Latin Trade 22.4 Jul/Aug 2014 - English edition

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Argentina: Buenos Aires, Córdoba, Mendoza, Rosario. Bolivia: Santa Cruz. Brazil: Brasilia, Curitiba, Porto Alegre, Rio de Janeiro, Ribeirão Preto, São José, São Paulo.

Chile: Santiago de Chile. Colombia: Barranquilla, Bogotá, Cali, Medellín. Costa Rica: San José. Ecuador: Quito, Guayaquil. El Salvador: San Salvador. Guatemala: Guatemala.

Guadalupe: Baie-Mahauly. Haití: Port-au-Prince. Honduras: Tegucigalpa. México: Cancún, Ciudad de México, Guadalajara, Interlomas, León, Mérida, Monterrey, Puebla, San Ángel, Torreón.

Panamá: Panamá. Paraguay: Asunción. Perú: Lima. Puerto Rico: San Juan. Dominican Republic: Santo Domingo. Trinidad & Tobago: San Juan. Uruguay: Montevideo.

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KILOMETERS OF STORIES

CONTENTS J U LY / A U G U S T 2 0 1 4

Editor’s Letter 8

Time for the entrepreneurs to shine

VO L . 2 2 N O . 4

14

The Scene 12 Services: Low productivity Intra-industry trade grows

Opinion The Contrarian 14 Is there light at the end of the tunnel in Argentina’s economy?

By John Price

Events 68 CFO México D.F.: Not just about numbers 70 CFO Bogotá: Architect of transformation The CFO of Avianca Holdings, Gerardo Grajales López, named CFO of the Year in Colombia.

16

72 CFO Bogotá: The changing role of CFOs Finance VPs are best suited to make profound corporate changes.

Features Energy

16 Brazil: Ghosts from the past still haunt Brazil The size and the consequences of an electric energy rationing this year.

Cover Story: Latin 500

18-40 Is mediocrity setting in?

Nearly half of the 500 largest companies in Latin America reported drops in revenues. However, some new leaders appeared.What are their secrets for success?

Special Report

42 Hospitality: Investing in the future Developers and hoteliers are bullish on Latin America’s hotel sector.

48 Hospitality: Young and smaller cities, a massive opportunity An interview with Frits van Paasschen, president and CEO of Starwood Hotels & Resorts Worldwide

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LATIN TRADE

JULY-AUGUST 2014

42

CONTENTS J U LY / A U G U S T 2 0 1 4

Features

VO L . 2 2 N O . 4

50

Country Report

50 Perú: A new Peruvian sprint As many emerging markets stumble following a decades-long commodities boom, Perú’s economy is still showing a strong footing.

Policy Agenda

56 Youth Unemployment Help wanted: Youth need apply

Trade Américas & ConnectAmericas

60 The new vision

60

Productivity is fundamental for investment in infrastructure to succeed. This opens enormous opportunities for the small business sector.

Industry Report

64 Insurance: Insurers eye the region Latin America is the promised land for insurers looking for double-digit premium growth.

66 Insurance: The next battleground International insurers are trying to increase their market share through acquisitions. A look at their strategies.

64 Web Find us online at www.latintrade.com

Cover: Latin 500 The Biggest Companies in Latin America

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LATIN TRADE

JULY-AUGUST 2014

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EDITOR’S LETTER

T

HE BAD NEWS. About half of the 500 largest companies in Latin America reported lower revenues in 2013. As a group, their sales were down by 4.5 percent compared with 2012. The culprit appears to be the lack of productivity.

Of course, in some countries, currency depreciation skewed the results downwards in dollar terms. In Argentina, the peso lost 24.5 percent against the dollar during the year. Brazil’s currency lost 12.8 percent, Peru’s 8.6 percent, Chile’s 8.4 percent and Colombia’s 7.9 percent.

It’s also clear that the sectors that generate most of the revenues in the Latin 500 had a lukewarm year. Eighty-one percent of total sales in this group were from 279 companies in five sectors: energy (including oil and gas), mining, food, trade and technology. The technology sector basically consists of telecommunications companies.

It should be noted that the revenue decline in energy firms (6.2 percent on average), and in mining (4.1 percent), is basically a response to the same reason as always: lower international commodity prices. The other three sectors, which more closely respond to local demand, did not compensate for those declines. Food companies increased their revenues by an average of 3.1 percent, trade was up by

NOW FOR THE GOOD NEWS. Almost 70 companies in five sectors had a notable increase in sales in 2013: pharmaceuticals by 13.8 percent, cement companies by 6.8 percent, agribusiness by 5.1 percent, automobiles 4.9 percent and foods 3.1 percent. All of them, except pharmaceuticals, operate with very narrow margins, which means their growth was a result of higher sales volumes in their domestic markets.

These firms could also increase their efficiency. For example, revenue per employee in retail and telecommunications is barely 60 percent of the average of companies listed on United States stock markets. Even the new Latin American stars, the holding companies, generate only half of the revenues per employee recorded in the United States.

Our conclusion: it’s the time for small companies and entrepreneurs. Seventy companies showed that they could grow in the region in spite of adverse circumstances. Now, all of them have to demonstrate that what they have done so far, can, no doubt, be done better.

TIME FOR THE ENTREPRENEURS TO SHINE

8

LATIN TRADE JULY-AUGUST 2014

barely 1.1 percent, and technology was down 2.6 percent.

This disappointing outcome shows that the region still depends too much on the price cycles of currencies and primary goods. But there are ways to overcome this perverse link. One is to make the producers more efficient. That may be a difficult task in Latin America’s largest mining companies because indicators, such as revenues per employee, are similar to the averages of their publicly traded counterparts in the United States. It should be much easier in food and energy companies, where revenue per employee is only 21 percent of what’s reported by their competitors in the United States.

Santiago Gutiérrez, Executive Editor sgutierrez@latintrade.com

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CEO Rosemary Winters EXECUTIVE DIRECTOR María Lourdes Gallo EXECUTIVE EDITOR Santiago Gutiérrez PUBLISHER Miguel Angel Chala DEPUTY EDITOR Mark A. Keller ART & PRODUCTION DIRECTOR Manny Melo GRAPHIC DESIGNER Vincent Becchinelli EDITORIAL ASSISTANT Carolina Herrera Cano CONTRIBUTING EDITORS Gabriela Calderón (research), Mark Ludwig COLUMNIST John Price CORRESPONDENTS Argentina: Élida Bustos, David Haskel, Charles Newbery Brazil: Taylor Barnes (Rio de Janeiro), Vincent Bevins, Thierry Ogier, (São Paulo) Chile: Gideon Long • China: Ruth Morris • Colombia: John Otis, Alejandro González México: Arturo Franco, Marco A. Núñez (Mexico D.F.), Nancy Ibarra (Monterrey) Perú: Lisa K. Wing, Ryan Dube • Spain: Sergio Manaut • Uruguay: Diego Stewart U.S.: Joseph Mann Jr., David Ramírez, Álvaro Moreno, Jaime Mejía (Miami), Mark Chesnut, Susana Baumann, José Luis de Haro (NY) TRANSLATION: Ken Emmond, Élida Bustos COPY EDITING: Millie Acebal Rousseau (English), Élida Bustos (Spanish) EVENTS & CONFERENCES PROGRAM MANAGER Yndira Marin

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LATIN TRADE JULY-AUGUST 2014

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THE SCENE

SERVICES: LOW PRODUCTIVITY

A

recent report from the Inter-American Development Bank (IDB) shows the low levels of productivity in services that may be observed in the Latin American region. It states that it’s not just low productivity within the companies, but also poor allocation of workers among the companies. It also shows that these problems are more serious in the service sector than in manufacturing.

Efficiency in the allocation of human capital in the industrial sector represents less than one-fifth of total productivity, while in the service sector, the efficiency of allocation reduces productivity by 11 percent. This means that if employers in a typical service industry, in a typical country within the region, were allocated at random among service companies, total productivity of this industry would increase by 11 percent.

ALLOCATIVE EFFICIENCY IN LATIN AMERICA AND THE CARIBBEAN 19.2%

1.5% Economy

Services Manufacturing

(Median across countries and industries)

-11.0%

Source: Inter-American Development Bank, Productivity in Services in Latin America and the Caribbean.

INTRA-INDUSTRY TRADE GROWS

T

INTRA-INDUSTRY TRADE INDEX AMONG SOUTH AMERICAN COUNTRIES (Selected bilateral relations)

0.70 0.59

0.60 0.50 0.40 0.30

0.37

0.37 0.33 0.29

0.32

0.32

0.31

0.30

0.28 0.25

0.20 0.10

Ur Chil ug e ua y Pa rag Ur ua ug y ua y B r Ur az ug il ua y Ch Pe ile rú

Co Chi lom le bia

Arg en t Br ina azi Arg l e Ur ntin ug a ua y Co lom Ec b ua ia do r Co lom b Pe ia r Ec ú ua d Pe or rú Arg en ti Ch na ile

0.00

Source: INTAL, South American intra-regional trade: export pattern and intra-industry flows.

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LATIN TRADE JULY-AUGUST 2014

he Institute for the Integration of Latin America and the Caribbean (Intal) has just issued a report on intra-regional trade in South America, which shows how, between 2003 and 2011, trade among South American countries exceeded the growth of worldwide exports and sales within the region relative to the rest of the world. The most important growth of trade within South America during this period was in the flows of intra-industrial trade, in both manufacturing and in natural resource-based products. In general, the South American economies have low levels of complementarity, given their specialization in raw materials production, although this does lead to complementarity with other economies that specialize in manufacturing. Intal figures the region shows a heterogeneous spectrum in terms of trade and identifies significant industrial flows in 11 of the 66 (16.7 percent) bilateral relationships between 2003 and 2011. It shows that just three economies (Argentina, Brazil and Uruguay) have a high intra-industrial trade index, although Colombia and Ecuador are not far behind.

Argentina and Brazil are the countries where the intra-industrial flows are the most relevant; in the other cases, there is almost no two-way interchange with the region as a whole.

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CONTRARIAN

IS THERE LIGHT AT THE END OF THE TUNNEL IN ARGENTINA’S ECONOMY?

BY JOHN PRICE

C

ensured by the IMF for misreporting statistics, shunned by foreign investors for its political meddling, and abandoned by thousands of middle-class émigrés, Cristina Fernández de Kirchner’s Argentina has few friends and fewer believers. But even skeptics’ eyebrows have risen at the actions undertaken by the Argentine government since November 2013, when CFK changed her economy minister, cabinet chief and the head of the central bank.

Threatened by declining foreign reserves, Argentina’s new economic team allowed the peso to devalue 35 percent during their first 60 days on the job. That helped correct worsening terms of trade. Soon after, Axel Kicillof, the new economy minister, presented a proposal to the Paris Club of creditors to seek a negotiated resolution to an outstanding debt of about $10 billion. By the end of May, an accord was reached.

Of concern to the energy sector was the unresolved dispute with Repsol over the 2012 expropriation of 51 percent of YPF, the Argentine subsidiary of the Spanish oil giant. In February, a settlement was negotiated and Repsol agreed to drop its legal cases against Argentina’s government and against rival Chevron who invested in a joint venture with YPF after the

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LATIN TRADE JULY-AUGUST 2014

expropriation took place. That lawsuit cast a pall over the future development of Vaca Muerta, one of the world’s largest oil and gas shale fields, located in Argentina’s Neuquén province.

The most surprising about-face has been the sudden embrace of reality by Indec, Argentina’s statistical agency, notorious for under-reporting inflation since 2007.

Honest inflation statistics is a tough pill to swallow. Doing so, calls for the recalculation of GDP and poverty rates. Fictitious, but wellveiled declines in Argentina’s poverty rate, was always a powerful political tool that galvanized Fernández de Kirchner’s support among the working class.

To end its pariah status, Argentina must still reach an agreement with the hold-out bondholders who refused the steep haircuts of Argentina’s 2005 and 2010 debt restructurings.

The bondholders want full repayment (with interest) and have the backing of the New York district and appeals court. The worst case scenario for Argentina is to pay $1.3 billion, which it can afford to do, and most likely will, in order to access international capital markets again after a 12-year hiatus.

All of this game changing activity begs the question, why now? Economists point to Argentina’s declining foreign reserves, which this

year fell below $30 billion. Vaca Muerta’s oil and gas riches will remain trapped underground without technical assistance from foreign investors. Both are powerful economic motives, but the president’s sudden change of heart may be driven by more personal reasons.

Last October’s mid-term election results made it clear that the majority of Argentines disapprove of Fernández de Kirchner and would therefore not likely support a referendum to alter the constitution, enabling her a third run for the presidency. That electoral defeat, prefaced by a diagnosis of subdural hematoma, may have instilled in the president a sudden reflection upon her own political and personal mortality. Come December 2015, CFK will no longer be president. She has until then to rewrite her own legacy.

For Fernández de Kirchner, maintaining popular support will be important beyond her role as president. She and her deceased husband made some powerful enemies inside, and outside, of Argentina over the last 11 years. Litigation against Fernández de Kirchner most likely awaits her when her legal impunity expires at the end of political office. For that reason, some speculate that she may run again next October, perhaps as a provincial governor. Such a scenario would offer a powerful incentive to repair Argentina’s failing economy.

A return to economic orthodoxy, regardless of motives, is a welcome sign. But emerging from financial purgatory will be a painful transformation.

At the beginning of June, there remained a 38 percent gap between the official and black market (dolar azul) rate of exchange.

Bridging that gap will trigger massive inflation, which can only be suppressed by higher interest rates, spending cuts and wage freezes, the combination of which will drive Argentina into a deep recession. If CFK maintains the courage to walk through that fire, awaiting the country on the other side is the promise of new lines of international credit and foreign investors keen to return to a nation rich in resources and opportunity.

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

PHOTO: COURTESY OF IDB

ARGENTINE ECONOMY

ENERGY BRAZIL

GHOSTS FROM THE PAST STILL HAUNT BRAZIL

The cracked ground of Jaguari dam, part of the Cantareira reservoir in Braganca Paulista, São Paulo. This year saw the driest summer on record in São Paulo.

The size and consequences of an electric energy rationing this year

A

fter years of strong economic growth, and electric energy consumption, Brazil may be close to reviving an ancient ghost: rationing.

With low levels of rain – the most severe in recent years, minor diversification in energy sources, and greater dependence on hydroelectric power stations to produce electricity, alarming talk of rationing returned on the eve of the World Cup. During the event, energy consumption will exponentially grow, especially on days of national team games.

According to the federal government’s Electricity Sector Monitoring Committee (Esmc), the likelihood of a reduction in consumption is still small, between two and three percent.

However, private sector consultants have a higher projection of 20 percent.

Economists say that with rationing, the country can grow less than one percent in 2014 and 2015. When considering rationing, the extent of the damage must be examined.

With the current scenario, energy rationing is becoming more likely, putting the credit quality of the electric power companies at risk, according to a report by Moody’s. The size of the loss will depend on the contractual position of power generating companies and the size of the rationing. A rationing of 20 percent for a year would generate an impact of $12.9 billion and a 10.2 percent price increase. If the reduction is 5 percent for seven months, the effect on the generators would be $3.37 billion, and the fees would rise 1.5 percent for customers.

Government representatives denied at the end of May the possibility of power outages. Mauricio Tolmasquim, president of the Energy Research Company (EPE), said that the current

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LATIN TRADE JULY-AUGUST 2014

system is much safer. According to Tolmasquim, there is greater power transmission capacity between regions of the country and diversification with the inclusion of biomass and wind power plants.

Experts, however, estimate that the current situation requires immediate action with the five percent reduction in supply. If the decision is postponed until October, after the presidential election, it might be that a greater reduction of 10, 15 or 20 percent may be necessary.

For the analyst Walter Lier De Vitto, from consulting company Tendências Consultoria Integrada, from a technical point of view, Brazil should have a rationing of five percent. “The energy supply is constrained and the demand growing. If the cut is postponed, you may need a more drastic reduction in the future,” he said.

In 2013, the government allocated $4.4 billion to bail out the energy providers. With the lack of rain, the thermal plants have to be turned on. However, the energy generated by these plants, is much more expensive and affects the Brazilian trade balance as fuel to power thermals has to be imported. At the beginning of the year, the import of fuel represented an additional cost of $300 million.

For political reasons, government announced recently a 20 percent reduction in the price of electricity. The move, naturally, had a tremendous fiscal cost. Now, the need to find new financial resources for the electricity sector may further complicate the economic scenario in 2014, and makes the goal of reaching a fiscal surplus of 1.9 percent of GDP almost impossible.

Ilton Caldeira reported from São Paulo, Brazil.

PHOTO: NACHO DOCE/REU TERS/NEWSCOM

BY ILTON CALDEIRA

LATIN 500

LATIN AMERICA’S TOP 500

IS MEDIOCRITY SETTING IN?

, ter os y F va an Sil mp as l co ç i a Gr ’s o as azil d r ria f B Ma O o bras E C tro Pe

BY ÁLVARO MORENO

T

he revenues of the 500 largest non-financial companies in Latin America fell by 4.5 percent during the past year, and profits were down 6 percent. In the midst of this severe decline, more than 30 companies, half of them in the energy sector, suffered revenue reductions of more than 20 percent. The sudden stop in revenue growth of the largest companies was widespread after five consecutive years of substantial increases. In fact, more than half of the Latin 500 – 58 percent - saw their revenues head south between 2012 and 2013.

The energy sector and many of its related industries slowed during 2013, mainly due to factors outside of the region, such as the slide in the prices of petroleum and its derived products. In fact, the three largest Latin Amer-

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LATIN TRADE JULY-AUGUST 2014

ilio Em

O CE n, i t s Au ya o z Lo

’s ex em P of

ica companies, the oil companies Petrobras, Pemex and Pdvsa, which together account for 15 percent of the Latin 500 revenues, showed a revenue downturn in the order of five percent. Moreover, two of every three energy companies in Latin America reported diminished revenues in 2013, and that’s the sector in which one-third of all revenues of the 500 largest were concentrated during this period.

Despite the negative effects of this reality, by looking at all of the Latin 500 collectively, it’s possible to find some relevant positive trends.

Such is the case with the one-third of the energy companies that managed to grow in the previous year, although they are mostly dwarfed by the three regional giants – with one to five percent of the revenues of Petrobras. A similar situation occurred with one out of every three companies in the mining sector that managed to increase their revenues during 2013.

Among the companies in other sectors that increased their revenues, there are hints of interesting features to help us understand the dynamics of today’s Latin American economies. Outstanding among these is the revenue growth of companies in sectors that deal more directly with demand in the region’s growing

e th of VSA t en D id y P es pan r p z, om ire oil c am d l R wne e fa -o Ra ate st

middle class – sectors such as retail, food and construction – and those with demand both within the region and outside it, such as car parts and airlines.

The Latin Holdcos, which deserved special mention in last year’s edition of the Latin 500, are showing their predominance again in this issue. They are among the few of the largest companies that managed to grow. On that list are Odebrecht of Brazil, Techint of Argentina and Alfa of México.

