Latin Trade 22.5 Sep/Oct 2014 - English edition by Latin Trade Group

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LATIN TRADE

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LATIN TRADE SYMPOSIUM & THE 20TH ANNUAL BRAVO BUSINESS AWARDS

TRANSFORMATIONAL

LEADERSHIP BUSINESS AWARDS Champions of excellence in business, government, and social endeavors in Latin America, meet the winners of the 2014 BRAVO Business Awards.

SEPTEMBER / OCTOBER 2014

Laurent Lamothe Prime Minister of Haiti Innovative Leader of the Year

ALSO INSIDE: INDUSTRY REPORT:

MARKET REPORT:

LOGISTICS:

BANKING

MEDELLÍN

TOO FAR TO EXPORT

Monetary normalization: an opportunity for banks in LatAm?

The “Medellín Miracle”

Transportation costs and customs, a challenge for exports.

YOUR BUSINESS SOURCE FOR LATIN AMERICA » WWW.LATINTRADE.COM

SEPTEMBER/OCTOBER 2014

ENTREPRENEUR ENTERPRISE

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KILOMETERS OF STORIES

CONTENTS S E P T E M B E R / O CTO B E R 2 0 1 4

VO L . 2 2 N O . 5

30 40

Features 17-37 18 20 22 24 26 28 30 32

20th Anniversary BRAVO Business Awards: The 2014 Winners Innovative Leader of the Year: Laurent Lamothe, Prime Minister of Haiti Innovative Corporate Leader of the Year: José María Álvarez-Pallete, COO, Telefonica Environmentalist of the Year: Caroline Scheufele, Co-President and Artistic Director, Chopard CEO of the Year: Miguel Galuccio, CEO, YPF Sustainability CEO of the Year: Carlos Fadigas, CEO, Braskem Dynamic CEO of the Year: Fabián Gosselin, CEO, Alsea Social Responsibility CEO of the Year: Ricardo Poma, CEO, Grupo Poma Trade Americas Award: CAF - Development Bank of Latin America

2014 BRAVO Legacy Awards: 34 William R. Rhodes, President and CEO, William R. Rhodes Global Advisors, LLC & Senior Advisor, Citi 36 Enrique V. Iglesias, Former President, Inter-American Development Bank

BRAVO: Innovation

38 Experts Weigh in on Innovation Five past BRAVO Award winners analyze the concept of innovation for Latin Trade and examine the best way to embrace it within organizations.

Trends: Employment

42 Employment Revolution

Latin Trade showcases some little-noticed trends in job creation among Latin America’s largest employers.

Trends: Panamá

46 “Better times are on their way” Exclusive interview with the president of Panama, Juan Carlos Varela

Trends: El Niño

50 The Region Weathers the Storm How will climatic fluctuations affect the region? 4

LATIN TRADE

SEPTEMBER-OCTOBER 2014

Telcos: Brazil

54 Battle for Brazil is on At stake is the Latin American market

Trade: The Nicaragua Canal

56 Controversial Canal Making Waves

The secretive Nicaragua Canal is on track to begin building in December.

Multilatinas: Cielo

60 Cielo’s the Limit

The payments company has managed to be a champion in its local market and has kept foreign competitors abreast. A fantastic success story.

Multilatinas: Banorte

62 Banking on Correspondents Banorte has firmly established itself in its local market through a growing network of non-bank correspondents.

CONTENTS S E P T E M B E R / O CTO B E R 2 0 1 4

Industry Report: Banking

64 A deep change

Logistics: Customs

68 Customs, a serious obstacle

Is the road to monetary normalization in the United States an opportunity for banks in LatAm?

Each day of delay for a cargo at the border can decrease trade between one and seven percent, says an IDB report.

65 A Mexican diversification The answer to uncertainty in the region: “diversify”

Logistics: Transportation

Market Report: Medellín

70 Medellín’s Makeover

66 Too far to export

Reducing internal transportation costs would increase the prospects for selling abroad.

Editor’s Letter 8

VO L . 2 2 N O . 5

Transformational Leadership

Medellín is ready for its comeback, but crime, gangs and corruption remain a challenge, therefore casting doubt on the “Medillín Miracle.”

The Scene 12 Lower revenues from non-renewable resources 12 The worst government in the world

Opinion 14 The Contrarian: Is Latin America becoming radically centrist? By John Price.

Events Latin America Philanthropy Initiative, LAPI 76 Philanthropic Thought and Action

Trade Américas & ConnectAmericas 78 The infrastructure powerhouse gathering The Pacific Alliance 82 Private Investors’ Roundtable CFO SERIES: São Paulo 84 Deciphering the “New Normal”

70 Web Find us online at www.latintrade.com

Cover: 20th Anniversary BRAVO Business Awards Illustration by: Christian Kitzmüller 6

LATIN TRADE

SEPTEMBER-OCTOBER 2014

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TRANSFORMATIONAL LEADERSHIP

very year, the September-October edition of Latin Trade showcases leadership. This time, the spotlight is on transformational leadership. It’s a theme that everyone who follows history will find very relevant, because Latin America’s transformation has been of epic proportions. In 1900, there were just 60 million people in the entire region. At the start of the 20th century, Brazil, the most populous country, had something more than 17 million people, and México, in second place, had 13 million – substantially fewer than the current population of

LATIN TRADE SEPTEMBER-OCTOBER 2014

metropolitan São Paulo, which is roughly 20 million. The beginning of the 20th century isn’t that long ago. We’ve all seen photographs and know by name people close to us who appear in them. But because the change is gradual, it’s easy to forget where we came from and to lose perspective. With today’s Latin American population of nearly 600 million, the spectacular demographic pressure of the last century has forced unprecedented changes in providing public services and in organizing companies, governments and even households. Part of

this new way of doing things has also made it possible for the incomes of Latin Americans to increase to an extent rarely seen before. Per capita income for the region’s eight largest countries – which have easily comparable statistics – grew by more than 13 times between 1900 and 2013. The increase hasn’t been the same for everyone. Some countries lost their way on this road to prosperity. In 1900, for example, per capita income in Argentina was 97 percent of France’s, but today, it’s barely 31 percent. Nor has well-being been spread evenly among the populations. In fact, the region is still the world’s most unequal, with a Gini index of income concentration of close to 0.5, worse than sub-Sahara Africa’s 0.45 and the 0.3 of the members of the Organization for Economic Co-operation and Development. There’s work to be done, but without a doubt Latin America today is much better off than it was a century ago. As well, the stage seems to be set for continued growth. The International Monetary Fund expects that Latin American’s per capita GDP will grow by 20 percent between 2014 and 2018, higher than the 18 percent forecast for the world’s most advanced economies or the European Union’s 16 percent. Trans-Latin companies are also new and powerful players in the improvement of conditions throughout the region. The investment of these Latin American firms in other countries has expanded from less than $5 billion in 1995 to nearly $50 billion in recent years. Behind this transformation are the actions of leaders, especially the ones who have caused another huge metamorphosis in the region: exchanging abstract ideology for the concrete idea of ensuring wellbeing for everyone, today and in the future. These are the people we want to showcase in this edition.

Santiago Gutiérrez, Executive Editor sgutierrez@latintrade.com

PHOTO: ISTOCKPHOTO.COM/ LEEDSN

EDITOR’S LETTER

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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, José Luis de Haro (NY) TRANSLATION: Ken Emmond, Élida Bustos COPY EDITING: Millie Acebal Rousseau (English), Élida Bustos (Spanish) EVENTS & CONFERENCES ASSOCIATE CONFERENCE DIRECTOR Yndira Marin PROGRAM MANAGER Drew Westervelt

EVENTS EXECUTIVE Sandra Bicknell

AUDIENCE DEVELOPMENT Ana Laura Miranda

MARKETING EVENTS MARKETING MANAGER Gina Ortela

DIGITAL MEDIA & MARKETING ASSOCIATE Cristina Díaz

SALES & CIRCULATION ASSOCIATE PUBLISHER Mercedes Fernández

SENIOR ACCOUNT MANAGER /TEAM LEADER Silvia Clarke

ANDEAN REGION/ CENTRAL AMERICA MANAGER Maria Cristina Restrepo

MARKETING & SALES COORDINATOR Viviana Gonzalez For advertising/sponsorship opportunities: cdiaz@latintrade.com or vgonzalez@latintrade.com LATIN BUSINESS CHRONICLE SENIOR MARKETING ASSOCIATE Rosemary Begg OFFICE MANAGER & CIRCULATION Claudia Banegas

Latin Trade Group CHAIRMAN OF THE BOARD Richard Burns GENERAL MANAGER - OPERATIONS Shawn Scott

EXECUTIVE VICE PRESIDENT Hilary Vartanian

ASSISTANT TO THE CHAIRMAN Clara Quiroga

DIRECTOR OF DIGITAL Dennis Rodriguez

Latin Trade Group is a division of Miami Media, LLC, an affiliate of Isis Venture Partners Executive, Editorial, Circulation and Advertising ofﬁces are located at: 75 Valencia Avenue, Suite 1000, Coral Gables, Florida 33134-6135, USA. CUSTOMER SERVICE AND SUBSCRIPTIONS: Please visit www.latintrade.com to order online or call +1 (305) 749-0880. Latin Trade (ISSN 1087-0857, USPS 016715) is published bimonthly, with editions in English and Spanish, by Miami Media, LLC. All rights reserved. Reproduction in whole or part of any text, photograph or illustration without written permission of the publisher is strictly prohibited.

LATIN TRADE SEPTEMBER-OCTOBER 2014

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THE SCENE

LOWER REVENUES FROM NON-RENEWABLE RESOURCES

ccording to a study from the Organization for Economic Cooperation and Development (OECD) and the Inter-American Development Bank (IDB), the unprecedented increase in the prices of raw materials over the past decade, and the introduction of legal reforms to capture rent from non-renewable natural resources, have been critical factors for improving macroeconomic performance and government revenues in the region. The study, called “Overview of Public Administration in Latin

2012, Chile experienced the largest downturn in revenues from non-renewable resources (11.3 percent), because mineral prices have stalled at prices lower than prices during the boom and yielded lower profit margins as a result of rising production costs and currency appreciation. The same thing occurred in México and Perú and to a lesser extent, in Brazil and Argentina. In contrast, Colombia and Ecuador continue to capture higher prices in this area than in the recent past.

America and the Caribbean 2014: Innovation in the management of public finance,” said that in some Latin American countries, the revenues derived from this source comprise a substantial percentage of total government revenues. In Bolivia, Ecuador, México and Venezuela, for example, they accounted for more than 30 percent of all revenues between 2009 and 2012. However, the positive trend governments enjoyed due to that revenue participation appears to be declining: between 2009 and

Relative share of revenues from non-renewable natural resources (Percentage of total revenue) 2000-04

2005-08

2009-12

40 35 30 25 20 15 10 5 0 Ecuador

México

Colombia

Chile

Perú

Argentina

Brasil

Source: OECD and IDB, “Overview of Public Administration in Latin America and the Caribbean 2014: Innovation in the management of public ﬁnance”

THE WORST GOVERNMENT IN THE WORLD

he latest issue of Ideas for Development in the Americas (Idea), a publication of the InterAmerican Development Bank (IDB), called attention to the scourge of patronage. Patronage may be strongly correlated with corruption, and as a result, can negatively affect economic growth and poverty. Unfortunately, Latin America is the world’s worst-rated region for this trait. The quality of governance in Latin America and the Caribbean is lagging compared with the other member countries of the Organization

for Economic Cooperation and Development (OECD), as well as with East Asia and the Pacific, Europe, Central Asia and South Asia, and is slightly below the Middle East and North Africa, and even Sub-Sahara Africa. In Latin America, Chile, Uruguay and Costa Rica have the best government management, while Haiti, Paraguay, Bolivia, Ecuador, Guatemala, Nicaragua and Venezuela are the worst, and they bring the Latin American average down to the worst level in the world.

International Comparison of Government Capacity in Latin America Latin America and Caribbean Sub-Saharan Africa Middle East and North Africa South Asia Europe and Central Asia East Asia and Paciﬁc OECD

Source: IDEA, Inter-American Development Bank, Clientelism: poison for public policy

LATIN TRADE SEPTEMBER-OCTOBER 2014

“REBUILDING” The Port of Prince

Congratulates Laurent Lamothe, Prime Minister of Haiti, recipient of the 2014 INNOVATIVE LEADER OF THE YEAR BRAVO Business Award

www.glfusa.com

IS LATIN AMERICA BECOMING RADICALLY

CENTRIST? BY JOHN PRICE

he year 2014 is proving to be economically disappointing for Latin America. At the same time, there is a new and refreshing air of pragmatism found in much of the region’s political discourse. The two trends are not unrelated. The year 2009 was also a difficult time for the region (-2.2 percent growth), but that year, Latin American leaders got a pass from voters who blamed their economic malaise on an American-made financial crisis. This year, Latin America will be the slowest growing emerging market in the world – disappointing investors and voters alike. Across South America, government coffers are slipping into the red thanks to declining natural resource rents and runaway corrupt spending tied to ambitious infrastructure plans. Voters have protested en masse in Chile, Argentina, Brazil, Colombia and Venezuela. Investors worry aloud about a surge to the left in Chile, bloated bureaucracy in Brazil and a failure to economically launch in México. Fortunately, many politicians are listening and adopting a more pragmatic approach of governance. In Brazil, the region’s political bell-weather, the PT, long thought of as invincible, may lose the presidency come October. Increasingly mature Brazilian voters are fed up with PT corruption scandals, dysfunctional infrastructure, overbearing bureaucracy and, more recently, rising inflation

LATIN TRADE SEPTEMBER-OCTOBER 2014

(7+ percent), a declining currency (20 percent drop over 18 months) and flat job & wage growth (both slightly negative). It is likely that President Rousseff will be forced into a second round in this year’s election. In México, Enrique Peña Nieto has transformed the political discourse of the country from one dominated by the narco-wars to a blueprint of bold reforms, including energy reform, long considered the third rail of Mexican politics. After 18 months in office, many Mexican voters question Peña Nieto’s tactics, but most support his goals – to modernize México so it may compete on the global stage. Global competition is also a source of anxiety among the business class in Chile. The country grew robustly under center-right President Piñera, but returning candidate Bachelet correctly read a broad voter rejection of the country’s free-market policies. A large privatesector presence in education and health systems, privatized electricity and water utilities, and privately run highways are lauded by economists, but the middle class resents paying taxes only to have to pay private fees for basic services. That same Chilean middle class is also a moderating voice against the more radical reforms on the table which call for greater state involvement and higher taxes. Without the supermajority needed to ram reforms through congress, the Nueva

Mayoría must negotiate with an emboldened congressional opposition. Bachelet has sensibly stated that her aim to lower inequality cannot be met without economic growth. Declining copper rents means that her party’s dramatic reforms will likely be scaled back to keep investors engaged. After a decade of waging war on capitalism, the Kirchner-Fernández era changed direction in late 2013 as President Fernández came to terms with her mid-term political defeat. New thinking was brought into CFK’s tent with the post-election cabinet shuffle; most notably, Axel Kicillof became economy minister. Kicillof has been at the center of several dramatic about-faces this year: a settlement with Repsol, a 35 percent devaluation of the peso, renegotiated terms with the Paris Club of creditors, and a more honest approach to reporting inflation. Notwithstanding the Fernández orchestrated political shenanigans associated with holdout bondholder negotiations, Argentina has moved further to the political center this year than any country in the region. Some analysts view the second round victory for President Santos in Colombia as a signal of centrist voter sentiment. A slight majority of urban and business minded voters welcomed a return to power of Alvaro Uribe’s firm and simple governing style through his handpicked candidate Óscar Iván Zuluaga. But rural voters, who suffered the greatest hardships through the decades of civil war between the Farc/ELN and Paramilitaries/Colombian army, voted against right-wing rhetoric and supported painfully compromising peace talks with the Farc. Across Latin America, there is an undercurrent of voter maturity that inspires optimism. In its 2013 report, the Latinobarómetro poll reported that 36 percent of Latin American voters consider themselves centrists and another 19 percent are neither left, nor right, on the political spectrum. Centrist sentiment has risen steadily since the poll began in 1996. The majority of Latin Americans believe good governance is executed in three fundamental areas: being elected in fair elections; paying close attention to macroeconomic equilibriums; and implementing aggressive social policies to combat poverty and inequality. John Price is the managing director of Americas Market Intelligence and a 22-year veteran of Latin American competitive intelligence and strategy consulting. jprice@americasmi.com

PHOTO: ISTOCKPHOTO.COM/ SDART

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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: Bogotá, Medellín, Barranquilla, Cali. 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. 16 Panamá: LATINPanamá. TRADE Paraguay: SEPTEMBER-OCTOBER Asunción. Perú: 2014 Lima. Puerto Rico: San Juan. Dominican Republic: Santo Domingo. Trinidad & Tobago: San Juan. Uruguay: Montevideo.

