XD\QDER 3XHUWR 5LFR 7KLV UHVWDXUDQW was built with technologies that reduce the use of electricity, water and gas. It is also equipped to promote UHF\FOLQJ DQG UHXWLOL]DWLRQ RI ZDVWH ZKLOH DOVR LPSURYLQJ WKH FXVWRPHU DQG HPSOR\HH H[SHULHQFH (YHQ WKH JDUGHQ Âł ZKLFK IHDWXUHV ORFDO SODQWV DQG Ă RZHUV Âł FRQWULEXWHV WR D UHGXFHG HFRORJLFDO IRRWSULQW ,Q 0H[LFR WKH 0F'RQDOGÂˇV UHVWDXUDQW ORFDWHG LQ 3DUTXH +XQGLGR ZDV UHFHQWO\ DZDUGHG /((' /HDGHUVKLS LQ (QHUJ\

DQG (QYLURQPHQWDO 'HVLJQ *ROG FHUWLĂ&#x20AC;FDWLRQ E\ WKH 86 *UHHQ %XLOGLQJ Council. It is the third McDonaldâ&#x20AC;&#x2122;s restaurant in Latin America to receive this JOREDOO\ UHFRJQL]HG FHUWLĂ&#x20AC;FDWH IRU H[FHOOHQFH LQ VXVWDLQDELOLW\ :KLOH ZHÂˇYH made some important strides in making our restaurants environmentally sustainable, we know we have more work to do. Our vision is to serve meals that are appreciated by millions of Latin American families while encouraging sustainable practices in our restaurants and local communities. 7KLV LV ZKDW PDNHV XV EHOLHYH LQ D JUHHQHU KHDOWKLHU DQG WDVWLHU IXWXUH

www.arcosdorados.com

CONTENTS

JA N U A R Y / F E B R U A R Y 2 0 1 3 VO L . 2 1 N o . 1

Features 16

Cover Best of Travel: Latin Trade weighs in on the best hotels, destinations, airports, and meeting venues in Latin America.

30 Industry Report Latin Trade’s Deals of the Year

36 Financial Strategies: Real Estate Shopping for the well-heeled

38 Corporate Strategies AIG starts over

40 Special Report: LatAm 2013 For companies, 13 is a lucky number

46 Education: Educating for Success Homework for the authorities in Ecuador and Haiti: Make sure the children get to school.

50 Country Report: Panama The Challenges Ahead: How will mega projects impact the country; a hub for the Americas, and the toruism boom.

60 Investments: China’s Slowdown Chinese Shadows: China’s economy is cooling. How will Latin America fare?

62 Investments: Venezuela Outlook

Venezuela in its labyrinth

64 Investments: Spain in Latin America Spain reconquers Latin America

66 Investments: Brazil in Africa Under the African sun: Brazilian firms increase their presence in Africa.

62 4

LATIN TRADE

JANUARY-FEBRUARY 2013

CONTENTS

JA N U A R Y / F E B R U A R Y 2 0 1 3 VO L . 2 1 N o . 1

Editor’s Note 8

Business Revs Up for Growth in 2013

The Scene 12 Thumbs Up for LatAm

Opinion 14 The Contrarian: Cash Credit is King By John Price

Tech Trends 70 E-Learning for the Twitter Generation How technology is revolutionizing education

Events 72 CFO México, D.F.

74 CFO Miami

Spotlight: Colombia 76 The Only Risk is Wanting to Stay...

Web Find us online at www.latintrade.com

Cover: Best of Travel

LATIN TRADE

JANUARY-FEBRUARY 2013

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

“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., all of which are registered brokerdealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured y May Lose Value y Are Not Bank Guaranteed. ©2012 Bank of America Corporation

EDITOR’S LETTER

BUSINESS REVS UP FOR GROWTH IN 2013

his year will be a good one for Latin America. In what is the first issue of Latin Trade for 2013, we want to show you what lies behind our optimism from a variety of angles. Maybe we’ve been donning our rosy-tinted spectacles. After all, the region’s economic growth came to a close on 3.1 percent last year, down from 4.3 percent in 2011. But estimates from Latin Business Chronicle, the digital news and market intelligence of Latin Trade Group, show that last year’s slowdown was far from a disaster for the productive sector. On the contrary, the region’s leading non-financial companies recorded a 10 percent average sales growth in 2012, and a quarter of them achieved increases of 20 percent or more (see story on page 40). The biggest increases were recorded by companies involved in commerce, consumer goods, transport and telecommunications. They were able to shrug off the problems of the international economy thanks to a growth in demand from Latin America. On top of that, leading economists, such as those from the UN Economic Commission for Latin America and the Caribbean, reckon that domestic demand will remain strong this year, as shown by labor indicators and growth in bank credit. Both drivers will boost growth of the middle class, which the World Bank has

LATIN TRADE JANUARY-FEBRUARY 2013

shown is now running neck-and-neck in numbers with the poor. Between 2003 and 2009, the region’s middle class grew from 103 million to 152 million. 2013 will also have an additional advantage. The prices of raw materials produced by Latin America are not expected to slump due to economic uncertainty in Europe and elsewhere because Chinese purchases will provide an additional support mechanism (see story on page 60). Yet another positive factor will be the renewed importance of tourism as a result of growth in business, the movement of the Europeans and help from governments (see story on page 16). Good results are also to be expected from the multilatinas, whose internationalization strategy has paid off in terms of a diversification of the sources of growth. They are opening up new markets in the South, as are Chilean companies in Peru and Colombia, Colombian firms in the Caribbean and Brazilians in Africa (see story on page 66). Investment flows will also continue from the United States, Europe (see story on page 64) and, to a lesser extent, Asia, providing increased financial returns from the growth of Latin America. For all of these reasons, as well as others, this

year is heading in the right direction from the viewpoint of business activity in almost all the region’s countries. For some of them, such as Panama, 2013 will be yet another marvelous year (see story on page 50). Of course, there are challenges to the fiscal fragility of some countries, especially those of the Caribbean, and the need to increase investments so that consumption is no longer the sole motor of growth. Others, thanks to their relative wellbeing, might find room for technical changes to boost social inclusion. But in general, except for unforeseen events, the productive sector will have a clean bill of health and will generate economic prosperity. Are things looking good for the year? No question.

Santiago Gutiérrez, Executive Editor sgutierrez@latintrade.com

MIXING BUSINESS WITH PLEASURE? AUTHENTIC EXPERIENCES INCLUDED.

Shouldn’t each business trip or vacation you take be an unforgettable experience? At InterContinental, that is our mission. We use our local knowledge and insight to provide you with an authentic and captivating stay at the best destinations and cities in Latin America and the Caribbean…every time you travel!

Do you live an InterContinental life? And now earn 10 Priority Club points for every US$1 spent at InterContinental hotels in the Americas Visit www.ihg.com/LAC or www.priorityclub.com/ambassador

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valuable time looking for data and analysis on

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Caribbean

CEO Rosemary Winters EXECUTIVE DIRECTOR & PUBLISHER María Lourdes Gallo EXECUTIVE EDITOR Santiago Gutiérrez ART & PRODUCTION DIRECTOR Manny Melo GRAPHIC DESIGNER Vincent Becchinelli CONTRIBUTING EDITORS Gabriela Calderón (research), Mark Ludwig COLUMNIST John Price

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CORRESPONDENTS Argentina: David Haskel, Charles Newbery • Brazil: Taylor Barnes (Rio de Janeiro), Tereza Cruvinel (Brasilia), Vincent Bevins, Thierry Ogier, (São Paulo) • Chile: Gideon Long • China: Ruth Morris Colombia: John Otis • Mexico: David Agren (Mexico D.F.), Nancy Ibarra (Monterrey) • Peru: Lisa K. Wing, Ryan Dube • Spain: Sergio Manaut • US: Alejandra Labanca, Joseph Mann Jr. (Miami), Mark Chesnut, John T. Sullivan (NY), Ángela María Riaño (Washington D.C.), Pablo Calvi, Isabel Piquer • Venezuela: Peter Wilson TRANSLATION: David Buchanan COPY EDITOR: Ronald Buchanan/Millie Acebal Rousseau EVENTS & CONFERENCES PROGRAM MANAGER Victoria Kenny EVENTS EXECUTIVE Sandra Bicknell EVENTS MARKETING EXECUTIVE Suzana Fiat SALES & CIRCULATION Miami/Pan-regional sales: Silvia Clarke, Senior Account Manager/Team Leader Mercedes Fernández, Business Development Director Andean region/Central America: María Cristina Restrepo, Manager Dubai: Stephen Dioneda Special Projects Coordinator: Rebecca Miller Sales and Marketing Coordinator: Silvia Morales For advertising/sponsorship opportunities: rmiller@latintrade.com or smorales@latintrade.com LATIN BUSINESS CHRONICLE Senior Marketing Associate: Rosemary Begg: rbegg@latintrade.com Marketing Associate: Blanca Charún: bcharun@latintrade.com OFFICE MANAGER & CIRCULATION Claudia Banegas

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CHAIRMAN Richard Burns CHIEF OPERATING OFFICER Joanne Harras ACCOUNTS MANAGER Kathy Pollyea, kpollyea@manhattanmedia.com Latin Trade Group is a division of Miami Media, LLC, an affiliate of Isis Venture Partners Executive, Editorial, Circulation and Advertising ofﬁces are located at Brickell Bay Ofﬁce Tower, 1001 Brickell Bay Drive, Suite 2700, Miami, Florida 33131, USA. CUSTOMER SERVICE AND SUBSCRIPTIONS: Please visit www.latintrade.com to order online or call +1 (305) 749-0880. Latin Trade (ISSN 1087-0857, USPS 016715) is published bimonthly, with editions in English and Spanish, by Miami Media, LLC. All rights reserved. Reproduction in whole or part of any text, photograph or illustration without written permission of the publisher is strictly prohibited.

Visit Latin Trade online @ www.latintrade.com 10

LATIN TRADE JANUARY-FEBRUARY 2013

THE SCENE

THUMBS UP FOR LATAM IT’S A GOOD TIME FOR REGIONAL COMPANIES TO PURSUE A PUBLIC EQUITY OFFERING.

here is a general consensus among North American and European investors that, despite significant macroeconomic headwinds in Europe and China, Latin America is a region with steadfast domestic markets and attractively valued companies with significant growth potential. Also, the consumer goods and services sectors are the most attractive to investors, while utilities, basic materials, and commodities sectors are the least appealing, according to a survery conducted by Ipreo in September 2012, on behalf of J.P. Morgan’s Depositary Receipts Group. Respondents for the survey were global institutional investors from the United States, Canada, and European countries.

Main challenges to maintaining a fair market valuation *

Most important factors for a successful IPO * Strong Senior Mgmt. Team

50%

Track Record of Execution

38%

Valuation

35% 35%

Corp. Governance Practices 23%

Strong Business Model

23%

Stability of Results 18%

Market Sector/Industry 0%

10%

20%

30%

40%

50%

Which sectors in Latin America do you favor? 65%

Consumer Goods

Government Intervention

38%

60%

Consumer Services

Liquidity

20%

Infrastructure

28%

15%

Financials

Investor Communications Practices Corporate Governance Practicies

25%

10%

Healthcare 0%

10%

20%

30%

40%

50%

60%

70%

23%

Which sectors in Latin America are you avoiding?

Macro Environment

23%

Utilities

Realistic Guidance

25%

Basic Materials

15%

20%

Commodities

Sustainability of Results

18%

Energy

15%

13%

Gov-Regulated Industries 0%

10%

15%

20%

25%

30%

35%

* Participants had the option of providing multiple responses. Only the responses with 6 or more mentions are displayed.

Does an ADR program help LatAm Issuers maintain a fair market valuation?

5% 10%

30%

55%

Yes No Mixed Opinion No Opinion

10%

40%

Technology

10% 0%

10%

20%

LATIN TRADE JANUARY-FEBRUARY 2013

30%

In total, Ipreo obtained feedback from 40 participants who invest in Latin America. As of June 30, 2012, these participants’ firms managed a combined $807.6 billion in equity assets, $43.0 billion of which represented holdings in Latin American companies. Of these firms, 70 percent are traditional investment advisers/mutual fund managers, while 30 percent are hedge funds. A high percentage of survey participants believe that now is a good time for a Latin American company to pursue a public equity offering. However, investors have concerns about government intervention, as well as company-specific shortcomings in financial accounting standards, investor communications, and corporate governance practices.

Source: North American and European Investor Opinions of Latin American Companies, by JP Morgan’s Depositary Receipts Group

60%

* Participants had the option of providing multiple responses. Only the responses with 7 or more mentions are displayed.

THE SCENE

TURNING ONE BILLION TOURISTS INTO ONE BILLION OPPORTUNITIES

On December 13, 2012, Latin America received its symbolic tourist number one billion, a Brazilian lady entering Argentina where she was greeted by a special welcoming committee. That billion figure

means one out of seven people crossed the borders of their country in just one year, 2012. Amazing! Also note, that in 1950, the registered figure of international travelers was 25 million passengers.

FIGURES FOR TOURISM IN LATIN AMERICA

9% GDP

1/12 jobs

(Direct, indirect and induced)

$ in US 1.2 trillion in exports

of world trade

8% exports of least developed countries

JANUARY-FEBRUARY 2013 LATIN TRADE

THE CONTRARIAN

BY JOHN PRICE

Credit _ CASH IS KING

he expansion of credit has dramatically altered the consumer landscape in Latin America over the last decade. Going back a bit further, in 1990, fewer than 3 percent of Latin American households had a credit card. By 2020, that figure will grow to 25 percent. In Brazil, where credit has grown even more radically, consumer loans expanded eight fold from 2002 to 2012. Access to credit changes how consumers

have jumped 671 percent, car sales have grown by 561 percent, and appliance sales have leapt 521 percent, all faster than GDP or general consumption growth. In Latin America, credit card interest rates are onerous, ranging from 30 percent to 230 percent per year. The banks defend the rates based on the high costs associated with collecting unsecured debt. High interest rates limit the use of cards. Latin Americans generally do

900 800 700 600 500 400 300 200 100 0 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Loan growth surpasses all other consumer categories (Brazilian Consumer Category Sales 2001-2015) Source: Economist Intelligence Unit

shop. Credit enables people to buy larger ticket items that would otherwise be out of reach. When Mexico’s Telmex began offering Acer computer packages to its landline customers in 1998, it instantly became the largest computer re-seller and doubled Mexican PC and laptop demand from 1 million to 2 million units per year. Most of Telmex’s customers could not obtain a credit card at the time, so the opportunity to pay for a computer through installments on their monthly phone bill was irresistible, even if the interest rate used to calculate the installments was set at loan-shark levels. The Telmex example illustrates how consumer credit, even unconventional and costly sources of credit, can unleash repressed demand for expensive but vital goods. Over the last decade, Brazilian software sales

LATIN TRADE JANUARY-FEBRUARY 2013

not buy groceries, medicine, clothing and other staples with a credit card. Plastic is reserved for big ticket and extraordinary expenses. High interest rates also provoke prudent balance management. Default rates in Latin America are about half the levels found in the United States. Even while growing, consumer credit in Latin America represents no more than 70 percent of total GDP, versus 230 percent in the United States. Consumer demand for credit in Latin America is not fully satisfied by banks. Pushing credit beyond the top 15 to 20 percent of households into the base of the pyramid has proven too daunting a task for most of the region’s banks, and their brick-and-mortar approach drives up the cost of customer acquisition beyond a sustainable level. In their place,

innovative alternative providers of credit have stepped in. The largest credit card issuer in Chile is Falabella, a leading supermarket chain. Elektra, the Mexican domestic appliance retailer focused on the vast working class segment, provides credit to customers who can show they receive regular remittances from family in the United States. Elektra is also the largest agent network for Western Union inside Mexico. The next frontier in the expansion of credit will be pursued on two fronts. Extending shortterm credit to Latin America’s 200 million base-of-the-pyramid consumers remains an unrealized ambition for a handful of banks and a curious mix of non-traditional lenders, including retailers, utilities providers, phone companies and mono-line lenders who are not burdened by the fixed costs of banking. The larger, still untapped prize is consumer mortgages. Of Brazil’s 62 million households, approximately 550,000 have mortgages (<1 percent) compared with over 50 percent in the United States. Mortgages are growing rapidly (by 58 percent in Brazil in 2010), but are both expensive and difficult to obtain. In most jurisdictions in Latin America, seizing property postforeclosure is a time consuming and legally costly procedure. That gives banks pause before extending new mortgages. Tenancy laws, which in many countries tend to favor tenants and squatters over property owners, need to be reformed before banks will be willing to extend mortgages to those beyond its premium level customers. So far, the benefits of credit expansion in Latin America have outweighed the costs. To get to the next level, however, both lenders and legislators will need to be far more bold and creative than they were during the last decade of easy and rapid growth.

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

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Scan the QR code* with your mobile device to view a video or visit sas.com/build for a free Harvard Business Review report.

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SAS and all other SAS Institute Inc. product or service names are registered trademarks or trademarks of SAS Institute Inc. in the USA and other countries. ® indicates USA registration. Other brand and product names are trademarks of their respective companies. © 2011 SAS Institute Inc. All rights reserved. S71303US.0411

BEST OF TRAVEL

Latin Trade’s

LATIN TRADE JANUARY-FEBRUARY 2013

Along with religion and politics, travel is a topic that produces very strong opinions. Whether they’re raving about the best airplane seat or ranting about the worst hotel restaurant, nearly every business traveler is well equipped to launch into a list of their best and worst travel experiences. In Latin America — as in the rest of the world — the travel industry is in a state of flux, as airlines merge, airports struggle to handle more passengers, and hoteliers and destinations react to economies that are booming in some places and struggling in others. No one knows this better than the readers of Latin Trade, who seem to cross national borders within the Americas the way that other people cross a street in their hometown. To help harried business travelers navigate the region and point them in the direction of the best possible experiences, we’ve assembled a group of well-traveled experts to rank and rate a variety of hotels, destinations, airports and meeting venues throughout the region. Our expert panel includes a crucial crosssection of savvy travelers and objective industry experts — including frequent business travelers, travel agents and destination management companies, the organizations that make meetings happen around the globe. The results offer unique insight into the very best options for travelers in Latin America — and helpful guidelines for the months of travel that lie ahead.

PHOTO: ©ISTOCKPHOTO.COM/ @ DIEGO CERVO

BY MARK CHESNUT

BEST OF TRAVEL

Hotel lobby of The Ritz-Carlton in Santiago, Chile

BEST HOTELS

PHOTO: COURTESY OF THE RITZ-CARLTON HOTEL COMPANY, L.L.C.