There are also important nuggets of information at the aggregate level hidden in the results of the 2013 Latin 500. For example, it shows that slightly more than 40 percent (210 companies, two more than in the previous year) of the Latin 500 were Brazilian, and 38 percent of the total revenues of the region’s 500 largest companies were concentrated in these enterprises.

Behind Brazil is México with the second largest number of Latin 500 companies, with 76 – one more than in the previous year – with a strong contribution (21 percent) to total revenues. Chile is in third place with 64 companies – one more than in the previous year – but with considerably lower participation of revenues, just nine percent. Colombia provides 39 of the Latin 500, down one from 2013, with just four percent of total revenues.

Perú has 27, and half of Colombia’s revenues

PHOTOS: UESLEI MARCELINO/REUTERS/NEWSCOM; STRINGER/MEXICO/REUTERS/NEWSCOM; FEDERICO PARRA/AFP/GETTY IMAGES/NEWSCOM

Nearly half of the 500 largest companies in Latin America reported drops in revenues. However, some new leaders appeared. What are their secrets for success? As we predicted, Latin Holdcos responded well in this challenging environment.

LATIN AMERICA’S TOP 500

PHOTO: STRINGER/CHILE/REU TERS/NEWSCOM; MAURICIO MORENO/EL TIEMPO DE COLOMBIA/NEWSCOM; IVAN ALVARADO/REU TERS/NEWSCOM

(2 percent), while Argentina has 23 percent of the Latin 500 companies, with total revenues similar to Colombia’s.

ENERGY COMPANIES MAKING THEIR OWN LIGHT The contrast between the fall in revenues among the largest energy companies and the revenue gains for some of the smaller ones can be best appreciated with a few examples. Thus, among the 10 companies with the biggest revenue increases in 2013, two were energy firms: Gas Natural de Lima of Perú, with a 38.2 percent increase, and Equatorial, in Brazil, with 37.7 percent revenue growth.

The Peruvian firm owes its remarkable results to the high-priority plan for expanding natural gas service in the areas where it operates. This resulted in a gain of more than 80 positions in this year’s ranking, from number 455 to 373. Since 2011, it has been 60 percent controlled by the Colombian company Grupo Energía de Bogotá (EEB), and Perú has granted it a 33-year concession for the design, construction and operation of the natural gas distribution system in the municipality of Lima and the province of Callao. The other 40 percent of the voting power is in the hands of another Colombian company, Promigas. EEB is also one of the energy companies showing good revenue results in 2013, with a 13.9 percent increase, thanks in part to its participation in Gas Natural de Lima.

Equatorial Energy is a Brazilian holding company with assets in the distribution, generation and sales of electrical energy. It has a 25 percent indirect interest in Grupo High Light de Rio de Janeiro, which serves about , te at ún M b l aín o rr of C a t L n do de ar esi n r r Be p

6.2 million customers in the state of Maranhão. It operates seven hydroelectric power centers with an installed capacity of 855MW, and two of them are in Maranhão. With its extraordinary results, Equatorial vaulted more than 100 places in the Latin 500 (from 366 to 264) and has some very satisfied shareholders, who had the satisfaction of seeing their shares rise by more than 40 percent over the past 12 months.

The Chileno firm Colbún is another energy company that distinguished itself with revenue growth of more than 20 percent and a rise of more than 70 spots in the Latin 500.

Colbún is in the process of completing the ambitious Angostura Project in Chile, a $2 billion investment started eight years ago.

The company closed 2013 with an Ebitda of $352 million. During the year, it refinanced all of its short-term debt and has a portfolio of promising future projects, such as the second coal unit of the Santa María Complex in Chile and a package of hydroelectric projects in various phases of development that will provide about 500 MW of power, mainly in the Maule River basin.

In addition to the energy companies focused mainly on the business of producing and distributing electrical energy, Pacific Rubiales of Colombia deserves a special mention. It’s the region’s oil company with the best revenue performance, an increase of 20.1 percent over the previous year. Thus it was able to advance from position 150 to 122 in the ranking of the largest Latin American companies. The most e tiv cu orp e x C , e gy pa ner m Ca s E la iale e l d ub ge fic R n A ci el f Pa u g o Mi an m r i ha -c co

LATIN 500

important deal for Colombia’s largest privately held petroleum company was the purchase of another Colombian firm, Petrominerales (number 441 in the Latin 500, up 10 spots from 2013 with a two percent increase in revenues) at the end of September 2013, a transaction worth about $1.5 billion.

THE VALUE OF THE MIDDLE CLASS, FROM ECONOMIC DISCUSSIONS TO CORPORATE REALITY The results of this year’s Latin 500 confirm that the time has come for Latin America to capitalize on its major socioeconomic trends.

According to data from the World Bank, the poverty rate has fallen from more than 40 percent in 2000 to less than 30 percent in 2013.

This means that 50 million Latin Americans left poverty behind during the last decade. The bank also estimates that at least 40 percent of the region’s homes moved into the “socioeconomic class” between 1995 and 2010.

Big changes like that in the size and composition of Latin America’s social classes will by definition have to point toward some kind of reconfiguration of the corporate value of Latin America, and this is precisely what is captured in this year’s list of the 500 largest

to, ue ent C ue sid es riq Pre irlin n E ice n A V La ive of t u c e Ex

JULY-AUGUST 2014 LATIN TRADE

19

LATIN AMERICA’S TOP 500

companies by revenues. Thus, among the 30 companies that saw their revenues grow by the largest amount, more than 20 are prominent in sectors that serve the growing demand from the middle class, in areas like food, cement, retail, electronics, education, agriculture and construction, as well as some others that have an export component, but are also very sensitive to local demand, such as automobiles and air transportation.

Vigor Alimentos, a Brazilian company, fits this story perfectly. This is its first appearance in the Latin 500, but in making its debut it surpassed 100 of the 500 of the region’s largest firms. Two factors contributed to its success: it had the largest revenue growth among this important group of companies, with a surprising increase of 76.6 percent in sales compared to the previous year, and in June 2013, it acquired 50 percent of Itambé Alimentos, another large Brazilian food company. Vigor specializes in the production of dairy products and processed oils, and early this year, it attracted the attention of the investment fund FB Participações, which increased its position in this company from 44.6 percent to 78.6 percent.

Also in the food sector, the Peruvian company Grupo Gloria did very well, rising from number 426 to 361 in the Latin 500, with a 2013 revenue increase of 25.3 percent. Gloria is an industrial conglomerate with businesses in dairy and foods, cement, paper, agribusiness, transportation and services. It operates in Perú, Bolivia, Colombia, Ecuador, Argentina and Puerto Rico. This portfolio of businesses has enabled the conglomerate to create synergies that, with the expansion of the middle class, have begun to yield results.

Another Brazilian company, André Maggi (Amaggi), a privately owned soy producer, shines just as brightly among the food sector companies. It occupies number 152 in the Latin 500, up from 200 the previous year, and reported a revenue increase of 25.2 percent in 2013. Another Peruvian company also benefited from this situation: Alicorp, in spot number 251 (314 last year) by way of an 18.9 percent increase in its revenues. This company grew from invoicing $80 million in 1995 to more than $2 billion in 2013, thanks to a strategy that focused on the innovation of new products and an aggressive acquisition program.

Alicorp expects to be invoicing $5 billion by

20

LATIN TRADE JULY-AUGUST 2014

2021, by strengthening its growing presence in Brazil, Argentina, Colombia and Ecuador.

In the cement sector, which reflects growing demand in infrastructure, housing, shopping centers, offices and warehousing, the role played by InterCement of Brazil stands out.

This company belongs to Grupo Camargo Corrêa and gained 100 positions in the Latin 500 to land at number 238, by increasing its revenues by 42.2 percent in 2013. The company is an international leader in managing industrial residues, and in Brazil, it has three cement production plants, which together produce four million tons of cement per year.

Globally, InterCement has 40 cement plants with a combined capacity of 46 million tons of cement, and is a leader in Portugal, Argentina, Mozambique and Cape Verde.

In the automotive sector, arguably the best sector to reflect the increase in the middle class purchasing power, the Brazilian car parts and accessories company Autometal posted a surprising revenue increase of 38.1 percent, moving up from position 491 to 415 of the Latin 500. The price of its shares, which are traded

on the Bovespa, grew by more than 15 percent over the last 12 months.

Fiat Argentina was another company with good news in the Latin American automobile sector, and with revenue growth of 27.5 percent this year it’s closing in on $2 billion, which positions it at number 269 of the Latin 500. The same thing happened with Fiat’s Brazilian affiliate, CNH, which moved up from number 214 to 168 in the Latin 500 with a revenue increase of 22.1 percent. It should be mentioned that the Dutch parent company of the Latin American operations also achieved respectable revenue growth at 18.3 percent.

Another sector that benefits from the broadening of the middle class comprises the retailers, the consumers’ closest suppliers. The French company Casino moved up from number 14 to number 10 in the 500 list by virtue of its $34 billion in revenues and a 34.2 percent growth rate. Walmart México also made the most of the trend and advanced more than 20 positions on the Latin 500, to number 58, with a 20.8 percent revenue increase in 2013. Bodega Aurrerá de México, owned by Walmart,

Gilberto Xandó, president of Vigor Alimentos

PHOTO: COURTESY OF VIGOR ALIMENTOS

LATIN 500

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LATIN AMERICA’S TOP 500

Marcelo Odebrecht, CEO of Brazilian construction group Odebrecht

The largest Latin Holdco is still the Brazilian construction giant Odebrecht, which moved from ninth place on the 500 list to eighth, with a revenue increase of 2.5 percent and sales of almost $38 billion.

completes the list of Latin American retail stars, passing from number 57 to 41 of the Latin 500 with its $12.5 billion in revenues, up 18.9 percent from the year before.

Another sector that sparkled as a result of the region’s ongoing socioeconomic changes was transportation, especially the airline industry. In fact, this is the sector that stands out in the Latin 500 numbers. Thus, the Chilean airline LAN rose from number 60 to 40 after showing revenues of almost $13 billion for the year, a 32.9 percent improvement over 2013.

Also showing significant revenue growth were the Panamanian airline Copa, Mexican airlines Volaris and Grupo Aeromexico, the American company American Airlines, and the Colombian line Avianca-Taca.

Similarly, the trend toward more consumer activity in the growing Latin American middle class is evident in the fact that among the 30 companies that posted the best growth in the region last year are from the electronics sector like Samsung in Colombia, which grew 31.7 percent in 2013. The same could be said about companies in education like Kroton of Brazil, which increased revenues by 25.1 percent following its merger with the university operator Anhanguera Educacional Participações, a business that reached a value of $2.639 billion, and which made Kroton the world’s biggest private for-profit educational operator.

22

LATIN TRADE JULY-AUGUST 2014

In the agriculture sector, the standout performer was the Brazilian company Yara, which rose from 246th place to 195 on the Latin 500. This fertilizer company, an affiliate of the Norwegian fertilizer company Yara International, improved its revenues by 22.4 percent to $2.888 billion.

Lastly, in line with what’s happening in the cement sector, construction is another of the big surprises of 2013, thanks mainly to the important revenue upsurge of two Brazilian construction companies: Helbor, whose revenues rose by 18.4 percent, and Tecnisa, with a 17.9 percent improvement. Construction is clearly another big winner from the diminishing poverty of Latin Americans.

THE LATIN HOLDCOS, RISING STARS The Latin American holding companies continued the trend that was identified last year in the Latin 500: most of them headed higher. Three reported double-digit revenue increases: Grupo OAS Brazil, with a rise of 18.7 percent, enough to push it up eight points on the Latin 500 to number 162; Quiñenco of Chile, which rose by 27 positions to number 142 on the strength of a 13.5 percent revenue increase; and Xignux of México, which grew by 11.2 percent and advanced 25 positions to number 199.

The largest Latin Holdco is still the Brazilian construction giant Odebrecht, which moved from ninth place on the 500 list to eighth, with a revenue increase of 2.5 percent and sales of almost $38 billion. The Argentine firm Techint, although it slipped by one position, still had revenues above $25 billion, good enough to make it the 14th largest nonfinancial company in Latin America in 2013.

Similarly, Votorantim of Brazil also lost one position from last year and registered sales of $11.215 billion.

Two other Latin Holdcos deserve attention this year for their increase in revenues. These are the Mexican companies Grupo Carso and Grupo Alfa. Grupo Carso, which controls companies in the industrial, commercial, infrastructure and construction sectors, improved from 94th place to 81 with a revenue increase of 2.1 percent. Alfa gained five positions, moving up from number 33 to 28 in the Latin 500, thanks to a revenue increase of 0.7 percent, which enabled it to report more than $15.5 billion in revenues.

With this data, it seems clear that the best business opportunities of the region are to be found in sectors that serve the middle class, and in particular, ones that can establish a corporate structure that enables them to monetize the economies of scale that they generate. Álvaro Moreno reported from Miami.

PHOTO: ENRIQUE CASTRO-MENDIVIL/REU TERS/NEWSCOM

LATIN 500

Executive

MBA

Executive

Education

LATIN 500

LATIN AMERICA’S TOP 500

2013 figures in millions of U.S. dollars Rank 2014 2013

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

1 2 3 4 5 6 10 9 7 14 8 11 12 13 15 19 17 16 18 21 24 22 25 23 36 26 32 33 29 30 34 31 27 39 35 42 41 37 38 60 57 44 45 20 53 52 46 49 43 59

Company

Country

Sector

Revenues

% Chg.

Petrobras Pemex PDVSA América Móvil Vale Telefónica JBS Odebrecht BR Distribuidora Groupe Casino Ecopetrol Walmart de México Grupo Ultra Techint CBD Copec CFE Volkswagen 1 Pet. Ipiranga Cencosud Femsa Carrefour Braskem Gerdau AB InBev General Motors 1 EP Petroecuador Alfa Carrefour Codelco Cemex AmBev Telefónica YPF Fiat Telcel Grupo Bimbo Endesa BR Foods LAN Bodega Aurrerá Walmart Oi Eletrobras Coca-Cola Femsa Falabella Votorantim Group ENAP Enersis Ford 1

Brazil México Venezuela México Brazil Spain Brazil Brazil Brazil France Colombia México Brazil Argentina Brazil Chile México Germany Brazil Chile México France Brazil Brazil Belgium USA Ecuador México Brazil Chile México Brazil Brazil Argentina Italy México México Spain Brazil Chile México Brazil Brazil Brazil México Chile Brazil Chile Chile USA

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

$130,150.20 $122,911.00 $116,256.00 $60,079.70 $43,323.60 $40,225.00 $39,658.00 $37,827.20 $37,115.60 $34,076.30 $32,516.20 $32,494.00 $26,013.90 $25,378.00 $24,643.70 $24,339.30 $24,335.20 $24,106.40 $22,763.30 $19,743.90 $19,725.70 $18,995.70 $17,488.90 $17,016.60 $16,915.00 $16,478.00 $16,334.50 $15,549.60 $14,957.10 $14,956.30 $14,953.90 $14,851.60 $14,822.00 $13,810.40 $13,741.80 $13,707.50 $13,454.40 $13,353.20 $13,028.80 $12,924.50 $12,477.70 $12,156.40 $12,132.70 $12,032.10 $11,923.60 $11,836.70 $11,214.90 $11,210.70 $10,876.70 $10,844.00

-5.5% -3.2% -6.6% 0.5% -5.3% -0.1% 7.1% 2.5% -5.3% 34.2% -13.8% 2.2% -1.4% -0.4% -1.1% 6.9% 1.4% -0.2% -0.5% 3.3% 7.3% 1.6% 0.6% -8.4% -1.0% -1.3% 4.6% 0.7% 0.6% -5.7% -1.6% -5.8% -10.7% 1.3% -5.8% 3.2% 0.8% -6.1% -6.6% 32.9% 18.9% -4.2% -1.5% -37.8% 4.6% 3.2% -0.4% -3.5% -16.8% 7.6%

Note: 1 Revenues exclude México

24

LATIN TRADE JULY-AUGUST 2014

Profits

% Chg.

Margin

$10,061.60 ($12,982.40) $19,853.00 $5,703.40 $49.10 $6,620.80 $395.70 $209.40 $1,264.40 -$6,945.40 $1,736.20 $523.00 -$449.30 $786.00 ($2,870.00) -$412.20 $439.00 $1,216.90 $863.90 $217.60 $676.10 --$6,229.60 $452.90 -$1,114.60 ($828.00) $4,070.30 $1,586.30 $785.40 $677.90 -$336.60 $2,434.70 $453.50 ($281.10) --$637.30 ($2,683.60) $882.20 $847.40 $101.60 $134.00 $1,257.30 ($34.00)

-2.9% -6041.6% 371.0% -18.7% -99.0% -16.5% 12.5% 127.5% 57.2% --17.8% -3.3% 5.7% --12.7% 91.9% -93.7% -7.5% -22.2% -23.8% 7.7% 160.8% -3.1% --6.2% -34.7% --72.1% 10.5% -20.8% -27.2% -0.9% -49.9% -115.1% 34.2% 14.0% -2664.9% ---27.0% 20.3% -14.2% 9.3% 138.6% 142.0% 59.5% -116.0%

7.7% -10.6% 17.1% 9.5% 0.1% 16.5% 1.0% 0.6% 3.4% NA 21.4% 5.3% 2.0% NA 1.8% 3.2% -11.8% NA 1.8% 2.2% 6.2% 4.5% 1.2% 4.0% NA NA 38.1% 2.9% NA 7.5% -5.5% 27.4% 10.7% 5.7% 4.9% NA 2.5% 18.2% 3.5% -2.2% NA NA 5.3% -22.3% 7.4% 7.2% 0.9% 1.2% 11.6% -0.3%

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LATIN 500

LATIN AMERICA’S TOP 500

2013 figures in millions of U.S. dollars Rank 2014 2013

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

55 47 48 51 56 58 54 79 62 66 69 68 63 74 67 84 71 72 50 73 65 86 77 92 70 80 75 81 76 85 94 40 -90 88 104 102 97 82 64 111 100 89 107 91 95 101 103 106 117

Company

Country

Tenaris Cargill Agrícola Fiat AES Telmex Intern.