THE 20 TH BRAVO BUSINESS AWARDS

2014 HONOREES

The welfare of the people of Latin America – of all Latin Americans – requires a strong and focused leadership to accelerate universal access to opportunities. The 2014 BRAVO Business Awards, as has been the case for the past 20 years, recognizes extraordinary leadership and the work of individuals who shaped the future in Iberian America. Each of this year’s winners, through their respective careers, have created jobs, stimulated wealth, and promoted sustainable living conditions for large groups of people. These are their stories of commitment, vision, perseverance, and ultimately, success. Meet the winners of the BRAVO Business Awards 2014.

SEPTEMBER-OCTOBER SEP EPTEMBER EPTEM TEM EM MBER BER--OC -O OCTOB TOBER ER 2014 2014 201 4 LAT LA LATIN ATIN IN N TRA TRADE R D DE E

1 17 7

BRAVO BUSINESS AWARDS 2014

LATIN TRADE SEPTEMBER-OCTOBER 2014

BRAVO BUSINESS AWARDS 2014 INNOVATIVE LEADER OF THE YEAR

LAURENT LAMOTHE PRIME MINISTER OF HAITI

BY MARK KELLER

PHOTO: ROBERT GALBRAITH/REUTERS/NEWSCOM

aiti’s national coat of arms, also present on the country’s flag, bears the motto “L’Union Fait La Force:” Unity Makes Strength. It seems to be a phrase the country’s prime minister, Laurent Lamothe, has taken to heart. Since taking office in 2012, Lamothe has brought the country together behind a number of policies aimed at reshaping Haiti’s reputation as a destination for investment and a country “open for business.” This has been done through a variety of reforms and promotion efforts that aim to make Haiti a safer, more equal, and more businessfriendly country. “We want to show the world that they can come to Haiti to do business, to buy a property, to vacation, and they will have a different and unique experience,” said Lamothe. Promoting private investment, rather than simply humanitarian aid, will be essential to helping the country recover from the 2010 earthquake and create a more prosperous future he added. “This is a paradigm shift for the country,” said Lamothe. “We are shifting from a country that is investment-shy to one that is actively promoting foreign direct investment and local investment as a key economic driver for job creation and poverty alleviation.” Indeed, the country has adopted an aggressive investment code, promoting 15-year tax holidays, tax breaks, and even opening a Center for the Facilitation of Investment to help speed up investment in the country. “To make the country a better place, we need both large investors and small investors.” The country has also vastly improved security. While violence surged following the chaos of the 2010 earthquake, both violent and petty crimes have fallen in the past few years. “Investors like to see the police presence on the streets,” explained Lamothe. To that end, the government grew its police force on the streets by 30 percent, increased access to equipment, and

introduced tourist police. The country’s homicide rate per capita – at 10.2 per 100,000 – is half that of the neighboring Dominican Republic. Kidnapping, once rampant, has declined rapidly, leading the country’s police chief to declare the country has “kidnapped kidnapping.” A number of multinationals have taken notice. From 2012 to 2013, foreign direct investment in Haiti increased 25 percent, and will grow again in 2014. Diverse global brands have made significant investments in the country, including $100 million from Dutch beer maker Heineken, $600 million from Caribbean mobile phone provider Digicel, and $200 million from Vietnam’s state telecommunications giant Viettel. This is on top of major investments by Marriott, Carnival Cruise Lines, and TOM’s Shoes in the country, which have boosted job creation, reconstruction and economic growth in Haiti. But Lamothe wants to do more. The prime minister wants to improve Haiti’s ranking on the World Bank’s Ease of Doing Business ranking, where it currently ranks 177 out of 189 economies. Haiti has opened an online company registration portal which reduces the time to register a business to 72 hours from 180 days – and at half the cost. Nevertheless, Lamothe acknowledged much remains to be done, but doing so will require tackling corruption, inefficiency, and the political intransigence of Haiti’s political system - issues Lamothe has passionately spoken against. His impatience perhaps reflects his background in the private sector. Lamothe studied political science at Barry University in Miami, and later completed a master’s degree, with honorable mention, in business management at St. Thomas University. After graduation, at the age of just 26, he co-founded Global Voice Group, a telecommunications company that became

one of the world’s foremost providers for the management and regulation of telecommunications. His success in bringing this technology, especially to emerging markets in Africa, led him to be named “Entrepreneur of the Year” by Ernst & Young in 2008. Still, throughout his business career, Lamothe demonstrated a profound sense of social responsibility, and dedication to the development of Haiti. When asked what his proudest achievements are as prime minister, Lamothe responded that it is putting together the most comprehensive education program in the history of the country, and fighting poverty “not by dividing, but by uniting.” In education, “we have managed to do what no government has ever been able to do before: we have an education program with 1.4 million children going to school for free – a program that did not exist three years ago,” he said. He said education is essential to ending the country’s nagging income inequality, but that social assistance programs and uniting the country in the fight against poverty are equally important. “We are showing the haves how to help the have-nots through job creation, and both sides what they have to lose by being at odds.” Still, governing one of the hemisphere’s poorest countries, with a violent and unstable history is challenging. But Lamothe sees a different path for the country. “If you look at Haitian history, we have been divided, we’ve been fighting, civil wars, military coups, class warfare – that’s what the old governments used to do,” said Lamothe. What the prime minister advocates instead is consensus: “we are making decisions that will be right for the country, but in a united way,” he stated. “Unity will bring stability, and stability will bring well-being for the population.” Indeed, “L’Union Fait La Force.”

SEPTEMBER-OCTOBER 2014 LATIN TRADE

BRAVO BUSINESS AWARDS 2014

LATIN TRADE SEPTEMBER-OCTOBER 2014

BRAVO BUSINESS AWARDS 2014 INNOVATIVE CORPORATE LEADER OF THE YEAR

JOSÉ MARÍA ÁLVAREZ-PALLETE COO, TELEFONICA

BY SANTIAGO GUTIÉRREZ

PHOTO: COURTESY OF TELEFÓNICA

“T

oday no one can understand Telefónica without understanding Latin America,” said José María ÁlvarezPallete, one of the company’s board members. “It’s satisfying to see how the region has become Telefónica’s engine of growth. Today, the company is more Latin American than European, and it makes me feel good to see how the early bet on the region has paid off.” He thinks Telefónica, with its investments of more than 110 billion euros since the 1990s and the company’s charitable works through the Telefónica Foundation, has contributed to improving the quality of people’s lives. He has contributed personally to creating an environment of creativity and innovation, as founder and architect of Wayra, an incubator for entrepreneurs that he set up in America and which has expanded to Europe. The organization’s goal is to find and promote the best IT talent. It does this by providing them with an incubator company, physical space, funds, training and contacts. Wayra’s results are impressive. In three years of operations, it is in 12 countries and has incubated almost 300 companies. Speed is part of Álvarez-Pallete’s personality. “I like all sports, but my passion is running,” he says. “I train a lot and whenever I have the chance, I always like to participate in races and marathons.” It looks as though Wayra is one race he has already won. WHERE DO YOU SEE WAYRA IN 10 YEARS?

I think that 10 years could change everything in the technology sector – consumer habits, tools, new user needs. Certainly solutions that we can’t even imagine today will emerge. It’s an industry where certainty is fleeting and that’s what makes it so attractive. I don’t doubt that Wayra will be close to all of these possible futures. We have already helped thousands of entrepreneurs to think, and above all to bring these new solutions to reality. In any case, I don’t think that what we will have reached can be measured by technology, but rather by the development of capacities and opportunities for entrepreneurs. When Wayra was set up three years ago, the goal was to help create conditions so that talented entrepreneurs could make their companies grow in the countries they live in. Today, we have the same commitment and this will continue to be the focus of our work. I think of course that Wayra’s success will be measured by its contribution in enabling more technology companies to grow and develop within their own ecosystems, showing that the dream was possible. That will be the most important goal. The potential is very large and in a few years Wayra will have been the cradle of some of the most powerful technology companies in the world and will have helped Telefónica become better. WHAT IS THE MOST IMPORTANT TRAIT OF LATIN AMERICAN IT START-UPS THAT DIFFERENTIATES THEM FROM THOSE OF OTHER REGIONS?

In terms of the most important traits, we don’t see many differences among entrepreneurs from different regions – it’s surprising how alike they seem. Rather, I would say that they share many more similarities than differences – passion, dedication to their companies, ambition, focus and competitiveness, just to name a few. However, the context and the business environment of Latin America favor the appearance of entrepreneurs who are more creative in problem-solving and much more flexible in adapting to continuous changes. Adaptation to change and flexibility in decision-making might be two large differences compared to entrepreneurs in other regions. WHAT ARE THE TWO MOST PROMISING FIELDS FOR DEVELOPING COMPANIES IN THE IT SECTOR IN LATIN AMERICA? We think there are many good opportunities in the field of cloud services and products for businesses and professionals (B2B). There is huge potential in giving them better tools to make the entire value chain grow and to apply intelligence from supply to delivery (customer and data insights, logistics, remote collaboration, to name a few). Also, the fintech industry and new financial services offer many opportunities for taking advantage of the macroeconomic trends of millions of people in Latin America. There is still a lot to do in this sector and I think the start-ups can cover a lot of ground in it.

SEPTEMBER-OCTOBER 2014 LATIN TRADE

BRAVO BUSINESS AWARDS 2014

LATIN TRADE SEPTEMBER-OCTOBER 2014

BRAVO BUSINESS AWARDS 2014 ENVIRONMENTALIST OF THE YEAR

CAROLINE SCHEUFELE

CO-PRESIDENT AND ARTISTIC DIRECTOR, CHOPARD

BY SANTIAGO GUTIÉRREZ

PHOTO: COURTESY OF CHOPARD

“C

hopard’s Journey Towards Sustainable Luxury started in 2013,” said aroline Scheufele, artistic director and copresident of the manufacturer of luxury watches and jewelry. She was referring to a program that commits the company to suppliers who use good social and environmental practices. The Swiss company signed a partnership with the Alliance for Responsible Mining (ARM) – a Colombia-based charity and developer of the Fairmined standard – to support two artisanal mines in South America and help them get certified. “This will help transform the lives of artisanal and small-scale gold miners in South America and protect the natural resources and wildlife they depend on. Furthermore, we plan to buy gold from these mines,” she remarked. Small miners account for 80 percent of the mining workforce and produce 20 percent of the world’s gold. Chopard´s strong support of this program is a major catalytic force in the adoption of responsible mining standards in the world, as it increases their visibility. Indeed, as Caroline Scheufele recalled, the French actress Marion Cotillard wore to the Cannes Film Festival the very first piece of jewelry set in sustainably-

sourced Fairmined gold from the artisanal community mines supported by the alliance. The set also featured diamonds from mines certified to the standards of the Responsible Jewelry Council (RJC), sourced from the manufacturer IGC Group. “We are proving that things can change!” she stated. “It’s hard to measure yet the success of the Journey, but we noticed that our clients are more and more interested to know where material used to manufacture watches and jewelry come from and how those pieces have been made,” she added. She takes pride in having Chopard be a member of the RJC since 2010, an organization that she rates as a leading environmental, social and ethical standard setting organization. She is hopeful that her company’s actions will raise the bar for miners and jewelers on environmental issues. “By putting sustainability at the very heart of our brand, we are showing ourselves to be leaders in our industry and a company that truly wants to make a difference in the world of luxury jewelry and watches. I wish the standard in the whole industry could be to use only Fairmined gold and diamonds RJC certified.” In the meantime, Chopard, founded in

1860 and acquired in 1963 by Caroline’s father Karl Scheufele, is doing more than its fair its share in moving towards sustainable luxury. This year in Baselworld, the company launched the first Fairmined watch, the L.U.C Tourbillon QF Fairmined, and it is developing its Green Carpet Collection with more sustainable high jewelry pieces. “We will continue our Journey and look at how we can work in a sustainable way, with colored stones for example.” Her definition of triumph in this area is very clear. “The ultimate success would be, for what has been started with the Journey project at Chopard, to ultimately become the industry standard.” The company’s long-term focused action will probably allow this to happen. Its copresidents, Karl-Friedrich and Caroline Scheufele, belong to a dynasty of German watchmakers, and their bold moves, such as promoting an ethical gold initiative, respond to their view of what is the right way to do business. “As a privately-owned family business, independence is an essential value for Chopard. Being autonomous allows us to take decisions by our own, most likely in family. We don’t have pressure coming from any auctioneers, which is a real luxury,” she concluded.

SEPTEMBER-OCTOBER 2014 LATIN TRADE

BRAVO BUSINESS AWARDS 2014

LATIN TRADE SEPTEMBER-OCTOBER 2014

BRAVO BUSINESS AWARDS 2014 CEO OF THE YEAR

MIGUEL GALUCCIO CEO, YPF

BY SANTIAGO GUTIÉRREZ

PHOTO: COURTESY OF YPF

he president of the Argentine petroleum company YPF works long weeks. Still, he has some hobbies to unwind, mainly shooting, boxing, and flying a helicopter. “The work demands many hours, but there is always a chance. These are my favorite pastimes. Obviously, there are my wife and children, who aren’t entertainment – they’re my life,” Miguel Galuccio told Latin Trade. A full-time oilman, he was the president of Schlumberger Production Management. There, he solidified some of his deepest beliefs: the need to promote cultural diversity and technological innovation, and work focused on results as a benchmark for success. While at Schlumberger, he directed projects in Iraq, Russia, Malaysia, China, Indonesia and the Middle East, as well as other countries, and this experience prepared him to face with greater ease what he calls, his most important challenge: being the head of YPF (Yacimientos Petrolíferos Fiscales), the company he has led for the past two years. IN ADDITION TO THE SIZE OF THE COUNTRY’S RESERVES, WHAT IS THE BEST ARGUMENT TO CONVINCE INVESTORS TO PUT THEIR MONEY IN ARGENTINA? The country is facing one of the most important challenges in recent decades. Once Argentine President Cristina Fernández de Kirchner re-assumed control of YPF in April 2012, YPF embarked on the project of returning (the country) to energy selfsufficiency. After a decade of declining hydrocarbon production, YPF reversed the trend in just over two years. It resumed a growth path and launched the massive development

of “non-conventional energy,” Argentina’s big energy bet. The argument in favor of investing in Argentina is that we have the know-how, the natural and human resources, the infrastructure, the technology and the understanding of the shale formation for a large-scale advance in non-conventional energy. Today, we are the second country after the United States in developing non-conventional energy, with very promising results. Another argument is: “YPF is the partner of choice.”

to 1967, and as such, does not take into account new petroleum realities such as nonconventional and offshore production. This modernization also must contemplate ways to encourage investment and promote a fiscally stable and homogenous framework throughout the country. It requires longer time frames for non-conventional and offshore production given the investment needs, tax incentives to develop deposits of heavy crude and tertiary recovery of mature deposits.

THE VACA MUERTA FORMATION IN NEUQUÉN HAS ENORMOUS OIL RESERVES. WHAT WOULD YOU HOPE TO HAVE THERE WITHIN THE NEXT 10 YEARS? First, to be able to stop importing gas and to make Argentina energy self-sufficient. Certainly, the increased production of both gas and petroleum is opening opportunities for more competitiveness in energy-intensive industries and increasing the country’s refining capacity and its petrochemical industry. In just two years, YPF has invested more than $3 billion in its two flagship projects with Chevron and Dow Chemical, in less than three percent of the area of Vaca Muerta. And, we have just announced another very important project with Malaysia’s state oil company, Petronas, to develop shale oil in another area, called La Amarga Chica, also in Neuquén.

WHICH PROJECT HAS GIVEN YOU THE MOST PERSONAL SATISFACTION? If I were to have to talk about one project, I think it would be the massive development of non-conventional oil and gas in Loma Campana in the Vaca Muerta Formation. That’s because it is probably the most important of all; it represents the first real investment program on that scale in Argentina, and today, it is probably the biggest shale development in the world outside of the United States. It is a project completely managed by YPF, with production of more than 25,000 barrels of oil equivalent per day, where the physical activity has tripled in less than two years. (We went from four drilling teams in April 2012 to 21 that are currently active there). As well, Loma Campana, where we have invested about $2 billion. From it, we launched the first pilot project for shale in the country, and it is the second deposit in terms of oil production in Argentina. With this development, we showed the country, and the world, that non-conventional oil and gas in Argentina is more than a promise.

