latin trade (english edition) - may/jun 2012

YOUR BUSINESS SOURCE FOR LATIN AMERICA » WWW.LATINTRADE.COM MAY / JUNE 2012

ALSO INSIDE: • THE RUSSIANS ARE COMING

• P&C INSURANCE GROWS

• EXECUTIVE EDUCATION

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CONSUMERFEVERBRAZIL'S

AND SOME HEADACHE

2 LATIN TRADE MAY-JUNE 2012

MAY/JUNE 2012 VOL. 20 NO. 3

Features26 Cover: Brazil Consumer Fever - and Some Headache. While executives try to make the most of the consumer boom, the cost of doing business still is much higher in Brazil than in most countries in Latin America.

18 The Russians Discover Latin America Tourists from the Russian Federation started to flock to the region, eager to enjoy beaches and glaciers.

34 Industry Report: Logistics Bigger Panama Canal Will Broaden Trade The $5.25 billion expansion project will bolster trade and is pushing regional ports to revamp.

42 Special Report: Cuba Red Flags in the Sunset A new, increasingly business-minded Cuba is emerging.

46 Special Report: Benchmarking LatAmAnalyzing the best and worst countries in Latin America.

52 Industry Report: Property and Casualty Insurance Covering the risk of accidents and disasters.

58 Special Report: MBA Getting an Executive Education

Latin America’s leading business schools are proving to be increasingly viable alternatives for executives from the region and beyond.

28 Challenges and Opportunities for Brazil By Marcelo Odebrecht

32 Favelas: New Consumerism Booms from the Bottom

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CONTENTS


The Scene10 Luxury Mansions in Latin America

Unique properties hidden in glorious places.

12 Buenos AiresThe most competitive among 13 cities in Latin America.

Opinion14 The Contrarian: Go South, Joven

By John Price. How immigration trends changed in the region

16 A Latin Solution to an African Problem

By Marcelo Giugale

Tech Trends64 Digital Education makes its push in LatAm

Kuepa’s CEO Gonzalo Pulit anticipates what is coming in education.

Events 66 CFO Miami

68 CFO São Paulo

70 CFO Buenos Aires

10 76

On the Road 72 Monterrey

First hand tips for visiting the Northern Mexico industrial heart.

74 Ask the ConciergeAndres Santiago, from Sheraton Ambassador Monterrey, gives his tip on the city.

Spotlight: Peru

76 Rediscovering The Identity of a Country

Editor’s Note6 New trends in the region

CONTENTS

72


The Cost of BrazilBrazil, which has surpassed the United

Kingdom as the world’s sixth-largest

economy, continues to show strong pro-

mise despite its many challenges, as our São

Paulo correspondent Thierry Ogier points

out on page 26.

“While company executives try to make

the most of the consumer boom, the cost of

doing business still is much higher in Brazil

than in most other Latin American coun-

tries because of deficiencies in transport and

distribution logistics, taxes and labor laws,”

he reports.

According to Frontier Strategy Group,

Brazilian business units of multinationals

are less profitable than those in other Latin

American countries. A large part of that is

caused by Brazil’s cumbersome tax system

and high rates.

EDITOR’S NOTE

Joachim Bamrud

Executive Editor

[email protected]

THE RUSSIANS ARE COMINGGone are the days when Russians in Latin America would be connected to Cold War

schemes. Now they are more likely connected to cold drinks in the sun.

One country that is benefiting from the boom in tourism from Russia is Mexico, which

traditionally has depended on U.S. tourism. But with a shrinking U.S. market – partly

driven by economic problems in the United States, and partly from fear of visiting Mexico

because of the country’s drug violence – Mexico has been aggressively courting tourists

from other parts of the world, including Russia.

The result: Russian tourists have jumped from a paltry 1,600 in 2006 to 54,000 in 2010,

with forecasts of stronger growth in the next few years. Not only that, but they are a highly

attractive group since they typically spend $1,000 per day, more than twice the amount

spent by American tourists, reports our Mexico correspondent David Agren on page 18.

Interestingly enough, the Russians have not been scared by media headlines about the vio-

lence, Cancun-based tour operator Armina Wolpert tells Agren.

INSURANCE GROWTHAs Latin America’s economies continue

to grow, so do sectors such as insurance.

Countries such as Brazil and Ecuador are

showing growth of more than 20 percent in

insurance premiums, while the rest of the

region is growing between 12 percent and

15 percent, Juan Fernando Serrano, CEO of

LatinoInsurance, tells Joseph Mann in his

report on page 52 The auto sector alone is

a major driving force, thanks to the boom

in auto sales in Latin America. Brazil, for

example, is now the fourth-largest market

worldwide for car sales.


CHIEF EXECUTIVE

Rosemary Winters

EXECUTIVE DIRECTOR & PUBLISHER

Maria Lourdes Gallo

EXECUTIVE EDITOR

Joachim Bamrud

MANAGING EDITOR

Elida Bustos

ART & PRODUCTION DIRECTOR

Manny Melo

GRAPHIC DESIGNER

Vincent Becchinelli

CONTRIBUTING EDITORS

Gabriela Calderon (research), Mark Ludwig

COLUMNISTS

Alberto J. Bernal, Marcelo Giugale, John Price

CORRESPONDENTS Argentina: Charles Newbery, David Haskel, Paula Ancery • Brazil: Thierry Ogier (São Paulo), Taylor Barnes (Rio de Janeiro) • Chile: Gideon Long, Tom Azzopardi • China: Ruth Morris • Colombia: John Otis, Anastasia Moloney

France: Ilan Moss Mexico: David Agren • Panama: Sean Mattson, Eric Sabo • Peru: Lisa K Wing • Spain: Guy Hedgecoe • US: Joseph Mann Jr. • Venezuela: Jose Orozco

CONTRIBUTING PHOTOGRAPHERS Brazil: Paulo Fridman • Chile: Helen Hughes • Costa Rica: Juan Carlos Ulate • USA: Matthew Pace

TRANSLATION: Rebecca & Valentin Farro HowardCOPY EDITORS: David Wisor, Jude Webber

EVENTS & CONFERENCES

CONFERENCE PROGRAM DIRECTOR

Alexia Sagemuller

EVENTS EXECUTIVE

Sandra Bicknell

EVENTS MARKETING EXECUTIVE

Natasha Valle

AUDIENCE DEVELOPMENT COORDINATOR

Maria Vega

SALES & CIRCULATION

SALES REPRESENTATIVES

Miami/Pan-regional sales: Silvia Clarke, Senior Account ManagerMercedes Fernandez, Business Development Manager

Special Projects Coordinator: Ana BergerColombia/Panama: María Cristina Restrepo

India: Stephen Dioneda

CIRCULATION COORDINATOR

Claudia Banegas

LATIN BUSINESS CHRONICLE

Patricia Cabarcos, Enterprise Solutions/Datarisk Director, [email protected] Begg, Marketing Associate, [email protected]

CHAIRMAN

Richard Burns

CHIEF OPERATING OFFICER

Joanne Harras

ACCOUNTS MANAGER

Kathy Pollyea, [email protected]

Latin Trade Group is a division of Miami Media, LLC, an affiliate of Isis Venture Partners

Executive, Editorial, Circulation and Advertising offi ces are located at Brickell Bay Offi ce Tower,

1001 Brickell Bay Drive, Suite 2700, Miami, Florida 33131, USA.

CUSTOMER SERVICE AND SUBSCRIPTIONS: Please visit www.latintrade.com to order online or call +1 (305) 749-0880. Latin Trade (ISSN 1087-0857, USPS 016715) is published bimonthly by Miami Media, LLC. All

rights reserved. Reproduction in whole or part of any text, photograph or illustration without written permission of the publisher is strictly prohibited.

Visit Latin Trade online @ www.latintrade.com

Latin Trade Group

Companies striving for better results should consider how professional coaching can take their business to the next level. Joey Restaurant Group and BC Housing are the latest businesses to be recognized for their successful use of professional coaching by the International Coach Federation (ICF). Both groups received the ICF International Prism Award for demonstrating their use of professional coaching to achieve strategic business goals.Coaching helped Joey increase revenue, reduce turnover, and make the list of “Best Workplaces in Canada” by the Great Place to Work Institute two years in a row. Joey calculates a 682 percent return on investment from their coaching initiative. BC Housing has used coaching to help attract, develop, and retain top employees, as well as scale back the amount of external training purchased, resulting in signifi cant savings. BC Housing estimates a 70 percent return on investment from coaching.

For more information on coaching, visit Coachfederation.org/works


THE SCENE


HOUSE HUNTING?Looking for a special place in Latin America and the Caribbean? Here is a sample of some of the most luxurious properties offered through Christie’s International Real Estate.

ESQUEL, Argentine Patagonia Ranch by the lake, 6,000 acres, $12.9 million

GEORGE’S ISLAND, Port Royal Bay, Honduras, $27 million.