Grupo México Via Varejo Walmart Supercenter Embratel Minera Escondida GN Fenosa Ternium TIM PepsiCo LAF TIM Celular Sam's Club Telmex Org. Soriana Marfrig SABMiller 2 Caterpillar Dow Schlumberger Oxxo CSN Anglo American ArcelorMittal Alpek Grupo Modelo Grupo EPM Grupo Carso Cosan CNH 1 TAM ECT American Airlines Org. Terpel Globo Com. CPFL Cemig Coppel Walmart Antofagasta PLC Louis Dreyfus Southern Copper Claro Telecom Embraer Nestlé Lojas Americanas Liverpool

Argentina Brazil Brazil USA México México Brazil México Brazil Chile Spain Argentina Brazil USA Brazil México México México Brazil UK USA USA USA México Brazil USA/UK Brazil México México Colombia México Brazil Netherlands Brazil Brazil USA Colombia Brazil Brazil Brazil México Chile Chile Brazil USA Brazil Brazil Brazil Brazil México

Notes: 1 Revenues exclude México 2 For the fiscal year ending on March 31, 2014

26

LATIN TRADE JULY-AUGUST 2014

Sector

Steel Agriculture Auto Energy Tech Mining Retail Retail Tech Mining Energy Steel Tech Food Tech Retail Tech Retail Food Beverage Manufacturing Chemical Energy Retail Steel Mining Steel Energy Beverage Holding Holding Food Auto Transport Services Transport Energy Media Energy Energy Retail Retail Mining Agriculture Mining Tech Transport Food Retail Retail

Revenues

$10,596.80 $10,593.80 $10,373.90 $10,367.00 $10,277.10 $9,343.40 $9,287.10 $9,098.30 $9,055.00 $8,865.10 $8,738.60 $8,530.00 $8,503.90 $8,350.00 $8,300.00 $8,286.00 $8,070.20 $8,027.00 $8,004.90 $7,812.00 $7,811.00 $7,794.00 $7,751.00 $7,457.20 $7,390.30 $7,174.00 $7,098.70 $6,883.20 $6,771.70 $6,754.80 $6,562.90 $6,548.20 $6,422.00 $6,418.00 $6,314.90 $6,288.00 $6,269.70 $6,247.60 $6,246.80 $6,244.00 $6,140.20 $6,051.30 $5,971.60 $5,961.30 $5,952.90 $5,841.60 $5,820.80 $5,748.30 $5,720.60 $5,663.70

% Chg.

-2.2% -8.9% -11.5% -8.9% -3.4% -8.2% -16.9% 20.8% -1.5% 0.5% 4.3% -0.9% -7.4% 7.3% -5.9% 16.0% -1.4% -0.5% -31.1% -0.1% -12.7% 10.4% 2.6% 11.9% -10.6% -4.7% -7.6% -7.2% -11.6% -4.3% 2.1% -51.1% 18.3% -4.9% -7.6% 8.2% 5.3% 0.4% -15.2% -30.9% 16.0% 0.1% -11.4% 7.9% -10.7% -7.6% -2.5% 4.1% 3.1% 10.8%

Profits

% Chg.

Margin

$1,551.40 $163.30 $124.00 -$24.50 $1,822.10 $495.00 -$118.60 $3,212.80 $1,241.50 $592.90 $642.70 $1,242.00 $699.70 -$590.00 $238.20 ($390.00) $2,116.00 --$1,589.00 $604.20 $217.30 $2,109.00 $162.10 $20.00 $3,707.50 $845.10 $1,064.60 $112.70 -($615.20) $138.90 -$86.40 $1,068.60 $400.20 $1,325.00 $828.30 $270.30 $1,239.80 ($56.20) $1,618.50 ($494.30) $332.00 -$197.60 $588.60

-8.7% -18.1% -79.0% --82.4% -25.0% 215.4% --69.6% -1.0% 12.2% 210.6% -9.4% 17.3% -14.7% --35.1% -13.2% -255.9% 10.2% --14.6% 15.6% 205.7% -12.7% 137.7% -92.9% 289.4% -6.0% 80.7% -69.6% -2.0% -74.5% -18.7% -25.9% -33.3% -36.6% 9.7% 11.9% -28.7% -20.4% -16.3% -14.7% -2.8% --1.6% 6.0%

14.6% 1.5% 1.2% NA 0.2% 19.5% 5.3% NA 1.3% 36.2% 14.2% 7.0% 7.6% 14.9% 8.4% NA 7.3% 3.0% -4.9% 27.1% NA NA 20.5% 8.1% 2.9% 29.4% 2.3% 0.3% 54.8% 12.5% 16.2% 1.7% NA -9.6% 2.2% NA 1.4% 17.1% 6.4% 21.2% 13.5% 4.5% 20.8% -0.9% 27.2% -8.5% 5.7% NA 3.5% 10.4%

LATIN AMERICA’S TOP 500

LATIN 500

2013 figures in millions of U.S. dollars Rank 2014 2013

101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150

109 99 96 113 108 130 133 123 142 78 121 122 131 114 127 120 115 118 112 129 98 150 139 105 141 136 126 140 137 125 148 147 134 149 119 151 -154 132 153 145 169 144 158 124 138 146 152 128 167

Company

Country

Televisa Iberdrola Usiminas Petroperú Elektra InRetail Perú Votorantim Cimentos Mexichem Celulosa Arauco Ind. Peñoles Chedraui Colgate CMPC Cencosud Coca-Cola Whirlpool Éxito Avon Sabesp Renault NII Holdings Pacific Rubiales Arca Continental Neoenergia Avianca-Taca Alesat Combustíveis Ref. La Pampilla Walmart Centroamerica Claro 3 CGE PepsiCo Nemak Telecom NET Gruma Millicom CNO MAN Latin America Carrefour Arcos Dorados Whirlpool Quiñenco Copel Halliburton Eletropaulo Cencosud GOL Itaipú Binacional Endesa Sigma

México Spain Brazil Perú México Perú Brazil México Chile México México USA Chile Argentina USA USA Colombia USA Brazil Brazil USA Colombia México Brazil Colombia Brazil Perú

Sector

Media Energy Steel Energy Retail Retail Cement Chemical Pulp Mining Retail Manufacturing Pulp Retail Beverage Manufacturing Retail Manufacturing Water Auto Tech Energy Beverage Energy Transport Energy Energy Retail Colombia Tech Chile Energy México Beverage México Manufacturing Argentina Tech Brazil Tech México Food Luxembourg Tech Brazil Construction Brazil Auto Argentina Retail Argentina Food Brazil Manufacturing Chile Holding Brazil Energy USA Energy Brazil Energy Brazil Retail Brazil Transport Brazil/Paraguay Energy Chile Energy México Food

Revenues

$5,639.60 $5,528.50 $5,476.60 $5,463.40 $5,405.90 $5,324.40 $5,183.30 $5,177.00 $5,145.50 $5,086.30 $5,072.00 $5,012.00 $4,974.50 $4,967.60 $4,939.00 $4,928.00 $4,918.70 $4,840.50 $4,830.40 $4,776.60 $4,772.60 $4,626.90 $4,613.10 $4,531.00 $4,480.90 $4,428.30 $4,394.10 $4,389.20 $4,358.00 $4,350.80 $4,347.00 $4,304.00 $4,191.60 $4,144.40 $4,135.20 $4,132.00 $4,101.50 $4,064.80 $4,037.20 $4,033.30 $3,984.80 $3,923.50 $3,918.80 $3,909.00 $3,847.10 $3,833.60 $3,823.20 $3,800.40 $3,753.40 $3,744.10

% Chg.

5.5% -9.0% -11.9% 4.1% 1.3% 11.3% 12.7% 8.6% 19.7% -32.2% 2.8% -0.4% 4.5% -4.2% 2.2% -0.4% -14.8% -3.1% -8.2% -0.5% -16.9% 19.1% 6.3% -21.6% 3.8% 1.1% -9.2% 1.2% -0.4% -10.1% 9.9% 8.6% -7.0% 6.7% -1.5% 7.6% -9.9% 7.4% 5.5% 6.2% -3.7% 13.5% -6.1% 5.8% -21.1% -12.3% -3.6% 0.1% -22.0% 6.7%

Profits

% Chg.

Margin

$592.20 -($60.50) $33.00 $63.20 $55.80 $592.90 $83.10 $418.60 $363.90 $125.70 $1,385.00 $195.70 -$2,908.00 $557.00 $228.00 $478.60 $821.10 $99.50 ($1,649.60) $421.00 $456.50 $374.40 $241.90 $25.80 ($54.70) $161.70 $1,065.10 $155.40 -$200.30 $490.70 $75.40 $241.80 $1,018.00 $696.30 $316.90 -$53.90 $346.90 $238.40 $457.90 $518.00 $84.60 -($340.00) $1,188.90 $675.70 $218.20

-12.4% -80.7% 31.8% 104.3% -74.4% -26.1% -70.4% 191.6% -53.0% 8.5% -4.7% -3.0% -1.0% 17.0% -15.0% 7.8% -12.2% -53.9% -115.6% -20.2% 17.3% -40.0% 21.8% 76.5% -390.2% 43.6% -20.8% -15.0% -123.2% -10.0% -60.9% 181.0% -9.9% 60.7% 4.9% --52.9% 16.9% -18.3% 33.5% -13.5% 60.2% -54.1% 128.4% 38.0% -22.9%

10.5% NA -1.1% 0.6% 1.2% 1.0% 11.4% 1.6% 8.1% 7.2% 2.5% 27.6% 3.9% NA 58.9% 11.3% 4.6% 9.9% 17.0% 2.1% -34.6% 9.1% 9.9% 8.3% 5.4% 0.6% -1.2% 3.7% 24.4% 3.6% NA 4.7% 11.7% 1.8% 5.8% 24.6% 17.0% 7.8% NA 1.3% 8.7% 6.1% 11.7% 13.3% 2.2% NA -8.9% 31.3% 18.0% 5.8%

Note: 3 Former Comcel

JULY-AUGUST 2014 LATIN TRADE

27

LATIN 500

LATIN AMERICA’S TOP 500

2013 figures in millions of U.S. dollars Rank 2014 2013

151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200

28

87 200 -156 166 165 -161 155 181 175 170 171 177 176 -185 214 179 186 162 172 174 157 183 173 168 163 198 190 182 197 189 191 180 187 249 188 209 193 195 194 231 213 246 215 203 192 223 210

Company

Country

Andrade Gutierrez André Maggi SMU Cantv Comercial Mexicana Nestlé TCM Tereos Int Magazine Luiza Movistar Ericsson Grupo OAS BASF Coamo Sodimac Grupo Lala Anglo American Sur CNH UAL Recope Casa Saba CSAV Electrolux Light Telefónica ExxonMobil Molinos Río de la Plata Los Pelambres Entel Grupo Sanborns Samarco Min. Grupo Nutresa Aeroméxico Ind. Bachoco Energias do Brasil Natura Collahuasi SCM Bavaria Sidgo Koppers Fibria Makro Atacadista Weg Emb. Andina Bayer Yara Cielo Transpetro AHMSA Xignux Falabella

Brazil Brazil Chile Venezuela México México México Brazil Brazil Argentina Sweden Brazil Brazil Brazil Chile México Chile Brazil USA Costa Rica México Chile Sweden Brazil Perú Colombia Argentina Chile Chile México Brazil Colombia México México Brazil Brazil Chile Colombia Chile Brazil Brazil Brazil Chile Brazil Brazil Brazil Brazil México México Perú

LATIN TRADE JULY-AUGUST 2014

Sector

Holding Food Retail Tech Retail Food Retail Food Retail Tech Tech Holding Chemical Agriculture Retail Food Mining Auto Transport Energy Retail Transport Manufacturing Energy Tech Energy Food Mining Tech Retail Mining Food Transport Food Energy Manufacturing Mining Beverage Construction Pulp Retail Manufacturing Beverage Chemical Agriculture Services Energy Steel Holding Retail

Revenues

$3,672.90 $3,666.80 $3,645.60 $3,608.70 $3,596.70 $3,571.90 $3,521.60 $3,497.80 $3,452.80 $3,403.40 $3,402.80 $3,383.80 $3,333.50 $3,320.90 $3,306.50 $3,298.30 $3,295.50 $3,272.90 $3,261.00 $3,225.40 $3,215.90 $3,206.00 $3,203.60 $3,168.40 $3,164.80 $3,134.70 $3,130.90 $3,129.40 $3,109.00 $3,096.40 $3,075.40 $3,068.00 $3,045.60 $3,035.00 $3,029.30 $2,992.50 $2,987.10 $2,969.90 $2,953.00 $2,952.90 $2,932.10 $2,915.10 $2,905.30 $2,895.20 $2,888.30 $2,874.70 $2,825.90 $2,817.60 $2,806.50 $2,734.50

% Chg.

-3.0% 25.2% -17.0% -3.2% 2.1% 3.1% 2.1% -3.1% -8.0% 6.1% 0.7% 18.7% -3.1% 0.9% -0.3% 6.0% 3.4% 22.1% 0.2% 3.4% -10.7% -6.6% -5.3% -15.0% -0.9% -7.9% -10.4% -11.9% 4.0% 1.9% -4.0% 2.4% 0.7% 0.0% -5.7% -3.6% 31.2% -3.5% 6.0% -2.3% -2.8% -3.5% 18.6% 7.7% 22.4% 8.2% -2.2% -6.9% 11.2% -0.6%

Profits

% Chg.

Margin

$189.40 $123.90 ($1,014.20) $801.30 $282.30 -$66.10 $13.20 $48.60 --$7.30 $110.20 $221.90 $166.00 $197.10 $878.20 $154.30 -($13.10) ($37.20) ($169.00) $151.50 $250.70 $292.10 $44.80 ($29.10) $1,193.80 $280.60 $247.10 $1,166.00 $197.80 $82.60 $155.80 $160.40 $359.70 $934.60 $834.40 $120.80 ($301.60) $10.20 $360.10 $169.90 $310.80 -$1,141.30 $394.60 ($196.30) $17.20 $162.90

-11.4% 31.1% -1022.7% --45.0% -9.3% 0.2% 1572.1% ---96.9% -8.8% 0.4% -5.9% 105.9% -7.9% 80.0% --983.3% -233.0% 46.1% -37.9% 20.9% -7.0% 75.6% -578.5% -26.2% -19.7% 8.0% -10.0% 1.4% -19.1% -7.5% -4.1% -14.7% 88.8% 20.4% -14.6% 12.6% -58.3% 12.2% -7.2% 16.3% -0.8% 13.5% -531.4% -69.9% 6.6%

5.2% 3.4% -27.8% 22.2% 7.8% NA 1.9% 0.4% 1.4% NA NA 0.2% 3.3% 6.7% 5.0% 6.0% 26.6% 4.7% NA -0.4% -1.2% -5.3% 4.7% 7.9% 9.2% 1.4% -0.9% 38.1% 9.0% 8.0% 37.9% 6.4% 2.7% 5.1% 5.3% 12.0% 31.3% 28.1% 4.1% -10.2% 0.3% 12.4% 5.8% 10.7% NA 39.7% 14.0% -7.0% 0.6% 6.0%

LATIN 500

LATIN AMERICA’S TOP 500

2013 figures in millions of U.S. dollars Rank 2014 2013

201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250

230 219 196 216 206 245 237 199 208 254 241 227 184 207 224 229 233 225 253 220 221 236 238 284 218 242 264 217 239 228 204 255 232 266 251 159 244 338 280 202 234 252 270 247 222 287 265 276 205 226

Company

Syngenta Comgás Souza Cruz RaiaDrogasil 4 Arcor Grupo ICE Ripley Southern Perú Iochpe-Maxion Copa Airlines B2W Varejo Argos Paul F Luz CCR Rodovias Pan American Org. Cultiba Agrosuper Ternium Siderar Aurora Alimentos Suzano Suzano Papel Panamá Canal Authority Tractebel Paranapanema Petrobras En. Drogarias DPSP Minerva F. Heringer Baker Hughes CAP Cyrela Realty CCU Electrolux PDG Realty Kimberly-Clark ICA AES Gener InterCement Corp. Fragua Nextel SQM Colombia Telecom Movistar Grupo Clarín Gerdau Açominas Adidas Const. AG Graña y Montero Coelba Industrias CH

Country

Sector

Brazil Brazil Brazil Brazil Argentina Costa Rica Chile Perú Brazil Panamá Brazil Colombia Brazil Brazil Argentina México Chile Argentina Brazil Brazil Brazil Panamá Brazil Brazil Argentina Brazil Brazil Brazil USA Chile Brazil Chile Brazil Brazil México México Chile Brazil México Brazil Chile Colombia México Argentina Brazil Germany Brazil Perú Brazil México

Agriculture Energy Manufacturing Retail Food Energy Retail Mining Manufacturing Transport Retail Cement Energy Transport Energy Beverage Agriculture Steel Food Pulp Paper Services Energy Mining Energy Retail Food Chemical Energy Steel Construction Beverage Manufacturing Construction Paper Construction Energy Cement Retail Tech Chemical Tech Tech Media Steel Manufacturing Construction Construction Energy Steel

Note: 4 Merger between Drogasil and DrogaRaia

30

LATIN TRADE JULY-AUGUST 2014

Revenues

% Chg.

Profits

% Chg.

Margin

$2,715.00 $2,705.00 $2,684.00 $2,660.70 $2,642.00 $2,632.60 $2,624.00 $2,618.40 $2,615.30 $2,608.30 $2,599.00 $2,584.30 $2,571.50 $2,568.30 $2,557.20 $2,556.70 $2,480.80 $2,445.50 $2,437.90 $2,428.70 $2,428.30 $2,411.30 $2,377.10 $2,368.60 $2,351.00 $2,335.40 $2,329.30 $2,317.10 $2,307.00 $2,296.60 $2,293.10 $2,285.80 $2,280.10 $2,269.70 $2,268.20 $2,258.90 $2,244.80 $2,244.60 $2,213.00 $2,208.00 $2,203.10 $2,185.00 $2,177.10 $2,173.80 $2,173.50 $2,170.20 $2,167.50 $2,138.80 $2,127.80 $2,112.90

10.1% 4.7% -10.5% 1.0% -6.7% 13.0% 8.8% -11.3% -6.2% 16.0% 10.4% 4.5% -19.4% -9.0% 2.1% 3.6% 2.0% -2.3% 8.2% -4.5% -4.4% 0.0% -1.1% 20.2% -9.3% -0.2% 8.7% -10.8% -3.8% -7.0% -19.7% 1.7% -6.4% 6.4% 0.4% -23.2% -3.6% 42.2% 8.8% -23.9% -9.3% -3.2% 3.4% -5.4% -13.9% 11.1% 1.2% 4.3% -25.2% -15.0%

-$264.20 $723.30 $43.10 $23.70 $67.20 $83.80 $721.10 $72.70 $427.50 ($68.10) $95.60 $264.80 $576.70 $381.00 $2.80 $119.60 $323.00 $128.90 ($26.10) ($94.10) -$613.00 $2.50 $119.40 $79.70 ($134.00) ($14.50) $66.00 $183.50 $306.90 $234.90 -($115.70) $353.00 $32.40 $201.30 $199.50 $73.60 $311.10 $467.10 ($136.30) -$73.50 ($17.50) -$92.60 $114.60 $211.40 $112.20

-47.2% -10.0% -16.0% -56.3% 30.3% 8.3% -27.4% 122.2% 30.9% 18.5% -56.3% 17.6% 0.1% 35.3% -91.9% 135.6% 194.6% 45.6% -23.7% -5.6% --16.5% 102.5% -4.4% 8.1% -41.1% -1099.3% -66.5% -20.5% -5.0% -1.8% -89.1% 10.6% -56.1% -0.8% 66.9% 5.0% -53.9% -28.0% 13.9% --24.9% -131.8% --1.1% 0.7% -46.4% -19.1%

NA 9.8% 26.9% 1.6% 0.9% 2.6% 3.2% 27.5% 2.8% 16.4% -2.6% 3.7% 10.3% 22.5% 14.9% 0.1% 4.8% 13.2% 5.3% -1.1% -3.9% NA 25.8% 0.1% 5.1% 3.4% -5.8% -0.6% 2.9% 8.0% 13.4% 10.3% NA -5.1% 15.6% 1.4% 9.0% 8.9% 3.3% 14.1% 21.2% -6.2% NA 3.4% -0.8% NA 4.3% 5.4% 9.9% 5.3%

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insured.