WHAT NEEDS TO BE DONE TO REFORM ARGENTINA’S HYDROCARBONS LAW TO ATTRACT MORE INVESTMENT TO THE SECTOR? Argentina’s hydrocarbons law dates back

SEPTEMBER-OCTOBER 2014 LATIN TRADE

BRAVO BUSINESS AWARDS 2014

LATIN TRADE SEPTEMBER-OCTOBER 2014

BRAVO BUSINESS AWARDS 2014 SUSTAINABILITY CEO OF THE YEAR

CARLOS FADIGAS CEO, BRASKEM

BY SANTIAGO GUTIÉRREZ

PHOTO: COURTESY OF BRASKEM

raskem is a truly young multinational. Founded in 2002 from the merger of six companies, it has built its presence in over 60 countries, and it is the largest chemical producer in Latin America and one of the largest in the world. Leading the company is Carlos Fadigas, young as well at 44 years of age, and the personification of the company’s nonnegotiable goal of creating sustainable business. At 8pm, he is still in his office in Butantã, São Paulo, in meetings and, perhaps, thinking about his next move in the complex and new realm of sustainable business. One of his concerns is social issues, a key part of the sustainability equation in any developing country. “I lived in Switzerland for a year in 1999. At that time you barely saw any new construction. Population was growing at 0.0-something percent a year, so you did not have to build hospitals. The schools were there, the roads were there. Instead, we [in the developing world] are still building our countries and our companies. To address sustainability on top of that, is a very interesting challenge to have,” Carlos Fadigas said. Building a sustainable company begins with a task which might seem obvious: focus on the customer. Everybody says and understands that the customer is king, but aligning the organization with that objective is more challenging, says Fadigas. Assisting clients is easier for people in sales, or technical support, but not so much in areas like marketing, legal or finance, which have their trenches well behind the commercial front lines. “It’s very easy to say the customer is relevant. That has become commonplace,” he added, but understanding clients’ needs and taking the time to support them is a different thing. “We make sure that the processes allow us to help the

customer in every single possible way we can.” Another element which reinforces Braskem’s obsession with caring for customers is authority. “Hierarchy does not start at the top of the organization, but with the customer. Whoever has a close interface with a client ends up having the final word.” The opinion of the person that deals with a client on a daily basis will always prevail, Fadigas explained. A sustainable organization also requires the CEO to be a believer. “If you want to have a safe chemical plant, bring in experts and they will tell you how to do it. It’s a technical issue. Study it, learn it, and then practice it. When it’s about sustainability, you have to have an additional layer on top of the technical knowledge - if you are not a believer in sustainability things just will not happen.” Top management has to be deeply convinced that sustainability is an important value, that the company is capable of making progress in sustainability indicators, etc. That, he said, is the only concrete justification for the energy dedicated to that endeavor. A sustainable company also has to walk the talk. At Braskem, the agenda of the business review meetings on each of the 10 business units begins with a rundown on their sustainability and safety programs. “Before going into the financial results, we go through emissions of CO2, water consumption, waste water generation, solid waste generation. We go through these topics before we know if we are making money or not, or if we have enough cash or not.” Sustainability is a major social task, and requires the active participation of business, government and civil society. All of the actors, Fadigas said, have to be involved because they have different and complementary roles. “I

cannot write a new law; an NGO probably will not serve the end user via the production of goods.” Fadigas said that he understands the role of NGOs as challengers of business, but he feels that these organizations have to understand how businesses operate, to therefore present reasonable demands. In 1992, at the United Nations Conference on Environment and Development in Rio, for instance, businesses were seen as the devil, he stated. “NGOs and government had to get together to stop corporations from doing the bad things they were doing. But you can´t work on an equation like that because the firms are the ones who have an advantage to address sustainability. An NGO will not develop a more sustainable plastic, regardless of the good intentions they have. We are the ones who own the technology and the capacity to do that.” Fadigas thinks that NGOs have to engage in a dialogue “to educate themselves, and then challenge the businesses to pursue the right direction.” In a debate around the use of plastic bags, the solution is not a complete ban, he said. “What do you replace them with? Paper bags? Do you have an idea of how much water is needed to produce paper? If you say fabric, do you have any idea of the impact on public health when you use them to pack food?” NGOs should engage with business, to measure these impacts in the proper way, and then choose when to use paper, glass or plastic, he added. Late at night, Carlos Fadigas still finds time to tackle one final problem with an executive. A team player, he wants to make it clear to his team that he is with them, at their side. That they can count on him as a partner on the job. He doesn’t say so, but that’s another little secret he has to make Braskem sustainable.

SEPTEMBER-OCTOBER 2014 LATIN TRADE

BRAVO BUSINESS AWARDS 2014

LATIN TRADE SEPTIEMBRE-OCTUBRE 2014

BRAVO BUSINESS AWARDS 2014 DYNAMIC CEO OF THE YEAR

FABIÁN GOSSELIN CEO, ALSEA

BY SANTIAGO GUTIÉRREZ

PHOTO: COURTESY OF ALSEA

an a good story be told with numbers? In the case of Mexican Alsea, it is possible, in part. Founded in 1989, the company grew from zero to close to 2,300 restaurants in five countries to date. It manages the Latin American operation for 11 franchises, which include Domino’s Pizza, Burger King, Starbucks, and P.F. Chang’s, among others. Its net consolidated sales growth fluctuated between 24 and 36 percent in the past two and a half years, and its EBITDA margin between 11 and 14 percent in the same period. In words, these figures spell financial success. Shareholders know it. A Mexican investor who bought Alsea´s shares five years ago has seen his investment grow almost six-fold. The reasons for these results are many - a geographically diversified, wide-spectrum portfolio, which caters to lower income segments with their Vips restaurant chain, and to higher-end consumers with The Cheesecake Factory and P.F. Chang’s; a quick-draw for acquisitions; and a keen eye for highly visible moves like taking Starbucks to the heart of the Juan Valdez market in Colombia. But as always, a good story needs a hero. Fabián Gosselin could be a clear candidate to play the leading role. Alsea’s CEO since 2010, Gosselin’s dynamic style has pervaded the company. In four years, he led the doubling in the number of restaurants, and the company’s foray into the large, but complex, Brazilian market. His goals are equally challenging for the future. Last year, he announced a plan to double the company’s revenues in five years.

IN BROAD LINES, WHAT IS YOUR INTERNATIONAL EXPANSION STRATEGY? The success of our strategy has been exactly that we do not rely on one single avenue for growth. We have a very well balanced portfolio of brands and markets that generate sustainable growth without over stressing single business units. In the end, it is the sum of those single development targets that turns out as very aggressive expansion rates for the company as a whole. WHAT ARE THE SPECIFIC NICHES IN WHICH YOU SEE GROWTH FOR YOUR BUSINESSES IN THE NEXT THREE YEARS? At Alsea, we have a very focused strategy for increasing market share, or “share of stomach,” as we call it in our industry. That is why we have built a very strong and diversified portfolio of brands that appeal to a very broad base of consumers, even in lower socioeconomic segments, where we can offer great value propositions. We do see a healthy upward movement of all segments of the middle class in Latin America in the mid to long-term, and that will make a much bigger market for all our concepts. TELL US A BIT ABOUT ALSEA’S PLANNING PROCESS. HOW DO YOU DECIDE WHERE TO OPEN A NEW RESTAURANT? We are very careful with the site selection process, which we do on a store-by-store basis. This is a very crucial factor in our industry so

we do analyze how can we bring our brands closer to the consumers, depending on the socioeconomic and demographic data, and the relevance of our products for each segment of the population. Of course, there is a lot of research and a lot of knowledge within our team, but also sometimes you need some gut feeling too. WHAT CORPORATE PROBLEM KEEPS YOU UP AT NIGHT? I sleep very well, fortunately. I believe our biggest challenge is to have the right talent getting the right responsibilities. The aggressive organic expansion and recent acquisitions has also been a stress for the whole company, but I guess being ahead with very meticulous planning has helped us to be able to absorb this growth in a reasonable way. WHAT DO YOU THINK IS THE MOST IMPORTANT SKILL THAT LATIN AMERICAN CEOS HAVE TO DEVELOP TO BECOME SUCCESSFUL MANAGERS OF MULTINATIONAL BUSINESS? As I said before, I am a firm believer in building a great team. The more the company grows, the more vital it is for us to work aligned, making sure everyone is doing their own job in a very effective way. I think that the challenge is to have common purpose and goals between the company and our team. And of course, you have to love your job to have fun. I believe at Alsea we do that very often.

SEPTEMBER-OCTOBER 2014 LATIN TRADE

BRAVO BUSINESS AWARDS 2014

LATIN TRADE SEPTEMBER-OCTOBER 2014

BRAVO BUSINESS AWARDS 2014 SOCIAL RESPONSIBILITY CEO OF THE YEAR

RICARDO POMA CEO, GRUPO POMA

BY SANTIAGO GUTIÉRREZ

PHOTO: PARTICULAR GDA PHOTO SERVICE/NEWSCOM

icardo Poma is one of the most successful businessmen in Central America. The conglomerate he leads operates in 10 countries in sectors like the automobile trade (in operation for 96 years, they are the largest vehicle distributors in the region), real estate, hotels and manufacturing. Altogether, they employ directly more than 10,000 persons. Poma has always tried to find balance in his life. He studied engineering at Princeton, then took a master’s degree in business administration at Harvard. At Princeton he took courses in history and economics, learned Portuguese and even studied Don Quixote for a semester. “I don’t know whether that helped me in business, but it did help me develop a broader mind and maybe a philosophy of life.” He has given himself the task of doing things for his country and for the people close to his organization, an attitude he inherited from is father and his grandfather. Thirty years ago, for example, his father Luis Poma spearheaded the setting up of the Salvadoran Foundation for Health and Human Development (Fundación Salvadoreña para la Salud y el Desarrollo Humano, Fusal), which has had a far-reaching social impact on the country. Everyone who has read more than a couple of basic articles about corporate sustainability knows that this type of social conduct is hard to maintain if it does not align with the deepest objectives and values of companies and their lead-

ers. Health or training programs that do not support corporate objectives can be washed out quickly. But when Grupo Poma took the acid test of comparing its social programs with its entrepreneurial philosophy it turned out to be a perfect fit. The Group respects and actively promotes seven values: love of work, integrity, solidarity, renovation, service, excellence and respect. “We evaluate our new collaborators for yield, for performance indicators, and also for compliance with the group’s values,” he says. “Those values are absolutely vital. We have them in all our companies and we have passed them on from generation to generation.” Ricardo Poma believes deeply in people. “A company cannot be successful if the people who work there do not take part in its decisions and its results,” he says. “I believe strongly in people and above all, I believe very strongly in youth.” That’s why he founded Esen University in the buildings of a coffee plantation on the outskirts of San Salvador, to create opportunities for young people who would otherwise find it hard to get a quality university education. “Sometimes I think that founding Esen is something that I asked God for and that he placed it on my shoulders. There was a time when I would say: I would like to do something that has an impact through time, that would be able to give opportunity to people who have no chance to get ahead, but I wouldn’t

want to get into politics. In other words, when I spoke with Him (and he looked up smiling). I would like to do something that would have a large impact on my country and on the region. It was for that reason that I started Esen, I think … for some reason it was placed in my hands, I took it and ran with the ball,” he said with sincere pleasure that might be seen as giving thanks to life. He has always been thus, likeable, hopeful, persevering and enterprising. In some ways he considers this to be part of his heritage and a natural result of his long-term vision. “Our family has been in business for almost 100 years. I am the third generation. Imagine all that has happened in 100 years. If we had been fixated too much on the political and economic ups and downs all the time, without a long-term vision, we would never have done anything. We would never have invested in anything. There have been catastrophes, wars, earthquakes, and in the case of my family, kidnappings. If we had not believed in our surroundings and we had not had a true love for our country, we would not have had the enthusiasm and passion we have had to develop things throughout the region.” Ricardo Poma hopes that in the next 30 years the Group will stay with the same lines of business as today, possibly adding renewable energy. But above all he thinks that he will hold on tightly to his desire “to do things, and to do them well.”

SEPTEMBER-OCTOBER 2014 LATIN TRADE

BRAVO BUSINESS AWARDS 2014

The headquarters of CAF Development Bank of Latin America, in Caracas, Venezuela.

BRAVO BUSINESS AWARDS 2014 TRADE AMERICAS BRAVO AWARD

CAF

DEVELOPMENT BANK OF LATIN AMERICA

Enrique García, President of CAF Development Bank of Latin America. BY ALEJANDRO GONZÁLEZ

PHOTO: COURTESY OF CAF

AF is the world’s only large regional development bank that has both a multilateral structure and majority ownership by emerging nations. It currently has 18 members, of which only two are from outside of the region (Spain and Portugal), and their participation is just three percent, bank president Enrique García said. “Unlike the World Bank or the InterAmerican Development Bank (IDB), where there are donor countries and countries that receive the support, all the CAF members are both givers and receivers of resources,” said García. “This creates a sense of shared responsibility, since the fortunes of the institution depend on what we ourselves do.” CAF was selected as the winner of the Trade Americas Bravo Award, a prize awarded each year by Latin Trade to showcase organizations that do outstanding work for the growth of trade in Latin America. This development bank promotes public and private projects in the region, and has a sustainable model of credit operations, non-reimbursable resources and support for technical and financial structuring of projects. The Bravo Award judges highlight the

role CAF has played in the growth and promotion of companies throughout the continent, to expand access to financing and to facilitate the start-up of innovative initiatives. This is especially true for small companies that generate more than 60 percent of the region’s jobs and about 30 percent of regional production. “Small businesses are the heart of productive manufacturing in Latin America and the support of CAF will no doubt continue to be a key factor in promoting their expansion in the region,” said the panel of judges. In that spirit, CAF recently created the Latin American Fund for Guarantees (Fondo Latinoamericano de Garantías, or FLAG), through which it will have an impact on hundreds of thousands of small businesses by granting refinancing to national guarantee institutions, as well as promoting the creation of this type of organization. “We encourage the creation of innovative mechanisms for public-private works,” said García. “For example, we have just approved our participation in a fund in Colombia where, together with Ashmore Group, we will arrange to provide about $100 million to finance public-private infrastructure projects.

“It will be open to other players such as pension funds, and this would allow it to grow to $1 billion in the future.” The bank has experienced strong and sustained growth throughout its 45-year history. To start with, it had operations in five countries and $400 million of funds. Today, the bank has a presence throughout the region and lends about $12 billion each year. One of the reasons for its success was the decision to finance large infrastructure works in Latin America. “We saw a window of opportunity in infrastructure during the 1990s when, because of its mandate, the IDB and the World Bank downgraded the priority of this activity to emphasize the social sector,” said García. “Today, CAF is the main multilateral lender in infrastructure, especially infrastructure of integration.” Now, CAF Development Bank of Latin America is encouraging the creation of a long-term regional agenda which will enable it to achieve higher and more sustainable economic growth of better quality. “All of this leads to having a culture in which we must increasingly promote initiative and innovation as basic elements,” said García.

SEPTEMBER-OCTOBER 2014 LATIN TRADE

BRAVO BUSINESS AWARDS 2014

BRAVO LEGACY AWARD

g y

WILLIAM R. RHODES

PRESIDENT AND CEO, WILLIAM R. RHODES GLOBAL ADVISORS, LLC & SENIOR ADVISOR, CITI

BY SANTIAGO GUTIÉRREZ

PHOTO: OSWALDO RAMÌREZ/EPA/NEWSCOM

“B

anker to the world.” That’s not only the title of William R. Rhodes’s latest book, but a good description of his achievements in a tremendously interesting life that began in New York City in 1935. If a counterfactual history of economics is ever written - “what would have happened if,” he would surely be recognized as one of the few who helped avoid a world recession in 1982. The beginning of the 1980s was a period of tremendous inflationary pressures in the United States, and a time where massive amounts of petrodollars were being “recycled” through loans to developing economies. In an effort to curb inflation, the Federal Reserve Bank reduced money supply, causing interest rates to soar to 20 percent from an 11 percent level in 1979. “20 percent plus in the United States! We had not seen that in memory,” recalled Rhodes. Since interests on loans were tied to floating Libor or Prime rates, their value went up dramatically. In August, heavily indebted México found it could not service its debt. At the time, foreign debt payments amounted to one-half of the country’s exports. Senior vice president for Latin America at Citibank, Rhodes was vacationing in Quebec. “I was called back because I had experience restructuring debt of countries like Jamaica and Nicaragua,” he said. The problem had an unexpected large dimension. At the IMF meeting in September, the joke was that actions taken until then were like rearranging the deck chairs on the Titanic. “They were afraid that this would trigger another great depression, because the major banks of the world would not be able to withstand the non-servicing of debt if the Mexican situation got contagious throughout Latin America and other emerging markets.” The banking system in 1982 was undercapitalized, he added. William R. Rhodes was given the task to form a committee of banks to deal with the crisis. “There was no real script for this because no country with the size of the debt in México had ever been restructured.”