THE WAVE HOUSE, Dominican Republic, $13.5 million

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MAY-JUNE 2012 LATIN TRADE 11

THE SCENE

CAVE CAY, Bahamas. A private island, 9.6 million sq feet, $110 million.

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THE SCENE

Most Competitive: Buenos AiresArgentina is hardly known as the most competitive country in Latin America, but its capital, Buenos Aires, is ranked as the most competitive among 13 cities in the region, according to new research by the Economist Intelligence Unit (EIU).

The research, commissioned by Citibank, looks at eight factors: economic strength, physical capital, fi nancial maturity, institutional effectiveness, social and cultural character, human capital, environment and natural hazards, and global appeal.

According to the EIU ranking, the most competitive cities in Latin America after Buenos Aires are São Paulo, Santiago and Mexico City. The least competitive among the 13 cities on the list are Porto Alegre and Guadalajara.

Buenos Aires outperforms its Latin American peers in

global appeal, ranking 27th worldwide among cities in 120 nations, beating such cities as Dublin, Los Angeles and Dubai.

The Argentine capital also leads the way in Latin America in terms of human capital, ranking 43rd worldwide, ahead of such cities as Rome, Milan and New Delhi.

In physical capital, Buenos Aires ranks second (behind Santiago). Physical capital measures quality of infrastructure, public transport and telecommunications infrastructure.

Meanwhile, in fi nancial maturity, Buenos Aires shares the top score with three other cities: São Paulo, Mexico City and Rio de Janeiro.

When it comes to social and cultural character, Buenos Aires ranks third in Latin America, behind São Paulo and Rio de Janeiro.

Buenos Aires ranks fourth in Latin America in the category of environment and natural hazards. Monterrey ranks fi rst in that category.

And in economic strength and institutional effectiveness, Buenos Aires ranked in the middle in Latin America, ahead of such cities as Bogota, Lima and Mexico City. Institutional effectiveness includes fi ve factors: electoral

process and pluralism, local government’s fi scal autonomy, taxation, rule of law and government effectiveness.

But although Buenos Aires is the champion in Latin America, it doesn’t fare that impressively worldwide. It ranks only 60th globally – or in the middle of the EIU ranking.

-Joachim Bamrud

GRAN TORRE COSTANERA, Santiago de ChileHeight: 300 m. To be fi nished in 2013.

TRUMP OCEAN CLUB, Panama Height: 290 m. Finished June 2011.

TORRE MAYOR, Mexico Height: 230,4 m. Finished 2003.

TORRES GEMELAS DEL PARQUE CENTRAL, Caracas. Height: 225 m. Finished (east tower) 1979 & (west tower) 1984.

COLPATRIA, ColombiaHeight: 196 m. Finished 1979.

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THE CONTRARIAN

TWENTY YEARS AGO, when I

first headed south to Mexico to launch my

Latin American career, I filled my last tank of

U.S. gasoline outside of El Paso, Texas.

When the station manager, an old Tejano,

learned I was moving to Mexico, he quipped,

“You’re going the wrong way, man. They’re all

moving here.”

How times have changed. If estimates

are accurate, 2011 was the first year since the

1970s in which more people moved (back) to

Latin America than left it.

What induces people to uproot themselves

and move to another country is a combina-

tion of carrot and stick. Waving the biggest

official carrot is Brazil, where President Dilma

Roussef has reformed an outdated and insular

approach to immigration by granting record

numbers of visas to highly skilled European,

American and Chinese technicians, engineers,

financiers and entrepreneurs. In 2011, some

51,353 visas were issued, up 30 percent from

the previous year. Brazil is booming, and, to

meet its World Cup and Olympic hosting

commitments, it must build $500 billion worth

of infrastructure.

But Brazil’s woefully thin output of engi-

neering graduates cannot produce enough

native brain power, so talent must be imported.

The refreshing show of humility behind the

Brazilian policy also includes sending 100,000

Brazilian university students to study abroad

for a year at the world’s leading science and

engineering faculties.

The timing of Brazil’s sudden embrace of

foreign talent comes at an opportune moment

when European (especially Spanish and

Portuguese) and American skilled workers

are out of work and/or frustrated by the lack

of career mobility at home. Brazil’s program

is designed to attract typical unmarried,

30-year-old university graduates with five to

10 years of work experience.

Applicants are responding en

masse, but apparently more

than half of them drop out of

the process when confronted

by the time-consuming and

costly bureaucracy associated

with a Brazilian visa application,

including all the verification and notary-laden

steps required. Brazilian leadership might be

enlightened, but Brazilian bureaucracy remains

a noose around the country’s neck.

Economic opportunity is what moves most

Latin American migrants. When two dif-

ferently developed economies share a border,

unskilled labor from the poorer neighbor will

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In a nutshell.

THE CONTRARIAN

John Price is the managing

director of Americas Market

Intelligence and a 20-year

veteran of Latin American

competitive intelligence and

strategy consulting.

[email protected]

LATIN AMERICA’S FAVORABLE DEMOGRAPHICS

find a way to higher-paying jobs in its richer

neighbor. An estimated one mi-llion Haitians

live in the Dominican Republic today, tend-

ing fields, parking cars, washing dishes. Rural

Colombians continue to move, albeit in

smaller numbers than before, to Venezuela,

where higher wages can be found on farms.

An estimated 400,000 Nicaraguans live in

Costa Rica, where per-capita income levels

(and wages) are four times their own. But the

biggest magnet for undocumented rural labor

is Argentina, where farm families are shrinking

even while food production and exports rise.

About 14 percent of Argentina’s population is

made up of foreign-born nationals, compared

with 13 percent in the United States and 1

percent in Brazil.

The United States wields the stick in

today’s continental migration story. In 2011,

the Obama administration deported about

200,000 Mexicans, the most sent out by any

U.S. president. More than half of them were

indicted criminals whose fingerprints can

now be cross-referenced for residency status.

Another 400,000 Mexicans went home of their

own volition, a combination of seasonal labor-

ers, frustrated young (mostly) men who cannot

find decent employment in the United States,

and the families and loved ones connected to

deportees. The more than 600,000 Mexicans

heading south virtually equals the 600,000 who

tried to move north, one-third of whom were

stopped by U.S. marshals at the border and

sent home. That number continues to shrink in

spite of increased enforcement.

All told, the United States lost 200,000

more Mexican migrants than it attracted.

Perhaps it’s time to make some cuts to the

bloated U.S. border security budget. For all of

us, this brave new world requires some brand-

new thinking on everything from immigration

policy to business forecasting.



OPINIONto invest in “public goods” – such as primary

education, basic health and crime prevention.

Point taken. But whether that happens depends

on how much revenue the government already

is receiving. If your country is so poor that the

state is unable to provide much in terms of

services (think of newly independent South

Sudan), you might not want to take money

away from it.

But how about countries in which the

government has, for decades, appropriated all

the revenues from commodities – billions upon

billions of dollars – and has, by and large, wasted

them? Will sharing part of those revenues with

people reduce the quantity of public services, or

will it reduce waste? Look at most hydrocarbon-

rich economies, and you will get the answer.

So the idea of adapting Latin America’s

social transfers into Africa’s dividend trans-

fers could work in theory. But can it work in

practice? After all, Africa is not Alaska, where

oil dividends have been distributed to residents

since the early 1980s. Well, the necessary tech-

nology is getting better and cheaper by the day

– it costs only about $4 to biometrically identify

someone. And with the viral growth in the use

of magnetic cards and cellular telephones across

the developing world, making payments is a

non-issue. More to the point, about 30 African

countries already operate more than 100 cash-

transfer programs as part of their social policies.

It is now a question of linking those transfers to

the source of income from which they are paid,

and of extending them to everyone. Of course,

sitting governments have little or no incentive

to do that – they would lose the power to decide

who gets how much.

More likely, direct dividend transfers will

be championed by opposition politicians in

democracies holding elections (“Vote for me,

and the oil is yours.”). In other words, the time

is coming – in Africa and elsewhere.

Marcelo Giugale is the World Bank’s Director

of Economic Policy and Poverty Reduction

Programs for Africa, and formerly held the

same post for Latin

America. He holds

doctorate and master’s

degrees in economics from

the London School of

Economics.

You can follow Marcelo

Giugale on Twitter at:

@Marcelo_WB

FIFTEEN YEARS AGO, Mexico

did something that, until then, only rich

countries had dared to do – it began to transfer

cash directly to its poor. Th e payments were

conditional: Recipients had to help themselves

by keeping their children in school and

vaccinating them. Today, about 70 developing

countries have followed the example, and most

evaluations show that the idea worked. But

direct cash transfers can be more than a smart

way to deliver social assistance. In fact, they can

provide Africa with a neat solution to its most

urgent problem: how to handle its massive

commodity bonanza.