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It means our company is protected by an ‘AA’ rated insurer, one of the largest and strongest in the world. ACE people truly understand our risks and go out of their way to help. We can focus on growing our business because we know that ACE is there when we need them. © 2014 ACE Group. Coverages underwritten by one or more companies of the ACE Group. Not all coverages available in all jurisdictions. ACE®, ACE logo®, and ACE insured are trademarks of ACE Limited.

LATIN 500

LATIN AMERICA’S TOP 500

2013 figures in millions of U.S. dollars Rank 2014 2013

251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300

314 268 257 211 240 273 212 305 283 274 285 258 277 366 259 381 275 286 -272 278 243 293 281 262 299 306 235 269 -292 250 320 301 297 279 143 290 322 110 267 295 304 359 346 348 335 178 343 324

Company

Country

Alicorp Siemens Celesc Eletronorte Chevron Goodyear Drummond Const. OAS Condumex Praxair Julio Simoes SalfaCorp Avon Equatorial Energia Cencosud Ford DuPont Brasil Olímpica Fiat Casas Pernambucanas Klabin Const. Camargo Corrêa Mega Movistar Gasco Movistar Const. Queiroz Galvão Grupo Isa Nextel Biosev 5 Lojas Renner Grupo Simec M. Dias Branco Telefónica PepsiCo Chilectra Furnas Hypermarcas Randon Nokia Cerro Verde Banmédica Ferreyros Minera Valparaíso Anglo Am. Norte C.Vale Corp. Favorita Chesf Redecard Claro

Perú Brazil Brazil Brazil Colombia USA Colombia Brazil México USA Brazil Chile Brazil Brazil Colombia México Brazil Colombia Argentina Brazil Brazil Brazil México Chile Chile Perú Brazil Colombia México Brazil Brazil México Brazil Argentina Brazil Chile Brazil Brazil Brazil Finland Perú Chile Perú Chile Chile Brazil Ecuador Brazil Brazil Perú

Note: 5 Controlled by Louis Dreyfus Commodities

32

LATIN TRADE JULY-AUGUST 2014

Sector

Food Manufacturing Energy Energy Energy Manufacturing Mining Construction Manufacturing Chemical Transport Construction Chemical Energy Retail Auto Chemical Retail Auto Retail Pulp Construction Retail Tech Energy Tech Construction Energy Tech Agriculture Retail Steel Food Tech Beverage Energy Energy Manufacturing Manufacturing Tech Mining Health Retail Mining Mining Agriculture Retail Energy Services Tech

Revenues

$2,086.70 $2,083.70 $2,079.90 $2,072.90 $2,069.20 $2,063.00 $2,054.20 $2,044.80 $2,042.40 $2,042.00 $2,026.20 $2,023.30 $2,014.00 $2,012.70 $1,996.10 $1,992.00 $1,991.70 $1,987.90 $1,982.80 $1,968.60 $1,963.40 $1,945.80 $1,936.60 $1,922.30 $1,896.00 $1,891.00 $1,879.20 $1,873.20 $1,872.70 $1,869.10 $1,865.60 $1,862.50 $1,840.50 $1,835.40 $1,835.00 $1,832.30 $1,832.20 $1,818.00 $1,815.60 $1,811.90 $1,811.50 $1,801.60 $1,799.80 $1,783.80 $1,776.80 $1,756.10 $1,755.90 $1,749.50 $1,747.70 $1,742.70

% Chg.

18.9% -1.8% -6.5% -15.7% -12.5% -1.1% -23.6% 12.9% -3.4% -1.9% 3.0% -8.9% -1.4% 37.7% -9.4% 9.6% -3.7% 1.1% 27.5% -5.6% -3.6% -16.9% 2.6% -5.3% -12.2% 2.2% 3.9% -22.9% -11.2% --1.3% -18.2% 6.1% 0.1% -1.7% -10.0% -48.5% -4.1% 5.9% -21.4% -14.8% -4.1% -0.8% 20.0% 14.2% 13.2% 9.3% -40.4% 3.3% 1.8%

Profits

% Chg.

Margin

$131.90 ($35.40) $84.90 $541.40 $112.80 $283.00 $217.80 $174.80 $111.50 $467.00 $40.00 $47.80 -$29.30 ($151.90) -$223.20 $48.40 -$69.00 $123.80 $176.10 -$178.00 $140.20 $258.20 $81.50 $225.20 $179.90 ($271.30) $173.90 $115.90 $223.90 --$431.80 ($349.00) $109.60 $100.30 -$613.30 $86.10 $36.00 $116.20 $71.20 $36.30 $132.70 ($199.00) $810.30 $461.60

-4.5% -23.9% 167.2% 240.8% -10.3% 26.9% -48.4% 188.1% -19.4% 8.9% 5.0% -1.3% --57.5% -729.2% --1.2% -14.5% --17.4% -66.3% 80.0% --15.6% 20.9% -9.0% -47.7% 46.2% -67.9% -0.0% -27.4% -2.8% --17.6% 45.4% 9.8% 381.7% --20.6% -10.7% -58.1% -11.6% -63.2% 33.1% 17.0% 92.4% 2.3% -14.7%

6.3% -1.7% 4.1% 26.1% 5.4% 13.7% 10.6% 8.5% 5.5% 22.9% 2.0% 2.4% NA 1.5% -7.6% NA 11.2% 2.4% NA 3.5% 6.3% 9.0% NA 9.3% 7.4% 13.7% 4.3% 12.0% 9.6% -14.5% 9.3% 6.2% 12.2% NA NA 23.6% -19.0% 6.0% 5.5% NA 33.9% 4.8% 2.0% 6.5% 4.0% 2.1% 7.6% -11.4% 46.4% 26.5%

Global reach. Local grasp.

Seize opportunity, connect worldwide, and arrive at cross-border strategic solutions.

Lean, agile, and on the ground in Latin America, Asia, the Middle East, Europe, and the U.S., our multiethnic and multilingual attorneys, solicitors and consultants work hands-on, moving with assurance and speed in legal and business venues around the globe. The result: innovative and cost-effective results for sophisticated international clients—Fortune 500 corporations, foreign governments, public officials, international banks, and global entrepreneurs.

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LATIN 500

LATIN AMERICA’S TOP 500

2013 figures in millions of U.S. dollars Rank 2014 2013

301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350

318 307 345 323 332 379 311 327 -330 329 271 303 310 331 308 341 263 336 309 339 334 333 365 328 347 -321 -296 373 316 288 313 353 -351 -315 350 397 349 340 298 402 344 368 362 325 354

Company

Country

Guararapes Patagonia Claro Lojas Riachuelo Nueva EPS Colbún Codensa UTE Grupo Brasil Kirin 6 Cesp Duratex MRV Engenharia Grupo Algar Vitro Dufry AG Ampla Brasil El Palacio de Hierro Fresnillo PLC FasaCorp.

Enami Sears Grupo Martins Zaffari Galvão Eng. Praxair Alkosto Daimler Copasa Iberdrola Marcopolo Emerson ALL Carbón del Cerrejón Contax Pague Menos Camil Alimentos Cencosud Cedae Elektro OHL México Minera Candelaria Localiza Vallourec Tubos Profarma C.I. Prodeco SaludCoop Grupo Gigante Alpargatas Min. Esperanza Mastellone Hnos.

Brazil Argentina Ecuador Brazil Colombia Chile Colombia Uruguay Brazil Brazil Brazil Brazil Brazil México Switzerland Brazil México México Chile Chile México Brazil Brazil Brazil Brazil Colombia México Brazil Brazil Brazil USA Brazil Colombia Brazil Brazil Brazil Perú Brazil Brazil México Chile Brazil Brazil Brazil Colombia Colombia México Brazil Chile Argentina

Note: 6 Previously known as Schincariol

34

LATIN TRADE JULY-AUGUST 2014

Sector

Textile Food Tech Retail Health Energy Energy Energy Beverage Energy Manufacturing Construction Holding Manufacturing Retail Energy Retail Mining Health Mining Retail Retail Retail Construction Chemical Retail Auto Water Energy Manufacturing Tech Transport Mining Tech Retail Food Retail Water Tech Transport Mining Transport Steel Retail Mining Health Retail Textile Mining Food

Revenues

$1,737.00 $1,722.40 $1,721.00 $1,715.60 $1,697.70 $1,695.90 $1,695.10 $1,689.30 $1,685.20 $1,666.60 $1,653.20 $1,652.30 $1,646.40 $1,646.10 $1,643.80 $1,643.20 $1,635.70 $1,615.20 $1,613.60 $1,611.80 $1,610.60 $1,608.40 $1,607.20 $1,606.60 $1,603.00 $1,597.20 $1,596.50 $1,593.70 $1,589.00 $1,562.10 $1,555.00 $1,554.40 $1,552.30 $1,544.40 $1,528.90 $1,528.90 $1,527.70 $1,519.50 $1,515.10 $1,505.00 $1,504.30 $1,496.70 $1,481.60 $1,481.40 $1,476.10 $1,471.20 $1,464.80 $1,462.50 $1,460.70 $1,453.90

% Chg.

0.1% -4.8% 10.3% 0.2% 3.8% 20.4% -6.0% -0.5% -1.5% -0.5% -20.9% -6.8% -7.7% 0.2% -9.0% 4.5% -25.1% 0.9% -9.7% 2.5% -0.3% -0.6% 9.9% -3.9% 2.7% --7.5% 15.8% -16.4% 8.7% -11.0% -20.0% -12.8% -0.4% 12.5% -0.8% -9.9% -13.3% 7.0% 17.8% -3.4% -5.6% -20.4% 19.6% -5.8% 0.7% -0.6% -14.5% -5.1%

Profits

% Chg.

Margin

$179.50 $48.10 $567.00 $54.00 $7.90 $63.00 $278.70 $302.80 ($27.90) ($83.40) $221.90 $180.60 $68.90 $44.40 $108.00 $219.90 $81.30 $261.00 $30.20 ($79.40) $231.60 $29.60 -$86.90 -$45.60 -$179.20 $105.50 $123.20 -$5.60 $183.20 $43.70 $46.70 $53.00 -$124.40 $138.20 $510.10 $571.70 $164.10 $254.00 $8.70 ($32.50) ($259.50) $120.40 $132.30 $293.60 ($5.80)

0.4% 32.5% 1.3% -6.0% -22.5% 29.0% -3.4% 270.0% --215.1% -1.2% -30.0% -7.9% -78.3% -47.7% -8.9% 6.9% -69.5% -38.3% -374.2% 7.9% 22.7% -33.9% --1.4% --24.0% 45.0% -16.1% --95.2% -51.0% 100.3% -11.1% -20.7% -56.0% -21.1% 28.2% 36.6% 39.2% 8.1% -56.2% -26.3% -3798.8% 126.4% -3.4% -49.6% 74.1%

10.3% 2.8% 32.9% 3.1% 0.5% 3.7% 16.4% 17.9% -1.7% -5.0% 13.4% 10.9% 4.2% 2.7% 6.6% 13.4% 5.0% 16.2% 1.9% -4.9% 14.4% 1.8% NA 5.4% NA 2.9% NA 11.2% 6.6% 7.9% NA 0.4% 11.8% 2.8% 3.1% 3.5% NA 8.2% 9.1% 33.9% 38.0% 11.0% 17.1% 0.6% -2.2% -17.6% 8.2% 9.0% 20.1% -0.4%

The AGE (IÁIVW

·4PE]MRK XLVSYKL¸ XLI =IEVW IN TODAY’S WORLD, there is a great emphasis on staying youthful. We often forget that looking young and feeling young are separate entities that should be combined.

We don’t just want to achieve looking young; we want

Sports medicine surgeon Dr. Jonathan Glashow employs cutting-edge technology and less invasive procedures to ensure that his patients ‘live younger.’

to achieve “living young.” Cutting-edge advancements in sports medicine such as biologics and “partial replacements” have allowed us to “bend the aging curve” and allow athletes of all levels to continue to push their bodies harder as the years go by.

Driven by the fast-paced, billion dollar world of professional sports, orthopedic surgeons within the field of sports medicine have risen to the challenge by developing techniques to keep those with a physically demanding, highly active lifestyle going stronger and harder.

In the past, athletes with a torn ACL, for instance, often had to resort to full joint replacement later in life, while those with torn rotator cuffs were forced to give up their sport and active lifestyles. But current technology allows us to physically preserve youth. Arthroscopic surgery today is far less invasive, allowing most surgeries to be done on an outpatient basis with little to no hospital stay, and in private state-of-the-art facilities. We now know that some forms of knee arthritis are treatable with “partial replacements” rather than full joint replacements.

Such advanced techniques allow us to recommend, for example, reconstruction in the 50-plus-year-old to prevent the progression of arthritis. Arthoscopically patching joints can prevent the natural degradation arthritis brings. And that’s a big plus: Keeping your own joints helps you feel younger longer. Addressing issues one has today can prevent having to resort to full replacements and prolonged discomfort in the future.

Other advancements in medicine such as biologics, i.e., PRP (Platelet Rich Plasma) injections that were once reserved solely for professional athletes are now available to athletes at all levels, from “weekend warriors” to anyone with a physically demanding lifestyle. These biologics are used for both surgical and nonsurgical injuries, to heal and speed recovery.

Remember, looking 15 years younger is great, but if your physical performance is hindered, your appearance will not fool anyone, not even yourself. So, if you feel something, do something. Whether what’s bothering you is a pesky knee, an irritated shoulder or pain in your hip, addressing any issues you feel today can avoid further pain, discomfort and much more invasive surgeries down the line.

As co-chief of Sports Medicine at Mount Sinai Medical Center and chief medical officer/team physician for the Philadelphia 76ers, Dr. Glashow and his associate, Dr. Bryan Hanyspiak, combine the best of cutting-edge academic medicine and rehab for injuries of the knee, shoulder, elbow and hip.

“Cutting-edge advancements in sports medicine such as biologics and “partial replacements” have allowed us to “bend the aging curve” and allow athletes of all levels to continue to push their bodies harder as the years go by.”

JONATHAN L. GLASHOW, M.D., P.C. Clinical Associate Professor of Orthopedic Surgery Co-Chief, Division of Sports Medicine Mount Sinai Medical Center & Chief Medical Officer/Team Physician for the Philadelphia 76ers 737 Park Avenue, Suite 1C New York, NY 10021 T: 212.794.5096 F: 212.570.1507

SPECIAL ADVERTISING FEATURE

LATIN 500

LATIN AMERICA’S TOP 500

2013 figures in millions of U.S. dollars Rank 2014 2013

351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376 377 378 379 380 381 382 383 384 385 386 387 388 389 390 391 392 393 394 395 396 397 398 399 400

36

378 355 357 384 360 370 361 319 372 391 426 382 387 371 394 393 389 380 326 398 369 -455 312 364 282 294 342 376 337 405 256 385 -423 -386 374 377 403 -421 358 437 422 407 413 396 404 414

Company

Country

Movistar Arteris UCP Backus Ferromex Minera Spence Electricaribe Empresas Navieras Celpe Oxiteno BR Pharma Grupo Gloria CGE Dist.

Masisa CBA Sodimac Tupy CEG Lojas Marisa General Motors Skanska CTC Minsur Gas Nat.Lima Brasil Kirin MRS Logística Infraero Ultragaz Buenaventura Sonda Brookfield Emgesa Grupo KUO Maseca UTC Engenharia Ideal Celsia Liquigás Dist.

Energisa Coelce Sofasa Coomeva EPS E-CL Biomax Alsea Kellogg Superm. Peruanos Lojas Cem Alcoa Alumínio Ericsson Telecom.

Volcan

Colombia Brazil Perú México Chile Colombia Chile Brazil Brazil Brazil Perú Chile Chile Brazil Colombia Brazil Brazil Brazil Colombia Sweden Chile Perú Perú Brazil Brazil Brazil Brazil Perú Chile Brazil Colombia México México Brazil México Colombia Brazil Brazil Brazil Colombia Colombia Chile Colombia México USA Perú Brazil Brazil Brazil Perú

LATIN TRADE JULY-AUGUST 2014

Sector

Tech Transport Beverage Transport Mining Energy Transport Energy Energy Pharmaceutical Food Energy Manufacturing Steel Retail Manufacturing Energy Retail Auto Construction Tech Mining Energy Beverage Transport Transport Energy Mining Tech Construction Energy Manufacturing Food Construction Construction Energy Energy Energy Energy Auto Health Energy Energy Food Food Retail Retail Aluminum Tech Mining

Revenues

$1,450.90 $1,441.80 $1,435.00 $1,432.80 $1,416.80 $1,416.50 $1,404.50 $1,401.70 $1,399.20 $1,389.00 $1,379.60 $1,372.10 $1,364.70 $1,349.30 $1,341.30 $1,333.10 $1,330.90 $1,322.00 $1,321.50 $1,314.60 $1,313.20 $1,311.70 $1,303.30 $1,297.30 $1,296.90 $1,294.00 $1,289.50 $1,287.30 $1,283.60 $1,279.70 $1,279.20 $1,270.70 $1,256.20 $1,248.30 $1,239.00 $1,238.50 $1,237.40 $1,219.90 $1,216.50 $1,212.40 $1,208.00 $1,207.10 $1,204.60 $1,201.30 $1,195.00 $1,191.80 $1,190.20 $1,186.70 $1,175.30 $1,164.50

% Chg.

2.8% -5.5% -4.5% 4.9% -4.4% -3.4% -5.2% -19.2% -2.4% 5.7% 25.3% -2.1% 1.1% -9.0% 3.5% 2.0% -0.6% -6.1% -22.4% 4.1% -9.6% 8.3% 38.2% -3.1% -11.4% -35.8% -10.1% -17.6% -9.8% -19.6% 4.7% -7.8% -7.3% -2.4% 10.8% 8.4% -8.6% -14.6% -14.1% -1.5% -3.6% 6.8% -21.1% 15.2% 6.6% -0.5% 2.2% -7.3% -3.1% 0.4%

Profits

% Chg.