The complexity of the situation threatened major U.S. and Japanese banks, and ended up requiring him to coordinate the action of the Mexican government, led by finance minister Jesús Silva-Herzog, and that of the U.S. Federal Reserve, chaired by Paul Volker, of the IMF under Jacques de Larosière, and of the finance ministers of the G-7. Talks reached a climax when Silva-Herzog stopped responding to calls from bankers. “That was the most difficult point - we were afraid the negotiation would fall apart. By then, Argentina was already deep into trouble, and Brazil had the risk of going under also, along with Perú, Ecuador and other countries,” Rhodes recalled. In a now-famous move, he got on a plane and went to México City to find the Minister. After a three-day chase, Silva called Rhodes on the telephone to explain that he had undergone a minor surgery and was just recovering. He feared that news of his illness might trigger a financial panic. The banker, satisfied, returned to New York to reassure banks worldwide that the deal was on. The conclusion? A sequence of major economic decisions were taken in the region as part of structural reform programs which came as a response to the Latin American debt crisis. “The need to build institutions, to control runaway spending, to incentivize investment, to make sure that the banking system was recapitalized and able to lend in an orderly fashion - all of these structural reforms came out of this process.” It’s hard to find a person that has so forcefully helped the motion of the “invisible hand” of markets in the world like William R. Rhodes. It’s also difficult to avoid being charmed by his recollections of the Brady Plan, in which he was a key actor, or of the crossing of the Equator or the Panamá Canal, or about entering Baía de Guanabara “one of the most beautiful sights in the world,” when he worked in a ship, as a young Brown University student that wanted to get to know Latin America. No doubt he did.

SEPTEMBER-OCTOBER 2014 LATIN TRADE

BRAVO BUSINESS AWARDS 2014

BRAVO LEGACY AWARD

g y

ENRIQUE IGLESIAS

FORMER PRESIDENT, INTER-AMERICAN DEVELOPMENT BANK

BY SANTIAGO GUTIÉRREZ

PHOTO: OSWALDO RAMÌREZ/EPA/NEWSCOM

t’s hard to find a Latin American with a longer and more significant career of continent-wide service than that of Uruguayan Enrique Iglesias. He has been president of his country’s central bank, director of the Latin American Social Sciences Board, and board chairman of the Latin American and Caribbean Institute for Economic and Social Planning (Ilpes), a United Nations body. He has served as executive secretary of the Economic Commission for Latin American and the Caribbean (Eclac), and was secretary general of the United Nations Conference on New and Renewable Energy Sources in Nairobi, Kenya. Then, as foreign affairs minister in the administration of Julio Sanguinetti, he represented his country during the Uruguay Round of the General Agreement on Tariffs and Trade (Gatt), which later created the World Trade Organization (WTO), the final stage in creating the architecture of international trade. Starting in 1988, he was president of the Inter-American Development Bank (IDB) for 17 years. Since his retirement, he has often been called upon to participate as an expert in high-level United Nations commissions. His work has not been unnoticed, as evidenced by the nine honoris causa doctorates, the 13 honors awarded by national and municipal governments, and the three international prizes he has received. Perhaps the reason lies in the undying enthusiasm he shows for undertaking projects that improve the lives of Latin Americans. This generous enthusiasm can still be seen in his responses to questions in his interview with Latin Trade.

WHAT IS YOUR OUTLOOK FOR LATIN AMERICA IN 20 YEARS? Cautiously optimistic. There are still serious economic, social and, in some countries, political problems. But if the world doesn’t give us a hard time by worsening its grave political and economic disequilibria, there are enough human and material resources and experience for a bet on a more economically prosperous Latin America, with more social justice and more democratic freedom.

WHAT DECISIONS HAVE YOU TAKEN OVER THE LAST 20 YEARS THAT HAVE ENCOURAGED THE MOST GROWTH IN LATIN AMERICA? I think two of the most important decisions were putting the economies in order through better macroeconomic management in most countries, and adopting explicit policies for poverty reduction. Their effects were magnified by the entry of China into world markets, making it the number one destination for the primary materials of food, energy and metals, and substantially improving the terms of trade, especially in South America.

HOW WOULD YOU DEFINE YOUR MANAGEMENT STYLE? Recognizing that institutions are more than management and ideas, but are also committed to their objectives. No leadership in isolation can operate for the long term. You have to lead believing in and motivating the people that are with you.

WHAT DOES THE REGION HAVE TO DO TO BECOME MORE EGALITARIAN? It has to deepen its democracy and educate its people better. With the first, it would strengthen its institutions, making it possible to carry out the necessary policies. With the second, it would set the stage for breaking of the vicious circle of poverty, improving social mobility, and creating high-quality employees. WHAT DO REGIONAL BUSINESSMEN NEED TO DO TO BECOME WORLD CLASS (THOSE WHO STILL AREN’T)? Innovate and become part of the regional and worldwide value chains. WHAT WAS THE MOST IMPORTANT WORK OF THE IDB DURING YOUR TENURE THERE? Undoubtedly, it was working with countries to overcome the problems of external indebtedness that had started in the 1980s, which was considered to be a lost decade.

WHAT PROJECT IN YOUR PROFESSIONAL LIFE ARE YOU MOST PROUD OF? Having been able to serve my country from within and without, and betting on a growing, more democratic and more socially just Latin America.

SEPTEMBER-OCTOBER 2014 LATIN TRADE

Jorge Steffens, President, DLM Invista

BRAVO INNOVATION

Laércio Cosentino, President, TOTVS

Ricardo Gutierrez, Andrés Gluski, Juan Benavides, Board Member, Grupo Kaluz President & CEO, AES Corp. President, AFP Habitat

EXPERTS WEIGH IN ON INNOVATION

FIVE PAST BRAVO AWARD WINNERS ANALYZE THE CONCEPT OF INNOVATION FOR LATIN TRADE AND EXAMINE THE BEST WAY TO EMBRACE IT WITHIN ORGANIZATIONS. BY ÉLIDA BUSTOS

in the ranking of the 500 largest Latin American companies, with a ew concepts are as central to a company’s success as innovation. presence in four countries. Often associated with technological or industrial changes, in“Daring to change is first and foremost,” said Benavides, and from novation goes beyond that and can be found in all facets of corporate management. It’s possible to embed innovation in the business model, the other end of the continent, Ricardo Gutiérrez Muñoz, board member of Grupo Kaluz in México, said administrative processes, in the focus on new much the same thing. “We have to increase markets, product design, personnel training, our capacity by taking risks,” he stated. in conflictive relationships with the public, “We Latin Americans aren’t so bad (at inand much more. novation),” but one has to “understand that No one opposes it in theory, although in Juan Benavides, President of AFP Habitat the yield from capital is now lower than practice, sparking enthusiasm for change 2012 BRAVO Award, CEO Lifetime Achievement it was in the past,” and this increases the requires a dose of boldness mixed with urgency for being creative. adrenaline that not all organizations decide to undertake. Latin Trade Kaluz – the holding company of Mexichem and Elementia – develsought out responses from executives who forged far-reaching changes oped an innovation operations model which it calls Factor K, and puts in their companies. They were asked the best approach to innovation, it into practice in its companies to create and measure results. Of the and whether it should be gradual or disruptive. two companies that comprise the holdings, Mexichem, is the leader in “It’s a never-ending process that has to embrace the entire orgathe global chemical and petrochemical industry and is number 114 of nization,” said Juan Benavides, president of AFP Habitat in Chile the 500 main companies of Latin America. Together with Elementia, and the 2012 winner of the Lifetime Achievement Bravo Award as a it has a presence in 43 countries. CEO for his management at Falabella. “Innovation has to start from a deeply felt conviction that it’s the road to permanent growth,” he explained. INNOVATION AND PROTECTIONISM The expansion of Falabella is a good example of Benavides’ convicAnother executive with a track record of innovation is Andrés Gluski, tion about innovative policies and the willingness to take on risks. The president and CEO of AES Corp. Gluski sees creativity and innocompany was founded in 1889 as a tailor shop and today is number 46 vation in Latin America in music, sports and visual arts, but not so

“Daring to change is the ﬁrst step.”

3 38

LATIN L LAT AT ATIN IN N TRADE TRA TR RADE R DE SEP SEPTEMBER-OCTOBER PTEM EMBE BER-OC BER -OC OCTOB TOB O ER E 2014 20 4 20 201

PHOTO: JORGE STEFFENS, COURTESY OF DLM INVISTA; LAÉRCIO COSENTINO, COURTESY OF TOTVS; RICARDO GU TIERREZ, COURTESY OF GRUPO KALUZ; ANDRÉS GLUSKI, COURTESY OF AES CORP.; JUAN BENAVIDES, COURTESY OF FALABELLA

BRAVO BUSINESS AWARDS 2014

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“If a company penalizes those who try new concepts or has an aversion to risk in order to avoid failures, then it is unlikely that it will become a successful innovator.” Andrés Gluski, President and CEO of AES Corp, 2012 BRAVO Award, International CEO of the Year

“We have to think in terms of disruptive innovation and not just evolutionary innovation based on the best known practices.” Laércio Cosentino, President of TOTVS, 2009 BRAVO Award, Technology Leader of the Year

“What’s needed is to look for something that revolutionizes the company, business models that are truly revolutionary, disruptive.” Jorge Steffens, President of DLM Invista, 2007 BRAVO Award, Technology Leader of the Year

much in business. He thinks this is because of the history of protecCRITICAL AREAS tionism and too much government intervention. “What we need is There is no single response to the question of which areas Latin to be exposed to global competition so that there is a greater need to American companies would have to innovate over the next few years innovate faster and follow more closely the advances in other parts of to gain a competitive advantage. the world,” he said. For Benavides, innovation has to be focused on understanding It also happens that companies that are truly innovative are innovathe consumer, “because the changes are very strong and unpredicttive throughout and not by sectors, and the evidence points to manable these days,” – in the business model, in technology in general agement as the factor that creates a true culture of innovation. and in logistics. Similarly, Laercio Cosentino, president of the Brazilian company Gutiérrez Muñoz thinks along similar lines. He said companies Totvs, explained that innovation has to permeate all of a company’s that are not agile enough to adapt to changing market conditions and processes, products and services. Totvs, established in São Paulo in customer needs will not survive. 1969, is the world’s sixth most important company in business manFor Gluski, there isn’t any single area, but he identifies, for example, agement software, with 35 percent of the Latin American market and integrating a global supply chain instead of depending on local or rea presence in 40 countries. gional suppliers. But, above all, “a company has to set up processes that “Latin American businessmen need to face up to innovation as motivate its managers to dedicate resources to keep track of innovative part of the strategy of every company,” he ideas, spend the time and money to desaid and, taking up Benavides’ idea, doubles termine how these can be applied to one’s “We need to increase our down on it: not gradually. “We have to think business, and then make the new ideas a recapacity to take risks.” of disruptive innovation.” Both Benavides ality,” he said. “If a company penalizes those and Gutiérrez Muñoz believe it’s essential to who try new concepts or has an aversion to Ricardo Gutiérrez Muñoz, Board Member, take risks. risk in order to avoid failures, it’s unlikely to Grupo Kaluz, 2010 BRAVO Award, CEO of the Year For Consentino, companies are going to become a successful innovator. The creation have to reinvent their business models over the next few years, taking of the right incentives, culture and processes is absolutely vital for a into account the new behaviors of younger generations who are now company to become an innovator and follow that path.” in the consumer and labor markets. Alan Iny, a specialist in creativity at Boston Consulting Group, Jorge Steffens, also from the information technology sector and also talks about the need for constant innovation. “The ideas that winner of the 2007 Bravo Award as a technology leader when he are going to be successful aren’t necessarily going to work forever,” was CEO of the company Datasul, said that in order to innovate, he said. He reminds us that Henry Ford was very innovative in his “we have to look for something that revolutionizes the company, time, but later on, his ideas didn’t develop further. The executive sees such as the use of big data or business models that are truly revolumany people in the region ready to challenge the status quo, to think tionary and disruptive.” differently and to experiment. These days, Steffens is president of DLM Invista, a fund manager Definitely, as Benavides said, innovation “isn’t a flash in the pan” or that invests in software companies. The executive has no doubt that a single creative action. “It has to be an integral part of the philosophy innovation can be a key component for increasing productivity, and of the business that a company adopts.” doesn’t limit it to the private sector. Élida Bustos reported from Buenos Aires.

LATIN L LAT AT ATIN IN N TRADE TRA TR RADE R DE SEP SEPTEMBER-OCTOBER PTEM EMBE BER-OC BER -OC OCTOB TOB O ER E 2014 20 4 20 201

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TRENDS E M P LO Y M E N T

EMPLOYMENT REVOLUTION Latin Trade showcases some littlenoticed trends in job creation among Latin America’s largest employers.

mployment among Latin America’s largest companies has grown faster than in the economies of the region as a whole. The total number of people employed by the region’s top 100 employers expanded to 5.4 million in 2013, from 3.9 million in 2009, a 39 percent increase. Total employment in Latin America and the Caribbean grew by about six percent over the period. This finding could give pause to the idea that the most efficient way to solve the problem of job creation in Latin America lies in the indiscriminate promotion of small businesses. But, even more interesting, is the change in the composition of employment among the top firms on this list. The industries with the largest headcount from 2009 to 2013 were retail, food, energy telecommunications and beverages. These five sectors had a two-speed payroll growth. Food and beverages at rates of 21 and 32 percent, that is, below the mentioned 39 percent average. On the other hand, retail, energy and telecom, showed stark increases, greater than 40 percent. Meanwhile, the largest holding companies of Latin American conglomerates, and the biggest construction firms, doubled the size of their combined payrolls over the last four years. The seven holding companies listed among the region’s 100 biggest employers had a staff

LATIN TRADE SEPTEMBER-OCTOBER 2014

of 365,000 people in 2013 – that is equivalent to seven percent of the total employment of the group. In 2009, the three holding companies included in the top 100 generated 177,000 work positions, five percent of the total. This confirms a trend in Latin conglomerates to adjust their structure to better manage their new globalized operations. On the other side of the spectrum, financial service firms increased the number of employees by a mere nine percent during the quadrennium, not enough to stay on the list of the region’s biggest job creators, despite their current figure of 253,000 people employed. Other traditional employers like steel, mining, manufacturing and cement also lost ground. The large manufacturing firms increased their headcount by a bleak two percent, steel and mining companies at rates well below the regional average, while employment in textiles and cement decreased during the period. Construction, retail, energy and telecom, all tied to domestic consumption, will probably continue leading job creation in Latin America in the years to come. Holding companies, the result of corporate modernization, will probably not grow as much in the future, but they have already established their position as prime employers in the region. Santiago Gutiérrez reported from Miami.