The expansion of international hotel brands in Latin America is, in many regions, continuing an impressive growth trajectory. In Brazil, mid-market chains are growing especially quickly, largely in response to the growing middle class and, in Rio de Janeiro, also to prepare for the large influx of visitors expected to attend the 2014 World Cup and 2016 Olympics. Bogota and Panama City also stand out as cities with substantial growth in hotel investment and the debut of new international brands, while San Juan, Puerto Rico, is aiming to recast itself as a destination for meetings and conventions with new group-friendly upscale properties in the works. Hotels serve such a diverse group of clientele that it’s necessary to break them down into multiple categories in order to provide an accurate picture

of which properties are best. And even within each ranking category, there may not be a black-and-white best answer — especially when it comes to ranking things like value for the money, notes Vera Joppert, a member of Latin Trade’s expert panel for this issue and the director of Turismo Classico, a destination management company in Rio de Janeiro. Through her years of experience in the “Cidade Maravilhosa,” she knows well that what you pay for a hotel one month may be very different from the rate just a couple months later. In other words, you might get more for your money at one time of year than another, based on occupancy and peak travel trends. “This will always depend on the particular situation of each property for the requested date,” she says. “This applies to each and every city.”

THE IMPORTANCE OF THE MEETINGS MARKET Latin America is a closely watched region by the International Congress and Convention Association (Icca), a global organization that represents specialists in organizing, transporting and accommodating international meetings and events, with more than 950 member companies and organizations in 88 countries around the world. To host its 51st world congress, Icca chose the Caribbean island of Puerto Rico, a destination that saw its number of international meetings grow from 9 in 2010 to 30 in 2011 (Icca’s 2012 figures had not been released as of press time). The increase represents a

jump in Puerto Rico’s worldwide rankings (measured by number of international association meetings per country) from 77th place in 2010 to 56th in 2011 and, in the regional North and Latin American rankings, from 18th to 12th position. Latin America overall is becoming a more popular area for international meetings, according to Icca figures, with a steadily increasing market share over the past decade. And while the United States may lead the hemisphere in terms of number of international meetings, other nations lead when broken down by city.

According to the most recent Icca rankings, here are the western hemisphere’s most important countries and cities in the international meetings and convention segment: Number of meetings by country: 1. USA: 759 2. Brazil: 304 3. Canada: 255 4. Argentina: 186 5. Mexico: 175 6. Colombia: 113 7. Chile: 87 8. Peru: 55 9. Uruguay: 46 10. Paraguay: 34

Number of meetings by city: 1. Buenos Aires: 94 2. Rio de Janeiro: 69 3. São Paulo: 60 4. Vancouver: 55 5. (tie): México City: 51 Washington D.C.: 51 7. Montreal: 50 8. Santiago: 49 9. (tie) Bogota: 44 Boston: 44 Lima: 44 Toronto: 44 Fuente: www.iccaworld.com

JANUARY-FEBRUARY 2013 LATIN TRADE

BEST OF TRAVEL

Santiago: Grand Hyatt Santiago, Ritz-Carlton, Santiago Santo Domingo: Hotel Frances Mgallery, Meliá Santo Domingo, Occidental El Embajador Sao Paulo: Grand Hyatt Sao Paulo, Renaissance Sao Paulo, Tivoli Sao Paulo Mofarrej Tegucigalpa: Tegucigalpa Marriott

BEST FOR NUMBER/QUALITY/ VARIETY OF CONVENTION ROOMS

Exterior view from a hotel room in the Real Metrocentro Managua

THE WINNERS (Note: Hotels are presented in alphabetical order, not in order of votes)

BEST LOCATED HOTELS FOR BUSINESS ACTIVITIES Asuncion: Bogota: Brasilia:

Sheraton Asunción Charleston Casa Medina, JW Marriott Bogotá Brasil 21 Convention Suites, Meliá Brasil 21, Royal Tulip Brasilia Alvorada Buenos Aires: Four Seasons Hotel Buenos Aires, Hilton Buenos Aires, Palacio Duhau Park Hyatt Buenos Aires Caracas: Eurobuilding Hotel & Suites, Gran Meliá Caracas, JW Marriott Caracas Guadalajara: Fiesta Americana Grand Guadalajara Guatemala City: Barceló Guatemala City, Real InterContinental Guatemala, Westin Camino Real Guatemala Lima: JW Marriott Lima, Miraflores Park, Westin Lima Hotel & Convention Center Managua: InterContinental Real Metrocentro Medellin: InterContinental Medellín Mexico City: Four Seasons Hotel Mexico, D.F., JW Marriott Mexico City Montevideo: Radisson Victoria Plaza, Sheraton Montevideo Panama City: Miramar Intercontinental, Panama Marriott, Sheraton Panama Hotel & Convention Center Quito: JW Marriott Quito, Sheraton Quito, Swissotel Quito Rio de Janeiro: Copacabana Palace, Sofitel Rio de Janeiro Copacabana, Windsor Atlantica San Jose: Grano de Oro, InterContinental Real San José San Juan: Caribe Hilton, El San Juan Resort & Casino San Salvador: Courtyard by Marriott San Salvador

LATIN TRADE JANUARY-FEBRUARY 2013

Sheraton Asunción JW Marriott Bogotá Brasil 21 Convention Suites, Naoum Plaza Brasilia, Royal Tulip Brasilia Alvorada Buenos Aires: Alvear Palace, Hilton Buenos Aires, Sheraton Buenos Aires Hotel & Convention Center Caracas: Gran Melia Caracas Guadalajara: Presidente InterContinental Guadalajara Guatemala City: Westin Camino Real Guatemala Lima: Miraflores Park, Westin Lima Hotel & Convention Center Managua: Crowne Plaza Managua Medellin: Dann Carlton Mexico City: Four Seasons Hotel Mexico, D.F., Sheraton María Isabel Hotel & Towers Montevideo: Radisson Victoria Plaza, Sheraton Montevideo Radisson Panama City: Miramar Intercontinental, Panama Marriott, Sheraton Panama Hotel & Convention Center Quito: JW Marriott Quito, Sheraton Quito, Swissotel Quito Rio de Janeiro: Sofitel Rio de Janeiro Copacabana, Windsor Atlantica, Windsor Barra San Jose: Crowne Plaza Hotel San José Corobici, InterContinental Real San José San Juan: Caribe Hilton San Salvador: Sheraton Presidente San Salvador Santiago: Grand Hyatt Santiago, Ritz-Carlton, Santiago, Sheraton Santiago Hotel & Convention Center Santo Domingo: Occidental El Embajador, Meliá Santo Domingo Sao Paulo: Grand Hyatt Sao Paulo, Renaissance Sao Paulo, Tivoli Sao Paulo Mofarrej Tegucigalpa: InterContinental Real Tegucigalpa

BEST VALUE FOR THE PRICE FOR BUSINESS TRAVELERS IN GENERAL Asuncion: Bogota: Brasilia: Buenos Aires:

Sheraton Asunción Charleston Casa Medina, JW Marriott Bogotá Brasil 21 Convention Suites, Meliá Brasil 21 Hilton Buenos Aires, Meliá Buenos Aires, Sofitel Buenos Aires

PHOTO: COURTESY OF IHG

Asuncion: Bogota: Brasilia:

BEST OF TRAVEL

Caracas: Guadalajara: Guatemala City: Lima:

BEST OVERALL SERVICE Asuncion: Bogota: Brasilia: Buenos Aires:

Sheraton Asunción Charleston Casa Medina, JW Marriott Bogotá Meliá Brasil 21, Royal Tulip Brasilia Alvorada Alvear Palace, Four Seasons Hotel Buenos Aires, Palacio Duhau Park Hyatt Caracas: Gran Melia Caracas Guadalajara: Westin Guadalajara Guatemala City: Westin Camino Real Guatemala Lima: Country Club Lima, JW Marriott Lima, Westin Lima Hotel & Convention Center Managua: InterContinental Real Metrocentro Medellin: InterContinental Medellín Mexico City: Four Seasons Hotel Mexico, D.F., JW Marriott Mexico City Montevideo: Radisson Victoria Plaza, Sheraton Montevideo Panama City: Le Meridien Panama, Marriott Panama, Miramar InterContinental Quito: Hilton Colon Quito, JW Marriott Quito, Swissotel Quito Rio de Janeiro: Copacabana Palace San Jose: InterContinental Real San José San Juan: Caribe Hilton, Ritz-Carlton, San Juan San Salvador: Sheraton Presidente San Salvador Santiago: Grand Hyatt Santiago, Ritz-Carlton, Santiago, W Santiago

LATIN TRADE JANUARY-FEBRUARY 2013

W Santiago in Chile

Santo Domingo: Hilton Santo Domingo, Hotel Frances Mgallery, Meliá Santo Domingo Sao Paulo: Fasano Sao Paulo, Grand Hyatt Sao Paulo, Hotel Unique Tegucigalpa: Tegucigalpa Marriott

BEST REWARDS/LOYALTY PROGRAM Asuncion: Bogota: Brasilia: Buenos Aires:

Sheraton Asunción JW Marriott Bogotá Meliá Brasil 21, Royal Tulip Brasilia Alvorada Hilton Buenos Aires, Marriott Plaza Hotel Buenos Aires, Palacio Duhau Park Hyatt Caracas: Gran Meliá Caracas, Renaissance Caracas La Castellana, Tamanaco InterContinental Guadalajara: Crowne Plaza Guadalajara, Westin Guadalajara Guatemala City: Real InterContinental Guatemala Lima: JW Marriott Lima Managua: InterContinental Real Metrocentro Medellin: Four Points by Sheraton Medellín Mexico City: JW Marriott Mexico City, Presidente InterContinental Mexico City, Sheraton María Isabel Hotel & Towers Montevideo: Radisson Victoria Plaza Panama City: Le Meridien Panama, Panama Marriott Quito: JW Marriott Quito Rio de Janeiro: Copacabana Palace, Sheraton Rio Hotel & Resort

PHOTO: COURTESY OF STARWOOD HOTELS

Eurobuilding Hotel & Suites, Gran Meliá Caracas Crowne Plaza Guadalajara Westin Camino Real Guatemala Meliá Lima, Miraflores Park, Westin Lima Hotel & Convention Center Managua: Hilton Princess Managua Medellin: Holiday Inn Express Medellín Mexico City: Meliá México Reforma Montevideo: Radisson Victoria Plaza Panama City: Deville Hotel Panama, El Panamá, TRYP by Wyndham Panama Centro Quito: Holiday Inn Express Quito, Hotel Quito, Sheraton Quito Rio de Janeiro: JW Marriott Rio de Janeiro, Rio Othon Palace, Sheraton Rio Hotel & Resort San Jose: Aloft San José, InterContinental Real San José San Juan: Caribe Hilton, Conrad San Juan Condado Plaza, InterContinental San Juan Resort & Casino San Salvador: Hilton Princess San Salvador Santiago: Grand Hyatt Santiago, Sheraton Santiago Hotel & Convention Center Santo Domingo: Occidental El Embajador, Meliá Santo Domingo Sao Paulo: Grand Hyatt Sao Paulo, Renaissance Sao Paulo, Tivoli Sao Paulo Mofarrej Tegucigalpa: Tegucigalpa Marriott

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BEST OF TRAVEL

LAN DreamLiner/Boeing 787-8

InterContinental Real San José Caribe Hilton, InterContinental San Juan Resort & Casino San Salvador: Sheraton Presidente San Salvador Santiago: Grand Hyatt Santiago, Ritz-Carlton, Santiago Santo Domingo: Hilton Santo Domingo Sao Paulo: Grand Hyatt Sao Paulo, Renaissance Sao Paulo, Sheraton Sao Paulo WTC Tegucigalpa: InterContinental Real Tegucigalpa

BEST CHECK IN-CHECK OUT SERVICE Asuncion: Bogota:

Granados Park, Sheraton Asunción B.O.G. Hotel, Charleston Casa Medina, JW Marriott Bogotá Brasilia: Royal Tulip Brasilia Alvorada Buenos Aires: Four Seasons Hotel Buenos Aires, Hilton Buenos Aires, Palacio Duhau Park Hyatt Caracas: Eurobuilding Hotel & Suites, Gran Melia Caracas, InterContinental Tamanaco Guadalajara: Westin Guadalajara Guatemala City: Westin Camino Real Guatemala Lima: JW Marriott Lima, Meliá Lima Managua: InterContinental Real Metrocentro Medellin: InterContinental Medellín Mexico City: Four Seasons Hotel Mexico, D.F., JW Marriott Mexico City Montevideo: Radisson Victoria Plaza Panama City: Le Meridien Panama, Panama Marriott Quito: Swissotel Quito Rio de Janeiro: Copacabana Palace San Jose: InterContinental Real San José San Juan: Caribe Hilton, El San Juan Resort & Casino San Salvador: Hilton Princess San Salvador Santiago: Ritz-Carlton, Santiago, W Santiago Santo Domingo: Hotel Frances Mgallery, Meliá Santo Domingo Sao Paulo: Grand Hyatt Sao Paulo, Renaissance Sao Paulo, Tivoli Sao Paulo Mofarrej Tegucigalpa: Clarion Hotel Real Tegucigalpa

LATIN TRADE JANUARY-FEBRUARY 2013

AIRLINES/RENTAL CARS THE BEST AIRLINES FLYING IN LATIN AMERICA Any list of the best — or worst — airlines flying in Latin America today is noticeably shorter than it would have been a few years ago, thanks to the continuing consolidation of the industry. LAN and TAM have come together, although still flying as separate brands, while the TACA name will disappear in 2013 as its parent, AviancaTaca Holding S.A., rebrands its various divisions under the Avianca banner. Still, clear favorites appear in our expert panel opinions.

THE WINNERS 1.

Best food and beverage (in order) LAN, TAM/Copa (tie), Avianca, Emirates

Most comfortable cabins overall (in order) LAN, Avianca, TAM, Aeromexico, Copa, Emirates

Best business-class service (in order) LAN, American/Copa/TAM (tie for second), United

Best in-flight technology and entertainment (in order) LAN, American/TAM (tie for second), Delta, TACA

Best VIP lounges (in order) LAN, TAM, Aeromexico, American

Best on-the-ground service (in order) LAN, Copa, TAM, United, American

Best partnerships and alliances with other carriers Delta, LAN, Avianca, United

Best frequent flyer program in terms of rewards (in order) American, LAN, Delta

10. Best overall route network for travelers in Latin America Copa, LAN, Avianca, TAM 11. Best luggage handling (in order) LAN, Copa, Avianca, TAM 12. Best with on-time arrivals/departure (in order) LAN, Copa, Avianca

San Jose: San Juan:

PHOTO: ©ISTOCKPHOTO.COM/BLACKRED

BEST OF TRAVEL

RENTAL CARS BEST NEW LUXURY OPTION: HERTZ CORPORATION BEST PAN-LATIN PRESENCE: AVIS BUDGET GROUP The Avis brand maintains a presence at 337 locations around Latin America, including 68 offices in Argentina, 4 in Bolivia, 85 in Brazil, 24 in Chile, 6 in Colombia, 75 in Mexico, 8 in Uruguay and 67 in Venezuela. In Latin America, licensees operate every location of the Avis and Budget brands except in Argentina, which is a corporate operation. “We are seeing increases in travel to and from South America, and our intent is to ensure that the trusted Avis brand is conveniently located to meet the needs of both commercial and leisure travelers here,” says Patric Siniscalchi, president for Latin America/Asia Pacific at Avis Budget Group. The company recently announced its intention to acquire Zipcar Inc., a company that specializes in car sharing, although no plans have been made public about introducing that brand into Latin America.

ONE TO WATCH: DOLLAR THRIFTY AUTOMOTIVE GROUP Hertz recently completed its acquisition of Dollar Thrifty, potentially increasing this dual-brand company’s exposure in Latin America. According to Dollar Thrifty, Brazil holds a lot of potential for the division. “We are experiencing robust growth in Brazil, where Thrifty Car Rental has expanded operations to 32 cities across the country,” says Fernando Intriago, executive director for Caribbean & Latin America operations at Dollar Thrifty Automotive Group. The Caribbean and Latin America figure heavily in the international operations of the company’s Dollar Rent A Car brand, and Panama was cited as a major focus in Latin America for both brands.

BEST NEW PARTNERSHIPS: ENTERPRISE HOLDINGS In 2012, Enterprise announced two new franchising agreements: One to bring the Alamo and National brands to three locations in Uruguay, and another with Brazil-based rental car company Unidas to introduce both Alamo and National in Brazil, starting with the five largest international airports. Enterprise maintains a franchise network for its National Car Rental and Alamo Rent A Car divisions at more than 350 locations in 23 countries in Latin America and the Caribbean.

LATIN TRADE JANUARY-FEBRUARY 2013

Travelers seeking a bit of luxury on the road in Mexico might want to consider Hertz, which recently introduced its Prestige Collection there, featuring vehicles like the BMW 325i. Hertz also provides Hertz Gold Service in Mexico, and plans to expand to other Latin American countries in 2013. Hertz has more than 24,000 vehicles in Latin America and the Caribbean, with franchises in Mexico, the Caribbean and Central and South America; Hertz Puerto Rico and St. Thomas are the only corporate operations in the region. The company recently signed up a new franchise operator for Bolivia, leaving Guyana as the only South American nation where the brand is not represented.

BIGGEST SOUTH AMERICA PRESENCE: LOCALIZA In 2012, Localiza opened 29 new offices in Brazil, for a total of 464 offices in that country alone, with a total fleet of 107,312 vehicles. This Brazil-based company operates 513 offices in 352 cities, with a presence in Argentina, Bolivia, Colombia, Ecuador, Paraguay and Uruguay.

BEST DESTINATIONS People look for different things in different cities, depending on the purpose of their visit. Individual business travelers might be most concerned with a decent airport experience, a good hotel and perhaps a pleasant restaurant or two. Those involved with meetings, conventions and other business-minded events need all those things too, as well as group-friendly venues where they can spread out and get down to business. In the following ratings, Latin Trade’s Expert Panel weighs in on all of these aspects of Latin America’s top business destinations. In some cases, ratings can vary widely — especially with airports, several of which are in the midst of expansion and upgrades. In addition, new meeting and convention spaces that are about to debut are already attracting business as well as positive reviews even before their opening date, since meeting planners work months or years ahead of time.