Margin

-$199.10 $335.00 $201.40 $375.80 $24.40 $30.90 $45.60 -($64.60) $111.90 $40.30 $50.60 ($55.80) $57.40 $36.90 $145.70 $36.50 $0.70 ($7.30) $87.30 $177.40 $46.70 ($81.70) $200.40 ($1,133.30) $14.10 ($101.80) $126.80 ($292.90) $452.60 $95.00 $134.80 $40.10 $72.50 $194.30 $10.00 $86.00 $66.80 $48.20 ($10.10) $39.60 $7.60 $52.10 $157.00 $3.40 $116.70 ($44.20) $40.40 $173.60

-0.8% -3.6% -7.8% -9.9% -33.0% 2.2% 515.8% --4540.2% 18.1% 97.4% 11.9% 82.8% -7.6% 13.5% 2.5% -67.6% -83.9% 91.3% -29.3% 10.0% -30.8% -225.9% -7.0% -1618.6% -34.6% -114.9% 33.1% -54.3% 2.3% 216.5% 30.8% -38.0% 237.6% 49.2% -54.7% -39.5% -67.5% -27.5% -0.3% -29.5% -26.6% 85.0% -6.0% -84.9% 25.6% -72.8% 239.9% -17.7%

NA 13.8% 23.3% 14.1% 26.5% 1.7% 2.2% 3.3% NA -4.7% 8.1% 2.9% 3.7% -4.1% 4.3% 2.8% 10.9% 2.8% 0.1% -0.6% 6.7% 13.5% 3.6% -6.3% 15.5% -87.6% 1.1% -7.9% 9.9% -22.9% 35.4% 7.5% 10.7% 3.2% 5.8% 15.7% 0.8% 7.0% 5.5% 4.0% -0.8% 3.3% 0.6% 4.3% 13.1% 0.3% 9.8% -3.7% 3.4% 14.9%

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LATIN 500

LATIN AMERICA’S TOP 500

2013 figures in millions of U.S. dollars Rank 2014 2013

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

430 -401 406 388 409 411 410 400 415 412 367 431 434 491 417 424 289 399 435 -443 436 395 -427 445 446 428 466 448 441 439 -472 -440 -438 419 451 452 442 425 432 450 454 461 433 --

Company

Country

Grupo Famsa Vigor Alimentos 7 El Abra Mine Magnesita Alunorte Vitro Envases Novartis EcoRodovias Bandeirante Energia Atento Empresas Carozzi Abril Com. Positivo Inf Goodyear Autometal Celpa Dasa Gafisa CPFL Piratininga Even Embasa Isagen Unacem RGE GRSA Roche Wembley Coteminas Metal Leve EEB CruzBlanca Drogarias Pacheco Sanepar Namisa Herdez Samsung AES Tietê Volaris Elementia Cemat Petrominerales Colombia Elecmetal Aluar Cerr. Zona Norte CEEE Saga Falabella Colanta Grendene Minera Zaldívar BBA

México Brazil Chile Brazil Brazil México Brazil Brazil Brazil Brazil Chile Brazil Brazil Brazil Brazil Brazil Brazil Brazil Brazil Brazil Brazil Colombia Perú Brazil Brazil Brazil Brazil Brazil Brazil Colombia Chile Brazil Brazil Brazil México Colombia Brazil México México Brazil Colombia Chile Argentina Colombia Brazil Perú Colombia Brazil Chile Brazil

Sector

Retail Food Mining Mining Aluminum Manufacturing Chemical Transport Energy Tech Food Media Tech Manufacturing Auto Energy Health Construction Energy Construction Water Energy Cement Energy Services Chemical Textile Textile Manufacturing Energy Health Retail Water Mining Food Electronics Energy Transport Construction Energy Energy Steel Manufacturing Mining Energy Retail Food Textile Mining Steel

Note: 7 On June 2013, the company acquired a 50% stake in Itambé Alimentos.

38

LATIN TRADE JULY-AUGUST 2014

Revenues

$1,150.10 $1,149.70 $1,134.00 $1,133.80 $1,131.00 $1,128.10 $1,127.50 $1,126.60 $1,112.40 $1,105.90 $1,102.50 $1,097.20 $1,095.60 $1,093.40 $1,089.90 $1,065.10 $1,061.90 $1,059.20 $1,058.80 $1,049.70 $1,045.00 $1,041.60 $1,037.50 $1,033.70 $1,028.60 $1,024.60 $1,023.90 $1,023.70 $1,021.80 $1,018.70 $1,015.80 $1,012.20 $1,011.80 $1,011.60 $1,007.30 $1,003.00 $997.60 $993.80 $988.20 $987.40 $985.70 $985.20 $985.00 $978.60 $966.30 $955.10 $941.80 $933.70 $931.40 $923.20

% Chg.

5.6% 76.6% -8.3% -6.0% -15.9% -5.0% -3.7% -4.4% -11.1% -4.4% -5.7% -2.0% 2.8% 38.1% -7.4% -4.2% -45.3% -15.6% -0.8% -10.1% 2.0% -1.1% -20.0% -3.7% -6.2% 2.2% 2.3% -6.3% 13.9% 3.2% -1.5% -2.6% -46.1% 8.5% 31.7% -3.5% 10.3% -5.1% -14.0% 2.0% 2.4% -4.0% -11.1% -9.8% -1.3% -0.4% 1.4% -12.6% 2.9%

Profits

% Chg.

Margin

$50.30 ($1.20) $352.30 $23.70 ($268.80) -$57.50 $169.80 $81.40 ($2.60) $49.20 ($71.90) $6.70 -$58.40 ($97.70) $56.10 $370.30 $35.40 $120.80 $32.80 $225.70 $69.40 $52.90 $35.40 $50.10 $0.10 ($8.50) $86.00 $438.80 $19.70 $28.90 $172.00 $381.10 $46.40 $10.30 $376.20 $20.50 $37.30 ($163.40) ($37.90) $70.70 $51.00 $158.40 ($97.60) $59.40 $4.40 $185.10 $309.50 $86.40

101.8% -107.8% -9.0% -31.6% -12.5% --3.6% -17.8% 105.5% -104.3% -41.4% -259.6% -55.0% --24.2% 71.4% 34.4% 707.7% -52.9% -3.9% -46.3% -13.2% -55.6% -66.2% 232.8% -37.7% 100.5% 83.1% -1.9% 12.5% -46.5% 0.0% 4.7% -51.8% -75.1% 20.5% -14.7% 23.7% 48.7% -531.3% -199.9% -22.4% 2.6% -32.4% 35.4% 17.3% -57.0% -11.8% -21.9% 60.6%

4.4% -0.1% 31.1% 2.1% -23.8% NA 5.1% 15.1% 7.3% -0.2% 4.5% -6.6% 0.6% NA 5.4% -9.2% 5.3% 35.0% 3.3% 11.5% 3.1% 21.7% 6.7% 5.1% 3.4% 4.9% 0.0% -0.8% 8.4% 43.1% 1.9% 2.9% 17.0% 37.7% 4.6% 1.0% 37.7% 2.1% 3.8% -16.5% -3.8% 7.2% 5.2% 16.2% -10.1% 6.2% 0.5% 19.8% 33.2% 9.4%

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LATIN 500

LATIN AMERICA’S TOP 500

2013 figures in millions of U.S. dollars Rank 2014 2013

451 452 453 454 455 456 457 458 459 460 461 462 463 464 465 466 467 468 469 470 471 472 473 474 475 476 477 478 479 480 481 482 483 484 485 486 487 488 489 490 491 492 493 494 495 496 497 498 499 500

449 463 457 -390 469 456 460 408 420 478 500 459 -481 497 429 464 418 -490 471 352 -476 -479 494 -482 --493 ---489 492 475 486 -487 484 470 --485 483 480 474

Company

Country

TV Azteca Cemex Saraiva Grupo Solví Rossi Res. Prod. Familia Concha y Toro Bio-Pappel Molymet AES Sul Springs Global Genomma Lab Int. Escelsa Kroton Farm. Benavides Shougang Hierro Cooxupé Interoceánica Cemar Helbor EAAB Tiendas CM Pampa Energía Min. Cerro Colorado Albrás CPFL Geracao Edelnor Aché Corp. San Luis Luz del Sur Confab Minera Frisco Axtel Megacable Tecnisa Emcali Coca-Cola Embonor Anhanguera Aceros Arequipa Aguas Andinas CFR La Polar Corp. Lindley Tegma Logistics Man. Atlas Schindler Lafarge Cresud Besalco Mirgor El Tesoro Mine

México Colombia Brazil Brazil Brazil Colombia Chile México Chile Brazil Brazil México Brazil Brazil México Perú Brazil Chile Brazil Brazil Colombia México Argentina Chile Brazil Brazil Perú Brazil México Perú Brazil México México México Brazil Colombia Chile Brazil Perú Chile Chile Chile Perú Brazil Brazil Brazil Argentina Chile Argentina Chile

Sector

Media Cement Retail Holding Construction Food Beverage Paper Chemical Energy Textile Manufacturing Energy Education Health Mining Food Transport Energy Construction Water Retail Energy Mining Steel Energy Energy Pharmaceutical Manufacturing Energy Manufacturing Mining Tech Tech Construction Energy Beverage Education Steel Water Pharmaceutical Retail Beverage Transport Tech Cement Agriculture Construction Auto Mining Total

40

LATIN TRADE JULY-AUGUST 2014

Revenues

% Chg.

Profits

% Chg.

Margin

$921.60 $916.00 $915.10 $913.60 $910.40 $908.50 $908.10 $895.50 $892.00 $884.90 $872.10 $868.30 $865.50 $860.60 $847.10 $847.10 $841.60 $841.50 $840.40 $830.20 $829.90 $821.80 $817.60 $816.10 $804.90 $803.70 $801.00 $794.20 $791.90 $788.90 $787.70 $787.60 $786.20 $785.60 $782.10 $780.60 $775.20 $773.80 $770.40 $768.70 $767.90 $760.10 $758.40 $756.60 $754.30 $754.00 $750.80 $749.00 $748.50 $747.40

-4.9% -0.2% -2.8% -6.2% -31.5% 2.2% -3.5% -3.2% -25.3% -22.8% 5.9% 14.9% -7.1% 25.1% 3.4% 10.8% -22.8% -8.3% -26.9% 18.4% 5.0% -5.2% -46.8% 21.5% -3.8% 9.8% -2.5% 1.3% 9.3% -3.2% -16.9% 13.1% 0.0% 13.5% 17.9% -2.4% -2.5% -1.6% -9.3% -3.9% 34.5% -4.7% -5.7% -14.1% 1.7% -9.0% -6.5% -7.1% -8.9% -12.2%

$88.50 $86.10 $5.60 $37.20 $17.50 $71.80 $63.30 $65.40 $27.40 ($8.60) ($22.70) $133.90 $57.20 $220.50 $22.20 $296.00 $6.50 $0.20 $82.10 $129.80 $62.70 -$43.80 ($63.20) $20.40 $102.30 $97.00 $172.40 ($10.90) $115.10 $68.50 $11.80 $184.00 $148.30 $94.40 $156.90 $55.10 $53.50 $8.30 $222.80 $58.30 ($114.00) ($26.00) $21.10 $126.30 $65.90 ($64.30) $24.00 $35.10 $225.60

-50.3% -26.6% -85.2% -17.3% 117.4% -3.2% 1.0% 31.4% 24.6% -106.9% 67.7% 11.0% -25.5% 123.0% 11.3% 19.4% -29.7% -98.3% -56.4% -2.5% -46.2% -133.2% -757.5% 646.2% -33.8% 14.2% -16.7% -176.7% -5.1% -20.1% -82.6% 436.6% -0.7% 212.9% 28.8% -30.3% -28.0% -64.2% -12.1% -26.7% -129.1% -187.9% -48.3% -5.0% -41.8% -424.8% -55.2% 15.1% -4.7%

9.6% 9.4% 0.6% 4.1% 1.9% 7.9% 7.0% 7.3% 3.1% -1.0% -2.6% 15.4% 6.6% 25.6% 2.6% 34.9% 0.8% 0.0% 9.8% 15.6% 7.6% NA 5.4% -7.7% 2.5% 12.7% 12.1% 21.7% -1.4% 14.6% 8.7% 1.5% 23.4% 18.9% 12.1% 20.1% 7.1% 6.9% 1.1% 29.0% 7.6% -15.0% -3.4% 2.8% 16.8% 8.7% -8.6% 3.2% 4.7% 30.2%

$2,556,746

-4.5%

$148,758

-6.0%

5.8%

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

SPECIAL REPORT

INVESTING IN THE FUTURE Developers and hoteliers are bullish on Latin America’s hotel sector.

BY MARK CHESNUT

H

otel development and investment has grown tremendously in recent years in Latin America, as investors and developers partner with international hotel brands to create an array of new properties around the region. Despite some challenges, the growth seems unstoppable.

“It is a vast region with vast opportunity,” said Javier Rosenberg, chief operating officer for Radisson, Americas. “Some countries are easier to work with than others, but without a doubt the potential is there, the growth is there, and we are starting to see more formal investment vehicles, in funds where they have a mandate to invest in the [hospitality] industry. It’s creating a healthy new development environment for the industry.”

“Latin America is booming, in terms of economic growth and political and institutional stability, which is creating a promising business climate,” said Craig S. Smith, president of the Caribbean and Latin America for Marriott International. “This is an exciting time for hotel development in Latin America; the growing regional demand and broadening market, combined with the lack of consistent domestic hotel product and service, represents a large opportunity to develop upscale branded hotels as well as multi-unit, moderate tier development platforms with local partners in the region.”

42

LATIN TRADE JULY-AUGUST 2014

Last year, Wyndham Hotel Group commissioned a white paper study by Jones Lang LaSalle titled “Economic Transformation Drives Latin America’s Lodging Industry,” which predicted a need for more than 425,000 new hotel rooms in the region over the next 10 years. Wyndham is focusing largely on Brazil, México, Colombia and Perú, according to Paulo Pena, the company’s senior vice president and managing director for Latin America. “What the research showed is that the evolution of Latin American economies, combined with the dynamics of infrastructure investment, a rising middle class and new discoveries in oil and gas” are all fueling the demand.

According to the latest hotel index from Latin Business Chronicle, the number of rooms held by the region’s 10 largest hotel chains increased by around 8,000 last year to 200,000.

The index also showed that Accor Hospitality is now Latin America’s largest hotel chain, with 38,143 rooms in the region. Accor’s expansion in Latin America represents nearly one-third of its global growth.

HOT CATEGORIES When it comes to hotel growth in Latin America, most money is in the middle. “The huge opportunity in the whole region is in the mid-

market, limited service hotel,” said Arturo García Rosa, president of Sahic, the South American Hotel and Tourism Investment Conference.

“One of the key trends that we’re seeing is the growth of the mid-market section,” concurred Danny Hughes, senior vice president of operations for Caribbean, México and Latin America at Hilton Worldwide. “We’re now starting to see, in several countries, [interest in] products like Hampton Inn and, in particular, the Hilton Garden Inn, not only in the larger cities, but also in the secondary and tertiary cities.”

The reason for the midscale boom is only logical, according to Salo Smaletz vice president of development for Latin America at IHG, which owns brands including InterContinental Hotels & Resorts, Crowne Plaza and Holiday Inn. “There are only [so] many cities in Latin America that would actually be able to afford a luxury brand,” he reasoned. “When we talk about midscale, the opportunities are much broader, because you have a market that’s looking for a price range that is lower than InterContinental or Crowne Plaza, and with limited service like Holiday Inn Express, or a midscale brand that can be full service, like Holiday Inn. Most of our projects that we have been signing lately are for Holiday Inn and Holiday Inn Express.”

That’s not to say that the upscale and luxury segment isn’t in growth mode. Starwood Hotels & Resorts Worldwide — which owns luxury brands including Westin, Sheraton, St. Regis and W — grew from the sixth to the fifth larg-

Latin America is booming, in terms of economic growth and political and institutional stability, which is creating a promising business climate.

Craig S. Smith, president of the Caribbean and Latin America, Marriott International

PHOTO: ISTOCKPHOTO.COM/ BRIANAJACKSON; COURTESY OF MARRIOTT INTERNATIONAL

H O S P I TA L I T Y

SPECIAL REPORT

The evolution of Latin American economies, combined with the dynamics of infrastructure investment, a rising middle class and new discoveries in oil and gas are all fueling the demand.

Paulo Pena, senior vice president and managing director for Latin America, Wyndham Hotel Group

est hotel chain in the region between 2012 and 2013, according to Latin Business Chronicle.

Simon Turner, Starwood’s president of global development, predicted that in Latin America, “in the biggest six or seven major cities, you’re going to have W [hotels] and you’re going to have St. Regis. It’s just a matter of time.” These projects would include an upscale residential component.

GROWTH MARKETS In Latin America, opportunities and challenges vary from country to country.

“Clearly the differences are significant among countries,” said Rosenberg. “Let’s call one pocket [of countries] favorable to business. You could throw in countries like Panamá, Colombia; I think Perú has been quite flexible and open in the last six to eight months, and Ecuador is starting to be flexible, to drive investments in hospitality. Chile is probably in that pocket, because it’s a country [in which it’s] easy to do business and it’s a very stable country. Then you’ve got a middle pocket —the countries that may not be necessarily aggressively looking to expand the industry, but they’re not hindering the industry.

Then you have the last pocket, which would be the countries that make it very difficult. Venezuela and Argentina come to mind.”

Every hotelier has its focus markets. Hilton is focusing heavily on Colombia, Perú and Chile, according to Hughes, and “México’s on fire.

That’s our number one growth market in the region,” he said, noting that the Hilton Worldwide

44

LATIN TRADE JULY-AUGUST 2014

Development Forum, which took place at the recently opened Hilton Santa Fe in México City in May, was expected to draw some 20 percent more attendees than the previous year, for a total of 290 investors.

“We are very bullish on México,” agreed Starwood’s Turner, noting that the country’s increasing popularity as an industrial hub is fueling some of the demand. “As China becomes more and more expensive, México becomes a source of manufacturing. What the government has done has been tremendous from a pro-business perspective. We’re seeing a lot of growth in México in the Four Points [by Sheraton] level and in the Aloft brand.”

Wyndham’s Pena is similarly positive about México. “It’s a large economy that has continued to move forward, and in tertiary markets it still has a fairly limited inventory of quality-branded product,” he said. “The demand we’ve seen is in secondary markets, driven by investment in things like new automobile factories, [and] there’s been recent reform in the energy segment. We see a similar landscape in México to what we see in Brazil.”

Preferred Hotel Group predicts growth in México’s leisure destinations as well. “We see a lot of investments still in the Cancun area,” said Rodrigo Tsutsumi, the company’s director of business development for Latin America. “We’re going to see a lot of investment in future years in the Riviera Maya, Playa del Carmen, going south to Tulum,” he predicted.

BANKING ON BRAZIL Government regulations, financing and other local practices may make it slightly difficult to enter, but Brazil’s allure for domestic and international travelers keeps it on the radar. According to a recent study released in May by Amadeus, “Building the future of travel: megatrends that will boost industry growth on the next decade,” Brazilians will double their spending on travel over the next 10 years, to more than $40 million — although the growth will be more pronounced with international travel than domestic.