High prices and vast discoveries of oil, gas and

minerals are turning the continent into a giant

boom town. Big money is beginning to fl ow

into governments’ coff ers. Th e risk that the new

money might be wasted – or stolen – is big. Th e

best way to hedge that risk is to upgrade public

institutions, such as budget, investment and anti-

corruption offi ces. But that will take time. What

can be done in the meantime? Transfer part of

the money directly to the people – universally

and uniformly, the same sum to each person, rich

or poor. Call them “direct dividend transfers.”

Why would you do that? Will this not mean

less money for schools, clinics, and roads? Not

necessarily. In fact, direct dividend transfers can

lead to less poverty, less corruption and more

public services.

First, poverty. If a typical African govern-

ment (think Gabon’s) distributed, say, a tenth

of its hydrocarbon or mineral revenues, each of

its citizens could get about $100 per year. Th at

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might not be much for the well-off ; they might

not even bother to collect it. But it would be

a huge help for poor households – a day-and-

night diff erence in their eff orts to climb out

of poverty. Optimally, one would like to focus

the transfer only on the poor – and away from

the rich. But, in most places, that would prove

politically complicated, if not impossible. And,

anyway, the rich are very few in Africa.

Second, less corruption. Th e best way to un-

derstand why direct dividend transfers can make

governments less corrupt is with a hypothesis.

Say that you get home tonight and your spouse

is waiting for you with a surprise gift – a brand-

new Ferrari. Th at would probably make you

very happy. But soon you would ask yourself:

“Where did the money come from? I didn’t

know we had that kind of cash.” Th e same will

happen to people if their government suddenly

gives them, say, 10 percent of its mineral revenue

– they will want to know what the government

is doing with the other 90 percent!

You would create a “scrutiny eff ect,” a popular

interest in how the bureaucracy manages the

national treasury. In technical parlance, you

would have fostered the “demand for good

governance.” (By the way, if you are getting a cut

of the profi t from your country’s gas industry,

would you insist on its nationalization or on its

effi ciency? Would you want it run by politically

appointed public employees or by profi t-driven

private managers?)

Th ird, more public services. A big argu-

ment against direct dividend transfers is that

they would leave less money for a government

A LATIN SOLUTION

TO AN AFRICAN PROBLEMBY MARCELO GIUGALE


BY DAVID AGREN

MEXICO CITY – Armina Wolpert always

saw the potential of Mexico as a tourist desti-

nation for Russians despite the lack of direct

fl ights and long distances between Moscow

and Mexico City – nine time zones, to be pre-

cise. But distance was just the beginning of her

challenges in tapping a burgeoning market for

potential tourists.

Th e Cancun-based tour operator saw few

results in the early years, but she continued

promoting Mexico at tourism fairs and among

travel wholesalers, sensing that Russians, un-

able to travel freely during the decades of com-

munist rule, were eager to see the wider world.

Wolpert encountered diffi culties along the

way: the Sept. 11, 2001 terror attacks, to name

one. Th e tepid response from Mexican tourism

offi cials was another. In 2006, just 1,600 Rus-

sians visited Mexico annually, according to the

Tourism Secretariat, or Sectur.

Th en violence related to organized crime

and drugs erupted in some parts of Mexico

– generating gory and sensational headlines.

Th e 2009 H1N1 viral outbreak made matters

worse, along with a world economic downturn

that hit both the United States and Mexico

especially hard.

Th e diligence paid off , though – and hand-

somely. Russians now fl ock to Mexico in record

numbers. Th eir presence is noticeable in Can-

cun and the Maya Riviera by the job advertise-

ments soliciting Russian-speaking employees,

the Russian-language classes off ered to tourism

industry workers and the arrival of regularly

scheduled fl ights at the Cancun airport by

Russian carriers Aerofl ot and Transaero.

“It’s just been crazy,” Wolpert says of the vo-

lume of business Armina’s Travel has handled

during this most recent high season.

Th e Russian tourists arriving in Mexico

form part of a new boom in foreign tourism to

Mexico by visitors hailing from countries with

emerging economies, and they include Brazil,

Peru and Colombia. Th e boom comes as the

United States sputters as a source of tourists,

making a diversifi cation of countries of origin

ever more important for Mexican tourism of-

fi cials.

Th ey have set a goal of more than doubling

the number of tourism visits to the country,

from 22 million last year to 50 million by

2018. Tourism from countries such as Russia

is important for reaching that goal, along with

off setting any decline in the U.S. market.

“We want to continue being a preferred des-

tination for Canadians and Americans, but we

also want to depend less on one single market,”

says Ricardo Anaya, undersecretary for tourism

planning at Sectur in Mexico City, the govern-

ment dependency responsible for fomenting

activity in an industry representing 9 percent

of the country’s GDP. “We want to open up to

the whole world.”

Mexico is opening to more than just Rus-

sians these days – although the numbers ar-

riving from Russia are impressive. Sectur says

54,000 Russians visited Mexico in 2010, with

the number jumping 55 percent in 2011. Th e

visits from Brazil surged, too – 66 percent last

year, driven by a strong currency and an easing

of Mexican visa restrictions. Th e number of

Peruvians and Colombians visiting Mexico last

INDUSTRY REPORT: HOSPITALITY

RUSSIANS DISCOVERLATIN AMERICA

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year grew by 37 percent and 22 percent, re-

spectively, and the number of Canadians fl ying

south for vacations increased by 7 percent.

Th ese tourists are making up for a decline

in the U.S. market, where the overall number

of people taking foreign trips has declined in

recent years, even though Anaya says Mexico is

expanding its share of a shrinking market.

An increased awareness among U.S. tour-

ists that destinations such as Cancun and its

environs – which include the state of Yucatan,

where the low murder rate is on par with

Canada’s – are far from the violence of Ciudad

Juarez helps, too. Still, tourist visits by people

arriving by air increased just 2 percent in 2011,

and number of cruise-ship dockings dropped

about 15 percent. “We believe that a breach

exists between the reality and the perception,”

Anaya says.

Wolpert doesn’t encounter those kinds

of image problems in Russia. Most Russian

tourists consider Mexico “exotic” and thus at-

tractive, and stories of violence have failed to

scare them off – especially since the problems

in Mexico seem less serious in comparison to

the massive fl oods in Th ailand last year and the

revolutions sweeping the Middle East, Wolpert

says, referring to popular destinations for Rus-

sian tourists. Russians also show skepticism


toward what is reported in the news.

“When the U.S. market says, ‘It’s dangerous,’

the Russians will say, ‘What’s dangerous for a

gringo is okay for us,’ ” Wolpert says. “Th is is a

great advantage.”

She recalls never being asked about security

in Mexico while giving seminars in Russia – at

a time when her colleagues working the U.S.

market were bombarded with such queries.

How Mexico arrived on the Russian tour-

ism map remains uncertain, but Wolpert and

others in the industry credit an aggressive push

from the Mexican government, including trips

to Russia by Tourism Secretary Gloria Gue-

vara. Th e Mexican government helped things

even more by simplifying visa applications and

changing the rules in 2010 to allow anyone

with a U.S. visa entry into Mexico. Mexican



Guanajuato, Mexico.

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SANTO DOMINGO – Russians might seem to be taking over the Dominican Republic, but unlike previous occupations throughout the Slavic country’s long history, their presence is a godsend this time.

Russian tourists choose Do-minican Republic and boost its already-robust tourism indus-try for one big reason: hospital-ity. The Dominicans’ seemingly constant smiles and gregari-ous nature have long been the country’s top attraction.

And even when Latin Ame-rica in general, and Mexico’s Maya Riviera in particular, also prove a magnet for Russian tourists, they are drawn to the charm of the Caribbean coun-try’s inhabitants. Russians’

attraction to the Dominican Republic gets stronger every year, from 41,890 tourists in 2008 to 54,414 in 2009, and last year’s fi gure of 120,000. Rus-sian visitors will likely grow to become the Dominican Repub-lic’s fourth-largest source of tourists this year.

CLOSE TO THE KREMLIN

The Caribbean country aims to shore up its position in the Russian market even further by opening a new tourism

promotion offi ce in Moscow, adding to the one already do-ing business in St. Petersburg, said Petra Cruz, director of the Dominican Republic’s Tourism Promotion Offi ce in Europe.

“The Russian market is of considerable importance for the Dominican Republic, as seen recently by its impres-sive growth,” Cruz said, not-ing that Dominican tourism could profi t from Russia’s unrivaled size and by adding another offi ce to promote it.

Cruz said that once the Mi-nistry of Tourism identifi ed Russia as an emerging and promising market, it was up to tour operators to work by set-ting up “fam trips” to her coun-try for Russian travel agents and tour operators by 2006.

“We organized the fi rst charter fl ight to the Domini-can Republic,” Cruz said. “We started with one and expanded to seven last winter season; we will have two more in the summer.”

DOMINICAN REPUBLIC

Russians are drawn to the charm of the Caribbean country’s ALLWAYS SMILING INHABITANTS AND NEVER-ENDING BEACHES

tourist visas can be obtained online and in mere

minutes, Wolpert says.