BEST OF TRAVEL

General view of Comalapa International Airport in El Salvador

THE WINNERS AIRPORT RANKINGS (“1” is bad, “5” is excellent) based on infrastructure, services, amenities

Asuncion: 1 Bogota: 4 Brasilia: 3.3 Buenos Aires EZE: 3 Buenos Aires AEP: 3 Caracas: 2.2 Guadalajara: 3 Guatemala City: 4 Lima: 3.5 Managua: 2 Medellin: 3 Mexico City: 3 Montevideo: 3.3

Panama City: 4.3 Quito: 3 Rio de Janeiro GIG: 2.5 Rio de Janeiro SDU: 3.5 San Jose, Costa Rica: 3 San Juan: 2 San Salvador: 5 Santiago de Chile: 4.2 Santo Domingo: 3 Sao Paulo GRU: 3.2 Sao Paulo CGH: 2.8 Tegucigalpa: 3

BEST NON-HOTEL MEETING SPACE

Medellin: Mexico City:

Centro de Convenciones Plaza Mayor La Hacienda de los Morales, Expo Bancomer Santa Fe Montevideo: IMM Centro de Convenciones, Torre de las Comunicaciones Panama City: Centro de Convenciones Atlapa, Club de Golf de Panamá Quito: Centro de Convenciones San Francisco Rio de Janeiro: RioCentro, Centro de Convenções SulAmérica San Jose: Teatro Nacional de Costa Rica San Juan: Puerto Rico Convention Center San Salvador: Centro de Ferias y Convenciones-CIFCO Santiago: Espacio Riesco, CasaPiedra Santo Domingo: Terminal Sansouci Sao Paulo: Ahhembi Parque, Centro de Convenções Rebouças, Expo Center Norte Tegucigalpa: Centro de Convenciones Plaza Juan Carlos

EASE OF ORGANIZING A MAJOR CONVENTION

Yacht y Golf Club Paraguayo Club El Nogal Centro de Convenções Ulysses Guimarães, CICB — Centro Internacional de Convenções do Brasil (to open in 2013) Buenos Aires: Centro Costa Salguero, La Rural, Faena Arts Center Caracas: World Trade Center Valencia Guadalajara: Expo Guadalajara Guatemala City: Domo Polideportivo de la CDAG (Domo de la Zona 13), COPEREX (Comité Permanente de Exposiciones) Lima: Larcomar Managua: Centro Cultural de España en Nicaragua

LATIN TRADE JANUARY-FEBRUARY 2013

Asuncion: 2 Bogota: 3; Brasilia: 3.3 Buenos Aires: 4;

Caracas: 4; Guadalajara: 4;

“general security issues” “Buenos Aires has lots of good hotels, is attractive as a city, and has a good price/value relation.” “general security issues” “easy access via plane from major gateways in the US and Central America via Mexico City”

Guatemala City: 5 Lima: 3.75; “needs to improve communication access and transportation”

PHOTO: ROBERTO ESCOBAR/EPA/NEWSCOM

(“1” is very difficult; “5” is very easy)

Asuncion: Bogota: Brasilia:

PHOTO: ©ISTOCKPHOTO.COM / SURPASSPRO

BEST OF TRAVEL

Colorful stage production with monitor displays

Managua: 3 Medellin: 3 Mexico City: 4; Montevideo: 2.5 Panama City: 5;

COST OF ORGANIZING A CONVENTION OR GROUP EVENT “lots of convention hotels, easy access from all of the Americas” “lots of convention hotels, easy access from all of the Americas”

Quito: 4 Rio de Janeiro: 4.3 San Jose : 4; “limited hotel inventory in five-star category” San Juan: 4.5; “easy access from all major gateways in the US” San Salvador: 3 Santiago: 4.25; “lots of convention hotels, easy access from all of the Americas” Santo Domingo: 3.5; “limited hotel inventory in five-star category” Sao Paulo: 4.2; “lots of convention hotels, easy access from all over the world” Tegucigalpa: 3

Asuncion: Bogota: Brasilia:

Reasonable to inexpensive Reasonable to expensive Reasonable to expensive, “depending on time of the year” Buenos Aires: Reasonable to inexpensive Caracas: Reasonable to expensive Guadalajara: Reasonable Guatemala City: Reasonable Lima: Reasonable to inexpensive Managua: Inexpensive Medellin: Reasonable Mexico City: Reasonable to expensive Montevideo: Reasonable to inxpensive Panama City: Reasonable to inxpensive Quito: Reasonable Rio de Janeiro: Reasonable to expensive, “depending on time of the year” San Jose: Reasonable San Juan: Reasonable to expensive San Salvador: Reasonable Santiago de Chile: Reasonable to expensive Santo Domingo: Reasonable to inexpensive Sao Paulo: Reasonable to expensive, “depending on time of the year” Tegucigalpa: Reasonable

Expert Panel Ezequiel Barrenechea, director for Latin America & Caribbean, Corporación América, Buenos Aires; Luciana Belfort, manager, Ovation Rio/Ovation Global DMC, Rio de Janeiro; Sandra Borello, president, Borello Travel, New York City and Buenos Aires; Francisco Cerezo, chair, Foley & Lardner LLP’s Latin America practice group and co-chair of the firm’s international practice, Miami; Bryan D. Foat, senior sales executive, Bloomberg LP, Buenos Aires (Foat’s input reflects his own personal opinions and not an endorsement on the part of Bloomberg LP); Doris Dornheim, managing director, Condor Verde Travel, Caracas; Benedicto Grijalva, marketing director, Martsam Travel, Antigua Guatemala, Guatemala, www. martsam.com; Gaelle Jacques, Mice director, Surtrek, Quito; Vera Joppert, director, Turismo Classico, Rio de Janeiro; Mariann Lentz, market manager of the Americas, Sportstour, Santiago de Chile; Aaron Paiva Leyton, general manager, Peru Magia y Misterio, Lima; Brian Pearson, founder and CEO, Santiago Adventures Ltda, Santiago de Chile; David Preciado, director of sales and marketing, Latin America & Caribbean region, The Hertz Corporation, Miami; João H. Rodrigues, senior account director, Turner PR, New York City; Alonso Roggero, country manager, Metropolitan Touring Peru, Lima; Ana Royo, CEO, Experience Panama DMC, Panama City; Emanuel Schreibmaier, president, Global Travel Leaders, Doral, Florida, USA; Alejandro Verzoub, president, AV Business & Communication, Buenos Aires; Anonymous panel member, frequent business traveler, Miami, Florida.

LATIN TRADE JANUARY-FEBRUARY 2013

INDUSTRY REPORT

Latin Trade’s

Deals Year of the

From complex loan arrangements to large-scale initial public offerings, innovation was a hallmark of several deals in 2012. These are some of the most interesting of the year.

BY PETER WILSON

hen BNP Paribas began to put together a $390 million loan for a Colombian consortium to operate, manage and expand the airport in the capital, Bogotá, many commercial banks balked at participating. The Opain consortium, made up of five local construction and infrastructure companies, needed the funds to complete the terms of the 20-year, $1.2 billion concession contract they won in 2007. BNP Paribas, and its partner, Bancolombia, met their customers’ needs by thinking outside the box. “Many commercial banks were reluctant to take on 14-year debt at a time of US dollar liquidity issues,’’ said Jean-Valery Patin, managing director and head of BNP Paribas Latin America. “That is what made us think about seeking help from multilateral lenders such as the Inter-American Development Bank (IDB) and the Development Bank of Latin America.” But in an added twist, BNP Paribas and Bancolombia approached the China Development Bank (CDB) even though it had minimal experience in Colombia. Nonetheless, the CDB put up $175 million for the loan, taking the lion’s share of the credit facility. The IDB approved $165 million and CAF $50 million. “The idea to seek capital from China was due to that country’s decision to join the IDB

LATIN TRADE JANUARY-FEBRUARY 2013

as a non-borrowing member country,” said Patin. “This was the first time that the CDB had participated in a transportation project in Latin America.” Innovation and creativity were necessary ingredients last year in Latin America as bankers faced the lingering effects of the US financial meltdown, as well as the crisis in the Eurozone. Many financial institutions were still reluctant to lend. Others tightened requirements. But deals did get done, and often with unexpected benefits for clients. Opain was a case in point. The inclusion of multilateral lenders resulted in lower borrowing costs and the certainty that the deal would be made, said Philippe Birebent, a director at BNP Paribas, who worked on the transaction. “Our client wanted to be certain that they would receive the funds, given the deadlines for expansion works in the concession agreement. That was paramount,” he said. The involvement of the development banks did come at a cost. More work was involved because the loan concession not only had to meet the requirements of Opain’s five shareholders, but also of the participating multilateral lenders. Slower execution is not uncommon in the region. “In Latin America in general, deals take a longer time to complete,” said Hernan Rissola, head of advisory for Latin America

at HSBC Securities (USA) Inc. “Many of the deals completed, and in the works, have a long history.” Many of the deals consummated in 2012 were years in the making, discussions starting before the US meltdown and then concluding as conditions improved. Regional differences also played a part. ALL IN THE FAMILY Global players sometimes take a long time to learn that building client relationships is crucial in Latin America, especially as many companies are family owned. Close ties and long-term partnerships are key to deal making in the region. In 2012, there were some interesting examples. HSBC helped broker a deal between American paint company Sherwin-Williams and Mexico’s biggest paint company Consorcio Comex. Sherwin-Williams agreed to acquire privately held Comex for $2.34 billion, the largest coatings transaction ever in Latin America. The acquisition was also the largest investment bank-driven sale in Mexico in 2012. HSBC was the sole financial advisor to Comex, a family-owned company, during the sale. Long ties to the company meant everything, said Rissola. Bank of America Merrill Lynch parlayed

INDUSTRY REPORT

INNOVATION IN LATIN AMERICA

PHOTO: ERIKA SANTELICES/AFP/GETTY IMAGES/NEWSCOM

The president of Dominican brewer CND, Franklin Leon; the chairman of the board of directors of ELJ, Abel Wachsmann; and the vice-president of Ambev, Alexandre da Medicis Silveira. Brazilian Ambev acquired 51 percent of CND, making it the leading company of the sector in the Caribbean.

a good working relationship with the family that owned the Dominican Republic’s largest brewer, Cervecería Nacional Dominicana (CND) into a deal that might serve as a model for other mergers with family-owned companies in the region. “We had been advising the family that owned Cerveceria for several years on various matters and projects,” said Martin Sánchez, who heads Bank of America’s mergers and acquisitions unit in Latin America. “Many families are very reluctant to engage in straight sales of businesses. Personal relationships are therefore very important in putting deals together. You build trust with time. We approached them with this idea.” Bank of America proposed that the family look into merging CMD with Ambev, the Brazilian unit of Anheuser-Busch InBev, the world’s largest brewer. Under terms of the accord, that took two years to hammer out, Ambev paid $1.23 billion for a controlling interest in the resulting company. The agreement brought together Ambev’s exceptional operating capabilities and CND’s strong footprint in the Caribbean, said Sanchez. “It’s a win-win deal for both parties,” Sánchez said. “It creates value for each party. It’s a strategic alliance. We think the resulting deal that emerged (a joint venture instead of a straight buyout) between Ambev and Cer-

veceria can be a model throughout the region for family-owned companies.” GOVERNMENT INTERESTS Bank of America also successfully put together the merger of Colombia Telecomunicaciones, the country’s third-largest fixed line operator, and Movistar, which was the secondlargest mobile operator. The agreement also included a restructuring of the payments to the Colombian government’s pension fund. “The biggest challenge to the deal was arriving at the relative valuations of the companies,” said Sánchez. “When Telefónica invested in 50 percent of the fixed line company in 2006, who would have imagined that the wired line businesses around the world would suffer in a relatively short period of time versus wireless/integrated operations.” “Making the agreement trickier was the need to talk to the government to reduce its participation in the new company, as well as reshaping the government pension fund.” The fund was in charge of administrating pension payments to former Colombia Telecomunicaciones employees. The fund received payments from the company as defined in the original concession agreement. As a result of the agreement, the government took a 30 percent stake in the new company, with Telefónica retaining the remainder.

Financial instruments and structures in Latin America tend to follow trends and developments in Europe and North America. According to bankers surveyed, there are reasons why Latin America lags in innovation and creativity. The level of financial sophistication varies greatly throughout the region, often mirroring the state and health of the countries’ capital markets and the size of their middle class. Brazil, Chile and Mexico are regarded as the most developed markets; laggards include Venezuela and Ecuador. Secondly, many businesses in Latin America remain in the hands of their founding families or governments. For such businesses, financial records – essential to putting deals together – are often lacking as the owners have minimal accountability. That makes it difficult to assess the veracity of any results they might care to share. Accountants can be pressured to overlook financial twists and turns, leading to unintended or blatant misrepresentation of facts, they say. Government-owned businesses carry their own set of baggage. Governments can reverse their policies, and seize previously privatized companies. Venezuela, for example, has resumed control over previously sold telephone, steel, and electricity companies with mixed results for the former owners. And thirdly, banking and financial instruments remain out of touch for many firms in the region due to their lack of projects. Given that, financial institutions have little reason to think outside the box.

JANUARY-FEBRUARY 2013 LATIN TRADE

PHOTO: AGENCIA EL UNIVERSAL/EL UNIVERSAL DE MEXICO/NEWSCOM

INDUSTRY REPORT

Government and corporate ofﬁcials from Grupo Financiero Santander at the company´s IPO on the Mexican Stock Exchange.

The government also agreed to take the new company’s payments to the fund. Bank of America advised Telefónica, which owned 50 percent of the fixed-line operator, and 100 percent of the mobile operator, on all aspects of the agreement. “This was a very complex deal as it involved two parties with different participations in two assets, the government and the restructuring of the pension plan,’’ said Sánchez. “For the government, an important consideration was to restructure its participation in the context of creating a leading integrated player in the country.” THE HOTTEST DEAL OF THE YEAR Deutsche Bank, acting as one of four global coordinators, successfully priced Grupo Santander’s Mexican unit initial public offering, which sold a 24.9 percent stake of the company for $4.3 billion. The sale was the largest Mexican IPO ever, the largest in Latin America since 2009, and the ninth largest bank IPO in the world in the last decade. Key to its success was strong coordination among the four leaders, said Deutsche Bank. The quartet led a syndicate of 22 banks, and 11 international bookrunners. “Deutsche

LATIN TRADE JANUARY-FEBRUARY 2013

Bank compiled a team of experienced bankers to closely advise the issuer on every aspect of the transaction,” the bank said in a statement. Deutsche said key to the IPO’s success and its oversubscription by five times was a truly global marketing effort, both before and during the roadshow. Deutsche bankers visited more than 500 clients and investors before the sale. The sale, although it took place during a period of market volatility coming as it did on the heels of concerns about Greek and Spanish financial stability, was successful as the bank stressed Santander Mexico’s dominant position in retail banking and the opportunities for increased lending in the country. The Mexican operation was very important for the bank as it accounts for approximately 10 percent of its global profits, which is very close to the amount they receive in Spain. Interestingly, Santander had sold a 24.9 percent share of the company in 2006 to Bank of America, and bought it back in 2009. “So, in effect, all they’re really doing is putting the same 24.9 percent back into play,” said Wharton lecturer Adrian Tschoegl in a recent interview for knowledge@wharton.

On the same direction of tapping local markets, another IPO attracting attention and investor interest was Cemex LatAm Holdings’ $1.2 billion offer. The IPO was the second largest ever offered and executed in Colombia, and was led by a quartet of global coordinators: Bank of America, Santander, Banco Bilbao Vizcaya (BBVA) and Citibank. The sale had a local public offering in Colombia and an international offering as well. The offer was oversubscribed by three times with strong demand from international funds leading the way. Unique to the Colombian portion of the sale was the IPO´s bookbuilding mechanism, the first time it was used in the country. ¨Citi was the only global securities firm that could structure, market and close this landmark transaction, because of its integrated Colombia-US banking and European capital markets and local brokerage capabilities, Citibank said in a statement. TOP NAMES “In Brazil, Banco Pactual and Banco Itau are the leaders without a doubt,’’ said one banker who didn’t want to be identified. “Throughout

INDUSTRY REPORT

PHOTO: LA SEGUNDA/EL MERCURIO DE CHILE/NEWSCOM

Chilean retailer Cencosud offered its stock on the New York Stock Exchange in 2012. Horst Paulmann, founder of the ﬁrm, at the helm.

Completion of the transaction made Cencosud Latin America’s largest independent food retailer. the rest of the region, J.P. Morgan is the most aggressive bank in going after new business. Whenever we hear of an opportunity, J.P. Morgan is usually already there. They’re tough.” J.P. Morgan’s big deal of the year was its handling of Chile’s Cencosud’s purchase of Carrefour’s Colombian unit. “J.P. Morgan provided Cencosud a unique competitive advantage by delivering single-handedly an integrated $2.5 billion debt commitment and disbursement in a very short time frame, and without having to tap other banks,” said the bank’s former CEO for Latin America Nicolas Aguzin, by email. Aguzin has since moved to head the bank’s Asian Pacific unit. Cencosud is Latin America’s third-largest retailer. The company is expanding aggressively throughout Latin America, where it has bought several small to medium-sized retail chains in Brazil over the last five years. Colombia’s growing economy, which was forecast to grow by 5 percent in 2012, led Cencosud to consider the deal. “To minimize the risk of interlopers, J.P. Morgan committed

LATIN TRADE JANUARY-FEBRUARY 2013

the full amount and only after the announcement reached out to other institutions,” Aguzin said. “We saw this as a key competitive advantage for Cencosud.” J.P. Morgan’s strategy also meant that Cencosud could close the deal 60 days earlier than competitors, and went a long way towards convincing Carrefour that the Chilean company was a credible buyer, Aguzin said. Completion of the transaction made Cencosud Latin America’s largest independent food retailer. Appetite for longer-term debt was also more pronounced last year, as witnessed by BNP Paribas’ management of a $527 million debt placement for the Parque Rimac project. The bond placement was for 25 years, a record tenor, said Paribas. The overall project, which carries a price tag of $983 million, is for a brownfield urban toll road expansion in Lima, Peru. Once completed, it will comprise 15 miles of highways. Lamsac (the concessionaire) will operate the concession for 30 years under a contract with the Metropolitan Municipality of Lima.

Last year’s strong momentum is expected to carry through 2013, especially as the US fiscal crisis seems to have been averted for now, and worries about Europe subside. “We look for increased activity in 2013,” said Gerardo Mato, chief executive officer at HSBC Global Banking Americas. “There is more and more interest in emerging markets and in Latin America. “Mexico and Brazil will always be the chief areas of interest, but we are also seeing interest in Colombia and Peru. Investors view companies in Chile as more expensive and with lower growth potential than in the rest of the region, but with more stable cash flows.” Bigger, more innovative deals: That is a trend that was consolidated in 2012 and which will surely continue this year as a liquid world looks for investment opportunities. Latin Trade wanted to recognize some of the most important members of this sophisticated financial legion that in 2012 devised interesting ways to place capital in productive projects. Peter Wilson reported from Miami.