“Brazil is at a point like the United States was in the 1960s,’” said Daniel Fonseca, president and chief visionary officer at Latinn Hotels, a Belo Horizonte-based hotel developer that is partnering with Wyndham to develop Super 8 and Travelodge properties. Latinn Hotels aims to develop 20,000 new hotel rooms in a 10-year period in Brazil, primarily in secondary cities, with a total of 400 hotels within the next 10 to 15

years. In addition, Latinn Hotels recently opened a new office in Miami, to expand the company’s focus and develop Wyndham properties in Colombia, Perú, Argentina and México.

Wyndham’s Pena echoed Fonseca’s enthusiasm. “We continue to believe [in] the evolution of Brazil’s economy, the growing middle class, the investment in infrastructure,” he said. “We found in a number of secondary markets in Brazil that there was an undersupply of branded hotel rooms.” He mentioned Parauapebas, a town in northern Brazil that’s home to a large iron mine. “It’s a fairly recent discovery,” he said.

“The mine itself is generating 30,000 jobs and the city currently has 200 [hotel] rooms. We found that with basic, conservative projections, that town will need at least 900 rooms. There are a number of projects like that throughout Brazil.”

Among Starwood’s main goals in Brazil, according to Turner, is to place a W and a St. Regis hotel in both Rio and São Paulo, likely paired with a residential development. Wealthy Brazilians traveling abroad more is an important selling point in developing these luxury properties. “The number of Brazilian guests that we have, for example, at the W in South Beach has gone off the charts,” he said. “Many of those very wellheeled individuals, when they go back to São Paulo or Rio, they’re saying that ‘[we want the same] experience that we had at the St. Regis Bal Harbour.’ It’s just one of those examples where the world is getting smaller and smaller, particularly at the high end.”

For Preferred Hotel Group, “the main interest in the last few years has been Brazil,” said Tsutsumi. “We currently have seven hotels there,

One of the key trends that we’re seeing is the growth of the midmarket section.

Danny Hughes, senior vice president of operations for Caribbean, México and Latin America, Hilton Worldwide

PHOTOS: COURTESY OF WYNDHAM HOTEL GROUP; COURTESY OF HILTON WORLDWIDE

H O S P I TA L I T Y

SPECIAL REPORT H O S P I TA L I T Y

COUNTING ON COLOMBIA Colombia is also ranking on the “must-build” list.

One of the biggest selling points: Proexport Colombia, which promotes investment in the nation and offers income tax exemption for 30 years for new developments, valid from the start of operations for hotel services, from 2003 to December 2017. Add the relatively stable economy, and growth in international arrivals from 600,000 in

There are only [so] many cities in Latin America that would actually be able to afford a luxury brand.

Salo Smaletz, vice president of development for Latin America, IHG

2000 to over 1.6 million in 2012 (according to Proexport), and it’s easy to see the attraction.

Among the newest hotels in Colombia are the 159-room Cali Marriott, the 233-room Radis-

son Cartagena Ocean Pavillion Hotel and the 168-room W Bogotá, which opens later this year as a joint project between Starwood and Colombian developer Terranum, as part of a mixed-use development. Separately, Terranum this year acquired Decameron Hotels & Resorts, which has hotels in 10 countries.

“We’ve got nine hotels open or under construction, and it’s a fabulous environment there,” said Hughes, noting Colombia’s “readily available financing, talented entrepreneurs looking to develop and an educated labor force.” Another factor driving growth: “With the virtual collapse of Venezuela, so much [business] has moved to Colombia. The demand generators are very real.”

CHALLENGES & OPPORTUNITIES When it comes to challenges, two destinations are mentioned most: Venezuela and Argentina.

“Both countries today share a very common challenge,” said Rosenberg. “We are working in both countries with people who are looking for opportunities with us, but they cannot find a way

PHOTO: COURTESY OF IHG

which is very small [relative] to what we believe will eventually be the need.” His company just hired a regional director based in São Paulo, and is partnering with Windsor Hotéis for that company’s new Miramar Hotel by Windsor in the fast-growing Barra da Tijuca area in Rio de Janeiro. But Tsutsumi acknowledges that Brazil presents challenges.

“The main barriers may be financing and bureaucracy,” he said. “There are some definite barriers to entry. For Brazilian investors, you have to talk about an equity fund, but no loans from banks — the interest rates are just too expensive.”

JULY-AUGUST 2014 LATIN TRADE

45

SPECIAL REPORT H O S P I TA L I T Y

to commit to the necessary investment to get the elements that they need and the supplies they need. We’ve lost deals because of that.”

Argentina and Venezuela have “the same issues in common, but with different futures,” according to García Rosa. “Venezuela, no one knows what will happen and no one can predict when a change will happen. What’s happened in

Venezuela is very tough.”

Argentina may be facing difficulties related to inflation and exchange rates, García Rosa continued, “but in 2015 there will be elections,” he noted. “Nobody has any doubt that change will arrive, because the potential candidates understand very well that this [situation] really damaged not only the hotel business, but also the

In Latin America, in the biggest six or seven major cities, you’re going to have W [hotels] and you’re going to have St. Regis. It’s just a matter of time.

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LATIN TRADE JULY-AUGUST 2014

most important businesses in other niches.”

While most take a “wait and see” approach to Venezuela, sentiment is more optimistic in the Southern Cone. “Argentina is always a wild card,” said Smaletz. “There are ups and downs and cycles. There are some challenges for hotel development affecting other industries as well — but still, it’s a very strong country, and we hope that it’s just another cycle that will soon end.”

Developers and investors may find fresh opportunities by gauging the needs of international hotel companies, according to Turner. “We want somebody who understands the local market inside and out, but also has a global perspective and also understands how our brands should be positioned both for the local market and for the global market,” he said. “We see very few investors that are pan-Latin American in focus,” he said, noting that most developers operate in only one or two countries. “I think there’s an opportunity for someone to create more of a pancontinental investment platform.”

As for government regulations, Turner said they are “a challenge in any market, but if we’re having a global conversation, in Latin America they vary from country to country,” he said. “For us, this is part and parcel of being a global company. Latin America is no more challenging than any other part of the world.”

Mark Chesnut reported from New York.

PHOTO: COURTESY OF STARWOOD HOTELS & RESORTS WORLDWIDE

Simon Turner, president of global development, Starwood Hotels & Resorts Worldwide

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situation. We’ve been operating in México for 45 years, and for over 40 years in Chile, Argentina and Brazil, and we’ve seen it all. While I expect there will be more economic disruption in Latin America, over the long term, the opportunity is really quite good. The bigger risk is to be too conservative on the growth.

When you see the growth in the middle class in Latin America, the opening of borders for more travel, the overall growth in worldwide travel driven by technology, this is a very exciting time to be in high-end travel business.

WOULD YOU COMPARE LATIN AMERICA WITH ASIA?

YOUNG AND SMALLER CITIES, A MASSIVE OPPORTUNITY An interview with Frits van Paasschen, president and CEO of Starwood Hotels & Resorts Worldwide

BY SANTIAGO GUTIÉRREZ

S

tarwood Hotels & Resorts Worldwide is one of the world’s largest hotel and leisure companies, with close to 1,200 properties in 100 countries. They operate brands such as St. Regis, Luxury Collection, W Hotels, Westin, Le Méridien, Sheraton, Four Points and Aloft.

Frits van Paasschen, CEO, shared with Latin Trade his view on business in Latin America.

ARE THERE BUSINESS OPPORTUNITIES FOR HOTEL DEVELOPERS IN THE REGION? The growth in demand for travel generated a secular growth in Latin America, in Europe, Asia and North America. But there was a generational change. Today, 20 percent of the one billion international travelers are 15 to 20 years. This is a

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massive opportunity.

Growth is moving now from the megacities to the second tier cities, like Barranquilla or Mendoza.

There has been so much influx to the megacities that they are almost uneconomical. Curitiba is a well-planned city, more livable, more affordable, and business and developments are going to those cities in a bigger way. With technology, you can be in touch with your tier-one city, and have all employment in second-tier ones.

WHAT ARE THE RISKS OF A FAST EXPANSION IN LATIN AMERICA? The growth of our business, and the hotel sector, is a reflection of the health of the economies where we operate. If there were a risk, it would be the volatility of the economic

LATIN TRADE JULY-AUGUST 2014

It’s a bit difficult to speak of Latin America as a region. The countries of Latin America behave like separate markets. We see difficulties in Argentina and Brazil, and as they represent a huge portion of the output for Latin America, the growth is somewhat slower, but the dynamism and growth that you see in Chile, in Colombia, in Perú, in Panamá, Costa Rica, in México largely offsets that.

The income levels in many cases in Latin America are higher than the base incomes in Asia.

The percentage rates in Asia can look more heroic, but they are growing off a smaller base.

The expansion of manufacturing, particularly in México, the liberalization of the energy sector, the favorable demographics will favor economic development.

WILL LATIN AMERICA BE ABLE TO TAP THE NEW CHINESE TOURISM WAVE? The Chinese outbound traveler is a global force to be reckoned with.

I say that in a positive way. We were the first global-branded hotel company in China, with The Great Wall Sheraton in 1985. Today, we operate 125 hotels and have 100 under construction. In the early

days, our hotels were built for Western travelers seeking a sanctuary in the People’s Republic. Today, our business is, in a vast majority, for Chinese travelers. The next wave will be Chinese outbound travelers.

Last year, Chinese travelers spent more money outside their country than people from the U.S. did outside of theirs. We’ve seen a near doubling of Chinese travelers coming to our hotels in Latin America.

In our business, over 75 percent of our revenue comes from BtoB, from business travelers. The increase of trade and investment will continue to stimulate that travel as well.

IS STARWOOD EXPLORING THE USE OF TECHNOLOGY? We’re using technology to create benefits and services, taking what customers want and transfering it to the hotel experience.

Guests can now use their smartphones as room keys. As you land in a city, you can check-in through your smartphone and go straight to your room. We are using them at an Aloft in Harlem, NY, and an Aloft in Cupertino, California, but we want to expand rapidly.

IS THAT THE FUTURE? It’s the mix of Big Data and dialog, because it’s more than predictive analytics. As you land in a city on a business trip, if you haven’t been there before, there’s someone talking to you: ‘Do you need a car?

What kind of restaurant do you want?’ Or, ‘I see from when you were here last time, this is something that might interest you. Can I get you tickets for a museum?’ If I’m with my wife on an anniversary, it’s a very different trip. It’s an opportunity to understand what a trip means. It’s where data meets dialog.

Technology is key, but in the end, it’s the human factor that matters.

We use technology to enable our associates to deliver better services, to be more responsive than they are even today.

PHOTO: COURTESY OF STARWOOD HOTELS & RESORTS WORLDWIDE

Frits van Paasschen, president and CEO of Starwood Hotels & Resorts Worldwide

COUNTRY REPORT PERÚ

(L-R) Peruvian Finance Minister Miguel Castilla, World Bank Secretary Mahmoud Mohieldin, Peruvian Prime Minister René Cornejo, IMF Secretary Jianhai Lin and Reserve Central Bank President Julio Velarde unveil the details of the World Bank Group board of governors and the International Monetary Found (IMF) annual meetings, due to be held in Lima in 2015.

A NEW PERUVIAN SPRINT

BY RYAN DUBE

P

erú, the champion of economic growth in Latin America during the past decade, hasn’t been immune to the slowdown that has hit neighboring countries, as lower commodity prices put a strain on exports and investments. Economic growth in the Andean country still remains solid, expanding 5 percent in 2013, down from 6.3 percent in 2012 and 6.9 percent in 2011.

But officials here are optimistic that the gradual slowdown is near its end, projecting a rebound in the second half of the year, followed by a bigger recovery in 2015. In April, the Central Reserve Bank of Perú said it expected growth of 5.5 percent in 2014, followed by 6.7 percent in 2015.

While the mining industry remains an important economic player, a number of

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other sectors are attracting major private sector investments, including infrastructure, energy and logistics projects. At the same time, a bigger middle class means that banks continue to see strong demand for consumer loans, while more and more residents are now able to enjoy trips to some of the country’s world-renowned tourism spots.

In the long term, economists say the sustainability of Perú’s growth will depend largely on the government’s ability to eliminate what businesses say are cumbersome barriers for investors, as well as improving its notoriously-poor education system.

INFRASTRUCTURE In December 2013, Finance Minister Luis Miguel Castilla Rubio unveiled more than

two-dozen infrastructure projects that he said would be a key driver for Perú’s economic growth in 2014 and 2015. Castilla Rubio said the 25 projects would be auctioned off in private-public partnerships, attracting investments worth some $13

PHOTOS: ERNESTO ARIAS/EPA/NEWSCOM; ISTOCKPHOTO.COM/ IZUSEK

As many emerging markets stumble following a decades-long commodities boom, Perú’s economy is still showing a strong footing.

COUNTRY REPORT PERÚ

billion. The projects include new highways and roads, airports, electricity transmission lines, and telecommunications works.

The government has already made headway in awarding some of the contracts, including a concession for one of the biggest infrastructure projects in Perú’s history. In March, the government awarded a 35-year contract to a consortium that includes Peruvian, Spanish and Italian companies, to build and operate a 22-mile underground metro in the capital Lima.

Officials say the project, which will require investments of $5.6 billion, will provide a much-needed improvement to public transportation in Lima, directly benefitting some two million people. The metro is the latest infrastructure project in Lima, a city of some nine million people, aimed at improving its traffic problems.

Another major infrastructure project that is expected to be awarded this year is the Southern Peruvian Gas Pipeline.

The pipeline will transport natural gas some 621 miles from the Camisea fields

in Perú’s southeastern Amazon region, up through Andean towns and down to the Pacific coast in the Moquegua region.

President Ollanta Humala said in late May, during a trip to Apurímac, an impoverished region in southern Perú that is expected to benefit from the pipeline, that the project will support economic growth by providing inexpensive gas to the region, while also fueling the development of a petrochemical complex.

ENERGY In addition to the pipeline, Perú has lined up several other initiatives in the energy sector, with both upstream and downstream development.

In May, the government signed a $2.7 billion contract with Spanish firm Técnicas Reunidas to upgrade the Talara Refinery, which is owned by state oil company PetroPerú. The project, which is expected to take 55 months, is considered the largest turnkey project worldwide that has been awarded to a single contractor.

Officials say the upgrade of the aging Talara Refinery is important for Perú’s energy security, as it will increase the refinery’s production capacity to 95,000 barrels a day from 62,000 barrels. It will also curb environmental pollution by significantly lowering the sulfur content, and provide thousands of jobs in the northern region of Piura, where the refinery is located.

For downstream activities, the government agency responsible for awarding hydrocarbon concessions, Perupetro, has been preparing auctions for oil and gas exploration. The first auction, for off shore concessions, is expected to be relaunched this year. The government has been reviewing the terms of the auction, which was put on hold late last year partially due to a lack of geological information about the resource potential.

The government also has on its backburner, plans to award some 26 contracts for oil and gas exploration in the Amazon rainforest. The schedule for the launch of that auction is unclear as officials are

PHOTO: ENRIQUE CASTRO-MENDIVIL/REU TERS/NEWSCOM

A worker helps put together a pipeline during the construction of the Olmos Irrigation Project in Perú’s northwestern region of Lambayeque.

JULY-AUGUST 2014 LATIN TRADE

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COUNTRY REPORT PERÚ

Perú’s Energy and Mines Minister Eleodoro Mayorga

in the process of completing prior consultation requirements with indigenous communities. But the head of Perupetro, Luis Ortigas, has said it could occur this year. He says that each concession would attract initial exploration investments of about $50 million.

Plans to increase drilling are part of a broader strategy to increase oil production, which has declined steadily since the 1980s.

The strategy to attract investments has also included reducing obstacles for energy companies, which formed an association in 2013 to lobby for permitting changes. Energy and Mines Minister Eleodoro Mayorga, a well-known petroleum engineer who took office in February 2014, has stated that his office would work with the private sector to reduce red tape and community conflicts that have delayed

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oil and gas investments. Officials hope that these reforms will help reverse more than two-decades of declining crude oil output.

LOGISTICS The startup of new mines has required Perú to increase its logistics capacities.

In April, global logistics company Impala inaugurated an $80 million project to double the storage area capacity of its mineral concentrate warehouse in Callao, Perú’s largest port.

The increased capacity at the warehouse will service the Toromocho copper mine, located in Perú’s central Andes. The mine, which is owned by China’s Chinalco, began operations in late 2013 and is expected to reach full-capacity production by later this year.

Officials from Impala, which is a sub-

sidiary of Dutch multinational Trafigura Beheer, have been reported saying that they could invest another $200 million in a port in northern Perú to service the country’s expanding agro-industrial sector.

Back in Callao, a consortium that includes Impala, Chinalco, and three other firms, began operations in May at a minerals pier that will service increased copper production from the central Andes.

That project, which cost $163 million, includes a conveyor belt that will cut back on the use of cargo trucks to transport minerals to the pier.

FINANCIAL SERVICES In the financial sector, banks have continued to see strong demand for loans from both individuals looking to buy consumer goods and businesses interested in financing expansions.

PHOTO: ENRIQUE CASTRO-MENDIVIL/REU TERS/NEWSCOM

Energy and Mines Minister Eleodoro Mayorga, who took office in February 2014, has stated that his office would work with the private sector to reduce red tape and community conflicts that have delayed oil and gas investments.

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COUNTRY REPORT PERÚ

Education Minister Jaime Saavedra visits Ugel 05 in San Juan de Lurigancho.

Education Minister Jaime Saavedra said that Perú needs a radical change in its education system in order to maintain economic growth, with part of the change involving better evaluations of teacher performance.

TOURISM Like other sectors, tourism in Perú, home to mysterious Inca ruins like Machu Pic-

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chu and biodiverse hotspots in the Amazon rainforest, has grown faster than in other countries in recent years. In 2011 and 2012, for example, the Trade and Tourism Ministry says that Perú’s tourism sector expanded about three times faster than the global tourism industry.

The ministry is projecting growth of about 14 percent in tourism this year, with about 3.6 million foreign tourists visiting the Andean country to take in its ruins, colonial past, wildlife, sandy beaches and world-renowned cuisine.

Increasingly, Peruvians are playing a bigger role in the growth of local tourism.

During holidays like Easter weekend, for example, residents in Lima alone spend about $140 million on trips to places like Ayacucho and Cusco.

The expectation is that the growth will continue. By 2021, the government’s national tourism plan (Pentur) forecasts that some five million foreign tourists will come to Perú, resulting in greater travel, restaurant and hotel demands. An industry group known as the Bureau of Conventions estimates that hotel growth will rise by 15 percent this year.

EDUCATION A major weak spot in the longer term outlook for Perú’s growth is the country’s education system.

Both government officials and private sector economists recognize that sustainable growth over the long term will depend on the ability to improve a public primary and secondary education system that ranks as one of the worst in the region.

The latest alarm bell came in late 2013 when the Organization of Economic Cooperation and Development (Oecd) announced the results of its standardized tests in reading comprehension, math and science. The test, known as the Programme for International Student Assessment, or PISA, found that Perú came in last place of the 65 countries that were included in the evaluation.