PHOTO: ISTOCKPHOTO.COM/ RAPIDEYE

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TRENDS E M P LO Y M E N T

LATIN AMERICA’S TOP 100 EMPLOYERS (2013) (Number of employees as of December 2013) Rank ‘13 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

‘12 2 3 10 4 5 7 8 9 6 11 12 13 14 15 19 21 16 20 18 17 26 29 28 24 25 27 31 32 33 35 36 37 38 39 43 42 44 41 45 52 46 47 49 51 48 56 55 50 61 53

Company

Country

Sector

Walmart de México 1 Femsa JBS Odebrecht América Móvil CBD Pemex Cencosud Atento PDVSA Grupo Bimbo ECT BR Foods Contax Falabella Oxxo Bradesco Arcos Dorados Itaú Unibanco CFE Petrobras Coca-Cola Femsa Elektra Soriana Vale Walmart Grupo Carso Alfa Techint Camargo Corrêa Votorantim LATAM Airlines 2 AmBev Grupo Sanborns Liverpool Walmart Exito Marfrig Cemex Oi SMU Gerdau Grupo Chedraui Guararapes Arca Continental Nutresa SalfaCorp Grupo Modelo Grupo Televisa ICA

Mexico Mexico Brazil Brazil Mexico Brazil Mexico Chile Brazil Venezuela Mexico Brazil Brazil Brazil Chile Mexico Brazil Argentina Brazil Mexico Brazil Mexico Mexico Mexico Brazil Brazil Mexico Mexico Argentina Brazil Brazil Chile Brazil Mexico Mexico Chile Colombia Brazil Mexico Brazil Chile Brazil Mexico Brazil Mexico Colombia Chile Mexico Mexico Mexico

Retail Beverage Food Constr. Tech Retail Energy Retail Tech Energy Food Shipping Food Tech Retail Retail Finance Food Finance Energy Energy Beverage Retail Retail Mining Retail Holding Holding Holding Holding Holding Transport Beverage Retail Retail Retail Retail Food Cement Tech Holding Steel Retail Textile Beverage Food Constr. Beverage Media Constr.

It includes Central American operations.

LATIN TRADE SEPTEMBER-OCTOBER 2014

It includes LAN and TAM employees.

Employees

Ch. '13/'12

243,853 209,232 191,426 181,556 173,174 156,451 155,106 154,603 153,638 140,626 125,416 125,337 110,138 108,044 105,364 102,989 100,489 96,815 95,696 95,131 86,111 84,922 84,334 80,907 79,646 75,475 70,953 61,085 59,429 58,000 54,847 52,997 52,964 47,553 47,012 46,890 46,484 45,771 43,087 42,571 41,615 41,615 41,081 40,351 39,273 36,726 33,772 32,934 32,047 31,982

-1.8% 14.8% 35.2% 3.7% 2.4% 3.6% 2.7% 5.6% 0.0% 6.5% 0.1% 4.5% 0.2% 0.7% 9.4% 12.0% -2.8% 2.7% -1.3% -2.3% 1.2% 15.7% 10.1% -5.6% -6.6% -8.4% 1.6% 2.1% 0.4% 0.5% 1.0% -0.9% 3.2% 0.9% 6.2% 3.9% 5.2% 1.0% -1.9% 15.9% -0.6% -0.6% 5.9% 9.2% 0.8% 16.0% 2.3% -11.9% 12.1% -6.9%

Sources: Individual companies, Latin Business Chronicle

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TRENDS PA N A M Á

“BETTER TIMES ARE ON THEIR WAY”

Juan Carlos Varela President of Panamá

Exclusive interview with the president of Panamá, Juan Carlos Varela

ust a few days before his inauguration as President of the Republic of Panamá, Juan Carlos Varela took time from his hectic schedule to sit for an interview with Latin Trade. Varela was victorious in what most considered a surprise win on May 4 against President Ricardo Martinelli’s handpicked candidate Jose Domingo Arias (with Martinelli’s own wife Marta Linares running as his vice presidential candidate), and former Mayor of Panamá City Juan Carlos Navarro’s center left candidacy. Well behind in published opinion polls, Varela had surged to just under 40 percent of the vote in this country of four million when the polls closed, ahead of Arias’ 32 percent and Navarro’s 29. On election night, Martinelli had rather cryptically remarked: “I know the candidate and, really, God help us.” He had also approached the electoral commission with vague comments about irregularities (rejected – as one prominent businessman told Latin Trade: “thank heavens that of all the institutions that Martinelli weakened or corrupted, the electoral commission was not one of them.”) For his part, Varela had spoken on election night that “better times are on their way” and his desire for an “honest, humane government of national unity” – clearly alluding to the pervasive corruption and insider dealing which is alleged to have taken place during the past five years of the Martinelli administration.

LATIN TRADE SEPTEMBER-OCTOBER 2014

Throughout his interview with Latin Trade, Varela repeatedly used the word “accountability.” It was clear that not only was this to be a key word for his new administration, but that it would also be used retroactively. The interview took place in a small conference room at the Miramar Inter-Continental Hotel facing out on Balboa Avenue with a wonderful sweep over the 180 degrees from the Presidential Palace in the Old City to the right, the Dubai-esque Trump Tower to the left, and the ships out to sea on the Pacific waiting their turn to enter the Panamá Canal.

LATIN TRADE DID A MEMORABLE FRONT COVER FOUR YEARS AGO WITH FUNES AND MARTINELLI. AT A TIME OF CHANGE IN LATIN AMERICA, WE SPECULATED WHETHER PANAMÁ OR EL SALVADOR COULD PROVIDE A CENTER-LEFT OR CENTER-RIGHT PARADIGM FOR GOOD GOVERNMENT AND MANAGEMENT IN THE REGION. CLEARLY, NEITHER DID. WHAT WILL THE VARELA PRESIDENCY DO TO BE SUCCESSFUL? An honest government, he replied without missing a beat. It’s not about ideologies, but making your citizens’ lives better every day, by putting your people first and serving the people. Using the

PHOTO: PACIFIC PRESS/SIPA USA/NEWSCOM

BY RICHARD BURNS

TRENDS PA N A M Á

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TRENDS PA N A M Á

“It’s not about ideologies, but making your citizens’ lives better every day, by putting your people ﬁrst and serving the people.”

assets of the presidency and put them at the service of your people. It’s not about ideology but being a better person and making it a better country. THERE ARE A LOT OF HIGH HOPES FOR THE VARELA PRESIDENCY, BUT IF WE LOOK BACK FOUR YEARS TO THE LATIN TRADE COVER STORY THERE WAS, EXCUSE ME FOR SAYING THIS, A LOT OF SIMILAR LANGUAGE. THE LANGUAGE WAS SIMILAR BUT THE CAR CAME OFF THE ROAD. WHAT HAPPENED? You see that rocket there, that small park with a rocket (Varela points out of the window to a piece of land on the Balboa waterfront)? That was the final battle, and the reason I left the government. In government, you have to try to serve the people, but other people are trying to serve themselves. When a group of people tried to steal that piece of land to make it their private property, I fought to stop them. And at the end of the fight, it created a lot of tension with the president and that’s how I ended up leaving government. But in the end, the pressure was so big, the president couldn’t allow his friends to take over the property and it became a public park and they put that rocket in it. So, it’s a symbol now of our fight for public transparency. WILL THERE BE JUSTICE FOR THE LAST FIVE YEARS? Yes. There will be accountability and justice is part of that. We are in charge of accountability; and the justice department is in charge of that. We will make sure that we will bring accountability to public office. If there is no accountability, people think they can do whatever they want. ACCOUNTABILITY FROM NOW ON, OR RETROACTIVELY FOR THE PAST FIVE YEARS? No. We have to go back. If somebody did something, then we have to go back. IN ADDITION TO A REGIME THAT BELIEVES IN CORRECT BEHAVIOR AND ACCOUNTABILITY, WHAT ARE THE MAJOR ISSUES THAT THE VARELA ADMINISTRATION WILL WANT TO ADDRESS IMMEDIATELY IN YOUR FIRST YEAR IN OFFICE? The cost of living so our people have access to a good life. Second, security. Third, education. I would also add basic sanitation like water and sewage. Those are the key four issues. And there is always economic growth and making sure that economic growth reaches everybody.

LATIN TRADE SEPTEMBER-OCTOBER 2014

Education is a particularly key challenge to prepare Panamanians for the opportunity that our geographic location gives us. We also need to improve housing and provide another 300,000 families in Panamá with homes. HOW DO YOU SEE THE GOVERNMENT’S FINANCIAL ABILITY TO CARRY OUT THESE INITIATIVES? I think that an honest government will bring that. My new tax is going to be a tax on corruption. By fighting corruption, a lot of money is going to come into the government and that is going to help to pay off debts and keep the country moving forward. CAN YOU QUANTIFY THE COST OF CORRUPTION IN PANAMÁ? HOW MUCH DO YOU THINK CAN BE LIBERATED BY AN HONEST GOVERNMENT RELATIVE TO PANAMÁ’S ROUGHLY $40 BILLION ECONOMY. I would say one part is corruption and one part are opportunities that are not used the right way for the people. For example, parking at the airport should have gone for a bid. Mineral resources, land around the airport are other examples. It’s hard to give a specific amount; that would be speculating. But it’s an important amount. ANY COMMENTS ON THE CANAL? We decided to re-ratify the administrator of the canal. He has 17 years of experience. But, he will face big challenges over the next 24 months. We have told him for himself and the canal to stop giving specific dates for completion of the expansion since I see further possible delays. Of course, as President of Panamá, I am committed to finishing the project as soon as possible. ONE OF YOUR FIRST PHONE CALLS AFTER BEING NAMED WINNER IN THE ELECTIONS WAS FROM NICOLAS MADURO OF VENEZUELA, WAS IT NOT? Yes, it’s true. Listen, in the end, there are only two places in the world where you have all the countries participating: the United Nations in New York, and the Panamá Canal. That’s our foreign policy, and all our diplomats need to know that. We’re a neutral country. If you want to play the role as mediators that our geographic position asks us to play, even if you have sympathy for people fighting for their rights, you must understand that our role is to be a mediator and facilitator. Our foreign policy is defined where we were born: in the middle of the Americas. Richard Burns is chairman of the Latin Trade Group. He reported from Panamá City.

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TRENDS EL NIÑO

EL NIÑO: THE REGION WEATHERS THE STORM Once again, the El Niño phenomenon is affecting parts of Latin America. Its climatic ﬂuctuations produce both good and bad effects in the region. Who will it affect this year?

Low rainfall linked to El Niño has led to drought in parts of Central America, causing widespread damage to crops, shortages and rising food prices, worsening hunger among the region’s poor.

lthough it’s not as strong as expected, the El Niño ocean current is furrowing brows in more than one government office these days. Nicaragua, Costa Rica, Honduras and Guatemala have all declared emergencies in parts of their countries for lack of water. The worst drought in decades is causing havoc in almost one-third of Central America, the “dry corridor” where 10 million people live. The Caribbean coast of Colombia and northern Brazil are suffering from the same problem, and even where emergency measures such as rationing are not in effect, they will soon be needed. Meanwhile, Uruguay, Paraguay and Argentina are getting strong rains, and a stormy winter could affect Chile’s mining region. That’s how El Niño works – not even a drop of water for some areas, and for others, torrential rains. According to the International Research Center, this year’s El Niño event is less severe than the one in 1997-98 and not as strong as had been forecast, but it will reach peak impact in the last quarter of the year and will not subside until early in 2015. Understanding El Niño and predicting its effects is complicated, but three economists, two from the International Monetary Fund (IMF) and one from Cambridge University, have investigated its impact. They present their results in an article entitled “Fair Weather or Foul? The Macroeconomic Effects of El Niño.” In that publication, Paul Cashin, Kamiar Mohaddes and Mehdi Raissi analyzed the phenomenon between 1979 and

LATIN TRADE SEPTEMBER-OCTOBER 2014

2013 using 21 models of countries or regions. They simulated not only the direct influence on the area affected, but also indirect effects on third country markets. “While Chile and some Asian countries face a short-term decline in economic activity, for others the impact powers growth,” said Mohaddes, a researcher at Cambridge University. “For some (like the United States), it’s a result of direct effects, while for others (such as Europe), it’s through positive indirect effects, by being trading partners.” According to this analysis, El Niño usually produces stormy winters in Chile that disturb the production chain, and this in turn affects copper prices. Even though it creates an increase in the price of the metal, the production decline is a negative effect and implies a reduction in the growth of the Gross Domestic Product (GDP) of 0.19 percent. “However,” the article added, “it is also observed that for Chile, the usual effect after four quarters is positive by 0.37 percent.” This would explain the positive effect El Niño has on the northern hemisphere, where Chile’s main trading partners are located: Europe, China and the United States. For northern Brazil, there is a high probability of having a year with low precipitation when El Niño arrives. This region’s drought – which it is now producing – could push world prices of coffee, sugar and citrus fruits higher. As well, the abundant rainfall that southeastern Brazil receives during the spring and summer of an El Niño year would result in higher agricultural

PHOTO: OSWALDO RIVAS/REU TERS/NEWSCOM

BY JUANITA URIBE

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SEPTEMBER-OCTOBER 2014 LATIN TRADE

TRENDS EL NIÑO

While El Niño translates into lower growth in some economies, others can beneﬁt from the lower temperatures, higher rainfall and fewer natural disasters.

production, compensating in macroeconomic terms for the negative effect created in the northern region. Nor is Perú free from the effects of this peculiar meteorological phenomenon. The fishing industry expects to be affected, in this case by the changes in the rising current of nutrient-rich water along the coast. And, “as Perú is the world’s largest exporter of ground fishmeal used for animal food, a smaller supply from Perú has ramifications for livestock prices throughout the world,” the article stated. But at the same time, higher humidity in the environment favors Perú’s agricultural production. The conclusion is that although the effect on average growth for Perú is negative (-0.33 percent after four quarters), it is statistically insignificant relative to the positive effect on agricultural production (which constitutes 5.8 percent of GDP). Fishing comprises barely 0.6 percent of Perú’s GDP.

LESS GROWTH FOR SOME, FEWER HURRICANES FOR OTHERS While El Niño translates into lower growth in some economies, others can benefit from the lower temperatures, higher rainfall and fewer natural disasters. For example, up to August of this year, just two hurricanes developed in the Caribbean area, while in a year without El Niño, there could be half a dozen. Argentina, which exports 95 percent of its soybeans, benefits from the rains that help its agriculture, although this year, there

LATIN TRADE SEPTEMBER-OCTOBER 2014

are too many flooded fields. Canada enjoys a warmer climate in an El Niño year and this improves the incomes of its fishing fleets. México sees fewer hurricanes on the Atlantic coast and more on the Pacific side, and that generally results in stability in petroleum production and an increase in that sector’s exports. Obviously, the larger the territory, the more possibilities a country has to counterbalance El Niño’s negative effects. But, the authorities also take specific measures. For Maximiliano Campos, of the Department of Sustainable Development of the Organization of American States (OAS), the critical factors are early warning systems and national policies that protect the most vulnerable producers, the farmers. “You only have to look at Australia, the only country in the world with a national policy for fighting droughts,” he said. The study by the economists from the IMF and Cambridge also calls for policies and institutions that will enable countries to counter the adverse climate effects. Specifically, it advocates changes in crop patterns; sowing faster-maturing varieties; conservation of rainwater; careful management of grain stocks; and changes in policies and volumes of imports. These measures would help agricultural production in years of scarce rainfall caused by El Niño. In summary, since the effects of El Niño cannot be avoided, only pro-active public policies can mitigate the adverse effects on national economies. Juanita Uribe reported from Washington D.C.

PHOTO: ISTOCKPHOTO.COM/ GHORNEPHOTO

Argentine climate experts hope that soy and corn harvests reach record levels, thanks to expected heavy rains brought by El Niño.

SEPTEMBER-OCTOBER 2014 LATIN TRADE

TELCOS BRAZIL

BATTLE FOR BRAZIL IS ON Telefónica wants to consolidate its leadership in the giant South American country and end its partnership with Telecom Italia. At stake is the Latin American market, and the rival is América Móvil.

Telefónica aims to fold GVT into Brazil’s leading mobile phone network Vivo as mobile subscriber growth slows in the nation of almost 200 million.

he news is that Telefónica made an offer to the French group Vivendi to buy their Brazilian operator Global Village Telecom (GVT) for $8.98 billion. It’s also stated that the Spanish company could offer the French firm its shares in Telecom Italia, which amount to 8.3 percent of the voting shares. This share transfer would bring to an end the transaction between Vivendi and Telefónica Brazil. Now, let’s look at what all this means. Telefónica’s play goes far beyond the purchase of an operator to achieve inorganic growth. As the European telecommunications market matures, Telefónica is going all out in Latin America, and Brazil is the market to conquer. But first, to consolidate its position in the South American giant, Telefónica has to get rid of some excess baggage, which appears to be its participation in Telecom Italia, which makes it a shareholder in TIM and brings it under the purview of the Brazilian regulator. TIM is one of the four large mobile phone operators in the country, with a market participation of 27.2 percent. The other three are Vivo (of Telefónica with 28.7 percent of the market), Claro, with 24.9 percent, and Oi, with 18.4 percent. TIM is the thorn in the crown. Telefónica acknowledged to Latin Trade that an exit would mean distributing the Telecom Italia operator among the three biggest players. Even though they know this move is hardly viable because the competition authorities will have a lot to say about it, they said, “and the Italians don’t want to sell TIM.” In fact, Telecom Italia president, Marco Patuano, who met recently with President Dilma Rousseff – in an uncomfortable meeting in Madrid – said his company will invest $1.82 billion per year in Brazil between 2014 and 2016.