Russians visit destinations beyond Cancun.

Th e Four Seasons Mexico City has welcomed

a growing number of Russian leisure travelers

– who, sales and marketing manager Patricia

Ortiz says, come looking for the most expen-

sive accommodations and requesting amenities

such as exclusive menus and fi ne dining.

“I wish we had even more Russian visitors,”

she says.

DIFFERENT KIND OF TOURIST?

In many ways, the Russians, along with

Brazilians and others from emerging markets,

make attractive tourists. For one thing, they

stay longer: 11 days on average, compared

with the fi ve days an American or Canadian

tourist spends in Mexico, says Jesus Almaguer,

president of the Cancun Convention and Visi-

tors Bureau. Russians spend more, too: $1,000

daily, more than double the amount spent by

an American tourist. “Th ey like to spend,” says

Almaguer, adding that Russians will buy every-

thing from mariachi sombreros to jewelry.

Th e Russian visitor is tough to stereotype,

however. Cancun resident and Canadian expa-

triate Kelly McLaughlin says Russians like to

stray off the beaten path, and she fi nds them at

unlikely spots, such as roadside taco stands.

Many prefer high style, though. Wolpert

says her clients will take SUVs to places such

as Chichen Itza with a guide and spend $1,000

for the excursion. Trips to Mexico now can

cost the same as a jaunt to Europe, but many

Russians come with plenty of cash and can be

demanding – something noticed by hoteliers in

the region.

“It is, along with Brazil, the most poignant

emerging market,” says Sergio Serra, sales

manager at the Ritz Carlton Cancun.

Serra noticed a trickle of Russians coming

to the luxury hotel late in the last decade. Th at

exploded after the visa rules changed in 2010.

“Th at was really the catalyst that triggered

all of this,” he says, adding that, since 2008, the

percentage of American guests at the hotel has

declined from 80 to 85 percent of the clientele

to 75 today.

With a little more work, that number will

be lower in coming years. Wolpert already is

working to make sure it happens. She is now

working in Ukraine to promote Mexico – and

having success, she says. She has another po-

tential gold mine lined up, too: Kazakhstan.

“Kazakhstan has a lot of potential,” Wolpert

says. “Give me a year. Th ere will be plenty of

people coming from Kazakhstan.”

[email protected]

BY JORGE PINEDA

FROM SIBERIATO THE SUNNY


HOTELIERS UPBEAT

ON UPTREND

Arturo Villanueva, executive vice president of the country’s National Hotels and Tourism Association (ASONAHORES), also agrees with statistics that point to Russia as the leading emerging market. The arrival of tourists from Russia has quadrupled with virtually daily Transaero fl ights from Moscow, and “even some days with more than one,” he said. Villan-ueva said the Dominican Republic now gets more than double the number of Russian tourists that visit Cuba.

Heralding the growth, the Tourism Ministry recently announced the start of four charter fl ights to the prime tourism region, Punta Cana, by the carrier Transaero, with planes that can accommodate 320 passengers.

Adding to the numbers that fl ock to the more than 15 miles of prime beach resorts dotting

the Punta Cana coastline, Rus-sians from St. Petersburg also go to Samana and Puerto Pla-ta, on the north coast, aboard Boeing 767-300 planes of the state-owned airline Rossiya, which can accommodate 330 passengers.

And, on March 31st, Do-minican Tourism vice minister Magaly Toribio announced that Transaero will start weekly fl ights between Moscow and Puerto Plata in October.

ARE THEIR POCKETS

DEEP ENOUGH FOR THE

OFFERINGS?

According to the local trade publication republicado-minicana.pordescubrir.com, in general Russian tourists “have a very high level of purchasing power.”

Russian tourists also fancy innovative excursions, accord-ing to Matias Mut, an operator of a successful excursions agency in Punta Cana. “They are very special because they’ll

do whatever they want,” he said, noting that, tourism by Russians is marked by their lack of fl uency in other lan-guages. “I have a translator here just to handle the excur-sions with Russians.”

“In general, they aren’t that savvy, although they are attracted mostly to adrenalin excursions,” he said of the 721 Russians of 13,044 total tourists who took part in his excursions, including horse rides, in 2011. “They come from all categories of hotels, and they like our Segway scooters.”

Laura Vladimirova, an American who’s been work-ing in the booming northern coast town of Cabarete, con-fi rms the Russians’ zeal for adrenalin: “They do things they can’t in Russia, like kite-surfi ng and deep-sea fi shing and diving.” She also noted that, unlike Americans, many of the Russian tourists travel as extended families, “with

the grandfather, grandmoth-er, three generations tagging along.” The fi rst large groups of Russian tourists stayed 10 to 14 days in the beach hotels in that area, and 86.2 percent of them came to the Punta Cana Airport, according to the Tour-ism Ministry.

They usually spend from $1,300 to $1,500 in accomoda-tion per person per day; from $250 to $400 in excursions; and $500 to $1,000 for souve-nirs and other items.

With roundtrip airfare of $3,500 in fi rst class, $2,000 in business, $1,500 in tourist and the room rate, packages range from $14,500 to as high as $16,500 for a 10-day trip.

Oleg Vasiliev, 58, and his wife, Tamara, 56, have visited the Dominican Republic twice in the past two years, and they are thinking of bringing their family next time.“What we liked most was the beach and the superb service,” Oleg said.

DOMINICAN REPUBLIC

RUSSIAN TOURISTS DISEMBARK IN THE

LOOKING FOR TANGO, ALSO

Irina Rubenski has lived in Argentina for 32 years, and she welcomes Russian tourists. She confi rms the trend that is seen in the region and

attributes it to the fact that “for so many years in the Soviet Union every-thing was closed, everything was forbidden, and now Russians can leave” to see the world.

The Russians who travel to Argentina do so as simple tourists, and not because they have family ties. Rubenski said they prefer the Iguazu Falls or the glaciers in the far south, in El Calafate. They spend a few days in Buenos Aires, and they often

travel to another South American country or to the Antarctic, even though that is an expensive trip.“Many come for the New Year, even though it is expensive. They discover Buenos Aires, and they love it,” Rubenski

said. “My tourists return,” she adds with satisfaction.According to data from the Tourism Secretariat, Russian tourism has more than doubled in four years, although the

numbers in the far South American nation fall short of the overwhelming number who visit the Dominican Republic. In 2007, about 3,600 tourists from the Russian Federation visited Argentina, and that number jumped to 8,093 in

2011. Sources from the industry also attribute this to the fact that the need for a visa for travel between the two coun-tries was eliminated in 2009.



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Hilton Worldwide, with 66 properties in Latin America and the Caribbean

and 20 more deals in the pipeline, is ex-periencing strong growth in the region, buoyed by expanding middle classes in several regional nations, generally strong economic growth and robust de-mand among business travelers.

“This is a great part of the world for the hotel industry today,” said Danny Hughes, Hilton Worldwide’s senior vice president for the Caribbean, Mexico and Latin America. “The con-sumer base is growing rapidly, not just in Brazil but in Colombia and other places.

“There is also great growth in air travel, and people want to see the world,” said Hughes, who heads Hilton Worldwide’s regional offi ce in Miami. “There will be cycles and challenges, but long-term, there are great oppor-tunities as the region develops.”

Hughes spoke to Latin Trade from the new, 256-room Hilton Bogota in Colombia’s capital.

“I can’t remember seeing a hotel that took off so quickly,” he said.

Investor-owned and managed by Hilton, the hotel had a soft opening in

December 2011 and its offi cial opening in February of this year, and it already is ap-proaching an 80 percent occupancy rate – a very high fi gure for the hotel business.

In contrast, the Ca-ribbean region, more reliant on leisure travel than Latin America, is seeing somewhat slow-er growth, especially

from the anemic economies in Europe.Keeping up with demand, Hilton

Worldwide has opened nine hotels since December 2009, in Mexico, Venezuela, Chile and Panama, as well as the Hilton in Bogota. Hilton is working on 20 new properties, including hotels in Argen-tina, Brazil, Colombia, Mexico, Panama and Peru.

The company, whose brands include

Hilton, Waldorf-Astoria, Conrad, Double-tree, Embassy Suites, Garden Inn and Hampton Inn, sees opportunities for properties across the entire range: new luxury hotels (The Panamera, a Waldorf-Astoria Hotel will open in Panama later this year) full-service hotels such as Hilton and Doubletree by Hilton as well as focused-service hotels such as Hilton Garden Inn and Hampton Inn by Hilton, in cities that do not need a full-service hotel. New opportunities include airport hotels and hotels in underserved cities.

In general, about 80 percent of Hil-ton’s Latin American bookings come from business travelers, but it varies from country to country. At Hilton’s two Costa Rica resorts, for example, 80 per-cent of visitors are leisure travelers.