FINANCIAL STRATEGIES: REAL ESTATE

SHOPPING

FOR THE WELL-HEELED The expansion of retail chains, the appearance of exclusive boutiques and consumers’ shopping habits are boosting commercial construction this year in Latin America. Investors in real estate are looking at double-digit returns. BY DAVID RAMÍREZ

rowth of the purchasing power of the region’s middle classes has spurred commerce and an increase in opportunities for new commercial projects in construction. Consumers prefer to shop in a single area in order to save time from one to another. As a consequence, shopping centers have arisen under the leadership of major chains of supermarkets and department stores that act as poles of attraction for the independent shops that surround them. The population’s increasing income in real terms, meanwhile, has drawn the opening of luxury boutiques that offer products from high fashion and jewelry to high-end automobiles. Brazil appears to be the main magnet for luxury boutiques. Last

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year, 28 new malls were opened, bringing the total to 458, with a likely increase this year of 48, according to Abrasce, the association of Brazilian boutiques. The proportion of unoccupied spaces is a mere 2 to 3 percent. The rental prices of top-class spaces are the highest in the region. Real estate consultants Cushman & Wakefield reckoned that the rental per square foot in Sao Paulo for such locations stood at $309 toward the middle of last year, the most recent estimate available. By comparison, the rentals per square foot in the Chilean capital, Santiago, were $97, in Lima $94, and in Mexico City $97. Bogota was much closer to Sao Paulo at $250 per square foot.

LATIN TRADE JANUARY-FEBRUARY 2013

FINANCIAL STRATEGIES: REAL ESTATE

In Bogota, intense competition for land has soared, pushing up the costs of rentals and real estate purchases in general, as it has in other Latin American capitals. A similar phenomenon has persuaded boutiques in Mexico City to opt to set up in already-established luxury malls. In the Colombian capital, they have sought to seek out new constructions in areas where land prices are highest. On the other hand, developers of commercial projects that target middle-class consumers have opted to tackle the shortage of land prices by building in provincial cities or on the outskirts and marginal areas, as well as underused locations of major population centers. One such expansion has been in downtwn Bogota where the development of commercial, housing and office space has been backed by the local government. Rental costs in the new development zones are about $6-$8 per square foot, according to the estimates of Carlos Rico of the Century 21 real estate agency. This level, way below that of the luxury areas, can provide annual rental profits of 10-12 percent for the owners of the properties, and are thus attracting the interest of investors. The association of Colombian malls, Acecolombia, forecasts that between last year and 2015, more than 45 malls will be opened and another 15 updated, for a total investment of more than $2.2 billion. Meanwhile, as Abrasce expects 48 malls to be opened in 2013 to bring the total to 500, the Peruvian association of shopping centers, Accep, forecasts 13 this year, up from the existing 35. As in other Latin American major cities, expansion of the leading retailers — most of them Chilean — is boosting the construction of new commercial areas. As Juan Agüero, of Coldwell Banker Perú, points out, Lima has enormous

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potential for new centers, given that the penetration of inhabitants is 1.5 million per mall compared with the overall proportion in Latin America of 2.5 million. Agüero adds that the new commercial developments that aim for middle-class consumers offer average rental costs of $12 per square foot, providing investors with gross annual profits of some 15 percent. In parallel with the surge in growth of major shopping centers in Lima and other cities of the region, there has been a growing tendency of construction of strip malls that are attracting investors, shops and consumers. Álvaro Antadillas of the real estate brokers Colliers International Panamá, says that the average profitability of investors in Panama City’s strip malls amounts to a gross 12 percent a year, per shop. Meanwhile, this year, two major new shopping centers are to be built on the outskirts of the capital that are expected to have a similar success to the new complex opened in 2012 around the Tocumen International Airport. Within the concept of strip malls along major streets and shopping centers in residential and office areas, real estate investors and funds in the Costa Rican capital of San José are looking at annual profitability of 11 to 12 percent a year, according to the estimates of Danny Quirós of Colliers International Costa Rica. People who live in San José feel that new commercial areas where they live and work are key to avoiding the growing traffic that affects them and other cities in the region. This year, the dynamics are expected to be similar to those of 2012, when eight new shopping centers were opened in the Costa Rican capital. David Ramírez reported from Miami.

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JANUARY-FEBRUARY 2013 LATIN TRADE

CORPORATE STRATEGIES: AIG

Ed Mena, AIG’s leading executive for Latin America and the Caribbean

“Latin America is very important to us,” said Ed Mena, AIG’s leading executive for Latin America and the Caribbean. The numbers prove his point. AIG’s Latin American operation is growing at a rate of 20 percent, boosted by greater access to credit and growth of a middle class whose younger members are now joining the labor market. But Latin America is a very profitable place to be. Insurers are receiving a return on their assets that Franklin Santarelli of Moody’s reckons to be 2.5 percent. The return in Brazil is slightly over 2 percent, but in Central America it is more than 5 percent.

STARTING OVER With the problems of the 2008 crisis behind it and its former name restored, the insurer AIG is embarking on an expansion in Latin America. BY SANTIAGO GUTIÉRREZ

ack in 1919, when Cornelius Vander Starr founded AIG in Shanghai, he could scarcely have imagined that the firm that began in two little offices in China would one day become one of the world’s top 10 insurance companies, only to face the setback of the 2008 crisis, overcome it, and stage a vigorous recovery in 2012. He would probably have imagined he had been dreaming if he were to see the major expansion plans the company has for Latin America this year. The 2008 crisis was no minor bump in the road. AIG had to borrow from the US Federal Reserve and Treasury in order to overcome the setback. It even had to change its name to Chartis, sold part of its assets – including some of its Latin American operations – staged a recovery, and once again kept its competitors awake at night in order to follow its progress.

LATIN TRADE JANUARY-FEBRUARY 2013

In addition, Mena says, the future holds a rich bounty of growth thanks to the continuance of controls on inflation combined with multimillion investments in infrastructure. And there is plenty of room to grow in the insurance industry; cover in the region is very scarce. On average, Moody’s estimates that premiums in Latin America amount to 2 percent of GDP. The proportion rises to 3 percent in countries such as Chile, but it falls well short of the 10 percent of GDP in Spain. With its former name restored, AIG aims to make the most of its opportunities by concentrating efforts on Brazil, Mexico and Colombia — three of the 29 countries where it has businesses in the region. These days, AIG is the leader of commercial insurance in many of these countries, especially in property, marine and financial policies. And, says Mena, it wants to maintain that position. But, this year’s strategy will focus on home, automobile and life insurance, with the aim of being “consumer-centric,” a favorite buzzword of Mena. In life policies, he forecasts major expansion projects in five countries, which he prefers not to identify. Mena also sees several opportunities in micro-assurance, as long as the governments concerned are willing to participate, as they do in Colombia and Venezuela. On the question of clients’ new needs, Mena mentions bancassurance and policies such as his Cyberedge product, which provides cover against damage or fraud in the management of information stored or moved by electronic media. Ed Mena aims to grow his basic channel of distribution through brokers and agencies. In fact, 85 to 90 percent of AIG’s distribution is done in this way. If that is not enough, Mena refuses to rule out the possibility of growing by means of acquisitions, as the company has in the past. These days, it generates 30 percent of its revenue outside of the US and Canada. AIG’s plans, on the basis of new offices and more hiring, seem to keep the company’s owners happy. The share price rose from $25.3 in January of last year to $26.2 a year later, which amounts to a 45 percent annual return for the shareholders — much more than the company’s closest competitors. Santiago Gutiérrez reported from Miami.

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FOR COMPANIES,

13 IS A LUCKY NUMBER Latin Trade presents its ﬁrst forecast for the performance of Latin American companies. Sales will show similar growth as in 2012. Mining will recover, and retail will maintain its proﬁts.

BY DAVID RAMÍREZ / RESEARCH BY GABRIELA CALDERÓN

he expected economic growth for 2013 in Latin America will offer an opportunity to recover for some of the companies in the region that were affected during 2012, as a result of a slower regional and global economic growth. Most mining companies in the region are among those that are expected to recover. This year will also help sectors such as telecoms and retail maintain their expansion rates. The mining and energy sector is expected to maintain its leadership in terms of striking the biggest business deals in the region this year. The main goal for integrated oil firms such as Petrobras, Pemex and Ecopetrol is to increase their reserves and production. To achieve this, they have planned multi-billion dollar investments, mainly in exploration and production. Brazil’s state-owned Petrobras, one of the companies in the stock market with the highest revenues in Latin America in 2012, will continue its ambitious investment program, valued at $237 billion from 2012 to 2016. Mexico’s state-owned Pemex will invest some $25 billion this year alone, which could turn out to be the year it radically changes its business model by introducing private investment into its activities, a move proposed by the government. Other large oil companies in the region, such as Argentina’s YPF and Colombia’s Ecopetrol have planned investments of $7 billion and $9.5 billion respectively. They too will focus on exploration and production. Ecopetrol will also use its investments to expand and improve its refinery capacity and transport.

LATIN TRADE JANUARY-FEBRUARY 2013

Optimizing refinery activities will require investments of $1.3 billion by Peruvian company Petroperu, and some $800 million by La Pampilla, a subsidiary of Repsol, also from Peru. Braskem, from Brazil, expects more positive conditions for the petrochemical industry this year, and hopes to recover some of its losses from 2012. Braskem’s plans for this year include several expansion projects, such as a mega refinery worth $12 billion, to be built in association with Petrobras. In addition, the company plans to build a polypropylene plant worth more than $3 billion in Mexico, currently under construction. Grupo Ultra, a Brazilian petrochemical company with the highest sales during 2012, is planning to invest $700 million for the expansion of its plants in Brazil, Mexico and the United States. Grupo Ultra might also make more investments in acquisitions. Grupo Copec has announced its intentions of increasing investments in its fuel distribution sector, which could lead to acquiring more assets. However, the investments in Arauco, the cellulose producer, will be shunned by the poor projections in the global market prices of cellulose. Mining companies are hoping that an expected growth in China’s economy will lead to an increase in the price of raw materials, helping them make up for their losses during 2012. Last year, the companies were affected by a sharp drop in sales and international prices. Brazil’s Vale, one of the world’s largest iron producers, has been recovering over the last few months thanks to an increase in the prices of iron, which has gone up by 70

percent since last September. Vale reported huge losses during all of last year. However, the predicted increase in iron prices in no way compares to the historic prices of 2008. Facing challenges and uncertainty as to the stability and growth in the global economy, Vale has implemented an austere investment plan for 2013, of about $16 billion. Sixty percent of the investment will focus on new projects. It is worth pointing out that some mining, energy and hydroelectric projects could be set back by socio-political or regulatory issues. In the case of Colombia, the construction of the El Quimbo hydroelectric plant, valued at about $800 million and financed by Colombian affiliate Endesa, has been subject to environmental and social protests. Resistance from local communities is also putting at risk the Conga project in Peru, a gold mine planned by US company Newmont and Peruvian company Buenaventura, which plan to invest $5 billion on the project. The economic slowdown of 2012 was not enough to stop growth for companies selling mass consumer goods, Internet providers, cellular phone services, banks, insurance and health companies. America Móvil, among the five top-selling companies in 2012, plans to expand its business this year, taking advantage of an increasing demand for wireless technology products. The company, controlled by Mexican billionaire Carlos Slim, plans to invest some $10 billion in maintaining and expanding its operations throughout Latin America. The large supermarket chains will continue to attract more customers by opening new

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planning to invest up to $1.2 billion this year to strengthen its presence in Brazil and open new stores in Peru. Falabella announced investments of up to $900 million this year, to launch new stores and shopping malls.

stores and introducing new formats. Chilean supermarkets could be among the big winners this year as the European Casino and Carrefour move out, but only if the Chilean companies’ regional expansion plans prove successful. More good news for Chilean

companies is the small growth expected for Walmart this year, although Walmart could launch a surprise by launching new operations in Central American countries or Colombia. Cencosud, which recently bought strategic stocks in Brazil and Colombia, is

2013 FORECAST

Latin America’s Top Companies Revenues

Company, Country

2012F

2013F

‘13/’12

Avg.

US$ Mill

% Ch.

# of est.

142,529

143,830

0.9

Petrobras, Brazil

América Móvil, Mexico

59,482

61,235

2.9

Vale, Brazil

43,800

48,574

10.9

Gerdau, Brazil

19,577

21,868

11.7

JBS, Brazil

37,525

39,964

6.5

Ecopetrol, Colombia

37,319

35,578

-4.7

Grupo Ultra, Brazil

27,262

29,129

6.8

CBD, Brazil

26,901

28,911

7.5

Braskem, Brazil

18,188

18,336

0.8

CSN, Brazil

8,239

8,873

7.7

Alfa, Mexico

15,792

17,407

10.2

Telefónica, Brazil

17,099

17,028

-0.4

AmBev, Brazil

16,386

16,956

3.5

Cemex, Mexico

15,230

16,097

5.7

YPF, Argentina

14,395

15,325

6.5

BR Foods, Brazil

14,401

15,187

5.5

LAN, Chile

9,265

14,616

57.8

Enersis, Chile

12,878

14,379

11.7

Oi, Brazil

12,402

14,346

15.7

Marfrig, Brazil

12,608

13,621

8.0

Coca-Cola Femsa, Mexico

11,361

12,241

7.7

TIM , Brazil

9,529

9,843

3.3

Cemig, Brazil

9,305

9,530

2.4

Southern Copper, USA

6,685

6,848

2.4

Embraer, Brazil

6,635

6,403

-3.5

Fibria, Brazil

2,786

6,106

119.2

Grupo Televisa, Mexico

5,331

5,678

6.5

Sabesp, Brazil

5,376

5,671

5.5

Gruma, Mexico

5,013

5,259

4.9

Telecom, Argentina

4,821

4,723

-2.0

GOL, Brazil

4,179

4,318

3.3

ICA, Mexico

3,835

4,154

8.3

Sources: Thomson Reuters, BofA Merrill Lynch, BTG Pactual, BBVA, Citi Research, HSBC, J.P. Morgan, Latin Trade. © Copyright Latin Business Chronicle/Latin Trade JANUARY-FEBRUARY 2013 LATIN TRADE

SPECIAL REPORT

YEAR-END 2012: These are the ﬁgures companies will likely post for 2012. 2011

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

Petrobras, Brazil Pemex, Mexico Vale, Brazil América Móvil, Mexico Ecopetrol, Colombia JBS, Brazil Walmart de Mexico Grupo Ultra, Brazil CBD, Brazil Copec, Chile Gerdau, Brazil Braskem, Brazil Eletrobrás, Brazil Telefonica, Brazil Femsa, Mexico Cencosud, Chile AmBev, Brazil BR Foods, Brazil Cemex, Mexico YPF, Argentina Alfa, Mexico Cosan, Brazil Enersis, Chile Marfrig, Brazil Viavarejo, Brazil Tenaris, Argentina Grupo Bimbo, Mexico Grupo Mexico, Mexico Falabella, Chile TIM , Brazil Coca-Cola Femsa, Mexico CSN, Brazil Cemig, Brazil Telmex, Mexico Org. Soriana , Mexico Ind. Peñoles , Mexico Southern Copper, USA CPFL, Brazil Grupo Modelo, Mexico Embratel, Brazil Usiminas, Brazil LAN, Chile Lojas Americanas, Brazil Grupo Carso, Mexico Sabesp, Brazil Embraer, Brazil Eletropaulo, Brazil Neoenergia, Brazil CSAV, Chile Petroperu, Peru

‘12/’11

2011

NET INCOME 2012F

‘12/’11

US$ Mill

% Ch.

US$ Mill

% Ch.

130,171.7 111,734.6 55,014.1 47,700.1 33,194.6 32,944.2 27,309.8 25,941.6 24,839.8 21,124.6 18,875.6 17,686.4 17,625.2 15,528.7 14,557.7 14,515.4 14,461.4 13,704.2 13,546.3 13,124.3 13,103.6 12,214.7 11,993.7 11,667.0 11,204.1 9,972.5 9,586.7 9,296.4 9,267.9 9,108.6 8,941.7 8,806.7 8,430.7 8,034.8 7,045.1 6,944.9 6,818.7 6,804.6 6,539.0 6,521.6 6,345.0 5,585.4 5,438.6 5,303.8 5,300.0 5,255.4 5,243.4 5,208.9 5,152.0 5,047.1

142,528.9 128,526.3 43,799.7 59,482.0 37,318.6 37,524.6 32,560.0 27,261.7 26,900.9 21,981.0 19,577.1 18,187.8 21,168.2 17,099.5 18,367.2 19,064.7 16,385.6 14,401.5 15,230.1 14,394.9 15,791.6 13,030.2 12,878.3 12,607.6 13,955.3 11,407.0 13,725.4 10,197.6 11,395.5 9,528.8 11,361.5 8,238.6 9,304.8 8,216.8 8,119.4 7,703.3 6,685.3 7,474.0 7,659.9 9,496.4 6,433.6 9,265.0 5,663.0 6,496.7 5,375.9 6,635.1 5,020.5 5,536.1 3,201.5 5,146.5

9.5 15.0 -20.4 24.7 12.4 13.9 19.2 5.1 8.3 4.1 3.7 2.8 20.1 10.1 26.2 31.3 13.3 5.1 12.4 9.7 20.5 6.7 7.4 8.1 24.6 14.4 43.2 9.7 23.0 4.6 27.1 -6.5 10.4 2.3 15.2 10.9 -2.0 9.8 17.1 45.6 1.4 65.9 4.1 22.5 1.4 26.3 -4.3 6.3 -37.9 2.0

17,759.4 -6,559.1 20,158.7 5,940.3 7,952.0 -40.4 1,595.5 452.5 382.9 932.7 1,069.3 -280.0 1,989.9 2,321.9 1,085.0 548.3 4,606.6 729.0 -1,371.3 1,225.9 373.2 1,565.8 720.0 -397.7 48.2 1,331.2 382.1 2,098.8 811.3 683.0 761.0 1,975.7 1,287.7 1,045.5 219.4 914.5 2,336.4 815.9 856.4 208.7 124.3 320.2 181.5 328.4 652.2 83.3 838.1 827.2 -1,249.8 153.1

9,937.0 -2,609.3 9,603.3 8,281.7 8,465.4 171.7 1,806.0 519.0 558.8 257.7 785.5 -574.7 1,854.5 1,980.5 1,304.2 629.7 5,471.7 178.1 -161.0 1,736.8 1,363.0 321.6 707.6 47.4 256.1 1,926.9 162.2 1,963.1 708.0 1,602.2 1,074.9 -309.6 1,591.7 1,030.0 332.0 683.2 1,637.9 660.6 917.1 443.1 -206.3 -44.8 205.8 663.1 1,351.0 -25,700.3 105.1 624.4 -268.7 144.0

-44.0 60.2 -52.4 39.4 6.5 525.3 13.2 14.7 46.0 -72.4 -26.5 -105.3 -6.8 -14.7 20.2 14.8 18.8 -75.6 88.3 41.7 265.2 -79.5 -1.7 111.9 431.1 44.8 -57.6 -6.5 -12.7 134.6 41.2 -115.7 23.6 -1.5 51.3 -25.3 -29.9 -19.0 7.1 112.4 -266.1 -114.0 13.4 101.9 107.1 -30,945.3 -87.5 -24.5 78.5 -6.0

* Publicly-traded companies

REVENUES 2012F

LATIN TRADE JANUARY-FEBRUARY 2013

SPECIAL REPORT

YEAR-END 2012: These are the ﬁgures companies will likely post for 2012. 2011

Company, Country 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

Walmart, Chile Oi, Brazil Amil, Brazil CMPC, Chile Endesa, Chile Grupo Televisa, Mexico CGE, Chile Ref. La Pampilla, Peru Exito, Colombia Telecom, Argentina Coppel, Mexico Liverpool, Mexico Copel, Brazil Gruma, Mexico Grupo Chedraui, Mexico GOL, Brazil Whirlpool, Brazil LF Telecom, Brazil Elektra, Mexico Light, Brazil PDG Realty, Brazil NET, Brazil Magazine Luiza, Brazil Mexichem, Mexico Grupo Casa Saba, Mexico Petrobras En. , Argentina Cyrela Realty, Brazil Arca Continental, Mx Nemak, Mexico Southern Peru Comercial Mexicana, Mexico Fibria, Brazil Molinos Rio, Argentina ICA, Mexico Paul F Luz, Brazil Natura, Brazil Souza Cruz, Brazil Sigma, Mexico Ahmsa, Mexico Arcor, Argentina Telefónica del Peru Energias do Brasil Siderar, Argentina CAP, Chile Weg, Brazil CCR Rodovias, Brazil Coelba, Brazil Suzano, Brazil Grupo Aeromexico, MX Xignux, Mexico

* Publicly-traded companies

REVENUES 2012F

‘12/’11

2011

NET INCOME 2012F

US$ Mill

% Ch.