LATIN TRADE SEPTEMBER-OCTOBER 2014

Forced to do some entrepreneurial engineering, they admit at Telefónica that the agreement proposed to Vivendi will enable them to consolidate their leadership in Brazil, while at the same time getting rid of their Italian partner without putting pressure on TIM. In effect, GVT, whose performance in the first quarter of 2014 shows 13 percent revenue growth and 10 percent growth in EBITDA, opens the door wide to Telefónica in the fixed-line telephone business, a segment in which the Spaniards are leaders in São Paulo. It also expands the services of broadband and pay TV. “In the light of recent speculation, Telefónica’s offer for GVT doesn’t surprise us,” said a Citigroup report. While this is a bold move by Telefónica, the bank recognizes that “we like it a lot.” “GVT has a very good strategic fit with Telefónica Brasil and has the potential to generate converging offers,” it said. A BNP Paribas report said, that from a strategic point of view, the purchase of GVT makes sense because it enables Telefónica to extend its presence in fixed-line telephones beyond São Paulo. “The question is whether Telecom Italia will now launch a counter-offer. We doubt it, but Telefónica has everything to gain,” it said. Until the GVT operation is resolved, Telefónica’s purchase of the Mexican operator Iusacell will have to wait. The battle for the future of the telecoms is being fought in Brazil and México. César Alierta, CEO of Telefónica, is mobilizing his artillery in Brazil to face his rival Carlos Slim of América Móvil. We will just have to wait to see who wins. Sergio Manaut reported from Madrid.

PHOTO: STRINGER/BRAZIL/REU TERS/NEWSCOM

BY SERGIO MANAUT

SEPTEMBER-OCTOBER 2014 LATIN TRADE

TRADE THE NICARAGUA CANAL

The Brito Inlet in Nicaragua, the Paciﬁc Coast outlet of the planned interoceanic canal

CONTROVERSIAL CANAL MAKING WAVES An exclusive interview with Latin Trade reveals the secretive Nicaragua Canal is on track to begin building in December. Some worry about its environmental impact, and others doubt if it will even be built.

ig, bold and controversial, the plan to build a canal through Nicaragua has come up against deep skepticism since Wang Jing, a little known Chinese billionaire, won a concession to build it last year. But as a start date draws near, chief project advisor Bill Wild said the canal plan makes good financial sense, is on track to begin in December, and will provide more jobs than Nicaraguans can fill. Meant to rival, if not dwarf, the Panamá Canal, the project carries an estimated price tag of $50 billion— more than four times the GDP of Nicaragua itself. Cutting across Lake Nicaragua, it would link the Pacific Ocean and the Caribbean Sea with a waterway three times longer than Panamá’s. Its deep-water ports, meanwhile, would accommodate a new generation of mega-container ships. Wang’s Hong Kong Nicaragua Canal Development Group (HKND) won a no-bid, 50-year concession to develop the canal in June of 2013. “During the construction of the canal, there will be work for every Nicaraguan who wants employment, either directly on the canal itself, or in industries that benefit directly from the spin-off from construction,” Wild said in an email exchange. “I think we will be bringing people from many parts of the world to work on this massive project,” he added. “There are simply not enough people in Nicaragua to do it on their own.” Nicaraguan support is hitched to the promise of an economic turbo

LATIN TRADE SEPTEMBER-OCTOBER 2014

boost. Some experts predict the country’s GDP could reach 14 percent during the five-year construction phase, from 4.6 percent last year. Nicaragua is the second poorest country in the Americas. Wild said many Nicaraguans would also benefit from technical and managerial training that would expand their employment options further down the road. The canal concession, which is renewable, carries sweeteners for HKND too. The company will be able to build and manage attractive side projects, including a free trade zone, resorts, and an international airport. The deal pays Nicaragua $10 million a year for 10 years, with the country’s ownership stake gradually climbing to 100 percent over a century. Critics say the project is long on ambition and short on transparency. Basic questions remain about who will be financing it and whether China’s government will be contributing funds. Online publication McClatchy has reported that several Nicaraguan businessmen who traveled to China last year to meet with Wang about the canal project left with the impression that the Chinese government was involved. Wang has denied any government stake. Asked who will be investing in the project, HKND spokesman Lu Dong said the company “cannot reveal the investors’ information according to our agreements on privacy.” Industry experts note the canal would help meet China’s rising de-

PHOTO: TIM JOHNSON/MCT/NEWSCOM

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TRADE THE NICARAGUA CANAL

HK Nicaragua Canal Development Investment Co Ltd (HKND Group) chairman Wang Jing, whose company is heading the project for the construction and management of a canal passing through Lake Nicaragua

mand for Latin American commodities, especially Brazilian iron ore and Venezuelan oil. In July, President Xi Jinping swung through Nicaragua during a Latin America tour to pen a new $4 billion credit-for-oil deal with Venezuela. China is the second-largest market for Venezuelan oil after the United States. The canal could also shave miles off journeys between Asia and farflung trade partners. An analysis by SeaIntel estimates carriers sailing between Asia and the East Coast of the United States could reduce their fuel consumption by 17 to 30 percent using the Nicaragua Canal, depending on the size of the ship. Meanwhile, industry experts have questioned whether another canal in Central America would attract enough shipping traffic to pay for itself. Success depends in part on traffic from ultra-large container vessels, like Maersk’s Triple-Es, which are a quarter of a mile long and as tall as a 20-story building.

HONDURAS

NICARAGUA

CARIBBEAN SEA

MANAGUA

Expected cost: $50 billion

Lake Nicaragua (Cocibolca) Punta Gorda

173 miles

Brito PACIFIC OCEAN

100 km

COSTA RICA

LATIN TRADE SEPTEMBER-OCTOBER 2014

The ships are too big to slip through the Panamá Canal, but would easily sail through Nicaragua’s waterway. On the other hand, many ports, including American ports, can’t accommodate them. For now at least, they account for a small percentage of the global fleet. Wild said HKND’s commercial feasibility study had been completed, and “indicates that there is a very robust business case for the GCN (Gran Canal de Nicaragua).” Nicaragua’s canal project seemed to win an endorsement in June, when Maersk Line’s head of daily operations, Keith Svendsen, told ShippingWatch that the Nicaragua Canal “seems to make good sense.” Pointing to waiting times to get into the Panamá Canal, he noted Nicaragua’s waterway might shave 500 miles off a journey from New York to Los Angeles. “We generally support infrastructure improvements,” he said. Maersk later distanced itself from Svendsen’s comment, although the article is still featured on the HKND website. Numbers aside, Wild said HKND is also working to ensure a “net positive benefit” on environmental and social fronts. Environmentalists are especially concerned about the vast and shallow Lake Nicaragua, a key drinking water reservoir. The canal’s route cuts straight across the lake, which puts it at risk from salt infiltration and invasive species, they say. Writing in Nature magazine, scientists Axel Meyer and Jorge HuetePérez said the canal’s construction also risked destroying the habitats of endangered land animals like jaguars and spider monkeys. “I believe that the canal can be built and operated, not just without negatively impacting the environment, but indeed with a very substantial net positive impact,” Wild said. Referring to the pristine forests of the Indio Maíz along the eastern leg of the route – home to 500-year-old trees and fingernail-size frogs, Wild cast the canal as protective. “One of the drivers in our choice of the canal route was the opportunity to assist in preventing the massive ongoing destruction of the primary forests in Eastern Nicaragua,” he said. “(The canal) will provide the means to stop further encroachment and I believe it is not only the key to saving the Indio Maíz, but the only way to save it.” With HKNG’s environmental and social impact assessment still in progress, Wild said the company was still on target to start work by the end of 2014. “We have found no technical issues that are not soluble,” he said. “Our attention at present is on determining just what should be started first.” Ruth Morris reported from Shanghai.

PHOTOS: OSWALDO RIVAS/REU TERS/NEWSCOM; AL/JS AFP/NEWSCOM

Industry experts have questioned whether another canal in Central America would attract enough shipping trafﬁc to pay for itself. Success depends in part on trafﬁc from ultra-large container vessels, like Maersk’s TripleEs, which are a quarter of a mile long and as tall as a 20-story building.

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SEPTEMBER-OCTOBER 2014 LATIN TRADE

MULTILATINAS C I E LO

CIELO’S THE LIMIT The payments company has managed to be a champion in its local market and has kept foreign competitors abreast. A fantastic success story.

Rômulo de Mello Dias, Cielo CEO

BY THIERRY OGIER

he fast growing credit card and payments company Cielo looks increasingly mobile. It has already attracted 200,000 customers who use its solutions. They turn smartphones or tablets into point-of-sale terminals that can take credit or debit cards, and even vouchers. Cielo’s drive towards mobility and small, or even microbusinesses that thrive across Latin America, was supported by a series of key moves. Last year, Cielo completed the acquisition of the U.S.-based Merchant e-solutions (Me-S). Last June, it also signed a memorandum of understanding for a joint venture with Linx in an effort to integrate management software, commercial automation and electronic payment platforms for small retailers. “There is a great potential among micro-entrepreneurs and individuals,” said Rômulo de Mello Dias, CEO of Cielo, which has 1.5 million active retailers in its current portfolio of 1.9 million points of sale – from pizza delivery joints to tire fitting outlets. There is no registration fee for the new

LATIN TRADE SEPTEMBER-OCTOBER 2014

mobile product, and the connectivity fee amounts to around $5 per month, including the chip and secret code reader. Cielo registered sales of $3.12 billion last year and it has enjoyed a market share of more than 50 percent in Brazil. Dias said he now wants to advance on three different fronts: the “B.A.U” – read “business as usual,” which includes an investment of $220 million this year, mainly in

the acquisition of POS equipment; structural projects, which he keeps close to his chest; and “B.O.B,” which stands for “best of both,” in a reference to the “tropicalization” of the Me-S technological platform. “We want to combine the best of the company we acquired in the U.S. and the best of Cielo in Brazil,” he said. Cielo, born as VisaNet, is not yet 20 years old, but it has grown fast. The credit card offshoot of some of the largest retail Brazilian banks, such as Banco do Brasil and Bradesco, has now lost the exclusivity of Visa products, but it still has a dominant position in the market, partly thanks to its exclusivity agreement with Elo, a card label issued by Bradesco and state-controlled banks Banco do Brasil and Caixa Econômico Federal. Such exclusive agreement expires next year, but Dias said he is looking forward to greater competition. “We are largely in favor of this. It is now bound to happen by the end of the year. It is part of the equation that has been understood by market players. It is positive in a sense because, it will help to demystify the idea that one company is in a privileged position compared to others.” Productivity is an imperative at Cielo. “We have managed to do more in less time than we originally thought. This is thanks to the competence of our staff, but it is also thanks to technical competence, because we are seeking to work with qualified suppliers that can bring what is most innovative in the world. This is part of our values. And to us, values are like the Bible,” said Dias. Thierry Ogier reported from São Paulo.

PHOTO: DANIELA TOVIANSKY

Cielo registered sales of $3.12 billion last year and it has enjoyed a market share of more than 50 percent in Brazil.

SEPTEMBER-OCTOBER 2014 LATIN TRADE

MULTILATINAS BANORTE

BANKING ON CORRESPONDENTS Banorte has ﬁrmly established itself in its local market through a growing network of non-bank correspondents.

n 2013, Banco Mercantil del Norte (Banorte) reported six million bank transactions through its network of 4,147 correspondents, 23 percent more than in the previous year. “This clearly represents a savings for us in the installation of automatic tellers and branches,” said Miguel Valero Cañas, Banorte’s director of financial inclusion and mobile channels. “We are taking advantage of third-party infrastructure and only paying for the transaction. This has enabled us to serve our clients more efficiently.” In México, installing a bank branch costs an average of $380,000, according to figures from the National Commission for Banking and Securities (Cnbv). “This cost can be uneconomic for some banks,” said Juan Carlos Rivera, director of Tecnológico de Monterrey’s school of marketing. “The best way to expand is through correspondent banks,” he added. Banorte has a twopronged strategy: on one hand, give clients a bank network with longer business hours, and possible weekend and holiday hours, and on the other, maintain a presence in places that do not have a branch or automatic teller. At present, 32 percent of México’s 2,456 municipalities have no bank representation – that is, there are 786 communities without an automatic teller or bank branch, according to the Cnbv’s latest Financial Inclusion Report. Banorte took note of this situation in 2005 and began its work with correspondent banks – establishments, which are outside of the banking system, but are authorized to carry out basic banking operations – through the network of more than 1,600 offices of Telecomm throughout the country. At that time, there were no clear-cut rules, explained Valero Cañas. But that

LATIN TRADE SEPTEMBER-OCTOBER 2014

changed in 2009 when standards for the use of correspondents were set up in México. They were issued to bring banking services to areas of the country with low penetration from traditional banking and its services. With this, the relationship between banks and correspondents changed. Banorte, which had a four-year head start, extended its alliances to the stores of 7-Eleven, Woolworth and Soriana. Last year, the number of its correspondents grew by 35 percent when it incorporated 886 Extra stores to its network, bringing the total number of correspondent to over 4,000 correspondents throughout the country. Today, Banorte averages 700,000 transactions per month in deposits, withdrawals and credit card payments through the correspondents. This represents one percent of their total banking operations, and will help it to grow its total operations by 15 percent, according to its 2013 annual report. All of this shows that companies in emerging countries are continually looking for new ways to grow their markets, said David Michael, a partner in the strategic financial consulting firm Boston Consulting Group, and author of the report Local Dynamos: How Companies in Emerging Markets Are Winning at Home. “The combination of new technology, consumer needs and local realities are motivating companies to grow,” said Michael. This year, Banorte’s goal is to have 12 million transactions, and within the next three years to arrive at 5,000 correspondents throughout the country by incorporating small businesses. “The banks are very focused on using correspondents,” said Valero Cañas. “The dream is that small businesses will turn themselves into correspondents.” Marco Núñez reported from Mexico City.

PHOTO: HENRY ROMERO/REU TERS/NEWSCOM

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INDUSTRY REPORT BANKING

A DEEP CHANGE Is the road to monetary normalization in the United States an opportunity for banks in LatAm? BY JOSÉ LUIS DE HARO

he decrease in global liquidity as a result of the U.S. Federal Reserve’s gradual tapering of its quantitative easing stimulus measures, also known as QE, has affected individual emerging markets in Latin America differently, reinforcing that they are not a homogeneous group. While the Fed seems committed to unwind the bond and mortgage-backed securities purchase by October, the next question is, when will the Federal Open Markets Committee start increasing interest rates from its historical lows. These loose monetary conditions have had tangible benefits for Latin America. A stance that supports growth and financial stability in the world’s largest economy is good for the region, given its links to the United States. In turn, continued U.S. growth is positive for commodities demand, both directly from the U.S. and via other countries that benefit from its growth. But the end of cheap money, and the tightening of monetary policy, couldn’t come at a worse time for the region. According to Alejandro Werner, Western Hemisphere director of the International Monetary Fund, there will be a very significant deceleration for Latin America in 2014 that will be

LATIN TRADE SEPTEMBER-OCTOBER 2014

partially reversed towards 2015 and 2016. But even so, the IMF sees a future for Latin America in upcoming years that is substantially weaker than that of the last decade. This economic environment could make it harder for international banks operating in the region to increase their profits, especially in certain areas of business. In the end, Latin America’s investment banking markets are small. In 2013, total revenues garnered by investment banks, are a bare $2 billion, and M&A volume in the first quarter totaled $22.9 billion, up 25 percent from $18.3 billion a year before, but down 44 percent from the previous quarter. The Inter-American Development Bank (IDB) warns that increased government spending and higher corporate debt loads to fuel growth, make the region’s banking sector even more vulnerable than it was before the 2008 crisis, particularly as government fiscal balances deteriorate. The IDB predicts an accelerated unwinding of U.S. monetary stimulus and extended Chinese slowdown could impact regional GDP growth. “While banks in the region have reduced their dependence and exposure to the dollar, the reality is that the U.S.

monetary policy led to a significant flow of capital to the region. Now, the monetary normalization involves a reversal of flows with possible effects on exchange rates and interest rates, causing higher funding costs for banks,” said Gema Sacristán, chief financial markets division at the Inter-American Development Bank, when interviewed by Latin Trade. There is evidence of a surge in the dollarization of investment/loan portfolios among high networth investors. Nevertheless, the undervalued Mexican peso has the potential to recover faster than other Latin American currencies after the current phase of increased market stress subsides. The Colombian peso may be subject to sporadic bouts of volatility, prompting intervention by the authorities, while the Brazilian real will continue to suffer from lackluster economic recovery conditions and the need for fiscal consolidation. As José Gonzales, managing partner at ECG Asset Management, pointed out, “the monetary normalization should extend the strengthening of the dollar and the realignment of interest rates and global asset allocation portfolios.” As he explained, in Latin America, this would generate a weakening in local currencies, but nothing dramatic, that will promote exports and reduce local demand. Both these things could damage loan portfolios for local consumption, a situation that could worsen under the global slowdown and the potential need to raise interest rates in tandem with the United States. All these will put banks under pressure, although not as serious as in past crises. José Luis de Haro reported from New York.