Hilton Worldwide owns and operates two hotels in the region (the Hilton Morumbi in São Paulo and the Caribe in San Juan), manages 27 for investors and has 37 franchise properties.

LATIN AMERICA’S TOP HOTELSHotel chains ranked by total hotel rooms in 2011 Rank Rank Hotel Chain LatAm Total

LatAm Global Rooms Rooms

1 1 InterContinental Hotels Group 32,490 658,3482 5 Accor Hospitality 30,182 531,7003 8 Sol Melia 21,654 78,0894 2 Marriott International 18,469 643,1965 9 Barcelo Hotels & Resorts 16,338 42,8406 10 Riu Hotels & Resorts 15,666 41,5447 3 Hilton Worldwide 15,500 633,2388 6 Starwood Hotels 15,172 322,346 & Resorts Worldwide 9 4 Wyndham Hotel Group 9,873 613,12610 7 Carlson Hotels Worldwide 7,262 165,802

Total 182,606 3,730,229

HILTON WORLDWIDE EXPANDING RAPIDLY IN LATIN AMERICA AS BUSINESS BOOMSBY JOSEPH A. MANN JR.

in partnership with

MIAMI JUNE 12-13, 2012 | InterContinental Hotel Miami

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BY THIERRY OGIER

SÃO PAULO - It has been known for years that Brazilians are crazed

shoppers – and not ashamed to be described as such. In spite of the

lingering crisis environment, Brazilians frequently show up as the most

optimistic consumers in Latin America, if not the world, as Credit Suisse

recently pointed out in its recent survey of emerging markets.

Brazilian customers are keen on smart phones and computers,

absolutely love shopping malls and ocean cruises. Young couples plan

to purchase baby clothes in Miami and older ones take their kids to

Disneyland – sometimes several times. Recently, though, it has been

the expanding middle-class that has excited marketers of fast-moving

consumer goods.

But some things never seem to change. While company executives try

to make the most of the consumer boom, the cost of doing business still

is much higher in Brazil than in most other Latin American countries

because of defi ciencies in transport and logistics, taxes and labor laws.

Th is generally refl ects in the price of goods – and the exchange rate.

For years, São Paulo’s famed Avenida Paulista has been hosting banks

and drugstores, but popular stores such as fashion chain Marisa, Renner

or Hering recently have set up shop there to attract a chunk of the 1.5

million employees who pass by every day.

“Th is is a refl ection of the improvement in the purchasing power of

the population and of social mobility within São Paulo,” says Marcos

Etchegoyen, president of Cetelem, a consumer fi nance company. An

impressive contingent of 64 million people has climbed up the social

ladder since Cetelem, owned by BNP Paribas, and Ipsos Public Aff airs,

began conducting consumer surveys seven years ago in Brazil. Th at is

roughly equal to the population of Italy, Etchegoyen notes.

NEW CONSUMER

Tatiana Candido de Lima is a young member of the new, emerging

middle class. She works at Qualicorp, a private health-services provider

that launched its IPO in June 2011, and she managed to quadruple her

income since she got her fi rst job fi ve years ago. Like many Brazilian

women, she can easily go on a spending spree.

Job creation and real income gains have boosted consumer confi dence.

Th e credit boom also helped: It went from a low 25 percent of GDP,

when former presidente Luiz Inacio Lula da Silva came to power in

2003, to about 50 percent in less than 10 years. No wonder Brazil,

which already is the world’s sixth-largest economy in nominal terms, has

become the world’s third-largest market for computers and the fourth-

largest for cars. Banks and retailers – such as Casas Bahia and Ponto

Frio– have made the most of it. Brazil has become the largest market for

Carrefour outside its home country, France, and it is the second-largest

for Nestle and other consumer-goods companies.

COUNTRY REPORT: BRAZIL

CONSUMER FEVERBRAZIL- and Some Headache

Avenida Paulista, São Paulo

IST

OC

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BRAZIL



Brazil has prepared itself

in recent years to be-

come a leading nation in the

international arena through

macroeconomic and social changes

that were carried out by governments

with different political orientations but a

similar aim.

Today, Brazil is experiencing a unique

moment in its history. However, although

it is essentially immune to the economic

crises in more-developed economies, the

country also has a unique opportunity to

complete urgent reforms that will make

it possible to reduce what is disdainfully

known as the “Brazil cost” and to release

the shackles that prevent the nation’s

more rapid and sustainable development.

The priority in this strategic agenda

should be to attack the chronic problems

of infrastructure and education. Many

steps have been taken in this direction,

through initiatives such as the Acceler-

ated Development Program (PAC) and Mi

Casa Mi Vida( (My House, My Life), but to

be successful both the government and

the private sector must invest more heavily

in the construction of ports, highways,

airports and railways, among other things,

as well as in the development and training

of individuals.

In education, Brazil must go beyond

quantitative goals such as universal ac-

cess, focusing not only on school-age

children who are not in school but also on

a consistent improvement in the quality of

what they are taught. Education in Brazil

has evolved, but the country still lies in

115th place in the Global Competitiveness

Reports ranking.

On the economic front, signifi cant pro-

gress has been made. We have managed

to control infl ation, we have solid macro-

Home ownership, which has been encouraged by

government programs such as Minha Casa, Minha Vida, also

is increasing, thanks to low unemployment and long-term

economic prospects after decades of domestic economic crises.

Economic stabilization in the 1990s after the Real Plan

meant that the mass market started to have access to chicken

and yogurt. Almost 20 years later, consumer demand has

become more sophisticated.

Social and regional inequalities are still great, but they tend

to become narrower. Economic growth has been especially

strong in the northeast, the north and the center west of

Economic growth has been especially strong in the northeast, the north and the center west of Brazil

CHALLENGES & OPPORTUNITIES FOR BRAZIL

elf

he

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S

BY MARCELO ODEBRECHT

Brazil. Th e Pague Menos drugstore chain is a good example

of this. Its president, Deusmar Queiros, started the business

in the northeast region 30 years ago and now it is a 500-store

chain, still with a stronger presence in the northern half of

the country. “Here the Bolsa Familia (government benefi ts

to poor families) makes a big diff erence,” Queiros says. “And

there is also a larger proportion of the population that relies

on the minimum wage,” like low-skilled workers and rural

pensioners in the Northeast. Th e Fortaleza-based chain

intends to launch 100 drugstores this year, compared with 89

last year, Queiros says.

Th e future also looks bright for companies such as the chocolate shop Cacau Show. Th e fi rm

started in the late 1980s, but it has really taken off in the past fi ve years, when its sales shot up

by 45 percent per year on average (450 million reais – about $150 million – in 2011). Business

has been booming, and the relaxed 41-year-old CEO, Alexandre Costa, says he has prepared a

standard e-mail to decline off ers from private equity investors.

Indeed, consumer goods have become the main target of foreign investors in Brazil, according

to Paulo Bilyk, a partner at Rio Bravo Investimentos. “Th ere is some kind of love aff air with

consumer-good assets, which is refl ected in the prices of shares of companies like Arezzo, Marisa

and Perdigão. Private equity funds have kept a close eye on them,” says Bilyk.

‘CUSTO BRASIL’ ALIVE AND KICKING

Nevertheless, exploring the expanding Brazilian market still comes at a price, and the business

environment has remained remarkably diffi cult, if not hostile.

Brazil has fared badly in the World Bank’s annual “Doing Business” survey, putting the country

at a disadvantage against its main competitors worldwide. Th e latest survey ranks Brazil 126th

among 183 countries, including a dismal 150th in the “paying tax” category.

CFOs in multinationals operating in Brazil usually express a lingering concern – if not

frustration – regarding tax complexity and compliance issues in Brazil, which often is described

as the most critical case in the region. Almir Barbassa, CFO of Petrobras, the oil company, notes

that 900 people are employed in Petrobras’ tax department.

Jorge Gerdau, chairman of Gerdau, the steel group, has complained that companies in Brazil

typically need 2,000 hours to comply with their tax obligations. He is now part of a presidential

steering group to improve management and try to cut bureaucracy, but executives still complain

BRAVO FORUM



economic fundamentals, and we have

companies that compete internationally.

However, if adequate defense measures

are not taken to revert the impact of the

global economic crisis, the consequen-

ces could be devastating, in particular

for our manufacturing sector.

One of these effects is the so-called

“foreign-exchange wars,” which have a

signifi cant and negative impact on our

economy, as well as putting the country

on the radar of speculative investment,

which does not bring any long-term

structural and economic benefi ts. The

Brazilian real is very strong against the

U.S. dollar, which has a direct negative

impact on Brazilian exports, as well as

subsidizing imports. The Brazilian gov-

ernment has taken measures to control

the high real, but the battle has not yet

been won.

Another aspect that reinforces these

challenges is the Brazilian interest rate

– and, in particular, the bank spreads.

They are among the highest in the world,

representing a high cost for the gov-

ernment, businesses and consumers,

diverting resources and increasing the

cost of investment.