US$ Mill

4,994.6 4,928.7 4,802.7 4,796.5 4,578.4 4,486.9 4,475.4 4,468.6 4,402.3 4,288.2 4,213.9 4,204.9 4,145.5 4,133.0 4,121.6 4,019.3 3,979.8 3,908.0 3,729.6 3,702.3 3,666.4 3,569.6 3,422.2 3,392.0 3,338.8 3,305.1 3,266.2 3,211.9 3,202.7 3,179.6 3,138.6 3,121.0 3,106.7 3,066.4 2,982.7 2,980.8 2,958.8 2,945.2 2,928.0 2,921.1 2,891.7 2,879.7 2,811.3 2,787.0 2,766.5 2,737.1 2,648.1 2,586.8 2,567.3 2,562.3

6,081.8 12,402.2 5,285.5 4,685.6 4,744.7 5,331.3 4,813.6 4,789.5 5,684.8 4,820.7 5,320.1 5,156.6 4,203.1 5,013.3 4,959.5 4,179.3 4,329.7 3,642.4 5,372.4 3,749.6 2,897.0 4,011.4 3,870.5 5,003.1 3,711.1 2,781.2 3,100.6 4,430.5 4,105.7 3,025.5 3,562.2 2,786.2 3,882.5 3,835.0 3,270.5 3,227.0 3,113.7 3,595.6 3,064.2 2,985.7 3,117.0 3,194.1 2,648.7 2,259.2 3,167.7 2,876.1 2,963.9 2,609.0 3,149.5 2,466.0

21.8 151.6 10.1 -2.3 3.6 18.8 7.6 7.2 29.1 12.4 26.3 22.6 1.4 21.3 20.3 4.0 8.8 -6.8 44.0 1.3 -21.0 12.4 13.1 47.5 11.2 -15.9 -5.1 37.9 28.2 -4.8 13.5 -10.7 25.0 25.1 9.7 8.3 5.2 22.1 4.6 2.2 7.8 10.9 -5.8 -18.9 14.5 5.1 11.9 0.9 22.7 -3.8

218.4 536.2 93.4 492.1 857.0 494.0 -27.2 107.7 200.5 560.7 534.5 469.1 617.2 377.9 108.8 -400.7 196.5 -104.2 2,153.4 165.6 375.5 198.9 6.2 194.4 6.3 163.0 265.6 323.4 76.4 1,078.1 88.6 -465.2 64.2 106.1 327.0 443.0 854.4 59.6 140.0 110.1 197.7 261.6 310.5 441.7 312.9 479.5 400.1 9.2 149.2 32.1

237.6 503.0 -95.6 159.4 532.3 696.2 54.8 15.4 306.0 569.7 793.6 617.7 498.3 129.5 115.3 -782.2 561.7 2.0 -1,143.5 1,473.6 -186.7 312.6 -12.0 534.3 109.0 103.2 272.3 396.6 133.8 1,030.5 536.1 -489.2 21.8 142.8 272.1 457.7 743.5 359.6 24.8 109.7 216.4 110.7 790.6 154.0 333.0 515.2 365.4 -28.4 75.3 211.4

LATIN TRADE JANUARY-FEBRUARY 2013

‘12/’11 % Ch. 8.8 -6.2 -202.4 -67.6 -37.9 40.9 301.7 -85.7 52.6 1.6 48.5 31.7 -19.3 -65.7 6.0 -95.2 185.8 101.9 -153.1 789.8 -149.7 57.1 -293.1 174.9 1,641.2 -36.6 2.5 22.7 75.2 -4.4 505.0 -5.2 -66.0 34.6 -16.8 3.3 -13.0 503.4 -82.3 -0.4 9.4 -57.7 154.6 -65.1 6.4 7.5 -8.7 -409.8 -49.5 559.0

EDUCATION

EDUCATING FOR SUCCESS Students with limited access to education in Latin America sometimes fail to develop cognitive skills needed for success.

BY ÁLVARO MORENO & SANTIAGO GUTIÉRREZ

ducation will become one of the main obstacles to competitiveness in Latin America over the next few years. Recent studies by Eric Hanushek at Stanford University show that the difference in students’ levels of knowledge has a lot to do with Latin America’s slow growth, compared to that of Asia or the Middle East. The problem is more about what students know, and the cognitive skills they acquire, rather than the number of years spent in the classroom. In Brazil and Peru, for example, only 1 in 10 students is functionally literate by age 20, says Hanushek. That means only 10 percent of those who finished primary school know how to read and write texts that are needed for their work, or everyday life. Hanushek also found that only 1.2 percent of Latin American students have superior cognitive skills. He adds that failure to take into account what the students know diminishes the importance of the role of human capital formation in economic growth. Hanushek’s disturbing observations sheds new light on the education debate and regional development. The results of the Latin Education Index, carried out by Latin Trade Group and Latin Business Chronicle, is based on five criteria. The Index shows the state of the education in 19 Latin American countries, and helps explore the paths they should follow in order to improve. Hanushek would no doubt agree that while education coverage is not necessarily the way to measure cognitive skills, it does present local authorities with a very clear goal: to make sure children go to school. That is particularly true of countries such as Guatemala and Ecuador, while education coverage is just over 70

percent, or in Haiti where it is 40 percent. In terms of coverage, Argentina and Uruguay are the region’s education stars, with coverage of about 90 percent. Another aspect to take into account is the number of years for which students attend classes. In countries such as Haiti and Guatemala, the average student only remains in school for about four or five years. In addition, the expected number of years in school should be increased for those who are now joining the system, so as to greatly reduce illiteracy rates of, for example, 35 percent for Haiti, and 25 percent for Guatemala. The data from the Latin Education Index shows that Uruguay has the best education system in the region, followed closely by Argentina. Chile, Venezuela, Bolivia, Peru and Brazil follow, in that order. After these, come Panama, Colombia, Mexico and Costa Rica, while at the other end of the scale are Paraguay, Ecuador, Dominican Republic, El Salvador and Honduras. Nicaragua, Guatemala and Haiti are at the very bottom of the list. Taking into consideration Hanushek’s observations, what would then follow is to establish that the education students receive will give them the necessary practical knowledge they will require in their jobs and community. That would translate into education that really has an impact on the development of the countries. Perhaps companies, which choose to focus their corporate social responsibility programs in education, can help make these muchneeded changes. Visit Latin Education Index at www.latinbusinesschronicle.com. Álvaro Moreno reported from Miami.

HOMEWORK FOR THE AUTHORITIES IN ECUADOR AND HAITI: MAKE SURE THE CHILDREN GET TO SCHOOL.

LATIN TRADE JANUARY-FEBRUARY 2013

CREATING AN ENVIRONMENT FOR

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Logistics 2013:

Overcoming the Challenges and Capitalizing on New Opportunities

rotectionist duties, outdated infrastructure, security risks and low productivity are among the traditional logistics challenges in Latin America. “Lack of rail and road networks, customs issues and port delays are among the biggest issues,” says Felipe Arbeláez, Panalpina’s area head of marketing and sales for Andina (Colombia, Ecuador, Peru and Venezuela). “In addition, the third-party logistics (3PL) market is fragmented with many small to medium-sized providers in niche markets, and supply chain security is an additional concern in almost every country in Latin America.” But signiﬁcant changes are underway, with even bigger ones on the horizon. Many ports are modernizing their facilities, and providers are investing in new technology to accelerate shipments. Imports and exports are expected to grow in 2013 due to improving global economies and additional free trade agreements, and the 2014 widening of the Panama Canal

By Richard Westlund

promises to create new logistics opportunities throughout the Americas. “Shippers increasingly need international and express delivery service,” says Alexandre Cecolim, managing director, logistics, FedEx Express Latin America and Caribbean Division. “Higher volumes of e-commerce and demand from consumers to receive their goods in a timely manner drive businesses to use express shipping services. Also, many of the goods shipped worldwide are becoming lighter and smaller, and thus easier to ship via express service.”

The Outlook for 2013 With a robust economic environment in Latin America and increased international trade Poul Hestbaek expects continued pressure on the region’s logistic infrastructure. “While there are a number of promising private port/terminal projects underway, there is a lack of substantial investments in the highway and railway systems in most countries,” says Hestbaek, senior vice president, commercial for Hamburg Sud, Caribbean and Latin America West Coast. As for trade ﬂows, Hestbaek believes the level of consumer goods imported from Asia will continue to increase in 2013. “With a slowly improving U.S. economy, we may see higher level of housing construction, which will have positive impact on the importing of building materials from Latin America,” he says. “We may also see an improvement of the ﬂow of imported refrigerated food products from Latin America.”

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Dredging the channel to Bill Johnson - Director, a depth of 50-52 feet... PortMiami Miami will be the only such deepwater port in the region, allowing us to continue growing... Looking at Mexico, Raul Barrera, regional head of industry vertical technology – Americas Region, Panalpina, expects a solid increase in manufacturing exports. “While the U.S. will remain the main destination for Mexican exports, shipments to Latin America will also grow proportionally, highlighting the importance of trade between emerging economies,” he says, adding that the bilateral trade between Latin America and Asia will outpace the growth of trade with other regions by a signiﬁcant margin.

Investing in the future Throughout the Americas, ports, transportation companies and service providers are investing in the region’s future. For example, PortMiami has three major infrastructure projects underway totaling more than $2 billion, according to Bill Johnson, director. “We have big visions and plans for the future, and we’re making great progress on our projects,” he says. Later this year, PortMiami will inaugurate on-port rail service providing direct connections to the rest of the nation. “Rail is a costefﬁcient, environmentally sound mode of transportation for shippers,” Johnson says. In May 2014, PortMiami expects to complete a four-lane tunnel that will allow trucks to access the U.S. highway system without a single trafﬁc light. “Our star attraction, in terms of infrastructure, is the deepening of our port,” says Johnson. “Dredging the channel to a depth of 50-52 feet is expected to start later this spring. When completed in 2014, in the same time frame as the Panama Canal widening, Miami will be the only such deepwater port in the region, allowing us to continue growing the container business.” FedEx is also preparing for the widening of the Panama Canal, which now handles about 12 percent of American seaborne trade, according to

Cecolim. “The Panama Canal expansion will help alleviate congestion at West Coast ports and offer options for North American shipping,” he says. Last year, FedEx initiated an alliance with Farmazona, a Panama-based 3PL operator with two major regional distribution centers. “This alliance will serve our customers who will be taking advantage of the Panama Canal widening next year,” Cecolim adds. As part of a global network, Panalpina offers multimodal solutions in Panama and is working on a unique solution for pharmaceutical customers, says Fernando Arias, country manager. Panalpina is also evaluating opening warehouse in Cartagena, Colombia to support its growing hub operations, according to Arbeláez. Brazil is spending billions of dollars to improve its air and seaports in advance of the 2014 World Cup and 2016 Olympic Games. Noting that new terminals are coming Santos, Rio de Janeiro and Suape, Karin Schöner, area head of marketing and sales, Mercosur, Panalpina, adds that Brazil is also investing in new railway concessions and an expansion of its road network to support cargo transportation.

Advice for shippers Shippers today should look at the entire supply chain with their logistics partners in order to implement best practices and streamline processes, says Ricardo Kamnitzer, trade lane manager FCL Asia-Latam, Panalpina. “Work with a well-established partner that understands the complex processes and changing regulations,” he adds. Andres Osorio, Panalpina’s area head of ocean freight product, Andina, advises shippers to get deeply involved with Latin American governments in infrastructure planning and international commerce policies. He adds that input from the private sector is vital to improving logistics operations. Finally, Cecolim says, “Globalization is not a static process, particularly since comparative advantages are constantly shifting. To see continued growth, companies must learn to think globally and to operate without borders. We believe that superior business performance minimizes waste, cost and effort, helping to make companies more competitive in this global marketplace.”

COUNTRY REPORT: PANAMA

PANAMA THE CHALLENGES AHEAD BY ÁNGEL RICARDO MARTÍNEZ

Panama is one of the rising stars of Latin America’s economy. The construction of large infrastructure projects, such as the $5.2-billion Panama Canal expansion and a $1.8-billion subway in the capital city, have boosted the country’s economy to 10.5 percent growth in 2012, slightly less than the 10.6 percent in 2010, and reduced unemployment to 4.8 percent in 2012. But as these mega-projects —most of them turnkey—come online, some analysts fear that the huge burden they will place on the country’s debt, and an eventual increase in unemployment, could have severe economic consequences. While the creation of a wealth fund sounds somewhat reassuring, it seems that the real challenge for Panama will be to position itself as a world-class logistics hub if it wants to consolidate its recent economic success. The inauguration of the new locks in early 2015 may give Panama a boost towards creating the kind of infrastructure it needs to truly take advantage of its strategic location.

Panama Canal

LATIN TRADE JANUARY-FEBRUARY 2013

COUNTRY REPORT: PANAMA

n economic terms, the last decade in Central America and the Caribbean may well be dubbed “the rise of Panama.” Between 2001 and 2011, this country of 3.6 million doubled its GDP, and commanded a 45 percent employment expansion. This outstanding evolution has naturally been accompanied by several double-digit growth figures, the latest being 10.4 percent in the second quarter of 2012, and low unemployment levels, currently at 4.2 percent. In the midst of the last few years’ global economic hardship, Panama’s achievements might sound like a great feat. But speaking with former President Nicolás Ardito Barletta (1984-85), one of the country’s top economists, one gets the sense that it was somehow meant to be. “Panama’s economy has been transformed over time. The handover of the Canal boosted our services-based economy, enabling the further development of a conglomerate of interconnected activities that revolves around the Canal and that generates 62 percent of our exports,” he says. That conglomerate, according to Barletta, “includes the ports, which moved more than 6.6 million containers last year; the Colon Free Zone (CFZ), with yearly activity topping $25 billion; and Tocumen International Airport, which connects Panama with more than 30 countries and through which 24 percent of the CFZ’s exports leave.” All that, moreover, “is complemented by a dollarized, world-class banking system and the best telecommunications infrastructure in Latin America. If I have to sum up this country in one word, that would be ‘connectivity ’,” he adds. It is this connectivity that puts Panama on the logistical map of the world. “These are the forces Panama has been taking advantage of. And they are all long-term forces. This is not a passing trend,” he concludes. According to Barletta, every dollar in Canal revenue generates an additional $1.27 in the local economy. Despite this apparent inevitability, few economists dare ignore the fundamental role played by the construction of large infrastructure projects in the recent economic bonanza. The two superstars are the $5.2-billion expansion of the Canal and the $1.8-billion subway in Panama City, but that’s hardly it. Overall, Panama’s public spending program will average some $8 billion a year in the 2010 to 2015 period. “What’s happening in Panama is that public investment has acted as a platform for private investment. That explains a great deal of the recent growth,” says Rodolfo Minzer, economic affairs officer at the United Nations Economic Commission for Latin America and the Caribbean (Eclac). With the majority of the megaprojects still under construction, Panama’s 2013 performance is expected to continue along the same lines. “For next year, we expect Panama’s economy to grow between 7 and 8 percent, and we expect that trend to continue in the following years,” says Óscar Calvo-González, the World Bank’s top economist for Central America. But as the completion dates arrive, many observers are already worrying about the possible effects of some of the more obscure aspects of the recent boom. The first headache is likely to be debt, with the country’s levels having swollen by 30 percent in the last three years, from $10.8 billion in 2009 to $14.15 billion in 2012. Linked to this are unemploy-

Construction on the Panama Canal

ment concerns: the Canal expansion employs 10,000 people alone. “We are worried about the pressure all these turnkey projects might exert on the country’s capacity to incur on debt and repay. Besides, many of these projects have not followed the proper allocation process, and there’s also the doubt that they are not as profitable as they claim to be,” says Roberto Brenes, executive vice president and general manager of Panama’s Stock Exchange. All in all, the current debt situation shouldn’t be a burden in the immediate future, provided the country maintains its outstanding economic performance. After all, FDI levels remain the highest per capita in Latin America, and authorities expect them to approach the $3-billion mark for the second consecutive year in 2012. “It isn’t a threat as of now, and if the economy continues growing above our potential— above 6 percent— it won’t become a burden. We have the capacity to face it,” says Felipe Chapman, managing partner at Indesa, one of Panama’s top financial services firms. Barletta agrees, but issues a warning. “We have to be careful. Right now it’s fine, but what happens if we stop growing? It could become a problem, so it’s better to be a bit more careful and not push the limits.” In line with Barletta’s arguments, the Panamanian government passed a law last September creating the Panama Savings Fund, known by the Spanish acronym FAP. The FAP is expected to serve as an economic stabilization fund during periods of economic recession or natural disasters. It will be kickstarted with $1.3 billion in seed money from a preexisting fund, and will receive any payments the Canal authorities make to the government in excess of 3.5 percent of annual GDP, starting in 2015. By 2026, it could amass some $6 billion. The question before Panama is how to keep the economy growing once the current megaprojects come online. For Eclac’s Rodolfo Minzer, the answer is simple: Panama should continue to work under the same formula. “If the secret is that public investment drives private investment, it is only logical to continue with those dynamics, so they should find new public projects. It will be complicated, but there are some things that can still be done.” So far, the subway’s second line could fill the gap. It is even rumored that the current government might allocate the project before leaving