Education Minister Jaime Saavedra said that Perú needs a radical change in its education system in order to maintain economic growth, with part of the change involving better evaluations of teacher performance.

Ryan Dube reported from Lima.

PHOTO: PERCY RAMIREZ/EL COMERCIO DE PERU/NEWSCOM

According to the private-sector banking association Asbanc, total loans from the financial system increased 14 percent, while the default rate remained at a low 2.37 percent. Most of the growth in loans has come from the sol currency, rather than the U.S. dollar. Asbanc forecasts that the financial system will see its loans increase by about 15 percent this year, slightly higher than 2013.

Perú’s strong economy has attracted new banks to the country, looking to do business with clients that are investing in mining and other sectors. In February, China’s biggest bank, the Industrial and Commercial Bank of China Ltd., opened an office in Perú.

The deputy general manager of Icbc’s Perú office, Eduardo Patsias, said the bank would initially focus on corporate clients, such as Chinese companies that are investing in Perú’s mining, energy and fishing sectors, as well as Peruvian firms looking to export to China.

POLICY AGENDA Y O U T H U N E M P LO Y M E N T

HELP WANTED: YOUTH NEED APPLY While companies lack qualified personnel, untrained young workers remain idle. High youth unemployment is a social burden that needs a solution.

BY CARMEN PAGÉS-SERRA*

A number of youth initiatives are underway in the region.

Regrettably, very few are subjected to the kind of rigorous evaluations that assess whether programs attain their intended results. Out of cases that have been evaluated, this is what we have learned:

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To achieve an effective school-towork transition, stronger links need

LATIN TRADE JULY-AUGUST 2014

to be built between education and employers. Countries with education systems that place more emphasis on vocational and technical education, and where youth acquire part of their training in companies, show better results in terms of youth employment than countries where education is more general and/or disconnected from the labor market.

2

Young people (and their families) need information and guidance about their options and labor-market returns in order to make the best decisions. Deciding what occupation to pursue is complex and often based on very limited information. This can lead to poor decisions, such as choosing occupations with low returns or having unrealistic expectations. Career guidance to young people could be a costeffective way of improving decisionmaking.

3

Certain groups require more effort in order to be integrated into the workforce. High school drop outs, and youth from very disadvantaged backgrounds or with disabilities, require particular attention to be integrated into the workforce. The evidence shows that interventions that include vocational guidance and placement in vacancies, combined with short

classroom-based training programs and in-company vocational training, have obtained better results in terms of increasing employment rates and earnings than those based on in-class vocational training alone.

4

Apprenticeship programs may be a good passport to better jobs for young people out of the school system.

Recent evaluations of apprenticeship programs in the United States and Germany indicate that program participants obtained relatively high returns, with a powerful effect on both incomes and likelihood of being employed.

Overall, the evidence underscores that securing strong futures for today’s youth requires more than the actions of youth themselves, or their governments; employers also need to be heavily involved, helping educators to identify the skills companies need and providing opportunities for on the-job-learning. In countries where employers, workers and governments join forces, the youth benefit, and the returns are positive for employers. That is, helping the youth to find better jobs is not only a matter of social responsibility; it also makes good business sense. *Carmen Pagés-Serra is chief of the Labor Markets and Social Security Unit at the InterAmerican Development Bank (IDB). The views expressed in this article are her own.

PHOTO: ISTOCKPHOTO.COM/ LUPUS44

I

nvesting in the youth is investing in the future. Yet, today, 15 percent of the youth in Latin America and the Caribbean are unemployed, and one out of every four is neither employed, nor in school or receiving some type of training. While some youth may be helping at home, many are idle, wasting valuable years to acquire experience and skills with which to build their futures. Interestingly, all this occurs at a time where companies are struggling to find workers. According to a recent study by the IDB, one in three firms in the region points to the lack of skills in the labor force as an important, or very important, obstacle for their business. It is necessary to build a bridge between those who are trying to find good workers, and those who are either trying to find good jobs, or not even trying.

How can countries harness youth energy and help companies find the people they need to grow?

Avoiding the Pitfalls of

International Expansion TMF Group helps companies expand and operate across borders.

Launching a foreign-owned business venture in Latin America can be a challenge. In order to capitalize on a promising new market opportunity, multinational companies must navigate a complex set of legal, accounting, tax, real estate and human resource (HR) issues.

To minimize risk and avoid the pitfalls, many multinationals are turning to global firms that can provide valuable back-office services and support for their international expansion plans.

“As confidence in the global economic outlook improves, more and more multinational businesses are looking to Latin America grow their revenues and profitability,” says Luigi Garlati (lower right), head of (Americas) at TMF Group, a leading global provider of support services to multinational businesses. “However, a failure to understand the numerous legal, regulatory and cultural issues that shape the business environment can be potentially disastrous.”

If a company violates the U.S. Foreign Corrupt Practices Act (FCPA), the UK’s Anti-Bribery Law or international anti-money laundering (AML) regulations, the consequences can be severe. For instance, failure to comply with the FCPA, which prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business, can lead to substantial fines against a publicly traded company, as well as its officers, directors, employees, stockholders, agents, consultants, distributors, joint-venture partners, and others. That makes it essential to maintain accurate accounting and financial records as well as a system of internal controls.

The compliance environment is particularly daunting in Latin America, where Argentina, Bolivia and Peru took the top three positions in TMF Group’s Global Benchmark Complexity Index, a survey of corporate secretarial experts based in more than 100 offices around the world. The study combined responses from both objective and subjective questions to evaluate the difficulty of doing business in jurisdictions in the Americas, Asia, Europe, Africa and Australia. Other Latin American jurisdictions in the top 25 were Nicaragua, Ecuador, Brazil, Venezuela, Chile, Dominican Republic, Guatemala and Honduras.

When expanding across borders, multinationals need to allocate more internal and external resources to comply with the requirements of complex jurisdictions, according to Garlati. To make good business decisions, international companies must also conduct in-depth due diligence research in a variety of fields, including the following:

Allocating appropriate resources

• Determining the most appropriate type of legal entity for compliance, risk management and tax purposes.

• Finding trustworthy local business partners, suppliers and service providers.

• Identifying a safe and secure location for a physical facility and whether to lease or purchase the property.

SPECIAL ADVERTISING FEATURE

• Screening, recruiting and hiring a productive workforce in compliance with local and national labor laws.

Rather than try to resolve these issues with an in-house task force or rely on the advice of independent local professionals in each country, Garlati suggests engaging a firm with global expertise in functional areas like tax, accounting, and human resources as well as on-theground knowledge of local markets.

“Our company’s slogan, ‘Global reach, local knowledge,’ reflects that combination of strategies,” says Garlati. “TMF Group has dedicated specialists in place around the world that take care of the administrative burden so companies can focus on their global ambitions. Our teams of professionals have an in-depth knowledge of the requirements necessary to help establish and maintain fully compliant operating, holding and finance entities around the world.”

Ari Ackerman, marketing director (Americas) at TMF Group adds, “TMF Group offers several QuickStart service packages to streamline entry into new markets, including a program for Latin American businesses considering a northward expansion to the United States or for companies around the world looking to penetrate markets in the Americas. Other

Global reach Local knowledge

QuickStart packages are designed to help multinationals simplify functions throughout a geographic region, or consolidate back-office service providers from multiple countries into a single provider”.

“As an independent global firm, we can provide multinationals with consistent reporting procedures across jurisdictions, while being fully compliant with local regulations,” Garlati says. “We provide a single point of contact no matter where a company operates, increasing accountability while reducing the time spent on compliance-related matters.”

One of TMF Group’s multinational clients is ISS Group, a Denmark-based multinational facility services company with local operations in more than 50 countries in Latin America, Europe, Asia and other locations. “TMF Group is a trustworthy global partner that supports our value proposition of mitigating our clients’ risk through a consistent and reliable accounting, back-office and compliance service in countries where ISS is not currently present,” says Søren Gammelgaard, compliance manager.

Being able to focus on the

Expanding core business issues is international particularly important at a operations time when many multi-

nationals are expanding their operations. TMF Group recently partnered with global research firm IDC to survey senior decision makers from corporations which were either planning to expand overseas or already had done so.

A large proportion of those surveyed – around 30 percent – plan to enter new markets within the next 12 months with this figure rising to 64 percent within two years, according to the IDC white paper, “Avoiding the Pitfalls of International Expansion.” This suggests a significant shift in business attitudes and priorities away from a conservative, often inwardly looking approach to a more confident, expansionist one, said the report.

Other findings of the report include: • The need to set up efficient financial procedures and banking facilities is also a major issue, and is quickly supplemented by the challenge of reconciling data from multiple subsidiaries, often involving delays and costs for the corporate finance function. Getting local financial reporting and regulatory filings done on time and to the exact local standards is a major issue. This is an area where on- the-ground local partners can play an important supporting role.

• Local expertise and on-the-ground service providers can play a critical role in successful territorial expansion, particularly in terms of creating the new legal entity, recruiting and training its senior management and its operational workers, and creating and supporting the running of the day-to-day “mechanics,” such as payroll processing, cash management, regulatory reporting, and so on. These are areas where local knowledge and experience is often vital, if not an absolute necessity.

• Enterprises considering international expansion should begin planning early and carry out extensive research into the specificities SPECIAL ADVERTISING FEATURE

of the territory’s political, legal, and cultural environments, as well as into the competitive landscape and the target market and/or workforce.

• Enterprises should give serious consideration to using third parties with strong local presence, particularly in the early phases of territorial expansion.

“One of the key recommendations in the IDC report was for expanding multinationals to consider working with third parties who have the requisite experience and local knowledge to help avoid the pitfall,” says Garlati.

“Our team can deliver the right package of corporate compliance services to ensure that new subsidiaries are properly constituted and remain compliant with legal and working practices.”

TMF Group specializes in helping companies expand About TMF Group and invest seamlessly across borders. The company’s expert accountants, legal, financial, corporate secretarial and HR and payroll professionals are located around the world, enabling clients to operate their corporate structures, finance vehicles and investment funds in different geographical locations. With more than 80 local offices around the world, TMF Group helps companies of all sizes grow their operations, simplifying the process of doing business across borders. For more information, visit www.tmf-group.com.

SPECIAL REPORT

IDB Project for integration of highways to Chile and Bolivia.

Modern building and elevated footbridge, downtown, Santiago, Chile.

Streets of Sao Paolo, Brazil.

Itaipu dam near Iguacu falls, Brazil

THE NEW VISION Productivity is fundamental for investment in infrastructure to succeed. This opens enormous opportunities for the small business sector.

BY JAIME MEJÍA

W

hen speaking of infrastructure, analysts often focus on the condition of the ports, highways, airports, energy plants and other bundles of large works that make up a country’s capital stock. For Tomas Serebrisky, the principal economic advisor of the Infrastructure and Environmental Sector of the Inter-American Development Bank (IDB), there’s a very important factor that may be hidden behind all the macro measures that comprise the investment of countries in large infrastructure works: the productivity of this investment. “It’s clear that we need more investment in infrastructure in Latin

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America, but what’s less clear is what type of investment in which projects, or what will generate higher productivity from this investment,” he said.

Serebrisky cites a recent report from the global consulting firm McKinsey & Company that shows that if all the countries of the world were to focus on raising the productivity of infrastructure investment, the global economy would save the considerable sum of $1 trillion per year. According to the McKinsey study, just supporting the economic growth of the world between now and 2030, global infrastructure investment would have

“It’s clear that we need more investment in infrastructure in Latin America, but what’s less clear is what type of investment in which projects, or what will generate higher productivity from this investment.”

Tomas Serebrisky, the principal economic advisor of the Infrastructure and Environmental Sector of the Inter-American Development Bank (IDB)

to increase by 60 percent, from the $36 trillion that was invested in the last two decades worldwide to $57 trillion in the next two decades.

The McKinsey report says these projections are based on the investment the world will need to make just to sustain global GDP growth at its present rate and maintain current levels of infrastructure capacity. It doesn’t take into account the possibility of reducing the infrastructure shortcomings present in many economies. The projection would only maintain current levels.

But the McKinsey report does go a bit further.

It estimates what would happen if countries were to use best practices in choosing and developing investment in infrastructure projects. The study concludes that countries would be able to obtain savings of close to 40 percent just by focusing on improving the productivity of infrastructure investment. This saving is where the figure of $1 trillion per year comes from. The study is based on an analysis of 400 cases of best practices, and among those, at least 100 of them quantified the savings realized by using best practices. “The achievement of these savings in productivity would not require leading-edge innovation. All it would need is the application of practices that have been established and proven throughout the world,” the report stated.

According to the study, the potential for promoting productivity is very high because countries often invest in projects that have not been well conceived, take a lot of time to get approved, miss opportunities for innovation, and in general, do not make the most of existing assets before opting for the building of new infrastructure assets.

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T R A D E A M É R I C A S & C O N N E CTA M E R I C A S

Building the Americas September 3-4, 2014 JW Marriott Marquis Miami

In Partnership with

Infrastructure development is key to ensuring Latin America’s future prosperity. The region needs to double its current investment in infrastructure development in order to stay competitive in the world. Currently, the region invests around 2.5 percent of GDP. Doubling the region’s infrastructure spending would add growth of as much as 2 percent a year to the region, and if maintained for 20 years, could help the region reach similar levels to East Asia. The private sector will be key in filling in this development deficit.

The Powerhouse Gathering in the Americas Latin Business Chronicle January 2014

Trade Américas & ConnectAmericas Expo Infrastructure

Join the leading companies, government offices, and small and medium size businesses, and hear about strategies, challenges, and opportunities

Lauro Bravar

Gabriel de la Concha

Director of Business Development, OHL

Chief Investment Officer ICA

José Manuel Loureda López

Luis Fernando Andrade Moreno

Director of International Division, Sacyr

President,National Infrastructure Agency of Colombia

Adi J. Blum Director First Reserve

Learn • Participate in a highly interactive two day event where you will learn, from high-level business and government leaders in the region and beyond, about the latest trends and opportunities in the infrastructure sector in Latin America and the Caribbean.

Connect • Network with key public and private players in the infrastructure sector, and establish links with potential clients, suppliers, and investors • Participate in Business Matchmaking Sessions

Finance • Connect with infrastructure financiers, learn about the latest trends and opportunities in infrastructure finance in the region.

For additional information on how you can register, please contact Stephanie Portillo @ 305-749-0884 or sportillo@latintrade.com.

www.tradeamericas.com

SPECIAL REPORT T R A D E A M É R I C A S & C O N N E CTA M E R I C A S

THE NEED FOR INVESTMENT IN LATIN AMERICA How much investment is needed in Latin America? According to the IDB, Latin America will have to invest close to five percent of its GDP, or $250 billion in 2010, for a long time if it is to close the infrastructure gap.

The IDB says this number is a regional average and does not take into account the necessary investments for adapting to climate change, which is estimated at $30 billion per year, or 0.6 percent of GDP. The infrastructure gap, or the difference between the infrastructure capacity of the region compared with that of developed countries, has widened in the last 25 or 30 years. The reason is tied to the fall of investment. The IDB report says infrastructure investment came to more than three percent of GDP during the 1980s, but has since fallen below that level. This decline is a result of a major reduction in public investment, which slid to just one percent of GDP during the 1990s. It didn’t start to recover until after 2006, with the increased fiscal breathing room that resulted from the prudent macroeconomic policies that were put into practice in the region.

In another development, private investment also lost traction in the 1990s, and even now, doesn’t represent more than one percent of GDP at the regional level. According to the IDB, if current trends in the composition of

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investment continue, public investment will continue to be the engine of infrastructure investment in Latin America.

REGIONAL CHALLENGES Looking to the future, Latin America faces a series of challenges that will make it even more necessary to boost infrastructure investment. An IDB report identifies five hotspots that represent the huge, future regional infrastructure challenges: globalization of trade, increasing urbanization, growth of per capita income, increased energy demand and the increase of greenhouse gas emissions, and growing vulnerability to natural disasters.

Globalization: More and more products are assembled with parts that come from various regions. As well, tariff barriers have fallen from 38 percent in 1985 to nine percent in 2011. This poses a huge challenge to infrastructure and logistics that Latin America will have to respond to.

Urbanization: The population of Latin America that lives in cities rose from 50 percent in 1970 to 80 percent in 2013. Latin American cities add six million people to their population every year, and that accelerated growth calls for a response in infrastructure.

Per capita income: The increase in per capita income and the easier credit available over the last decade in Latin America has enabled an important segment of the population to own

their own vehicles for the first time. The direct effect has been an increase in automobile ownership, which surpassed 131 vehicles per 1,000 of population in 2010. It’s estimated to rise to more than 280 in 2020, with the corresponding urban congestion, increased exhaust emissions and problems of road safety.

Growth and the demand for energy: It’s estimated that demand for energy will grow by 25 percent between 2012 and 2020, and the sources of power generation that use non-renewable resources will also increase in the region. This will create challenges from the standpoint of environmental sustainability.

Increase in emissions: Another challenge to infrastructure is that if the current pattern of emission generation doesn’t change in the region, emissions will increase by 60 percent by the year 2050, and will represent costs of between 1.8 percent and 2.5 percent of GDP. Natural disasters: The frequency of natural disasters and their cost have dramatically increased in the region. Economic damages in the last three decades (1980-2010) surpassed $110 billion, more than the damages recorded during the eight previous decades (1900-1980). Latin America has the highest median cost of economic damage per disaster in the world (0.18 percent of GDP per event). This represents an enormous challenge both in the management of resources and in the increase in investment in infrastructure.

PHOTO: GTW IMAGEBROKER/NEWSCOM

Zarate-Brazo Largo Bridge across the Parana River, Buenos-Aires, Argentina.

SPECIAL REPORT T R A D E A M É R I C A S & C O N N E CTA M E R I C A S

OPPORTUNITIES FOR SMALL BUSINESS The so-called infrastructure gap in Latin America represents an opportunity for small and medium-sized businesses in the region.

“Significant investments are required not only for large infrastructure projects, but also for infrastructure projects on a smaller scale,” said Ana María Orellana, head of debt investments for the Inter-American Investment Corporation (IIC), a member of the IDB group.

According to the IIC, the infrastructure market is enormous in Latin America and small businesses, with the support of the financial system, have a big opportunity, especially in areas like small renewable energy projects, water projects, desalinization, small projects in ports and airports, storage plants and logistics projects.

Between 2009 and 2013, the IIC approved $219.3 billion in financing for small and medium-sized businesses in Latin America.

One example of an IIC-financed project is the $7 million widening of a container yard in Argentina, carried out by Terminal Zárate S.A. Another project was the construction of a new air terminal for the city of Liberia in Costa Rica, for $7.95 million.

In renewable energy, a project for generating energy was carried out by Biomasa in Belize, with a total cost of $53.5 million.

There’s also a wind energy project in Argentina for $21.2 million, and a $76.8 million hydroelectric plant in Ecuador, which can generate 48 megawatts.

But huge challenges remain. According to Orellana, many Latin American small businesses lack the internal capacity and sufficient knowledge to develop projects, and also need injections of capital. In the future, she hopes that private capital funds will get involved in working with these companies for the development of projects.