However, while manufacturing suf-

fers, the Brazilian service sector has

demonstrated solid growth in recent

years, largely thanks to the improving

income of sectors of the population pre-

viously excluded from consumption. This

sector also is relatively sheltered from

the “Brazil cost and the FX war” as the

competition among businesses occurs

on the “domestic battle fi eld”.

Brazil has a natural advantage in the

BRAVO FORUM

area of agricultural and mineral com-

modities, and the country has consis-

tently demonstrated itself to be one of

the main world players. Moreover, if

we previously had a leading position

in agribusiness and iron, we could now

hold an even more prominent position

on the global stage with the develop-

ment of the pre-salt reserves. However,

for abundant oil and gas as well as the

large-scale production of other com-

modities to generate development, we

must add value to the raw material. Here

again, Brazil faces the challenges of

our industry and our education system,

which is responsible for producing the

qualifi ed workers the country needs.

Growth in Brazilian manufacturing

in recent years has been far below its

potential, and what is desirable. Looking

ahead, we must overcome the challen-

ges that emerge from the opportunities

that strong domestic demand and na-

tional policies impose on our companies.

In this regard, the government is

creating and improving industrial-sector

policies and working with the private

sector, understanding its needs and

defi ciencies, and seeking to establish

the conditions that will ensure new

and growing benefi ts for the country.

However, it is essential that we progress

further, in particular in the implemen-

tation of the measures that are being

elaborated.

We have the necessary political,

economic, social and environmental

conditions. The Brazilian government

has record popularity. The nation has

solid institutions, businessmen with a

“killer instinct” and marvelous people,

as well as natural wealth and a modern

and rigorous environmental legislation

that protects strategic forests, natural

springs and the biomass.

This enormous potential, combined

with the work that is already under

way, means Brazil is moving toward

becoming a more socially inclusive,

industrialized nation, in a position to

contribute even more to the solutions

the world seeks.

Representing the third generation of the

Odebrecht family, Marcelo Odebrecht

is now CEO at the company founded by

his grandfather, Norberto, in 1944. Be-

sides holding a leading position in the

engineering, construction, chemical and

petrochemical sectors in Latin America,

Odebrecht is also a player in the follow-

ing segments: bioenergy, environmental

engineering, defence and technology,

real estate, transportation and logistics,

oil and gas and stakes and investments.

Present in 20 countries, Odebrecht brings

together around 170,000 professionals of

60 different nationalities. He received a

Bravo Business Award in 2011.

Brazil is moving toward becoming a more socially inclusive, industrialized nation, in a position to contribute even more to the solutions the world seeks.



about the lack of tax and labor reforms. President Dilma Rousseff has

pledged to cut the tax burden, but structural reforms are not on the

agenda.

Rogerio Menezes, CFO of Akzo Nobel Pulp & Paper, is very critical

of what he calls “the tax monster”. He says there already have been

more than 300,000 changes in the tax legislation, which results in high

compliance costs. Th is is a drag on Brazil’s competitiveness as a whole.

At present, each of Brasil’s 26 states and the Federal District of Brasilia

has its own tax legislation and is able to tax the so-called ICMS (a sort of

sales tax on goods and services) at diff erent rates.

“Th e cost of doing business in Brazil continues to climb, as Brazil

has failed to address the principal elements of the ‘custo Brasil,’ such as

poor infrastructure, an onerous regulatory burden, heavy taxation and

non-compensation labor costs,” says Clinton Carter, head of research

for Latin America at Frontier Strategy Group (FSG), a U.S. business

advisory fi rm. “Add to this a scarcity of skilled labor that is pushing

salaries through the roof, and the result is a

‘custo Brasil’ that is climbing.”

Th e bottom line for foreign investors is that

“Brazilian business units are less profi table than

those in other Latin American countries,” says

Ryan Bryer, FSG’s Associate Practice Leader

for Latin America.

According to an FSG survey , “net margins

in Brazil are 5.1 percent narrower, on average,

than in the rest of Latin America, largely due

to taxes.” Whereas the average corporate tax

paid amounted to 48 percent of profi ts in

Latin America, the fi gure reached 69 percent

in Brazil, FSG says. Fast-moving consumer-

goods companies are much more heavily taxed

than those operating in other sectors, it says.

TIM cites a survey from the GSM

Association in 50 developing countries, and

Brazil shows up as the country with the third-

largest tax burden in the telecommunications

industry, behind Turkey and Uganda. But the

company says it has been negotiating with the

Brazilian authorities to improve the situation.

“TIM has been reviewing with the

government what kind of partnerships

may lower the tax burden on the

telecommunications sector. Th ere is currently

some ICMS tax exemption for broadband

services in the states of Para, São Paulo and

in the Federal district (Brasilia) through the

Popular Internet Program,” TIM

told Latin Trade.

Th e maximum price that the

company can charge for its services

is 30 reais ($17) per month, it says.

FSG says Foxconn is an example

of best practice in Brazil. “Th e Taiwan-based company saw a signifi cant

opportunity to serve the Brazil market but was unable to be competitive

without signifi cant tax breaks. It managed to leverage its government

relations function and the credible promise of US $12 billion in

manufacturing investments (near São Paulo) to secure tax exemptions

that represent a 40 percent reduction in costs.”

TRANSPORT BOTTLENECKS

Logistics costs also are high for domestic companies. Francisco Pontes

de Aguiar, the owner of the Amazon Green cosmetics company, says

The cost of doing business in Brazil continues to climb, as Brazil has failed to address the principal elements of the custo Brasil,’ such as poor infrastructure, an onerous regulatory burden, heavy taxation and non-compensation labor costsCLINTON CARTER, Head of research for Latin America at Frontier Strategy Group (FSG)

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MRIO DE JANEIRO – Few outsiders come to this favela (slum) in Rio de Janeiro’s West Zone, populated largely with recent migrants from Brazil’s traditionally de-pressed northeast region and controlled for years by anti-drug traffi cker para-militaries that made the favela the thinly-veiled subject of the recent blockbuster “Elite Squad: The Enemy Within.”

Tucked behind a lagoon popular for boating and the wealthy condos of the Barra region, Rio das Pedras had been accustomed to residents making their few big-ticket purchases in the malls of the Barra beachside neighborhood.

But a fl urry of new high-end commerce here is showing that Brazil’s new middle class is starting to do its shopping closer to home.

“For sound systems, they don’t buy 500-, 800-reais ones ($275-$440). They buy 2000-reais ones ($1100),” said Jorge Fiz, manager of the RicardoEletro electronics store that opened just before Christmas in 2011. The fl atscreen-TV and home-appliances store was the fi rst electronics outlet in the community, and it employs 25 salespeople. Fiz said he often sees custom-ers who have informal work – he names waiters, bus drivers and nannies – who are unable to get credit cards but purchase the store’s largest items with cash.

“The banks are slow to get in on this market, even though they have a high purchasing power,” Fiz said.

Lucia Ferreira Leite, who said she had

the cost to ship a container from Manaus to the consumer market in São Paulo is three

times greater than to import a container from China to Brazil. “Beyond the ‘custo Brasil,’ we

have to deal with the ‘custo Amazonia,’ ” he says. All companies still have to deal with some

inconsistencies: taxes on domestic cabotage (river or coastal shipping) are higher than for

international cabotage.

Yet, FDI has continued to pour into Brazil. In 2011, a record was set: $65 billion – and

they were not all commodity-related infl ows. “With developed markets stagnant, growth

opportunities in Brazil become even more appealing despite the challenges. Th at’s why, from

2009 through 2011, Brazil rose to third from 14th FDI receptor in the world,” says Ricardo

Amorim, president of the Ricam consultancy.

Nissan was hard hit by the end the car free-trade agreement with Mexico and the

imposition of quotas last March. But instead of protesting, its Brazilian-born CEO Carlos

Ghosn says, it will now speed up plans to build its second car plant in Brazil, near Rio de

Janeiro. Last year, Nissan had the fastest sales growth in the Brazilian market, partly because

of cheap imports from Mexico. Chinese car manufacturers also say they intend to set up

plants in Brazil to avoid paying the new rate of 30 percent of the IPI industrial tax.

Amorim, who used to be an emerging-market strategist at West LB, says: “Costs are rising

and margins are getting thinner, but they are still higher than in most other markets, and sales

volume is growing, partially compensating that. Some companies that are able to do so are

off shoring part of their production. Th e key point is that Brazil’s importance as a consumption

market is growing, while its importance as a prodution market is falling. Still, 10 years ago,

Brazil’s industrial production was the 10th-largest in the world. In 2009, it was seventh; in 2010,

sixth; and in 2011, fi fth.”

Th e strength of Brazil’s large domestic market has indeed become one its strongest

defenses against the global crisis. But doing business in there is defi nitely not for the faint-

hearted. And outsiders will have to continue to pay a high price to be able to join the great

Brazilian party.