JANUARY-FEBRUARY 2013 LATIN TRADE

COUNTRY REPORT: PANAMA

Panama City

office. On the private side, the construction of a new $6-billion copper mine is expected to have a major impact. Work on the project will begin this year, and its peak employment demand is expected to take place around the time the expansion of the Canal is completed. It should become operational in 2016. Even with renewed investment drive, Panama is facing a major obstacle in the form of education and professional training. A recent World Bank study shows that while Panamanians spend the same amount of time in school as students from the Oecd countries (11 years), their scores reflect the fact that the quality of their education amounts to only eight years. Furthermore, only 30 percent of those who finish secondary school attend universities, and only half of these actually complete their degrees. In addition, the universities’ output is not in sync with the needs of the market, with social sciences, administration and law proving the predominant choices for Panamanian freshmen. “It is already a problem and it will become more acute in the future. In Panama, there already is a lack of human resources. That will be the biggest hurdle for the economy’s future,” says Eclac’s Minzer. “The current training of our people is gravely poor, especially when you look at the results we get in areas like math, science, comprehensive reading or even English in international tests. We need a radical transformation of our educational system if we are to take advantage of our economy’s growth opportunities,” adds Indesa’s Felipe Chapman. In 2011, the English-teaching company Education First published a study in which Panama ranked 40th out of 44 countries in terms of English proficiency. According to economists, the road ahead shouldn’t be so bumpy. “The transition will be pretty natural, because as investment dwindles, consumption will gradually replace it within the joint demand. If consumption, both internal and external, fails to replace the impulse given by public investment, growth rates will decelerate a little, but always as part

LATIN TRADE JANUARY-FEBRUARY 2013

of high or very high growth levels in comparison with the rest of Latin America and the world,” says the World Bank’s Óscar Calvo-González. A key aspect of this will be the sharp increase in revenue from the expanded Canal. Between 2015 and 2025, the canal authority expects to contribute in excess of $30 billion to the government, $8.5 billion more than if the expansion had not taken place. “The expanded Canal will have a short-term impact: first, more revenue will be generated, part of which will be spent on new public projects. Second, and more importantly, as the Canal’s capacity grows, so does activity in the ports, in the CFZ, and in logistics centers like Panamá-Pacífico, making the conglomerate grow. Some people are wrong to think that once investments are off, the economy will shut down,” explains former President Barletta. The enhancement of Panama as a world-class logistics hub seems to be the key to Panama’s economic future. “On top of the Canal’s business, we have built an operational port base. So the idea is not only to have the vessels cross the Canal, but also have them stop in the ports and perform cargo operations for Latin American distribution,” says Juan Carlos Croston, marketing director at Manzanillo International Terminal. “The next step,” he adds, “was to tell multinational companies to come. For them, Central America and the Caribbean is a complicated market. We’re telling them that our logistics operators understand those markets, so they can set up storage and added-value centers.” So far, more than 100 foreign companies, including Adidas, HewlettPackard, Caterpillar, Procter & Gamble and L’Oreal, have switched their regional operations centers to Panama. “These companies add value to the port’s transshipment operations and, by extension, to Panama’s commercial route. It is important to understand the symbiosis between the Canal, the ports, and Panama as a logistics hub, because as one of us gets stronger, so do the rest,” says Croston. Ángel Ricardo Martínez reported from Panama City.

Panama,

a Hub for the Americas

Copa Airlines airplanes in Panama City

PANAMA WILL GAIN IMPORTANCE AS A LOGISTICS CENTER, AND WE WILL BE READY TO MEET THE CHALLENGES OF THIS NEW Pedro Heilbron, CEO of Copa Holdings ECONOMIC SITUATION. BY JOSEPH A. MANN, JR.

The airline,

Copa, which has played a key role in Panama’s rapidly expanding economy in recent years, will continue to be an important factor in the country’s future growth and development after the expansion of the Panama Canal is completed, Pedro Heilbron, CEO of Copa Holdings, told Latin Trade. “Following the canal expansion, canal-related businesses, including banking and other services, will experience new growth and present us with new opportunities,” said Heilbron, who has served as CEO since 1988 and who led the conversion of Copa from a small national carrier to a major player among Latin America’s international airlines. “Panama will gain importance as a logistics center, and we will be ready to meet the challenges of this new economic situation.” As Panama’s economy grew, Heilbron and his executive team took advantage of the country’s geographical location in the “middle” of Latin America to provide a wide range of connections between the United States, Central America, the Caribbean and South America. Focusing on international ﬂights, Copa developed the Hub of the Americas at Tocumen International Airport in Panama City as its base of operations, added new ﬂights to underserved destinations, invested in modern aircraft and employee training, established a strategic relationship with

LATIN TRADE JANUARY-FEBRUARY 2013

Continental Airlines (now United Airlines) and applied the best practices of Continental to its rapidly expanding system. Copa continues its alliance with United and in 2012 joined the Star Alliance global airline network. Copa also took over Aero República in Colombia in 2005 (now Copa Colombia), adding new routes in another fast growing market. Today, Copa offers more than 280 daily scheduled ﬂights to 63 destinations in 29 countries through its Panama hub and expects to carry about 10.3 million passengers this year. The airline currently has 83 modern aircraft, including 39 Boeing 737-800s, 18 737-700s and 26 Embraer 190s, and is adding seven new 737-800s next year. Copa invests $150 million to $200 million a year, mostly in new aircraft, and currently has more than 8,000 employees, with around 6,500 in Panama. For the past two years, the airline has grown so quickly that it has added an average of 100 new workers each month. In the third quarter of 2012, Copa Holdings, which trades on the New York Stock Exchange, posted operating revenue of $590.4 million, up 24.5 percent over the same period in 2011, and had net income of $111.9 million, a 59.1 percent increase over the third quarter of last year. Copa expects capacity growth of 24 percent this year, and 14 percent in 2013–the slowdown a result of adding fewer passenger aircraft in 2013 than in 2012.

PHOTO: DIEGO CAUCAYO/EL TIEMPO DE COLOMBIA/NEWSCOM

COUNTRY REPORT: PANAMA

PHOTO: JUAN JOSE RODRIGUEZ/AFP/GETTY IMAGES/NEWSCOM

View of the Museum of Diversity under construction at the inlet of the Panama Canal, in Panama City. The museum, located in an old US military base, was designed by Canadian architect Frank Gehry and will be opened in the ﬁrst half of 2013.

Panama’s Travel and Tourism Boom Investment in tourism and hospitality in Panama is at an all-time high. What does that mean for investors? BY MARK CHESNUT

anama’s current and future infrastructure projects read like a wish list for any global travel hub: airport expansion, new roadways, a new rail system, thousands of new hotel rooms, large-scale event venues and fast-growing mega-malls. But Panama’s growing importance on the business and tourism grid brings its own set of challenges. The number of foreign visitors to Panama grew between 7 and 8 percent between 2011 and 2012, according to Ernesto Orillac, sub-director for the gobernment tourism agency, known as the Autoridad de Turismo de Panamá, or ATP. “Panama will end 2012 with 2.2 million visitors,” he said, a staggering number considering Panama’s actual population is just 3.5 million. But Orillac is even more optimistic when it comes to growth trends at Tocumen International Airport, the nation’s primary international gateway. The rate of travelers using the facility surged 17 percent between September 2011 and September 2012, and more passengers now pass through this hub every year than the entire population of Panama (5.8 million in 2011). As more people get out of the airport and into Panama, according to Orillac, the nation’s business and leisure tourism segments will expand further.

LATIN TRADE JANUARY-FEBRUARY 2013

Building the appropriate infrastructure for a surge in visitors is a constant challenge. Tocumen, which serves as a hub for Copa Airlines, recently debuted a new northern concourse, and a $670-million contract has been awarded to build a southern concourse with at least 20 new gates within the next three years. Within the city limits, the government aims to alleviate intense traffic congestion with projects that include the construction of Central America’s first urban rail system - the Metro is slated to open its first line in 2014 - and the extension of the Cinta Costera waterfront boulevard, which will wrap around the historic Casco Antiguo district–a move that some critics fear will jeopardize the neighborhood’s status as a UNESCO World Heritage Site. Investment in infrastructure is “extremely important” to keep Panama competitive, according to Al Petrone, CEO of Bristol Hospitality Group. The group owns the Bristol Panama, a luxury hotel that opened a new 111-room tower in 2012, and the Bristol Buenaventura, a beachfront resort that was due to become a JW Marriott property by press time. “Panama is competing with other countries in the area for corporate investment in local regional offices, large trade shows, and global conferences,” he explained. “Panama must be an easy

COUNTRY REPORT: PANAMA

place in which to do business, with minimal disruption and limited bureaucracy. If Panama does not offer world-class level investment in infrastructure, we will see meeting planners, corporate travel managers, and large groups going elsewhere to avoid the hassle, lost time, and frustration in dealing with the basic needs of the 21st century traveler.” New meeting and event space, including a new convention center and the ﬁrst Frank Gehry-designed museum in Latin America, both slated to open near the mouth of the Panama Canal, are also expected to lure more visitors to Panama, according to Orillac. “All of these elements foster corporate tourism [and] business tourism,” he said.

Puente Centenario in Panama

MORE ROOM AT THE INNS There was a time when Panama City was dotted with mediocre hotels that charged inﬂated rates. That was when demand exceeded inventory. But times have changed, and the debut of a slew of internationally branded luxury hotels as well as mid-level chains is likely to put pressure on existing properties to either spruce up or drop prices. The new offerings inlcude the TRYP by Wyndham Panama Centro, which offers amenities like a rooftop pool, free gym access, free Wi-Fi and free breakfast. “In the last four years, there has been an increase of between 4,000 and 5,000 hotel rooms, with a total offering of 14,000 rooms,” said Ori-

llac. “It’s expected that by 2014, Panama City will have 18,000 rooms in hotels in the ‘gran turismo’ category.” In addition to the 92-room TRYP, recent hotel openings include the 1,500-room Hard Rock Hotel Panama Megapolis, the 111-room Le Meridien Panama, the 137-room Holiday Inn Panama Canal and the 369room Trump Ocean Club International Hotel & Tower, set in a 70-story

JANUARY-FEBRUARY 2013 LATIN TRADE

PHOTO: COURTESY OF STARWOOD HOTELS/LATIN AMERICAN DIVISION

COUNTRY REPORT: PANAMA

Westin Playa Bonita, Panama

Diversification will help keep hotel rooms full, according to Al Petrone, from Bristol Group. “Travel, tourism, construction, trade, infrastructure investment, banking, and the Panama Canal all play a key role in making sure Panama’s economy is not solely dependent on one sector.” tower that also houses residences. In addition, several small luxury hotels have opened their doors in the historic Casco Antiguo district. In the case of many large hotels, developers rely on condos and casinos to complement revenue produced by the hotel itself. Newland International Properties, the developer of the Trump Ocean Club, announced in November that Sun International would spend $45.5 million to buy the hotel’s casino, slated to open in 2014. Still in the works are hotels that will fly the flags of Hilton, Sonesta, W and Waldorf Astoria, as well as a Westin that will complement the recently opened 611-room Westin Playa Bonita, a convention-oriented beachfront property just outside the city. Hoteliers are already adjusting their forecasts to take into account the increased competition. When it comes to room rates, “We’re approaching next year very conservatively,” said John A. Cardona, director of sales and marketing at the Trump Ocean Club International Hotel & Tower, which opened in 2011. “There’s no doubt that the hotel industry in Panama City is experiencing a challenging time, as thousands of rooms have opened in the marketplace in the last three years,” said Daniel del Olmo, Wyndham Hotel Group’s senior vice president and managing director for Latin

LATIN TRADE JANUARY-FEBRUARY 2013

America. “In the late 1990s, Panama City had a very limited supply of hotel stock—less than 2,000 hotel rooms. Today, the city boasts more than 10,000 rooms, with more underway. Overall, we anticipate occupancy levels will not come back to pre-2012 levels until 2016 because of this rapid boom.” Diversiﬁcation will help keep hotel rooms full, according to Petrone. “Travel, tourism, construction, trade, infrastructure investment, banking, and the Panama Canal all play a key role in making sure Panama’s economy is not solely dependent on one sector,” he said. Panama’s economic success, which has resulted in a low unemployment rate, presents another challenge for the hotel industry, according to del Olmo. Panama “needs a stronger emphasis on education and service culture,” he said. “Panama’s unemployment rate is low right now — approximately 4 percent — so, as a result, there are challenges across the entire industry in attracting skilled workers that will not only be loyal to an employer, but will also exude the highest levels of service culture that is expected of the hospitality and tourism sectors.” For travelers, the biggest challenge may be just deciding among all the new hotel options.

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INVESTMENTS: CHINA’S SLOWDOWN

CHINESE SHADOWS China’s economy is cooling, weakening demand for the raw materials that go into building its skyscrapers and laying its roads. How will Latin America fare?

The dockyard of iron ore in Qingdao in East China’s Shandong province

hina’s voracious appetite for commodities has revived the growth engine in Latin America for years, turning Brazilian iron ore and Chilean copper into cold cash. But now that China’s economy is cooling, weakening demand for the raw materials that go into building its skyscrapers and laying its roads, how will Latin America fare? Many analysts forecast China’s GDP will dip below 8 percent this year, coming off two decades of growth in the 10 percent range. While that figure still blasts past growth projections for the United States and Europe, analysts warn the downshift could be especially detrimental to Latin America, which has become hooked on revenue from iron ore, copper, soy and zinc, but hasn’t had much success moving up the valueadded chain. The Economic Commission for Latin America and the Caribbean (Eclac) recently revised its forecast for regional growth to 3.8 percent in 2013, down from 4.3 percent in 2011, but higher than the 3.1 percent in 2012. The revision was based on a gloomy global economy, in part due to China’s slowdown. “The region has been benefitting from the rapid growth in China

LATIN TRADE JANUARY-FEBRUARY 2013

and I have no doubt that the current slowdown is going to be impacting quite a bit,” said Mauricio Mesquita Moreira, chief trade economist at the Inter-American Development Bank (IDB). Pointing to Brazil, he said the effects are already being felt. Brazilian exports to China — its No. 1 trading partner — grew a whopping 40 percent last year. But that rate slipped to about 4 percent for the first semester of 2012, he said. The deceleration comes as Brazil emerges from a cycle of government stimulus and credit expansion, making it all the more difficult to tackle. It also puts a damper on Brazil’s efforts to raise investment rates. “This is a clear sign there has already been a strong impact and the question is, ‘How big will the slowdown be in China?’” Moreira said. FOUR COUNTRIES, THREE COMMODITIES Experts say a failure to diversify trade compounds the problem. Just three commodities — iron ore, soy and copper — account for about 70 percent of Latin America’s exports to China. Iron ore, a steel-making ingredient, has been especially hard-hit; prices had slumped by more than 23 percent on the year when the

PHOTO: YU FANGPING/EPA/NEWSCOM

BY RUTH MORRIS

INVESTMENTS: CHINA’S SLOWDOWN

Chinese government announced in September it would pump an estimated 1 trillion yuan, or $158 billion, into construction projects, including roads, rails and runways. The stimulus has boosted prices somewhat. Latin America’s exports to China are also concentrated by country, with about 80 percent of the region’s exports to the Asian giant coming from Brazil, Argentina, Chile and Peru. Of these four, Moreira said, Argentina was in the most precarious position. A major soy exporter to China, among other agricultural products, Argentina’s high inflation gives the country less wiggle room to manage any adverse effects from China’s downshift, he said. “In Brazil, if the Chinese economy slows down even more probably

“That idea that Latin America can replicate the Asian development model in terms of being a major exporter of manufactured goods, I don’t think that’s on the table any more.” -MOREIRA

PHOTO: BLOOMBERG/EL TIEMPO DE COLOMBIA/NEWSCOM

you’ll see the real (currency) devaluing and it’s going to work as a buffer to this impact. But the government in Argentina can’t allow that to happen or else they can lose control of inflation… I think it’s a pretty difficult situation for them.” URBANIZATION DRIVES DEMAND Erik Bethel, co-founder of SinoLatin Capital, a Shanghai-based financial advisory and private equity firm, said Latin America can take heart from China’s stampede towards the cities — the driving force behind its need for raw materials in the first place. Nearly half of China’s 1.3 billion people still live in rural areas and about 20 million Chinese move to urban areas every year. (In some cases, the cities grow so fast that they actually swallow up farmers, who become city dwellers without leaving home.) Given this migratory tsunami, Bethel says China will look to Latin America for raw materials for decades to come. “When they move to the city they eat higher protein, and that comes from a cow or pig, and that pig needs to have animal feed and that animal feed comes from soybeans and there’s not enough soybeans in China, so they have to go to Brazil and buy it,” Bethel said. Urbanites also tend to have higher incomes and buy more stuff, like refrigerators. Bethel describes the common refrigerator as a box made from a series of commodities (like aluminum nickel and zinc), with a lot of perishable commodities inside, running off electricity that’s transmitted along cables containing yet another commodity-copper. If prices for these commodities edge lower, he added, China will see a good buying opportunity, meaning increased asset purchases in Latin America’s mining and agriculture sectors. “I think you’re going to see China going on a buying spree in Latin America,” he said.

Workers harvest soybean on a farm in the city of Tangara da Serra in Cuiaba, Brazil

VALUE UP, TARIFFS DOWN Moreira, of the IDB, agreed that natural resources and goods will make up “the core of trade” between Latin America and China for years. “That idea that Latin America can replicate the Asian development model in terms of being a major exporter of manufactured goods, I don’t think that’s on the table any more. This market is so congested,” he said. “So they will have to go in this direction of trying to add value to natural resources.” He called on Latin governments to write their trade agendas along the same lines, addressing Chinese tariff escalation regimes that impose higher duties on goods as they move up the value-added scale. And he advocated more direct access to Chinese consumers. Depending on the product being sold, Latin American companies exporting to China often must rely on Chinese distributors once they get there. Others partner up with a Chinese firm. On the other hand, experts note that even at its slower pace, the Chinese economy is still growing much faster than the United States and Europe. Plus, Asia has lots more room to grow. China is also in good shape to weather an economic storm. Its inflation is fairly low, and its foreign currency reserves are extremely highabove $3 trillion. “You have to put the slowdown in perspective,” said Bethel. “A slowdown in China means the economy grows 7 percent instead of 10 percent, which is not necessarily a catastrophe.” Ruth Morris reported from Shanghai.