Jaime Mejía reported from Miami.

SPECIAL ADVERTISING FEATURE

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What is Visa’s strategy for the SMB segment?

What’s the greatest opportunity for growth and development among SMBs?

This segment comprises over 95% of companies in the region, and accounts for nearly 56% of jobs and 30% of Latin American GDP. Visa, with more than 30 million active cards for SMBs in the Americas, enables those businesses to access the electronic payment industry and penetrate international markets.

Visa works closely with financial institutions to provide payment and collection solutions, serving the needs of companies of different sizes. We’re aware of the challenges they face (access to financing, interaction with other geographies, operative efficiencies, etc).

Solutions including debit, prepaid, revolving credit, working capital and business-to-business allow SMBs to conduct transactions in a secure manner, maintain control of their cash flows and obtain financing.

The global economy provides opportunity and challenges to SMBs. There are more than 70 million SMBs in the region, but only one in twenty does some type of international business. According to a study commissioned by Visa, 50% of the SMBs in the region engage in trading as a response to an external demand.

With the purpose of promoting the internationalization of SMBs, Visa has joined the Inter-American Development Bank (IDB), DHL, Google and Alibaba, to promote ConnectAmericas - a digital platform designed to facilitate networking and help SMBs connect with international supply chains.

By combining IDB’s capabilities with our knowledge in the SMB segment, ConnectAmericas (www.connectamericas.com) will become a major industry leader in our region.

JULY-AUGUST 2014 LATIN TRADE

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INDUSTRY REPORT INSURANCE

INSURERS EYE THE REGION

Latin America is the promised land for insurers looking for double-digit premium growth.

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ith an average real growth rate of more than 10 percent – over the last four years – in life insurance premiums, Latin America is currently generating a revolution for insurance companies worldwide. As premiums keep increasing at a double-digit pace, it seems that the region represents the last major untapped resource of growth in the foreseeable future.

Though, this is not without effort.

For Alessandro Jarzynski, CEO of QBE Insurance Group in Brazil, Ecuador, Chile, Colombia and Puerto Rico, the main challenge nowadays, “is definitely soft markets” since rates have been decreasing year over year. Some countries, like Brazil, are “very competitive” and it is “very hard to have a sizable operation where

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you can compete,” he admitted to Latin Trade.

While there may be obstacles, “Latin America is still a big priority to the group, and we are still very interested in growing in the region.”

In 2013, QBE registered a net earned premium of $1.2 billion through its operations in seven countries in North, Central and South America.

During the peak of the financial crisis in 2008, other regions like Emerging Asia and Central and Eastern Europe became the main focus of growth for the industry. But since 2010, Latin America has outpaced, and overshadowed, any other emerging market contender.

Insurance penetration rates still remain low in many of the Latin American countries, particularly in life insurance, despite continuing

PHOTO: ISTOCKPHOTOS.COM/ VECTORAART

BY JOSÉ LUIS DE HARO

INDUSTRY REPORT INSURANCE

economic growth and a decrease in poverty.

According to Ernst & Young, strong regional growth in small businesses, the modernization of mature industries and infrastructure will be the main pillars that will support a continuing expansion over the next couple of years. Brazil and México have become hotspots for insurers.

Total direct premium in Latin America’s biggest economy increased 14 percent in 2013, while total insurance in México grew at 11 percent, and is well above the country’s nominal GDP. Other regions are even more attractive. Insurance premiums in Perú grew 16 percent.

“The middle class is growing. And it is important to offer customers good value products early on, and to continue to accompany them.

This can protect the wealth that they are acquiring and presents growth opportunities for us,” said Helga Jung, member of the board of management of Allianz SE, Insurance Iberia and Latin America, M&A, Legal and Compliance.

Life, general and composite insurers from North America and Europe, which have been faced with slow business growth in their home markets, are particularly keen on increasing their exposure in Latin America. In the case of Allianz, their Latin American operations generated an operating profit of $191 million over total revenues of $3.6 billion in 2013. The number of customers increased 6.5 percent year over year. “Right now, we are introducing a new business model. With it, we can significantly improve our efficiency levels, reducing our internal expenses by several percentage points and positioning ourselves even better,” explained Jung when asked about the competitive edge of Allianz in Argentina, Colombia, México and Brazil, their largest markets in Latin America.

“This platform means a cultural transformation that will allow us to be more efficient and also work in a decentralized way with large and small brokers. It will give us a competitive advantage in all insurance segments where we are active. In short: we’re staying on course,” she confirmed while admitting that economic growth in Latin America was somewhat below expectations in 2013, and that the region as a whole is going through some turbulence. Improvement in Latin America will depend on the region’s ability to strengthen global demand for exports and stable domestic demand. Some countries like México and Brazil have generally

achieved macroeconomic stability, but structural reforms are needed to accelerate growth.

“I think that there are, certainly, plenty of opportunities, but also challenges we have to meet in the meantime, and we have to see how we address them. I think talent is one of those challenges. There’s a lot of growth in the region.

There are quite a few entrants that have been attracted by that kind of growth opportunity.

And so, the competition can be fierce,” said Michael Raney, CEO at Zurich Latin America.

For Ricardo Brockmann, Marsh’s CEO in

“There is a need for a more sophisticated risk management culture in companies in the region that are trying to compete globally or those that are expanding internationally.”

Ricardo Brockmann, CEO, Marsh Latin America

Latin America, one of the major, and most important, challenges in the region is still “the low penetration in almost all lines, when compared to other geographies in the world,” he told Latin Trade.

Consulting firm PricewaterhouseCoopers points out that international groups have some potential advantages as market entrants. As the Latin American middle class expands, demand for lifestyle products such as unemployment insurance or college savings plans will grow. This offers international groups a chance to leverage their experience in more sophisticated markets.

International groups may also benefit from a lower cost of capital than local players. Regulatory attitudes to reputable international buyers are typically neutral, but according to Marsh Risk Management Research, government regulation is “among the headwinds facing the insurance industry” since, in some cases, “it has introduced a level of uncertainty, and in the most extreme cases resulted in a withdrawal of capacity.”

“We’re actually investing a lot of money in making sure we can change with the regulatory environment which, in the end, is there to protect consumers,” explained Jim Dwane, president and CEO of the AIG Property Casualty Unit in Latin America and Caribbean. With operations in 15 countries, and over 100 products in the pipeline in the region, AIG wants to double its revenues in Latin America over the next five years. “We won’t sacrifice responsible underwriting and profitability for that growth,” he said. Dwane feels that the company is in a good position to achieve its goal “carefully.”

“Last year, on a net written premium basis, we grew over 20 percent on a foreign exchange adjusted basis. And in the first quarter of this year, we grew over 20 percent again on a foreign exchange adjusted basis.”

In the Latin American countries where AIG operates, there is a combined total GDP of $4.5 trillion and a property and casualty market of approximately $60 billion. As Dwane points out, there is ample ground in the region for insurers to develop new and interesting products, “whether it be major appliance insurance, or on the consumer side, cancer insurance.” As for AIG, the emerging concern about cyber risks, for example, a specialty covered globally by the company for more than a decade, has become the latest bet in Latin America. Others, like environmental or pollution insurance, are still fairly nascent markets in the region, but will continue to grow as they have in many other parts of the world.

Multilatinas are also embracing a new phase of risk management. As they expand globally, they are implementing far-flung global supply chains, which introduce a range of credit, business interruption and other financial exposures.

“This is a great opportunity,” Raney said. “There is a need for a more sophisticated risk management culture in companies in the region that are trying to compete globally or those that are expanding internationally,” Brockmann pointed out. These complexities require more targeted risk management and risk transfer solutions. Rising entrepreneurship, the growing small business segment and the expanding global needs of more mature businesses in many regions are propelling significant increases in commercial insurance premiums.

José Luis de Haro reported from New York.

JULY-AUGUST 2014 LATIN TRADE

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INDUSTRY REPORT INSURANCE

THE NEXT BATTLEGROUND International insurers are trying to increase their market share through acquisitions. A look at their strategies.

BY JOSÉ LUIS DE HARO

P

atience, flexibility and boldness. That is the key combination for potential foreign buyers willing to make M&As in Latin America work. Not an easy task to achieve, as a number of U.S., European, Japanese and Chinese firms already present in the region have struggled to increase their market share through inorganic growth. “I think there are companies with cash on their balance sheets doing that,” said Michael Raney, Zurich CEO for Latin America, when asked about this trend of international insurers trying to gain competitive advantages in markets like Brazil. “We don’t include M&A in our current strategic plans,” he confirmed to Latin Trade, pointing out that Zurich’s plans for

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the region “are really done on an organic basis.”

With operations in Argentina, Brazil, Chile, México and Venezuela, Raney considers that each of these markets play a role for the company. Brazil and México are the countries with the most immediate growth prospects in terms of size. “We see Latin America as being an attractive place for us to do business and to grow profitably over the coming years,” explained the Zurich CEO, while not discarding the possibility of expanding into other appealing markets like Colombia or Perú. The company does not comment about specific plans, but Raney’s includes M&A activity if Zurich finds the company that fits its strategy and goals.

Other global insurers are more eager when it comes to M&A. High valuations will continue to tempt regional and intercontinental groups to sell their business units – as seen in BBVA’s disposal of its Chilean pensions’ business to MetLife, and Principal’s acquisition of Cuprum. However, local buyers will often have an advantage in terms of the synergies they can create. For Alessandro Jarzynski, regional CEO for QBE Insurance Group in Brazil, Ecuador, Chile, Colombia & Puerto Rico, the success in expanding operations in the region will come “from a combination between organic growth and acquisitions. We will still be looking for acquisition opportunities, but we are also expanding only in countries that we are already in,” he told Latin Trade.

It seems that big international insurers are not rushing to acquire local competitors, but they are keeping their eyes open for enticing opportunities. “We are committed to continue to grow organically and profitably in Latin America, but obviously, we continuously watch out for new market opportunities to enlarge our business capacity,” explained Helga Jung, top executive for Allianz in the region.

In AIG’s case, “in order to even consider inorganic expansion, you have to ensure that you have a good, solid, stable organization,” said Jim Dwane, AIG’s CEO in Latin America. “We are very focused on growing our existing business, investing in geographies like Brazil, Colombia, and México, innovating with new products… so we can feel strongly about our foundation,” confirmed Dwane. “It has to exist before you consider inorganic opportunity, but, of course, we will consider inorganic opportunities in the future,” he stated.

José Luis de Haro reported from New York.

PHOTO: ISTOCKPHOTOS.COM/ALEXSL

It seems that big international insurers are not rushing to acquire local competitors, but they are keeping their eyes open for enticing opportunities.

CFO SERIES M É X I C O , D . F.

Carlos Capistrán, Director/ Chief México Economist, Bank of America Merrill Lynch

Jorge Alegría, CEO, Mexican Derivatives Exchange (MexDer)

Gerardo Pinto Urrutia, Finance Director, Estafeta Mexicana

Philippe Schrader, President, CHPS International LLC

Mario Farcic, CFO, Zurich General Insurance México

NOT JUST ABOUT NUMBERS ajor structural reforms, infrastructure investments and signs of economic recovery continue to put México on the spotlight of investors in Latin America and the world. To gain insight from a financial viewpoint, Latin Trade hosted its most recent CFO Event at the México City Four Seasons hotel, where finance executives from top Mexican and other multinationals discussed the Mexican and Latin American economic outlook, and analyzed the changing role of the CFO in today’s environment.

Carlos Capistrán, México economist for Bank of America Merrill Lynch, opened the session with a presentation on México’s growth estimates and outlook. Despite media reports with a pessimistic tendency, México is showing signs of steady growth, boosted in particular by the car manufacturing industry, and is in the

The role of the CFO requires actively taking part in making strategic and tactical decisions. spotlight for many large multinationals.

Gerardo Pinto Urrutia, Estafeta Mexicana finance director, kicked off the group discussion about the role of the CFO: “Leading Business Transformation.”

Participants agreed that the role of the CFO is no longer just about numbers, but also actively taking part in decision making, being an advisor in purchases, as well as being a co-pilot to the CEO, by helping develop operational plans and making tactical decisions.

Mario Farcic, CFO Zurich General Insurance México, led the workshop: Building the right team: “Strategies for developing and retaining talent.” The workshop gathered participants’ insight

CFO Event in México, D.F.

into the CFO’s role in spotting and placing professionals in the financial area of companies to drive success.

Special guest speaker Jorge Alegría, CEO of Mexican Derivatives Exchange, MexDer, delivered the event’s closing presentation: “Development of Financial Markets,” highlighting a dynamic outlook for the Mexican market and how changes in technology have affected trading.

Latin Trade’s CFO events are invitationonly events that offer CFOs, finance directors, treasurers and controllers from various industries in Latin America the opportunity to participate in high-level peer group discussions and interact in a private setting.

Moira,Paz-Estenssoro,Director-Representative,CAF, México; Miguel Chala, Publisher, Latin Trade Group

CONNECTING LATIN AMERICA’S CFO COMMUNITY

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PHOTOS: JORGE GONZÁLEZ

M

CFO SERIES

Zwannee Linares, Tourism and New Segment Director, Avianca Holdings; Gerardo Grajales López, CFO, Avianca Holdings - 2014 CFO of the Year - Colombia

ARCHITECT OF TRANSFORMATION The CFO of Avianca Holdings, Gerardo Grajales López, named CFO of the Year in Colombia.

BY SANTIAGO GUTIÉRREZ

T

he CFO of Avianca Holdings, Gerardo Grajales López, had a titanic task before him in 2002. He had to find the funds needed for the recovery of the airline Avianca, the oldest in Latin America. It had just emerged from the protection of Chapter 11, as the bankruptcy law is known in the United States. The amount he needed was relatively small: $15 million. “It wasn’t a very big amount, but it was an odyssey to convince the bankers. We had no credibility with the financial system,” he recalls.

In the end, he drew up a fiduciary structure that provided enough guarantees to satisfy the lenders and got the money. Since then, Avianca hasn’t looked back. By 2013, its 2002 fleet of 31 aircraft had expanded to 163. Over the same period, the Ebitdar mushroomed from $50 million to $828 million, and sales expanded from $623 million to $4.609 billion.

The company’s financial needs haven’t stopped growing, but Grajales López and his team have been wise enough to accompany this upswing with ever more interesting financial operations.

In May 2013, Avianca made its debut in the international debt market when it issued $300 million of seven-year bonds. On November 5th, it listed its shares on the New York Stock Exchange with a level 3 ADR, which enabled it to increase company assets by $187.5 million, and on April 8th, it successfully reopened its bond offer and obtained another $250 million.

The story of Avianca Holdings, which rose from virtual bankruptcy in 2002 to being number 141 of Latin America’s largest companies just 10 years later, is the stuff of legend. But to make it happen, the financial factor was crucial.

For that, Grajales López, who was there at every stage of the recovery process, received the

distinction in May of being named Colombia’s CFO of the Year. Latin Trade presents the award each year to financial professionals who have distinguished themselves by their progress and their achievements.

Grajales López thinks that today the work of finance directors in the new Latin American companies has changed substantially.

“The role of being a low-profile person involved in the company, which was the concept of the 1980s, 90s and early 2000s, is no longer enough,” he says.

With the development of the multilatinas, companies in the region are more visible and have better access to capital markets. This calls for another type of financial director, one with a more central role, one in which he is even more visible to investors and creditors, and increasingly, to the analysts and stakeholders outside of one’s country.

He also thinks CFOs have a different task within their own companies. He believes they must put the antiquated “financial emperors” out of circulation. “I don’t believe in the typical financial executive who has to pass everything through his hands to gain power, who micromanages. His job is to put it all together,” he says. He finds that today what’s needed are directors of finance who keep up their technical competence, but who are closer to the organization and above all, more knowledgeable about business and tasks related to trade. “The CFO has to be more complete, more businessoriented, so that he can better anticipate the changes in the business cycle.”

The CFO of Avianca Holdings puts a high value on common sense as a necessary tool for finance directors. He holds that even though it isn’t taught in the university, it can be developed by accumulating a vast knowledge of industry and of one’s own business. “You have to balance theory with common sense to make fast decisions. You have to understand what’s happening on the fly,” he says. “No one has left my office without a practical solution, or at least without a question to rethink a proposal,” he explains.

As for his vision of his position, Grajales López has no doubt about recommending a change of attitude among his colleagues who don’t see the change. “We have to learn that we are front-line soldiers,” he says.

Santiago Gutiérrez reported from Bogotá.

CONNECTING LATIN AMERICA’S CFO COMMUNITY

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PHOTOS: DAVID AMADO PINTOR

B O G OTÁ

TM & Š 2014 Cable News Network. A Time Warner Company. All rights reserved.

where Richard Quest goes to tell the business story

CFO SERIES B O G OTÁ

Ángela Barragán, Finance Director,Getronics (Colombia) Limitada; Hernando Francisco Chica Zuccardi, CFO, ETB

Gerardo Grajales López, CFO, Avianca Holdings; Adriana Nuñez, Senior Finance Director (ANCAM), Mondele-z International

LT CFO Event in Bogota

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atin America will grow asymmetrically, having countries like Perú, Colombia, Chile and Paraguay growing above four percent, and the rest including Brazil lagging behind: that´s the view of the director of the Center for Research on Economics and Finance of the Universidad Eafit, Gustavo Canavire. He believes that there are some structural obstacles that will slow growth in the region, and solutions will not come easy. The fiscal front is a growing problem that needs strong reforms soon, he said at Latin Trade’s

Finance VPs are best suited to make profound corporate changes.

CFO event in Bogota last May. Adriana Núñez, senior finance director (ancam) at Mondelēz International, said that CFOs are in a privileged position to build a culture of compliance and control of processes.

The CFO also could set the right metrics for the company, “measuring what matters, which in the end is building value,” she said. Finance professionals have to be permanent advocates for value creation. “Not only discuss cost control, but also the seeds for growth,” she added.

Núñez thinks that CFOs are best suited to

Mauricio Michelsen, Administrative and Financial Manager, Auto Germana; Rubén Dario Cardenas, Vice President of Finance, Caracol TV; Wilder U. López, CFO, Hewlett Packard Colombia Ltda

influence business transformation, because they see where to create value, understand technology, foster rigorous analysis, and know how to balance risks and rewards.

Diana Rúa, Vice President Corporate Finances, at EPM said that for the past three decades, the company owned by the municipality of Medellín, has been using financial forecasting tools to manage short and long range planning, in a manner largely inherited from multilateralbank practices. “We learned technical, legal and financial rigor from them,” she said.

Jorge Londoño, General Manager, Invamer Gallup

CONNECTING LATIN AMERICA’S CFO COMMUNITY

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Santiago Gutierrez, Executive Editor, Latin Trade Group; Diana Oliva Rúa Jaramillo, CFO, Empresas Públicas de Medellín (EPM)

PHOTOS: DAVID AMADO PINTOR

THE CHANGING ROLE OF CFOS

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