“Companies have to be there and deal with the consequences – or not be there at all,”

Clinton Carter says.

[email protected]

The cost to ship a container from Manaus to the consumer market in São Paulo is three times greater than to import a container from China to BrazilFRANCISCO PONTES DE AGUIAR, Amazon Green cosmetics company

A cargo ship arriving in Rio de Janeiro


washed her clothes by hand all of her life, wandered into the store to look for her fi rst washing machine. The elderly pensioner asked if she could pay in “carnê” – a system similar to paying parceled monthly amounts automati-cally charged on a credit card but in which clients pay their installments in cash and in person on a paper bill.

“I saw the ads. Now we’ll see if it’s worth it,” Ferreira Leite said.

Although RicardoEletro is the fl ashiest example of new enterprise here, tucked among the juice counters and landline-phone stations for calls to other states are the pricey mattress store Ortobom, Bradesco and BMG banks, a supermarket with 25 checkout counters, and two travel agencies – all opened within the last fi ve years, and several in 2011 alone.

Margarida Duarte, manager of a travel agency that monitors airfare promotions so it can call routine clients waiting to buy tickets, said the price of a plane ticket can be only slightly higher than that of the three-day buses to the northeastern cities where her clients go to visit their families.

“I believe the buses are going to close their doors soon,” Duarte said. “Someone who has traveled once by plane doesn’t want to go by bus again.”

Although Rio das Pedras has little formal policing and stores pay monthly protection fees to the heavy-handed para-militaries, favelas with the new Units of Pacifying Police program installed over the past three years have seen a rapid growth in formal commerce, especially as infor-mal networks that provided pirated utilities and services cease functioning.

Since the police invaded and occupied the massive favela of Rocinha in No-vember, the community opened a new cable-TV store, a RicardoEletro, a Banco do Brasil and two private foreign-language courses. Before the so-called “pacifi ca-

tion,” the only option to learn English was with tutoring offered at an Internet cafe.

The bright white walls and fl atscreen TVs of the language school Skill host full early-morning and evening classes of working-age adults. English is the most popular language course, though the school also offers Spanish, Mandarin, Ger-man and Japanese.

Leticia Salustino, a 22-year-old waitress in a sushi-and-pizza restaurant in tourist Copacabana, arrived early on a Saturday morning for her fi rst private English le-sson. Two hours of class a week and books costs a monthly 190 reais ($105). “Where I work, there are a lot of gringos,” Salus-tino said when asked why she enrolled. “People who work there live here.”

Next door to Salustino’s language school is the two-story RicardoEletro, where Elvis da Silva has come to scope out the store’s top smart phones. The copy-machine operator, who works across town, said he is tired of his cheaper Nextel phone, which

doesn’t allow him to access Facebook and online chats to talk to his girlfriend during his long trips to work. Since making a local call can easily cost several dollars when made to someone using another service provider, the phones advertise having spots for two SIM cards in order to use at least two operators in one device.

“Nowadays everyone listens to music in traffi c on their commute,” da Silva said while choosing a 400-reais ($218) Nokia C3-00.

While teams of sharpshooters and mili-tary vehicles rolled up the hills of Rocinha to reclaim it from drug traffi ckers, they were accompanied by another, weaponless army – more than 200 salesmen from the cable-TV company SKY. Sergio Ribeiro, commercial director of SKY TV, said the company sold more in the eight days after the pacifi cation of Rocinha than it did in its entire previous history in the favela. “With a better distribution of income, people have better access to TV channels,” he added.


INDUSTRY REPORT: LOGISTICS

BIGGER

PANAMA WILL BROADEN

Aerial overview of the new locks


BY ERIC SABO


CANAL TRADE

PHOTOS COURTESY OF CANAL DE PANAMÁ



Guanajuato, Mexico.

Having altered shipping routes by clearing a waterway

through 50 miles of jungle, the Panama Canal is two

years away from doing it again.

Th e outlines of a wider, deeper shipping lane can be seen

running parallel to the canal’s original locks, which allow boats to

crisscross the Pacifi c and Atlantic oceans.

For now, the site is a hole in the ground, dominated by

backhoes and dump trucks shuttling out debris. But, once

completed, the $5.25 billion expansion project is expected to

bolster trade by allowing more than twice as much cargo to fi t on

ships the size of the Empire State Building.

Th e expansion also will accommodate larger vessels to transport

commodities such as liquefi ed natural gas, coal and copper,

opening new export routes as the costs for shipping drop.

Major cities up and down the U.S. coast, the largest customers

for the canal, have been scrambling to prepare their ports for

larger ships. So have countries throughout Central and South

America, as well as the Caribbean.

With all eyes on Panama, Canal Authority CEO Albert

Aleman spends much of his time traveling to events to detail

the progress. In Washington, speaking at an Organization of

American States meeting this March, Aleman said most of the

dredging to deepen the canal is fi nished. After a nine-month

delay caused by poor-quality concrete, workers have begun to pour

the foundations for a third set of locks, the most challenging and

costliest part of the expansion.

Aleman remained confi dent that the project will be completed

on time, and the only question seemed to be which giant ship is

chosen as fi rst to steam through on the centennial anniversary of

the canal’s opening.

Aleman remained confi dent that the project will be completed on time, and the only question seemed to be which giant

ship is chosen as fi rst to steam through on the centennial anniversary of the canal’s opening.

Work on the new locks, in constant progress

SPECIAL ADVERTISING FEATURE



“We don’t know yet,” Aleman told delegates from 34 countries.

“But we want it to be historic.”

Robert McMillan, a former chairman of the Panama Canal

Commission, said it’s inevitable for such an ambitious undertaking

to face potential delays. Engineers working on the canal in the 1900s

thought they could just dig a waterway straight through Panama,

only to fi nd out they would need to add a series of locks to off set the

diff erent levels between the Pacifi c and Atlantic oceans.

“Anything of this magnitude has bumps in the road,” McMillan

said. Still, he thinks the Panama Canal will meet its 2014 target –

or, at least, “shortly after.”

Much is riding on Panama to complete the expansion work

quickly. Panamanian Finance Minister Frank De Lima has

proposed that earnings from an expanded Panama Canal be set

aside in a special fund, which the government could then tap to

revive the economy during a slowdown.

“Th e canal is on target to be completed in 2014 – and, more

importantly, under budget,” De Lima said on a conference call

with reporters in March.

Others might not be as lucky. A bigger Panama Canal should slash

transportation costs to carry Asian goods directly to the southern and

eastern U.S. states, raising alarms along the West Coast. China is the

canal’s second-biggest customer, followed by Chile.

With the expansion, as much as 25 percent of shipping traffi c

could be diverted from Los Angeles and Long Beach, California,

currently the busiest ports in the United States, once larger boats

can go straight to New York and Miami, according to a report by

Fitch Ratings.

Th e rerouting has to do with the higher costs of unloading

cargo onto trucks and trains to journey across the United States.

Cargo ships can carry a maximum of 5,000 20-foot boxes through

the Panama Canal now, but the expansion will allow vessels to

haul up to 12,600 boxes of freight. Shipping companies would

then save up to a third from using an all-water route, according to

Panama Canal Authority estimates.

Th e potential for traffi c has caused Eastern and Gulf Coast

ports to unleash their own expansion projects, from dredging

harbors and plans in New York to raise a bridge that is too low

“Anything of this magnitude has bumps in the road,” McMillan said. Still, he thinks the Panama Canal will meet its 2014 target – or, at the least, “shortly after.”

Besides work on new locks, there are also improvements in dredging.

WORKS PROGRESS in percentages (as of February 2012)

Pacifi c Entrance 68%

Dredging Pacifi c Entrance 84%

Dredging Gatun Lake 68% and Corte Culebra

Locks, Design and Building 21%

Dredging Atlantic Entrance 97%

Raising of Highest Operative Level 6%for Gatun Lake

Total % Enlargement Program 35%

Source: Press Offi ce, Panama Canal Authority

TIMELINEOCT 22, 2006 National referendum approves the channel expansion

SEPT 3, 2007 Works start

DEC 9, 2008 Financing contract with loan entities signed

JULY 1, 2011 Concrete dumping starts in new locks

OCT 19, 2011 Filling operation in the Pacifi c access (a 6.1 km via situated between the new locks and the existing channel) starts

OCTOBER 2014 End of building work


for bigger cargo ships. West Coast ports also are expanding to

compete. All told, the 13 busiest U.S. ports are spending $8.6

billion over the next few years to deepen their waters and add new

storage space, a report by Jones Lang LaSalle found.

Several of those ports are in danger of falling behind, though

they can make up for the loss by relying on increased traffi c from

smaller boats, said Aaron Ellis, a spokesman for the American

Association of Port Authorities.

“Not all ports need to be able to handle these ultra-large ships,

since some specialize in handling specifi c types of cargo that don’t

typically travel in such large ships,” Ellis said.