JANUARY-FEBRUARY 2013 LATIN TRADE

INVESTMENTS: VENEZUELA OUTLOOK

VENEZUELA IN ITS LABYRINTH

Venezuela’s economy will close this year with inﬂation of 30 percent and growth of only 1.8 percent. Can that forecast be altered? Opposition will not be in power in 2013. BY ÁNGELA MARÍA RIAÑO

“W

e’re capable of ensuring stability, democracy and peace in this country, whatever any threats we might face, and we can say that absolutely for sure,” Nicolás Maduro, Venezuela’s vice-president, said in an interview with the journalist, José Vicente Rangel. And he added: “This year will be an extraordinary one. Economic growth will be at least 6 percent for everyone.” Despite Maduro’s claims, the climate of political and social uncertainty appears to be generating a malignant growth in the Venezuelan economy that seems heading for a profound crisis. That is a view in which financial and political analysts, the rating agencies, the World Bank, and others all agree. With or without Chavismo, Venezuela’s economic future would appear to be a labyrinth for which the sole exits are the unpopular measures of a devaluation, a removal of exchange controls, increases in taxes and reductions in subsidies in the domestic economy, not to mention cuts in the external subsidies. According to the Washington Post, Venezuela hands out $500 million a year to Nicaragua, the equivalent of 7 percent of the Central American nation’s gross domestic product. It provides Cuba 100,000 barrels a day of oil, the equivalent of 5 percent of its GDP. As a result, it comes as no surprise that the credit rating agencies have pointed to the increase in risks facing Venezuela. As Aaron Friedman of Moody’s says: “We have a negative perspective on Venezuela that points to an increasing probability of a downgrade in the rating for the current period. What usually happens is that the negative perspective increases the likelihood of it changing. The perspectives are not only founded on political uncertainty. The rating incorporates the weakness of institutions, the concentration of power in the hands of Chávez. Uncertainty brings with it a deterioration of the economy.”

Many experts point out that the next Venezuelan government will have to confront drastic adjustments in order to return the country to economic health. Will that be possible?

SETTING THE SCENE Taking a look at the economic panorama on five fronts, first is the paradox of Venezuela’s oil: The country has the biggest reserves on the globe — 17.9 percent of all the crude in the world — but it has to import gasoline. That is due to inefficient management of resources and the government’s big spending. This includes the delivery of subsidized Venezuelan oil to the Caribbean and Latin America, in particular to Cuba; the loan to China — money that has already been spent — paid by Venezuela in exchange for oil; imports of gasoline at high international prices following the explosion of one of its major refineries; and a reduction in demand from the leading customer of Venezuela’s oil, the United States, thanks to new discoveries in the land of Uncle Sam. According to the Washington Post, in the 13 years in which Chávez has run Venezuela’s government, oil exports have halved. Oil exports generate 94 percent of Venezuela’s dollar earnings. “For the government, the cost has been high and the economic distortions substantial,” Barclays said in a January 18 report. And, while the official rate for the dollar is 4.3 bolivars, it is running at 17.5 in the unofficial market. Barclays reckons that inflation this year will close at 30 percent. The third point is that total imports have risen from $13 billion in 2003 to $54 billion, according to Coindustria, the Venezuelan confederation of private industry. Fourthly, the nation’s production has slowed down for a range of factors. On the one hand, there were price controls and the

LATIN TRADE JANUARY-FEBRUARY 2013

Venezuela gives Nicaragua $500 million a year, the equivalent of 7 percent of Nicaragua’s GDP. It sends Cuba 100,000 barrels a day of oil, 5 percent of its GDP.

INVESTMENTS: VENEZUELA OUTLOOK

availability of cheap imports; on the other, the nationalization of a thousand companies, according to the Christian Science Monitor. As a result, people have adapted to a constant shortage of basic food supplies, such as sugar, flour, chicken, beef, milk and others. Week after week, many of these products have been missing at family meal times in Venezuela. Finally, the fiscal deficit is reported to have stood at the close of 2012 between 11 and 20 percent. “The indicators deteriorated in 2012. Our best estimate is 11 percent of GDP (it’s our estimate because of the lack of transparency in last year’s fiscal results). The lack of transparency seems to be getting worse. Government spending was the principal reason for its increase in GDP… but this level of spending is not sustainable. Chávez recognizes that,” says Aaron Friedman of Moody’s. World Bank reports show that Venezuela’s economy will grow by only 1.3 percent this year. The “Doing Business 2013” report by the World Bank and the International Finance Corporation rated Venezuela as number 180 of 185 countries in the global ranking of the ease of doing business. That marks a significant drop in competitiveness.

Dialogue says: “In this scenario, Chavismo will continue, the power quotas will be shared out as well as the resources. With oil prices remaining high, the movement will take moderate measures, sufficient to provide room for maneuver and hang on. This scenario cannot be ruled out,” says Shifter. But what happens if the country faces a thorough economic crisis and takes drastic measures to manage it? In Shifter’s view, “This would create an enormous level of disorder. Obviously, there are several factions within Chavismo. There would be in-fighting for the resources, and a lot of trouble. Some economists suggest that the next government is going to make adjustments for devaluation. Drastic measures generate major social upheavals.”

DEVISING A WAY FORWARD With this as the background, it is worth checking out the possible scenarios for Venezuela’s short-term future. The big question is: What happens if Chavismo continues in power? Experts reckon that this is a highly probable scenario. The question then is whether there would be more of the same or a change of direction. “The fact that Chávez has appointed Nicolás Maduro will reduce the competition for the leadership of Chavismo and makes it hard for other sectors of the movement to reject the legacy,” says Cynthia Aronson, director of the Latin American program for the Woodrow Wilson Center. Despite being the heir, critics of Maduro believe that he lacks the charisma to achieve the unity he needs to impose himself within the Chavismo factions, that his relationship with the government is weak and, given the large number of problems that the regime has to tackle, the difficulties in imposing his leadership will represent a serious political deficit.” For his part, Michael Shifter, president of the Inter-American

Oil pump and storage tanks at Zulia State, Venezuela

And, what if elections are held and the opposition wins? “I don’t see that as a major possibility, but I wouldn’t rule out such a scenario,” says Shifter. “Governance would face a complex situation and, in economic terms, moderate and gradual measures would have to be implemented.” In terms of the transition alone, the nation is very polarized, with Chavismo the dominant political force and the opposition representing 40 percent or more of the population, which means that tensions are running very high. Any economic measure will have to take into account that perspective. In the words of Cynthia Aronson, “The terms of the Constitution have been interpreted with such creativity by the Supreme Court that nobody knows the next step in the transition. In Venezuela, the only certainty is uncertainty.” Ángela María Riaño reported from Washington, D.C.

JANUARY-FEBRUARY 2013 LATIN TRADE

INVESTMENTS: SPAIN IN LATIN AMERICA

Demonstrators in Valencia protesting cuts in social programs.

Recession has turned the heads of Spanish companies to Latin American markets and infrastructure projects. How are these ﬁrms faring in their reconquest? BY SERGIO MANAUT

t the inauguration of the 13th Latin American Summit in Cadiz, Spain, one thing was clear for King Juan Carlos: The relationship between Spain and Latin America has changed dramatically. “Spain needs more Latin America,” the King said. Spain has lived through many crises since the first Summit, 22 years ago, in Guadalajara, Mexico. Back then, Spain presented itself as a strong democracy with a healthy economy, while Latin America presented itself as a region of young democracies and hefty debts. Today, as Spain continues to sink into recession, Latin America expects to grow 3.2 percent in 2012, and 4 percent in 2013. Gone are the days when Spanish companies saw the region as an opportunity to expand and create multinational groups. Today, Latin America represents the hope of survival. A study by IE Business School shows that by 2015,

LATIN TRADE JANUARY-FEBRUARY 2013

Spanish companies with operations in Latin America will generate most of their revenues in the region, instead of the Spanish market. For telecom company Telefónica, it’s already happening. Spanish investment in the region has reached more than 90 billion euros, mostly in Brazil, Mexico, Chile, Colombia, Peru and Argentina, and is likely to grow.

INFRASTRUCTURE, THE NEW LATIN AMERICAN GOLD When Spanish companies started to arrive in Latin America during a privatization wave in the early nineties, most of them had their eyes set on the energy, telecoms and financial sectors. At the time, a real estate boom had helped Spain to become the eighth largest economy in the

SPAIN RECONQUERS LATIN AMERICA

INVESTMENTS: SPAIN IN LATIN AMERICA

world. Construction companies were popping champagne corks, but eventually the boom became a bubble, and after it burst, they had no choice but to take their bricks elsewhere. Sacyr Vallehermoso is a good example. With projects worth a total of 40 billion euros, it ended the third quarter of the year with 2 billion euros in growth. This includes new construction and infrastructure projects in Chile, the company’s main market in Latin America. Sacyr Vallehermoso’s operations in Chile are worth 1 billion euros in public works and another 1.7 billion in concessions. In 2009, when the Spanish crisis caused many construction companies to collapse, Sacyr Vallehermoso landed a 700-million-euro deal to expand the Panama Canal. During the second half of the year, the company started operations in Colombia and Bolivia. In Spain, meanwhile, the company’s results dropped 23 percent. Spain’s figures are frightening. All together, the country’s six main construction firms – Acciona, ACS, FCC, Ferrovial, OHL and Sacyr Vallehermoso – lost 973 million euros during the first nine months of the year. In contrast, during the same period last year, their revenues totaled 1.97 billion euros. Today, over 80 percent of their new projects to be developed are outside Spain. The international projects of these six firms add up to 72.84 billion euros, most of them in Latin America. The firms’ success is based on a regional infrastructure deficit of $250 billion a year, which includes railway, electricity and communications projects, according to the InterAmerican Development Bank. Brazil is the region’s crown jewel. The country’s president, Dilma Rousseff, has announced plans to invest some 66 billion dollars in railway and highway infrastructure. Even though the works are to take place over the next 25 years, half of the investment must be made within the next five, and concessions are slated to be assigned to companies by September of 2013. This explains why construction companies are eager to get involved. During the first week of December, Albertis, Spain’s largest highway builder, closed a joint deal with Canada’s Brookfield. Together, they acquired Partícipes, which owns 60 percent of OHL Brazil, the company that owns the Brazilian concessions of Spain’s OHL. Albertis and Brookfield will pay 10 percent of Albertis’s shares (884 million euros at market rates), plus 10.7 million euros cash and will acquire over 504 million euros in debt. Albertis will control 51 percent, while Brookfield will take the remaining 49 percent of the 60 percent

total. OHL Brazil is handing the Spanish company a total of nine concessions, with 3,226 kilometers of road projects to be built. After this transaction, Albertis will not only become the world’s leading highway construction company, but it will also reduce its Spanish market share, which currently accounts for 27 percent of its revenue. Telefónica’s results up to September of 2012 also show the growing contribution of the Latin American market. Today, 49 percent of the company’s revenue comes from Latin America, representing 22.6 billion euros. The figure overtakes for the first time that of the European operations of Telefónica, now at 48 percent. Brazil alone accounts for 22 percent of Telefónica’s income. Santiago Fernández, president of Telefónica for Latin America, confirmed that he would move from his Madrid office to Sao Paulo. Moving the company’s Latin American headquarters to Brazil is the first step in merging Telefónica’s regional activities into a single company, which would allow it to trade on the stock market independently from the corporation’s structure. Meanwhile, new Spanish companies continue to arrive on Latin American shores. Spain’s third largest financial group, CaixaBank, arrived in the region thanks to its 20 percent stake in Grupo Financiero Inbursa, and will soon open offices for corporate clients in Chile. The biggest hotel chains from Spain also seem unstoppable in their expansion, particularly in Colombia, Brazil, Peru and Chile, where the urban hotel concept is still underdeveloped. The chains are looking to copy the same model used in the Caribbean 20 years ago. Alberto Nuñez Feijóo, president of the Xunta of Galicia, recently traveled to Brazil for contract talks between Galician shipyards and Sete Brasil, which already has contracts with Petrobras for the construction of sounding lines for exploring oil wells. Also arriving in the region are companies related in other ways to construction and infrastructure. For instance, sanitation company Grupo Roca began operations in Brazil in 2009. By 2011, the country had become its main source of income. In just three years, boosted by Brazil revenue of 310 million euros, Grupo Roca became the leading company in its sector. Just as Grupo Roca is writing its own success story, so is Latin America, and Spanish companies want to contribute with at least some of the ink. Sergio Manaut reported from Madrid.

Brazil’s president, Dilma Rousseff, has announced plans to invest some 53.5 billion euros in railway and highway infrastructure. Even though the works would take place over the next 25 years, half of the investment must be made within the next ﬁve.

JANUARY-FEBRUARY 2013 LATIN TRADE

INVESTMENTS: BRAZIL IN AFRICA

UNDER

THE AFRICAN SUN Brazilian ﬁrms have increased their presence in Africa. In the process, they have seen heaven and hell. Where are the opportunities for other Multilatinas?

BY THIERRY OGIER

razilian companies have made headway in Africa with the active support of former President Luiz Inácio Lula da Silva, who frequently visited the continent when he was in power between 2003 and 2012, and with the diplomatic support of Itamaraty, the Brazilian external affairs ministry that has opened numerous embassies south of the Sahara in recent years. For sure, Brazil’s presence in mineralrich Africa can hardly compare with that of China, whose banks have already set up shop in the fast growing region. And the African adventure has not come without some bumps on the way, or even upsets. Vale, for instance, the world’s largest iron ore producer, just decided to halt its huge investment in the West African state of Guinea only months after describing the Simandou project as one of the biggest reserves of iron ore on the planet. But there have been some incredible success stories, and Brazil has started to become relevant in business terms. Activities now range from commodities to cosmetics. Africa will continue to provide fertile ground for Brazilian businesses in many areas. Take trade, usually a good measure of one country’s involvement with another. It shot up from a mere $4.3 billion in 2002 to $27.6 billion in 2011. Africa’s share of Brazilian trade is still relatively small (around 5 percent), but it has been growing. “The funding deficit is a great challenge,” said Luciano Coutinho, president of the Brazilian Development

Bank (Bndes). But the powerful Bndes has been flexing its export financing muscle. African loans barely amounted to $150 million five years ago, compared with $550 million last year. Loans from January to November of 2012 hit $561 million, and according to Bndes officials, the portfolio is increasing. “This is in line with the interest of Brazilian companies in the continent, especially in lusophone Africa.” This is especially true for civil engineering corporations, due to reconstruction opportunities in various (post conflict) countries. “Those firms tend to use Brazilian equipment and brands, so other companies from other sectors also follow suit and achieve some notoriety in Africa, too,” said Luciene Machado, foreign trade director at the Bndes in Rio. Investments have soared. Longtime business partners in Africa like Odebrecht are familiar with such credit lines. Angola and Mozambique, which both endured decades of civil war after independence from Portugal, have become prime targets for Brazilian firms. “Brazil was the first country to acknowledge Angola’s independence (in 1975) and maintained good relations with the country even during the most intense period of the civil war, so it’s natural that companies that have been here for a long time enjoyed some advantage during the reconstruction era,” she said. Odebrecht can also cash in some of its receivables in dollars outside Angola, including 10 percent upfront, thanks to its longstanding relationships with officials in the oil-rich southwestern country. On the Angolan government’s request, Odebrecht has also been operating a retail chain, quite a unique experience for the engineering group. Beyond maintaining good relations with governments, another important lesson from the Angolan experience is to be able to respond to the huge infrastructure demand all over Africa, said Machado. But she added that it would be a mistake to generalize. “We need to take into account the differences among coun-

LATIN TRADE JANUARY-FEBRUARY 2013

Africa will continue to provide fertile ground for Brazilian businesses in many areas. Take trade, it shot up from a mere $4.3 billion in 2002 to $27.6 billion in 2011.

INVESTMENTS: BRAZIL IN AFRICA

tries,” she said. In non-Portuguese speaking countries, the Bndes has been active in the oil-rich Ghana and Equatorial Guinea, as well as South Africa. Petrobras is also present in Nigeria and Tanzania, although it is more focused on its domestic interests right now. Air transportation has also been identified as another “strategic” area for Brazil and one of its star global firms, Embraer. “The continent’s infrastructure challenge renders air transport a potential leapfrogging technology akin to mobile phones,” said the African Development Bank in a statement, as it signed a cooperation agreement with the Bndes last year. The continent has also enjoyed high growth rates in recent years, around 5 percent, excluding 2009, although regional business is still hampered by poor regional connections, especially since the demise of Air Afrique in 2002. Embraer, which has already sold military aircraft to several African countries, could achieve a breakthrough in civil aviation there. “The adoption of regional jets was highly catalytic for the growth of aviation in Brazil and we believe that the same can happen in Africa,” said Marcio Migon, head of aircraft financing at the Bndes.

CHALLENGES Yet some Brazilian companies have had a hard time overseas, such as Marcopolo, the bus body manufacturer whose Egyptian plant in Port Said saw disruptions related to political instability. The Caxias do Sul-based company has been more successful with its investments in South Africa, including during the latest football World Cup. The widest contrasts in outcomes, though, have been experienced by one of the largest Brazilian multinationals, Vale (the company declined to comment on its African business). On the one hand, it has been exploring a profitable coal mine in Mozambique. “It is one of the best projects they have outside Brazil,” said Denis Demange, head of metals and mining at the investment bank Credit Agricole in São Paulo, who has visited the Moatize site twice. “Roger Agnelli (then CEO of Vale) was treated like a prince in Mozambique,” said a former company director. But on the other hand, Murilo Ferreira, Agnelli’s successor, has faced a near-hellish experience in Guinea, one of the poorest countries in the world, where Vale pledged to invest $2.5 billion to buy a 25.5 percent stake in the promising Simandou iron ore mining project in

LATIN TRADE JANUARY-FEBRUARY 2013

2010. The potential was great: Guinea, which is already the world’s largest producer of bauxite, could achieve a leap forward if the Simandou mine, which contains the word’s largest non-explored iron ore reserves, was put to work. But the experience soon turned sour. Vale signed the deal during a transition period between the death of former dictator, Lansana Conté, and the democratic election of Alpha Condé, a longtime opponent who decided to implement a new mining code and a review of existing contracts. These included contracts signed by Vale and its Israeli partner Benny Steinmetz. Condé, a former Sorbonne law lecturer, also called on former British Prime Minister Tony Blair and the mega-investor George Soros to advise him. The Brazilian investment bank BTG Pactual, which is allied in a joint venture with Agnelli, also teamed up with Condé. Under pressure, and after months of dithering, Vale finally decided to pull the plug on Simandou in December 2012 and focus on domestic investment in iron ore instead. “They have already spent $1 billion in Simandou,” said Demange. “But the project is doomed.” This is the kind of experience that undoubtedly leaves a bitter taste in the mouth. But business is business–even in Africa. Thierry Ogier reported from Sao Paulo.

Air transportation has also been identiﬁed as another “strategic” area for Brazil and one of its star global ﬁrms, Embraer. “The continent’s infrastructure challenge renders air transport a potential leapfrogging technology akin to mobile phones,” said the African Development Bank in a statement, as it signed a cooperation agreement with the Bndes in 2012.