PHOTO: ISTOCKPHOTO.COM/ CATLANE

While banks in the region have reduced their dependence and exposure to the dollar, the reality is that the U.S. monetary policy led to a signiﬁcant ﬂow of capital to the region.

INDUSTRY REPORT BANKING

A MEXICAN DIVERSIFICATION The answer to uncertainty in the region: “diversify” BY JOSÉ LUIS DE HARO

PHOTO: ISTOCKPHOTO.COM/ MIKEYLP T

well-functioning banking system is a prerequisite for the adequate operation of any economy. The recently approved, multi-layered financial reform in México contains measures that may strengthen the banks’ institutional framework, allowing for more robust and sustainable credit expansion, among other benefits, according to Manuel Sánchez, deputy governor of the Bank of México. These measures set an example to other countries in the region. México’s financial system has become more integrated with the rest of the world, making its financial services some of the most stable and regulated institutions in the region. México is the only LatAm country where we expect meaningful acceleration in the second half of the year, as it benefits from stronger U.S. growth and the approval of the structural reforms. The country is also the only one in the region where credit growth is holding up, and was the only LatAm country that had higher exports in 2Q compared to one year ago. Analysts suggest that engagement with foreign institutions through Nafta led to strong financial standards being set up by local regulators, plus the

supervision of parent companies from various countries. In addition, the presence of major banks also helped México import institutions from mature financial markets, and has contributed to a banking system with an average tier-1 capital ratio of 15.7 percent. That said, the current times have not been a bed of roses. As Grupo Financiero

México is the only LatAm country where we expect meaningful acceleration in the second half of the year. Banorte’s CEO, Alejandro Valenzuela, explains, “diversify the business” has been the only way to “deal with the slow economic growth in the region over the last 15 to 16 months.” Banorte, GFNorte’s banking subsidiary, is currently the fourth largest banking institution in México measured by size of loans and deposits, surpassing HSBC and Santander. It is the top provider of government financing, the

third largest in mortgages, and the fourth in credit cards and commercial loans. For Valenzuela, the key to deal during uncertainty is to be loyal to customers. “The dealer must have a relational, not transactional, business relationship.” That’s why, according to him, “the good banker must support its clients during good and bad times.” In fact, the success of Banorte “is precisely due to that.” But of course, Banorte’s CEO referred to the financial reform in the country as “a very important step in México, as it will help expedite a leveraged economy.” On the subject of creditors’ property rights, the reform makes significant progress towards correcting problems observed in the application of the bankruptcy law approved in 2000. Furthermore, it reduces obstacles to expediency in the judicial process to recover collateral, illustrated by the possibility for debtors to choose the court level and select assets to be seized. In the field of regulation, the reform provides rules for the authorities to manage the resolution or liquidation of banks in cases of liquidity squeezes and insolvency. With respect to competition in the sector, a new law facilitates mortgage substitution by debtors, allowing them to choose banks offering more favorable terms. In regards to other reforms recently approved, Valenzuela assures that compared to the Brics (Brazil, Russia, India, China and South Africa), “the Mexican economy is now more open.” Real GDP rose 1.6 percent year over year in the first quarter of 2014, slightly above expectations and putting the economy clearly in the recovery phase of the business cycle. Even in the face of these short-term headwinds, in the long run, upside risks may predominate due to the potential effects of structural reforms. If well implemented, the reforms could go a long way toward attacking the most insidious problem behind the unsatisfactory long-term performance of the Mexican economy, stagnant productivity. José Luis de Haro reported from New York.

SEPTEMBER-OCTOBER 2014 LATIN TRADE

LOGISTICS T R A N S P O R TAT I O N

trade liberalization and the signing of trade treaties in Latin America, the new trade barriers are to be found in the low investment in infrastructure and logistical shortcomings that raise internal transport costs. According to the study, Colombia would be one of the countries that would benefit the most: a one percent reduction in internal costs could increase agricultural exports by 7.9 percent, manufacturing exports up to 7.8 percent, and mining exports up to 5.9 percent.

Reducing internal transportation costs would signiﬁcantly increase the prospects for selling abroad. BY JAIME MEJÍA

n Punta Arenas, Chile, in the extreme south of South America, beer producers who want to export their product must ship their merchandise by truck to the port of San Antonio, over 1,800 miles away. The same thing happens with lumber exporters from Ucayali in Perú. They have to send their products through the Andean mountain ranges down 466 miles of unpaved roads. This story is repeated in many regions in Latin America and is one of the reasons why they often pass up the opportunity to cash in on the potential for exporting. One example of export potential that could not be developed due to internal transport difficulties is in the Cundiboyacá region on the high plains and in Santander in Colombia. This zone has large reserves of thermal coal ideally suited for metallurgy. But, says Mauricio Mesquita Moreira, an economist from

LATIN TRADE SEPTEMBER-OCTOBER 2014

the Inter-American Development Bank (IDB) and author of the recent study on the issue, “it is located in a hardto-access area and no transportation solution that would make exporting it feasible has materialized.” The study, “A long way from exporting,” analyzes internal transportation in Latin America and concludes that “a reduction in internal transport costs would have a very important positive effect on exports, especially in the municipalities that export the least,” said Mesquita.

COSTS ARE THE KEY One of the main conclusions of Mesquita’s study refers to the clear-cut inverse relationship between internal transport costs and the region’s exports, and how reducing those costs would set the stage for an increase in regional trade. In fact, the study said, after years of

THE INVESTMENT CHALLENGE Why are internal transportation costs so high? The usual suspect, which tells us the answer, is low infrastructure investment. The study says there is no up-to-date data on this, but the latest serious effort to estimate levels of infrastructure investment, back in 2006, suggests that in Latin America, they amount to about one percent of GDP. The best data explains the situation in Brazil and México. It’s estimated that in those countries, investment in transportation infrastructure has been less than one percent of GDP for the last five years. “This is equivalent to half of the historical levels and just one-quarter of the average that China has spent over the last decade,” the study said. According to Mesquita, another conclusion from his work is that reducing transport costs can also play a very important role in economic development by enabling the most remote areas to be quickly linked to the global economy through foreign trade. Jaime Mejía reported from Miami.

PHOTO: ISTOCKPHOTO.COM/ LIUF UYU

TOO FAR TO EXPORT

SEPTEMBER-OCTOBER 2014 LATIN TRADE

LOGISTICS C U S TO M S Port in Valparaíso, Chile

North America have a rating of about five, while Latin America lags behind at less than 3.7. All of this tends to end up as a trade barrier, which implies costs. The IDB study said the costs arising from border processes represent up to 15 percent of the total value of the goods traded.

THE KEY IS IN THE PROCESS

Each day of delay for a cargo at the border can decrease trade between one and seven percent, says an IDB report. BY JAIME MEJÍA

ustoms processes are crucial to trade and to the logistics process that enables a product manufactured anywhere in the world to arrive at the end user’s door at the right time and the right price. The customs process is so important to logistics that, according to data from the Inter-American Development Bank (IDB), every day a cargo waits at customs can reduce trade by one percent. The impact is even higher for perishable goods, where trade can be reduced by up to seven percent for each day’s delay. In other words, customs processes obviously have the potential to create or destroy wealth by facilitating or creating problems for global trade. “Customs duties are also fundamental for financial stability,” Manuel Márquez Farina, a leading specialist in customs issues at the IDB, told Latin Trade. “In Latin America, the customs office might receive between 30 and 50 percent of a country’s tax revenues.” Márquez said data from the World Economic Forum indicates that Latin America is one of the world’s least efficient regions in customs procedures. On a scale of one to seven, where one is very inefficient and seven is very efficient, the European Union and

LATIN TRADE SEPTEMBER-OCTOBER 2014

REGIONAL CHALLENGES There is a lot to do in terms of customs efficiency in the Latin American border areas. According to the Global Enabling Trade Report 2014, issued by the Global Economic Forum, the main challenges Latin America should be concerned about involve transparency and border administration. That’s where Latin American economies perform below the average of the developed countries by a significant margin. On the Ethical Trade Index (ETI), Chile leads, and is the lone Latin American country among the top 10 ranked countries. One of Chile’s strengths is that it has a very open tariff regime. But even in Chile, there’s room for improvement in transportation services and efficiency in border administration. The rest of Latin America ranked much lower on the index. After Chile, Costa Rica is second, at number 42, and Venezuela is the lowest, at 137. The border problems are even worse for imports. An ETI businessmen’s survey showed that the region’s three main importing problems are, in order: burdensome procedures at the borders, tariffs and corruption on the borders, and again, the customs offices. Márquez said that a program of coordinated border management to confront the challenges of customs procedures is being carried out with the support of the IDB. The first pilot project is underway with several Central American countries and México. Its goal is to have the governments improve information exchange to speed up trade at the border points. Jaime Mejía reported from Miami.

PHOTO: ISTOCKPHOTO.COM/ JORISVO

CUSTOMS, A SERIOUS OBSTACLE

When speaking of trade logistics, one generally thinks of countries needing high-cost investments in the infrastructure of ports, highways and other large-scale works. However, Márquez maintained that just 25 percent of trade delays are a result of deficiencies in highways or ports. The other 75 percent is because of inefficient processes. The amount of cargo that is inspected can make the difference in a customs process. According to Márquez, the world’s most efficient customs offices are the ones that inspect a small percentage of the cargo. Márquez cited the example of the port of Valencia, Spain’s largest port and the fifth-largest in Europe. Márquez said that in a container operation of five million TEUs per year, it only inspects 15 containers per day. The port has only two points where the trucks leave and no guard officials. “It’s not that the port’s customs office has given up on security, but rather the fact that it has analyzed the level of risk correctly enables it to inspect only a few containers per day,” Márquez said.

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SEPTIEMBRE-OCTUBRE 2014 LATIN TRADE

MARKET REPORT MEDELLÍN

View of the urban train in Medellín, Colombia. In 2013, Medellín received the award for most innovative city in the world in the ‘City of the Year’ contest, winning against New York and Tel Aviv.

MEDELLÍN’S MAKEOVER Medellín is ready for its comeback, but crime, gangs and corruption remain a challenge, therefore casting doubt on the “Medillín Miracle.”

o fully comprehend the transformation of Colombia’s second city, Medellín – from ultra-violent headquarters of Pablo Escobar’s cocaine cartel to hotspot for urban planning, innovation and foreign investment – it helps to talk with Medellín Mayor Aníbal Gaviria. Gaviria, 48, has lived through the worst of times including when cartel killings made Medellín the murder capital of the world. His mother was kidnapped by left-wing guerrillas who later abducted and executed his older brother, Guillermo Gaviria, who at the time was governor of Antioquia. “It was a grave and chaotic situation,” Gaviria told Latin Trade in a telephone interview. “But we are leaving this dark and painful period behind.” These days, Medellín is making headlines for its cable car system connecting hillside slums to the bustling downtown, for its public parks and libraries, for its enlightened political leadership, and for its efforts to build a knowledge-based economy. In the process, the city is filling its trophy case. Edging out Tel Aviv and New York, Medellín in 2013 was named the world’s most innovative city in a contest sponsored by The Wall Street Journal, Citigroup and the Washington-based Urban Land Institute. Medellín was praised for its “progress and potential,” for cutting CO2 emissions by 175,000 tons annually and for reducing crime. In a so-called “Smart Cities” survey focused on public services,

LATIN TRADE SEPTEMBER-OCTOBER 2014

security, and sustainable development, the Spanish technology multinational Indra in August named Medellín and Santiago, Chile, as Latin America’s top two cities to live in. Another sign of the city’s re-emergence came in April when the United Nations agency UN-Habitat held the 7th World Urban Forum in Medellín. At the weeklong conference, 22,000 delegates and guests discussed how to transform urban landscapes into safe, prosperous and harmonious spaces. Many praised the example of Medellín while Joan Clos, the director of UN-Habitat, proclaimed himself an honorary “paisa,” the nickname for residents of Medellín and Antioquia. How did this all happen? Has Medellín turned the corner for good? To be sure, Medellín has benefitted from massive improvements in security nationwide as well as tectonic shifts in the international cocaine trade. Military offensives have weakened drug-trafficking guerrillas who are now negotiating a peace treaty in Havana, Cuba, with the government of President Juan Manuel Santos. The two sides have agreed on three of the five points on the negotiating agenda and many analysts now believe a final peace treaty will be signed before Santos leaves office in 2018. Escobar was killed in 1993, and the Medellín cartel collapsed as did its rival, the Cali cartel. Cocaine production and trafficking remain rampant, but now the business is dominated by Mexican

PHOTO: LUIS EDUARDO NORIEGA/EFE/NEWSCOM

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MARKET REPORT

Residents of Comuna 13 in Medellín got a ride into the future with the installation of outdoor escalators.

crime syndicates. By contrast, Colombia’s smuggling organizations today are smaller, less powerful, and keep a lower profile. That, in turn, has helped lower the murder rate in Medellín. From a peak of 380 murders per 100,000 people in 1991, the homicide rate plummeted to 38 per 100,000 last year. That’s still high: The average rate in major U.S. cities is about 12 homicides per 100,000 people. “But compared to what we had before,” Gaviria said, “this marks a huge advance.” Besides traditional security strategies, officials have sought to improve and integrate Medellín’s slums, known as comunas, to give lower-income residents a stake in the city’s future. New schools, parks and public libraries have gone up. The city’s metro has been connected to a network of cable cars. These aerial trams carry people from the mountaintop barrios that overlook downtown to the subway system, giving them access to the rest of the city. Unlike roaring, exhaust-spewing buses, the system is quiet and fast. For slum-dwellers, commuting to jobs in the city center via cable cars and the subway now takes 45 minutes compared to two hours by bus. The gondolas move 20,000 people a day and have inspired similar cable car networks in the mountainside favelas of Rio de Janeiro and Caracas. Some of the cable car passengers read during the ride by checking out books from a new library and community center – designed by Bogota architect Giancarlo Mazzanti – that sits next to one of the cable car stations in the Santo Domingo comuna. Several subway stations house smaller libraries that carry everything from selfhelp manuals to the Harry Potter series. The city has even built a giant outdoor escalator so residents of a steep, mountainside slum known as Comuna 13 no longer have to climb the equivalent of a 28-story building to get home. The ride to the top now takes five minutes. Tourists now show

LATIN TRADE SEPTEMBER-OCTOBER 2014

up to ride the escalator and cable cars. Property values in Comuna 13 and other barrios are on the rise. “The idea was to make these people, who had been forgotten for so long, feel like they were part of the city. They began to feel important because their voices were being heard. And that has had many repercussions,” said Camila Escobar, projects deputy director for ACI Medellín, an organization focused on bringing foreign investment, conventions and other events to the city. Other aspects that are present in this city transformation is education. The city education secretariat, backed up by Fundación Nutresa and Fundación Universitaria Luis Amigó, leads a bilingual project named Pre-K English. The initiative has a $1 million budget to train over 400 kindergarten teachers in three years. “Fundacion Nutresa is involved in promoting an education that helps internationalization, and backs up the Medellín City Hall Bilingual Program, said Juan David Lee Aguirre, corporate communication manager at Servicios Nutresa SA. He said the project will strengthen the language teaching and train teachers in methodological strategies, which will improve the process of teaching and learning. Also, information technologies and communication areas are included in the program. According to the Urban Land Institute, changes to the institutional fabric of the city have been just as important as infrastructure projects. In particular, it noted that Medellín is one of the world’s largest cities to implement participatory budgeting which allows citizens to prioritize projects – such as community centers, health clinics, and youth groups – for public funding. Of course, not everyone buys the much-hyped “Medellín Miracle.” Crime remains a huge problem in the comunas, many of which are controlled by drug-trafficking gangs that also extort local businesses – from bus companies to street-corner groceries. At 14 per day, the city has the nation’s highest rate of car and motorcycle thefts, according to Medellín City Councilman Jesús Aníbal Echeverri. Max Gil, a political science professor at the University of Antioquia, points out that the drop in the city’s murder rate is partly due to cease fires negotiated between warring gangs. But when these peace pacts break down, he said, the murder rate spikes – as it did in 2009 when the city registered 94 homicides per 100,000 residents. In addition, Gil said the gangs control some of the neighborhood political councils, known as Juntas de Acción Comunal, which allows them to dictate where and how some of public money is spent. “There has been a big effort by city officials to hide these problems,” Gil said. “Those who question the progress are viewed as enemies.” Mayor Gaviria disagrees. “We don’t deny that we still have enor-

PHOTO: ROBIN U TRECHT/SIPA USA/NEWSCOM

MEDELLÍN

MARKET REPORT MEDELLÍN

SEPTEMBER-OCTOBER 2014 LATIN TRADE

MARKET REPORT MEDELLÍN

mous challenges,” he told Latin Trade. “We still have gangs, but we are fighting them and winning back territory from the criminals.” Escobar and others point out that crime has not deterred national and foreign companies from moving to Medellín. Most of the murders, extortion and robberies take place in the comunas far away from the city’s corporate high rises. In addition, big cities all across Latin America suffer from soaring crime rates. For their part, investors have found other aspects of Medellín much to their liking. Located in the Aburrá Valley in the Andes Mountains of western Colombia, Medellín is known as the city of eternal spring for its sunny, pleasant climate. With 3.5 million people, it is smaller than Bogotá and lacks that city’s epic traffic snarls, public transportation breakdowns and high cost of living. Medellín was founded in the 1600s and quickly became a center for gold production and the coffee trade. It later developed into a center for manufacturing and now serves as the corporate headquarters for major Colombian firms like Corona, Argos and Bancolombia. But lacking a national capital and located a two-day’s drive from the nearest port, Medellín has been forced to move in new directions to compete with other Latin American cities for foreign investment. In addition, there is no longer much room within the city limits for

factories. That’s why Medellín officials are now prioritizing health services, energy and information technology, and are building a broader ecosystem to foment innovation. “Medellín realized that it had to follow a different path,” said Paulina Villa, the general manager of the city’s Ruta N innovation district, a 275 acre technology park on the city’s north side set up to house high-tech companies. Villa pointed out that city officials have set aside $260 million for a 10-year plan to promote science and technology. The aim is to integrate universities and businesses, provide firms with guidance on intellectual property, and help entrepreneurs develop ideas and secure access to the global economy. The strategy appears to be working. The Swiss building materials giant Holcim has set up a service center in Medellín while Hewlett Packard chose the city for one of its global services hubs. Ironically, HP saw the city’s troubled history as something of a plus because for years the violence deterred high-tech companies from locating in Medellín and tapping the city’s full potential. “We are not yet Silicon Valley,” Villa said. “But we are moving in that direction.” John Otis reported from Bogotá.

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LATIN AMERICA PHILANTHROPY INITIATIVE NEW YORK LAUNCH

Richard Burns, Chairman, Latin Trade Group; Pedro Castillo, Director of Institutional Relations, Promotora Social Mexico; Victor Hugo Celaya, CSR Director, Angelica Fuentes Foundation; Jesus Aguais, Executive Director, Aid for Aids

Bill Drayton, Chair & Chief Executive Ofﬁcer, Ashoka: Innovators for the Public

PHILANTHROPIC THOUGHT AND ACTION

nternational non-profit institutions have been active for many years in Latin America. However, the region’s nonprofits are still in the process of developing their own fundraising strategies and social development initiatives. Moreover, the region’s affluent individuals, along with corporations, are becoming increasingly active in their pursuit of charitable endeavors. The emerging philanthropic

community is eager to share ideas and resources with local and international organizations, as well as learn more about philosophies and structures to create tangible results. To be a catalytic force in this area, Latin Trade Group, in partnership with Worldfund, launched in New York the Latin America Philanthropy Initiative (LAPI.) The initial event, one of a series,

Steven Shindler, Chairman, NII; Luanne Zurlo, Founder and Co-Chair, Worldfund

LATIN TRADE SEPTEMBER-OCTOBER 2014

Isabelle Lagarde, Haiti Program Manager, Clinton Foundation; Claudia Cisneros, Director, Digitel Venezuela; Hilary Vartanian , Executive Vice President, Latin Trade Group; Richard D. Salvatierra, President, Americas Health Foundation; Carina Morillo, President, Fundación Brincar; Gabriel M. Restrepo, Public and Institutional Affairs Manager, Cementos Argos S.A.

was hosted at the offices of J.P. Morgan, and provided a space for leaders and experts from around the region to discuss critical issues regarding philanthropy. LAPI’s mission is to share philanthropic thought and action in order to positively impact Latin America, focusing mainly on access to education and healthcare, poverty reduction and environmental sustainability.

Gabriel M. Restrepo, Public and Institutional Affairs Manager, Cementos Argos S.A.; Rosemary Winters, CEO, Latin Trade Group; Angélica Ocampo, Executive Director, Worldfund

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TRADE AMÉRICAS AND CONNECTAMERICAS EXPO

Stefan Selig, Undersecretary of Commerce for International Trade, U.S. Dept of Commerce

Plenary Session I: Infrastructure Trends for the Next Decade in the Americas speakers: Óscar Callejo, General Director of Highways, Secretariat of Communications and Transportation, Mexico; Leonardo Rodríguez, President, Emerson Latin America; José W. Fernández, Partner & Co-Chair Latin America Practice Group, Gibson, Dunn & Crutcher LLP (Former Assistant Secretary of State for Economic, Energy and Business Affairs at the U.S. Department of State); Christian Moller Laursen, CFO, APM Terminals; Alberto Alemán Zubieta, CEO, ABCO Global (Former CEO of the Panama Canal Authority)

Plenary Session II: Building a Business Community in Infrastructure speakers Sergio Jaramillo, CEO, Konﬁrma; Rodrigo Aguiar, President, ABESCO; Isabel Agudelo, Director, Logyca; Edgar Botero, Director General, MGM Innova Energy Services; Jorge de los Reyes, Manager of Advisory Services, PwC, chaired by Tomás Serebrisky, Economic Principal Advisor for the Infrastructure and Environment Sector, Inter-American Development Bank

Bernardo Guillamón, Manager of the Ofﬁce of Outreach and Partnership, IDB

BUILDING THE AMERICAS The regional event launched the ConnectAmericas Infrastructure Business Community and provided participants opportunities to connect with potential business partners and ﬁnanciers, as well as learn from regional corporate and government leaders about the latest trends in infrastructure in LAC. n September 3 and 4, Latin Trade Group and the Inter-American Development Bank (IDB) hosted the Trade Americas & ConnectAmericas Expo in Miami. The event focused on infrastructure development in the Americas, with an emphasis on bridging the region’s infrastructure gap, bringing together governments, infrastructure developers, and SMEs to build Latin America’s future. Distinguished keynote speakers featured Joe García, U.S. Representative for Florida’s 26th Congressional District, and Stefan Selig, U.S. Department of Commerce Undersecretary of Commerce for International Trade. Senior

O Fabrizio Opertti, Chief of the Trade and Investment Unit, IDB

Joe García, U.S. Representative for Florida’s 26th Congressional District

LATIN TRADE SEPTEMBER-OCTOBER 2014

representatives from the IDB gathered in Miami for the event, including Bernardo Guillamón, Fabrizio Opertti, John Beckham, David Bloomgarden, Esteban Diez-Roux, Ellis J. Juan and Alejandro Melandri, among others. Conference program panels addressed a number of issues relating to infrastructure finance and development. Special sessions focused on topics including financial innovations in infrastructure, financing the infrastructure value chain, and regional trends in transportation and logistics, energy efficiency and renewable energy, and urban infrastructure. Additionally,

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TRADE AMÉRICAS AND CONNECTAMERICAS EXPO

John Beckham, Chief of Debt Investments Division, Inter-American Investment Corporation; Matías Núñez Castro, Director for SMEs Division in Latin America, Banco Santander; Diego Rodríguez, Vice President Commercial Solutions, Visa, Inc. LAC, Verónica Baranda Sepúlveda, Director, Planning, Analysis and Control, Banobras

Matthew Rooney, Executive Director for the Americas Business Dialogue, U.S Chamber of Commerce

Mario Garcia, President & CEO, Garper Energy Solutions; Hero Balani, Business Development Ofﬁcer, BelizeINVEST

Felipe Rivas Villatoro, Executive Director, FOVIAL (Fondo de Conservación Vial), El Salvador; Travis Cobb, Senior Vice President, Network Operations, DHL Express Americas; Esteban Diez-Roux, Principal Transport Specialist, IDB; Jaime Szulc, President, Latin America Region, The Goodyear Tire & Rubber Company; Gonzalo Peschiera, Business Development Manager, OHL Americas

Guilherme Loures, Investment Banking Analyst, Goldman Sachs; Sergio Hinojosa, International PPP Consultant, Ikons Atn; John Graham, Principal Investment Ofﬁcer, Structured and Corporate Finance Department, IDB; Adi Blum, Director, First Reserve Corporation; Marco G. Monroy, CEO, MGM Innova Capital; Sean Mulvaney, Member, Board of Directors, Export-Import Bank of the United States

Alejandro Echeverri, Foreign Investment Representative, ProExport; Luis Germán Restrepo, Director, ProExport; Diego Sanchez, Local Rep, ProExport; Silvia Morales, Marketing Associate, ProExport; Daniela Zambrano, Local Rep, ProExport

Rosemary Winters, CEO, Latin Trade Group

LATIN TRADE SEPTEMBER-OCTOBER 2014

Stefan Selig, Undersecretary of Commerce for International Trade, U.S. Dept of Commerce, Maria Lourdes Gallo, Executive Director, Latin Trade Group

the event included presentations on public-private partnership projects, as well as on the IDB as a partner for doing business in the region. The event launched the prototype of the ConnectAmericas Infrastructure Business Community, designed to help overcome the information barriers that are preventing bidders from submitting to infrastructure tenders in the region. The second day of the event set the stage for business matchmaking, with 500 meetings between governments, large construction companies and SMEs taking place. Trade Americas & ConnectAmericas

Carlos Pineda, Superintendent for PPPs, Government of Honduras; Sergio Trelles Jasso, General Director, HIDROTEC

Expo brought together a number of distinguished speakers from the public and private sector including Alberto Alemán Zubieta, former CEO of the Panama Canal Authority; José W. Fernández, former Assistant Secretary of State for Economic, Energy, and Business Affairs at the U.S. Department of State; Leonardo Rodríguez, President of Emerson Latin America; Matthew Rooney, Executive Director for the Americas Business Dialogue at the U.S. Chamber of Commerce; and Jaime Szulc, President for the Latin America Region at Goodyear. www.tradeamericas.com

SEPTEMBER-OCTOBER 2014 LATIN TRADE

THE PACIFIC ALLIANCE

Javier Vásquez Campos, ProInversión, Perú; Mario Chacón Carrillo, ProMéxico, México; Santiago Gutiérrez, Latin Trade Group; Nicolás Muñoz, CIE Chile; Jorge Yáñez, CIE Chile; Santiago Viera, ProExport, Colombia.

PRIVATE INVESTORS’ ROUNDTABLE

he Pacific Alliance has the potential to be a huge investment magnet. In a special session of Trade & Connect Americas, representatives from the investment promotion offices of the four countries of the alliance – Chile, Colombia, Mexico and Peru – presented infrastructure and energy projects that totaled more

than $675 billion. It’s not just the amount that is attractive; there’s more. Chile is one of the world’s 20 most attractive countries for investment; Colombia is one of the hemisphere’s most stable countries; Mexico is Latin America’s industrial miracle and has opened up a new investment vista with passage of its recent re-

forms; and Peru is set to grow at high and sustained rates of about six percent per year. The presentation of investment opportunities was led by Ambassador Mario Chacón of Proméxico. Also participating were Jorge Yáñez and Nicolás Muñoz of CIE Chile, Javier Vásquez of ProInversión and Santiago Viera of Proexport.

Santiago Viera, ProExport, Colombia; Nicolás Muñoz, CIE Chile; Jorge Yáñez, CIE Chile; Mario Chacón Carrillo, ProMéxico, México

Lourdes Arana Flores, Coordinator for Latin America, ProMéxico; Melissa Toledo, Local Representative, ProMéxico; Moisés Peraza Zaragoza, Trade and Investment Commissioner, ProMéxico

LATIN TRADE SEPTEMBER-OCTOBER 2014

Naoll Mary, Concessions Manager, FCC Aqualia at The Paciﬁc Alliance’s private investor roundtable.

Tuck Executive Education at Dartmouth Accelerates Strategic Leadership in I atttended Tuck’s Strateggic Financiall Leadership Program. I left a more conﬁdent and effective stra ategic leeader. Latin America’s continued d growth depends on a pipeline of talented leaders— and th hatt is Tuck’s expertise. Cheryl McDowell, Vice Pre esi side dent de nt Fin inan an nce & Operations, Latin America at Oracle

Cheryl is an active participant at Latin Trade’s CFO Miami series, and also a member of Latin Trade’s CFO Advisory Committee

Upcoming Programs at Tuck: Leadership and Strategic Impact Strategic Financial Leadership

Oct. 19-24, 2014 & May 31-June 5, 2015 May 10-15, 2015

For more information about these or other programs at Tuck, please contact Greg Cooper, Client Executive for Latin America, +1-603-646-0206.

Tuck Executive Education at Dartmouth @TuckExecEd Tuck Executive Education at Dartmouth

CFO SERIES S Ã O PA U LO

Ivanyra Correia, CFO, Zurich General Insurance Brazil

LT CFO Advisory Board Member Rogério Menezes, Finance Director, AkzoNobel PPC Brazil

David Beker, Chief Brazil Economist & Fixed Income Strategist, Bank of America Merrill Lynch

Odair Ribeiro, Finance Director, Cisco do Brasil

DECIPHERING THE “NEW NORMAL” Finance executives will have to adjust to a more challenging Brazilian environment. Changes are coming. been very resilient in recent times, but he believes that local investors will hold off on new commitments until the new president is elected. Fiscal deficit will set a negative backdrop on the economy in the next few years. The country has to reach a stable 2 percent primary surplus, from the current 1.4 percent, most of which was obtained with extraordinary, non-recurrent revenues, he said. “If Brazil does not adjust in the next two years, it will lose its investment grade,” he warned. Motivated by a presentation from Cisco’s finance director, Odair Ribeiro, attendees discussed best practices to develop and retain talent. Zurich General Insurance´s CFO,

CFO Event in São Paulo

Ivanyra Correia, noted that high turnover is a pervasive new trend in corporate Brazil. To counter it, CFOs agreed on the importance of giving teams a clear vision and a sense of purpose. Honest leaders, even to convey the worst news, are also required to have involved employees, Philips do Brasil´s Herman Hanssen added. Political expert, and managing partner at Prospectiva, Ricardo Ubiraci Sennes, analyzed the possible electoral outcomes under the unfortunate condition of Eduardo Campo’s death, and gave a detailed account of possible regulatory changes under the direction of the new presidential candidates.

Ricardo Ubiraci Sennes, Managing Partner, Prospectiva Consulting

CONNECTING LATIN AMERICA’S CFO COMMUNITY

LATIN TRADE SEPTEMBER-OCTOBER 2014

PHOTOS: NEWTON MEDEIROS

razil needs a confidence jolt to jumpstart consumption and investment. Otherwise, they will grow at a much slower pace than in previous years. That was one of the conclusions of chief Brazilian economist at Bank of America Merril Lynch, David Beker, during his presentation at Latin Trade’s CFO event that took place last August at the Tivoli Hotel in São Paulo. A group of 60 heads of finance shared their points of view about the Brazilian economy and about the challenges they face as toplevel finance professionals. Beker believes that consumption will grow at a much less exuberant annual rate of three percent. He showed that FDI has

Deutsche Bank db.com

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