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TECH TRENDS

BY CHARLES NEWBERY

t Belgrano Day School in Buenos Aires, teachers use computers, interactive whiteboards and video screens in the classroom, and the students seem attentive. “One teacher uses technology in 90 percent of her lessons,” said Federico Johansen, overall deputy director of the K-12 school, with an enrollment of 1,200. Teachers can quiz students online and let the computer do the grading, while students can study texts accompanied by interactive programs and videos that build on in-class lessons. Can’t figure out a math problem at home? Watch a video demonstration or chat with classmates over the school’s e-learning platform. Johansen, a 40-year education veteran, speaks glowingly of technology’s advance in education. “Technology is a tool so efficient that it is going to change the existing model of school like the printing press transformed education from an oral foundation,” he said. The promise is creating opportunities for suppliers of e-learning content, hardware, software and services across Latin America. Governments are handing out laptops to students; private schools are asking their ranks to bring in their own computers, tablets or other devices. Corporations are rolling out e-learning platforms for employees to hone their skills. The e-learning business has had fits of activity and slumps over the past decade in Latin America. Schools have stocked up on interac-

LATIN TRADE JANUARY-FEBRUARY 2013

tive whiteboards only to see use falter as untrained teachers couldn’t figure out how best to use them. Workers have trudged through dull online courses, and companies have demanded better courses. Gustavo Grobocopatel, president of Grupo Los Grobo, said e-learning should help his 1,000 employees gain new knowledge and skills for his agriculture business in Argentina, Brazil and Uruguay. But, he’s not found products to fit his needs, and instead prefers in-field training. E-learning developers are taking note, and blended learning is gaining traction by com-

Brazil will grow fastest at 21.5 percent, trailed by Colombia at 18.6 percent and Bolivia at 17.8 percent - Adkins. bining computer time with classroom debate and hands-on practice. Colombia’s National Open and Distance University (Unad) is doing something of the sort. Students can take courses online and via videoconferencing at any one of 60 centers around the country and in Florida, where they can hang out with peers. The Siglo 21 Business University (UES 21) has 140 such centers in Argentina. Blended learning proponents say the approach is cheaper and democratic: stu-

dents can study from anywhere, and at 30-70 percent less than on campus. For their part, universities can fatten enrollment beyond the campus, helping to bolster profits without pushing up costs much. With computer programs, teachers spend less time grading and more time teaching – and more effectively, said Ursula Eyherabide, director of the Ibero-American Association of Blended Learning. The digital content also makes it easier to monitor progress, allowing teachers to attend to the needs of slower students and offer additional material to those making faster strides, she said. GROWTH PROSPECTS Sam Adkins, chief research officer at Ambient Insight, a market research company in Monroe, Washington, estimates that e-learning revenues in Latin America will almost double to $2.29 billion in 2016 from $1.16 billion in 2011, or 15 percent annual growth. Brazil will grow fastest at 21.5 percent, trailed by Colombia and Bolivia at 18.6 percent and 17.8 percent, respectively, he said. “Brazil could easily have more than two million online higher education students by the end of 2013, more than twice the number of online enrollments in 2010,” Adkins said. While schools are on top in Brazil, corporations dominate e-learning in Argentina and consumers do in Chile and governments in Colombia, Mexico and Venezuela, Adkins said. Underpinning the growth is the rapid digitization of academic content across the region, such as with such government initiatives as Bolivia’s Educational Technology Revolution or Venezuela’s Canaima Program, he said. This is opening up opportunities for suppliers. So far, global suppliers such as Apollo Group, McGraw-Hill and Pearson dominate the field in Latin America, yet a domestic contingent, including Aura Interactiva, Competir and Kuepa is gaining ground. Pearson recently teamed up with Mexican educational technology and curriculum developer Inite to create Utel, an online university in Mexico. Adkins expects Pearson and other big foreign players to dominate the business in Latin America for the next five years, including by buying domestic players to build market share. But as the business matures, the international suppliers could find themselves slug-

R FOTION

R N A ING E L E-THE TWITTER GENER

TECH TRENDS

E-learning revenues in Latin America will almost double to $2.29 billion in 2016 from $1.16 billion in 2011, or 15 percent annual growth. ging it out on price to sustain sales in the larger markets of Argentina, Brazil, Mexico and Venezuela, something already happening in the corporate segment in Argentina and Mexico. This could lead companies to target the smaller markets of Bolivia, Chile and Colombia, and it could create opportunities for Latin American players to offer tailored solutions, not the one-price-for-all packages of the international suppliers. “Smaller suppliers may not have the brand awareness and the marketing muscle of some of the larger players, but they can modify products and prices to meet the needs of local buyers,” Adkins said. Another challenge for local and foreign elearning companies is the advance of Mountain View, California-based Coursera and other companies offering free courses taught by teachers from universities such as Harvard. Coursera now has 60 percent of its students outside the United States, 4 percent of them in Brazil. Latin American suppliers also are starting to export. Sao Paulo-based Imaginologia sells online courses for the healthcare industry to Portuguese-speaking African countries, while Sao Paulo State University and the Catholic University of Brasilia offer online Portuguese courses in Mozambique and Angola, respectively. CREATE YOUR OWN CONTENT A market preference in Latin America is to create your own content, in particular at corporations and tertiary education. This likely will keep demand for tools and platforms steady, including open-source e-learning platforms such as Blackboard, Desire2Learn and Moodle. About 45 percent of corporations and most tertiary schools in the region are purchasing cloud-based tools and platforms to create their own content. Adkins also expects the latest trends in the United States – content-as-a-service (CaaS) and school-as-a-service (SaaS) – will catch on in Latin America. With CaaS, content is rent-

ed, a cheaper option for parents and students than buying e-learning courses. SaaS allows a school to launch a large-scale e-learning program in days by rebranding the third-party supplier’s platform. In primary and secondary schools, Kuepa is making strides in selling services in its home market of Argentina and in Colombia. Colegio Buenos Aires has tapped the supplier for the country’s first blended-education program for secondary students. Gonzalo Pulit, who runs Kuepa, said it takes time to land buyers. The market is big and fragmented, so lots of meetings must be scheduled and time spent on convincing seasoned educators to overcome any technological skepticism. That is happening. Parents and K-12 schools are starting to jump on board attracted by the lower cost of e-learning, its ability to track performance more easily, and the zeal of students who, growing up with Facebook, Twitter and YouTube, view e-learning as akin to their era, Pulit said. Dual-diploma programs are popping up. Kuepa has hooked up Belgrano Day School with Somerset Virtual Academy in Pembroke Pines, Florida for such a program at a fee of $800-900 per student a semester. Students take additional online courses to receive a US high school diploma while completing one at their school at home, widening their education and opportunities for getting into a US university. The school can market the dual diploma at no fixed costs. Back at Belgrano Day School, Johansen sees e-learning as a way to curb state education spending by reducing costs, and also to reel in dropouts by finishing their studies through distance learning. But, he warns that any technological push must start with training teachers. “When they see that technology is very efficient for teaching, then they will use it,” he said. “They will get committed.” Charles Newbery reported from Buenos Aires.

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Kathryn Rooney Vera, senior emerging markets macroeconomic strategist & partner, Bulltick Capital Markets

MEXICO

Well-positioned despite the extra region panorama oriented economy, solid currency and relatively low inflation, which, Vera said, should come in at 3.6 percent in 2013, alleviating pressure on the central bank to raise interest rates until at least the end of that year. The peso, meanwhile, “is the most undervalued currency in the region.” The United States, Mexico’s main trading partner, raises concern with its “fiscal cliff,” which, if unresolved, could cut 1.5 percent from GDP in the first half of 2013. Vera expects politicians to solve the problem, saying, “It doesn’t benefit anyone not to do so.” Longer term risks remain, such as debt and fiscal trends, and a need to fix entitlement programs. But in other areas, 2013 could be bright

Gustavo Ardila, vice president, productive & ﬁnancial sectors, CAF

Victor González Bernal, director of treasury and accounting, Volkswagen Mexico

CONNECTING LATIN AMERICA’S CFO COMMUNITY

LATIN TRADE JANUARY-FEBRUARY 2013

PHOTOS: RAMÓN GONZÁLEZ

atin America and Mexico are well-positioned heading into 2013, despite risks in China, Europe and the United States, which must contemplate its looming fiscal cliff, participants at the Latin Trade CFO Event in Mexico City were told. The reasons for optimism include solid macroeconomic indicators, especially in Mexico, said Kathryn Rooney Vera, senior macroeconomic strategist at Bulltick Capital Markets in Miami. The average debt-toGDP ratio is 30 percent in Latin America, compared to 80 percent in the developed world, to cite one metric. The region’s banking system is better capitalized, too, and not over-leveraged. Mexico shows especially positive signs, with its export-

MEXICO D.F. LT CFO

LT CFO Event in Mexico

for the United States, producing favorable follow-on effects for Mexico. Vera forecasts US growth of 2.2 percent in 2013 and says it will be driven by housing and consumption. Housing, she says, “is a virtuous cycle,” in which consumers feel better since their main asset is increasing in value. Boosting consumption means more manufacturing – much of it in Mexico, especially in the expanding automotive sector. The average age of a car in the United States is 11 years old, Vera said, explaining that consumers haven’t been purchasing due to the downturn. That’s something she expects to change, meaning “a boom for Mexico.” Vera shared her forecasts at a Nov. 15 event that Latin Trade

organized for CFOs. The event acknowledged Víctor Bravo Martín of Empresas ICA as “CFO of the Year.” Bravo, CFO for one of Mexico’s biggest construction companies, shared equally upbeat expectations for Mexico, which recently approved an overhaul to its labor laws and is expected to finally make progress toward opening its state-run energy sector – a move that Bravo says would add “1 percent to 2 percent” to annual GDP. Mexican President-elect Enrique Peña has said Mexico must spend 5 percent of its GDP on infrastructure. A new publicprivate partnership law also bodes well for ICA and its investors, Bravo said, explaining the new

rules lend more judicial certainty to projects and allow companies to pitch their proposals to the government. “The outlook is positive,” he said. Managing risks can be a key part of a CFO’s responsibilities. Nelson E. Telemaco, vice president and regional head of client management and global risk solutions at Chartis/AIG Latin America, gave a workshop on multinational risk management. Multinationals, Telemaco says, “have depended on local subsidies to manage risk.” That’s changing as “multinationals see value in changing how they manage risk,” he said. The changes include implementing a controlled master program that “combines the

Nelson E. Telemaco, VP regional head of client management group and global risk solutions, Chartis/ AIG Latin America; Luis Emilio Fortou, head of LAC multinational program, Visa; Rogelio Flores, finance director, SAS Latin America North; Francisco Sánchez, finance manager & legal representative, SAP Mexico and Central America; Víctor Bravo Martín, CFO, Empresas ICA; Rodrigo Llop, business development director, SAS; Santiago Dawson, head, treasury & corporate finance, América Móvil

best of both worlds: local and global policies.” This offers the benefits of control, compliance, value and limiting potential costs. “We shouldn’t reserve this as a last-minute response to a crisis,” Telemaco said. Another way to avoid crises is to take advantage of card programs that can track how employees are spending company money, provide advanced data on whether it’s being spent properly, and benchmark performance against peers in the same industry, said Luis Emilio Fortou, head of LAC multinational program, VISA. It also can provide KPIs for improving company performance. David Agren reported from Mexico City.

Paolo Patrone, ﬁnance director, Hamburg Süd

CONNECTING LATIN AMERICA’S CFO COMMUNITY JANUARY-FEBRUARY 2013 LATIN TRADE

LT CFO MIAMI

Alexandre Chourmert, controller, Latin America & Caribbean, Ferragamo Latin America; Seher Samilgil, manager, ﬁnance & business support Latin America & Caribbean, Inter-Continental Hotels Group

Philippe Schrader (2011 Latin Trade “CFO of the Year - Multinational”), vice president, CFO & strategy, Latin America, at Walmart Latinoamérica; Ignacio Corral (2012 Latin Trade “CFO of the Year - Multinational”), ﬁnance director of Latin America and the Caribbean, Diageo.

he fiscal cliff – the combination of tax increases and automatic spending cuts decreed by US Congress – presents a serious threat to the US economy this year, but full execution of the measures is unlikely since it would drive the economy into recession, Kathryn Rooney Vera, director of macroeconomic research at Bulltick Capital Markets, told participants during December’s Latin Trade CFO Forum held in Miami. The US economy has the potential to grow by 2.3 percent this year, but is likely to grow by less than 2 percent, she told the forum. The full impact of the fiscal cliff, already affecting the economy, would equal more than $607 billion in 2013 or 4 percent of nominal GDP, she noted, and

if fully implemented would push the economy into a recession during the first half of the year. The economy would return to growth in the second half of 2013, posting marginal growth for the year as a whole. Rooney Vera said then that it was logical to expect tax increases as a result of the fiscal cliff negotiations, since the Democrats have the stronger hand in talks. The top 2 percent of earners will see taxes increase. Moving to another key international player, the Bulltick executive said she believed that a hard landing in China over the next few years was unlikely. China’s GDP growth should reach 8 percent in 2013 and the future outlook depends on how quickly China can harness the consumption model,

Carl Occhipinti, VP ﬁnance, FedEx Express Latin America and Caribbean Division

Carlos Vaitman, business leader small business, Latin America & Caribbean, Visa; Steve Horton, ﬁnancial planning and analysis manager Latin America & Caribbean, Wendy’s International Latin America; Eduardo Vera, real estate ﬁnance manager, Real Assets Capital Partners; Kathryn Rooney Vera, director and partner, macroeconomic research, Bulltick Capital Markets

CONNECTING LATIN AMERICA’S CFO COMMUNITY

LATIN TRADE JANUARY-FEBRUARY 2013

PHOTOS: PABLO BLAZQUEZ

US:

Unlikely to fall from the fiscal cliff

LT CFO MIAMI

LT CFO Event in Miami

as opposed to its current export model, she said. Latin America, meanwhile, has shown itself to be quite elastic in absorbing economic shocks, and should post GDP growth of 1.4 percent in 2013, down from this year’s IMF estimate of 1.5 percent. Mexico is set to outperform Brazil, with projected GDP growth of 4 percent in 2012. For 2013, Mexico should grow by 4 percent. Brazil, which at 5 percent unemployment is at full employment, has the potential to show GDP growth of 3.7 percent this year, but will likely grow by just 1 percent, Rooney Vera forecast, even with a big government stimulus and reduced taxes on durable goods.

Currently, Brazil has a consumption-driven, government stimulus model. It must increase investment and move to a competitive model, she said. Investments in education and research and development could prove to be a powerful driving force for growth in this South American counrty. In addition to the economic outlook, Ignacio Corral, finance director of Latin America and the Caribbean for beverage company Diageo, received the Latin Trade “CFO of the Year” Award in the multinational category from Philippe Schrader, vice president, CFO & strategy, Latin America, at Walmart Latinoamérica, who was last year’s winner. Corral noted that the Latin American and Caribbean region,

Deidre Lloyd, LAR business ﬁnance manager, Eastman Chemicals Latin American; Alex Russell, VP of ﬁnance for Emerson Process Latin America, Emerson

one of five Diageo geographical units worldwide, was among the three fastest growing regions. “With seven million new, affluent consumers, mostly stable national economies and the average age at 30, this is the land of opportunity,” he said. The company has about 3,000 employees in the region and, Corral added, he expects strong growth to continue until 2020. Last year, the company achieved the No. 1 spot in Mexico in its market. One of the main drivers of this growth has been Diageo’s commitment to making regular investments in the region for more than 15 years, he said. Also making presentations at the Miami forum were: Laura Maydón, senior business leader, Commercial Solutions, Visa; Alex

Russell, CFO, Emerson Process Latin America; and Carl Occhipinti, vice-president of finance, FedEx Express Latin America and Caribbean Division. Speaking on the topics of working capital management, DSO, procure-to-pay and DIO, Visa’s Maydón told participants that a clear focus on accounts payable can help companies meet their targets. Automation using Visa cards and processes can lead to savings and improve working capital, she said. Using cards for B2B payments in Latin America offers great potential, she added, and can provide financial officers with precise data on expenses. Joseph A. Mann, Jr. reported from Miami .

Rogelio Flores, ﬁnance director, SAS Latin America North; Ignacio Corral, ﬁnance director Latin America & Caribbean, Diageo; Rodrigo Llop, business development director, SAS; Rosemary Winters, CEO, Latin Trade Group; Peter David, regional CFO, SAP Latin America & Caribbean; Juan Felipe Gómez, manager of SAP financing, SAP Latin America

CONNECTING LATIN AMERICA’S CFO COMMUNITY JANUARY-FEBRUARY 2013 LATIN TRADE

SPOTLIGHT

Caribbean Coast in Colombia

COLOMBIA

THE ONLY RISK IS WANTING TO STAY…

BY PAULA ANCERY elling Colombia as a tourist destination in the international market has been a difficult task in the past. Right-wing paramilitaries, left-wing rebels and drug-trafficking cartels all gave the country a negative and dangerous image, difficult to tackle through campaigns or communication strategies. For many foreigners, images of drug violence eclipsed the Colombia of Juan Valdez, Shakira and Gabriel García Márquez, whose hometown of Aracataca served as the inspiration for Macondo. Not even the lure of pristine Caribbean waters was enough to help boost tourism to desired levels. That was until Proexport, the government agency charged with promoting exports, foreign investment and tourism, decided to take the bull by the horns and asked Sancho BBDO design agency to come up with a campaign to attract tourists from specific markets around the world. (Sancho is no longer working with Proexport, but the agency was responsible for creating and developing the tourism campaign.) The agency took a gamble: it decided to include the word “risk” in the campaign’s slogan. After all, it represented what was foremost in everyone’s mind, and the very concept the agency wanted to counter. And so, three years ago, the campaign “Colombia, the only risk is wanting to stay,” was born.

LATIN TRADE JANUARY-FEBRUARY 2013

“The effect of the phrase was so powerful, it’s even been used by the government when trying to attract direct foreign investment,” said Marcelo Arango Gómez, vice president of strategic planning at Sancho BBDO. “Thanks to exposure in international television (advertisements), the campaign has surely reached business travelers.” The brief for the campaign was based on studies showing that despite tremendous changes in the country, the rest of the world still associated it with civil conflict and drug trafficking. “That’s why we designed a campaign that not only showed nice things, but would be hard-hitting. That’s when we decided to use the word ‘risk,’ something never before done when trying to design a campaign to attract tourists,” explained Arango. The campaign focused on attracting tourism to specific places like Bogotá, Barranquilla, Huila, Amazonas, Cartagena and San Andrés. Activities such as bird watching, scuba diving and golf also were highlighted. The campaign’s narrative style presented foreigners who “came across” Colombia, or just happened to go to the country without knowing what to expect. The visitors recount how they were pleasantly surprised by Colombia and fell so deeply in love with the country that they decided to stay. The campaign was released on television but had a much more aggressive presence in digital

media and international tourism fairs. “Colombia has changed a great deal,” said Arango. “We have stopped being a question, and we have now become an answer. The sun has definitely started to shine on us.” He added: “Colombians want to be a part of the global scene, and creativity in advertising is a part of that. What’s more, last year Colombia had its best performance at the Cannes Film Festival, with a wide range of awards and truly wonderful ideas.” Paula Ancery reported from Buenos Aires.

Ecohabs at Tayrona National Park

PHOTOS: COURTESY OF WWW.COLOMBIA.CO

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