Th e Bahamas, Jamaica and even Panama are deepening ports to

attract big container lines, with a plan to shuttle goods on smaller

boats to overcome cramped U.S. waterways.

Although the Canal Authority has won widespread praise for

the expansion – including nearly 80 percent of Panamanians who

voted for it in a 2006 referendum – the choice of companies to

build the new locks stoked rare controversy.

Panamanian Vice President Juan Carlos Varela called the

$3.1 billion contract a “disaster” after a group led by Spain’s

Sacyr Villahermosa bid almost $1 billion lower than Bechtel

to construct the locks. A confi dential U.S. diplomatic cable,

released by the anti-secrecy group WikiLeaks last year, said Varela

expressed concerns about Sacyr completing the work because the

company is in “deep fi nancial trouble”.

In January, striking workers paralyzed construction of the locks

for almost a week, demanding higher pay.

Although the Panama Canal Authority received $2.3 billion

in loans to expand, shipping companies could balk at higher fees

needed to pay for the work and avoid the wider, deeper waterway

after 2014.

Th e canal currently charges tolls based on shipping volume,

which includes the amount of cargo and the ship’s size. Ships that

require less help from so-called mules that pull them through the

locks are charged less.

Faced with struggling world economy, the Canal Authority

delayed raising shipping tolls in 2010. It has since upped the

fees and has vowed to increase them further to help pay for the

expansion.

Big ships might have little room to complain, however, as the

only option is to sail around the tip of South America, resulting in

longer trips and typically higher costs.

McMillan praises the Panama Canal as expertly run and

says that will continue once its next administrator, Jorge Luis

Quijano, takes over for Aleman in September. Quijano is an

engineer who has been in charge of the expansion project since

the beginning. Neither the United States nor “anyone else” could

probably do a better job at managing the project than Panama,

McMillan said.

[email protected]

Ports from the US West Coast are expanding to compete. The 13 busiest US ports are spending $8.6 billions over the next few years

to deepen their waters and add new storage capacity.

TOP 10 BY ORIGIN AND DESTINATION OF CARGOFiscal Year 2011 (Million Long Tons)

Rank Country Origin Destination Total

1 US 92.7 51.7 146.2

2 CHINA 18.7 34.4 53.1

3 CHILE 14.6 14.3 28.9

4 JAPAN 4.9 17.7 22.6

5 SOUTH KOREA 9.0 10.1 19.1

6 PERU 7.4 7.8 15.2

7 COLOMBIA 9.7 4.8 14.7

8 ECUADOR 6.9 7.5 14.5

9 MEXICO 4.2 7.6 12.2

10 PANAMA 2.2 9.6 12.0

Source: Panama Canal Authority, Offi ce of Market Research and Analysis


BY RONALD BUCHANAN

M iguel Angel Morales Menendez was born in 1974. By then

his grandfather, Ramon Menendez, had lost the business

that made him a personal fortune.

After he arrived in Havana in the early half of the 20th century from

his native Asturias in Spain, Ramon Menendez launched a mom-and-

pop store in a colonial building in the city’s old quarter. Soon it became

a coff ee shop and bar. As the business grew, it launched branches, and

Ramon bought buildings to rent for housing.

But it all came to an abrupt end after the bearded rebel army of

revolutionaries marched into Havana in 1959. Ramon died in Havana,

an octogenarian.

“His business was all that he talked about,” recalls his grandson,

Miguel Angel.

Now, in the same old colonial house where his grandfather’s business

began, next to the Havana Cathedral, Miguel Angel has revived it.

Under the same name, La Moneda Cubana, the business has become

SPECIAL REPORT: CUBA

RED FLAGSA new, increasingly business-minded Cuba is emerging.IN THE SUNSET

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one of the privately owned restaurants that are prospering under Cuba’s

economic reforms.

By the beginning of this year, the number of small-business owners

like Miguel Angel had grown four-fold since September 2010, when the

law was changed.

Much more timid market reforms were launched more than two

decades ago, only to be reversed. Will that happen again?

“Defi nitely not,” says Kirby Jones, whose Alamar Associates off ers

consultancy for U.S. companies that want to do business in Cuba. “Th ese

have been extraordinary changes.”

Th e rise of small businesses has reached critical mass, Jones argues:

“Th ere’s no going back now to the old ways. Th ere’s no way you’re going

to get that toothpaste back in the tube.”

Th e business growth means major new industrial projects, golf courses

with ambitious real-estate complexes, a blossoming of small businesses

throughout Cuba, and deep-water oil exploration.

Fidel Castro’s intestinal ailment has obliged him to cede power to

his brother Raul. A small but rapidly growing private sector is being

promoted by Raul. Th e aim, he says, is to “erase the notion once and for

all that Cuba is the only country in the world where you can live without

having to work.”

It is too early to say whether Cuba will follow in the footsteps of

China or Vietnam. But it surely will not follow the road that the former

Soviet Union and its allies took when they collapsed two decades ago. As

Raul Castro has often said, the progress of the reforms must be “without

any haste but without any pauses, either”.

OIL ON THE HORIZON

Th e pace of change might not be blinding, but it is quickening.

Since last year, Cuba and the Spanish oil company Repsol have been

betting on what could be the major single development in the Cuban

economy. Repsol is contracting the Chinese-made, semi-submersible rig

Scarabeo-9.

“A well has been spudded in January,” a Repsol spokesman said. “Th e

results will be available shortly. And there are other companies waiting

their turn to use the Scarabeo once Repsol has fi nished. Th ey include

Gazprom of Russia and the Malaysian state company Petronas.”

Jorge Piñon, a Cuban-American, is a former president of Amoco in

Latin America. He now works as an academic and consultant on Cuba’s

energy industry. Repsol already drilled a well in Cuban deep waters

in 2004 but, though oil was found, the amount was not regarded as

commercial. “But the fact that Repsol is still involved in Cuba tells me

that there is a high probability of hydrocarbons,” Piñon says.

By his reckoning, Repsol already has spent about $100 million in

Cuba. And the U.S. government estimates that Cuba could have 4 billion

to 6 billion barrels of crude reserves yet to be discovered. But Piñon adds

a cautionary note: “Until you’ve drilled, you can’t really be sure about any

potential reserves.”

Nor would a Repsol discovery launch an instant oil boom.

“It would take another three to fi ve years to develop the reservoirs,”

Piñon says. “Th e short-term impact of any discovery would be political

rather than economic.”

Politics, however, is the very name of the game in the tangled

The rise of small businesses has reacheda critical mass



Guanajuato, Mexico.

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relationship between Washington and Havana.

A LEVER IN MARIEL

Whatever the result of the oil exploration, Cuba also is adding a

powerful lever to its economy in the port of Mariel, about 50 kilometers

west of Havana. Th e development there is likely to have a major impact

on the entire region.

If all goes according to plan, Mariel will be Cuba’s largest port, by far.

Mariel will be run by Almacenes Universales, a Cuban military enterprise,

in association with the Brazilian construction giant Odebrecht.

According to Odebrecht, “A total of $957 million will be invested

over four years to transform the Port of Mariel into an international

container terminal, of which $682 million will be fi nanced by the

Brazilian government and the remainder by the Cuban government”.

Construction began in the fi rst quarter of 2010 and should be concluded

by 2014.

“More than 30 kilometers of highway will also be rehabilitated,

and dredging works will be executed on the entrance channel and

maneuvering basin of the future terminal, which will handle one million

containers (TEU) per year. Th e project currently employs 2,700 workers

and should create 3,000 direct jobs and some 5,000 indirect jobs.”

Mariel will be one of Cuba’s “Special Development Zones,” which aim

to boost exports, substitute imports, promote high-technology business

and, of course, increase the number of jobs. Th e idea is not to recreate

the state-controlled market enclaves of China in the 1980s, but rather to

make the special zones outgoing springboards for integration with the

surrounding economy.

GOLF AND REAL ESTATE

Golf is expected to form another springboard for Cuba’s new economy,

in conjunction with luxurious real-estate developments, along the lines of

those in the Dominican Republic or Barbados.

Th e current leader in the race to be Cuba’s fi rst post-revolutionary

golf-based resort is Britain’s Esencia Group, head by Alexander

Macdonald of Boisdale, a Scottish aristocrat who blends salsa music with

whiskey in his chain of upscale London-based restaurants.

Esencia is developing Th e Carbonera Club in association with the

Cuban state company Palmares. Golf, tennis and ocean sports will

feature in 170 hectares that will off er villas and apartments for sale

in what could be the fi rst housing sales to foreign buyers since the

Revolution.

“Th e Carbonera Club is close to achieving approval by the

authorities,” Macdonald says. “It’s taken rather a long time, but that’s not

a problem. It’s important to get things right.”

A source at the Carbonera Club said the property will be positioned

to be competitive within the Caribbean region for properties of similar

specifi cations and amenities. Th e launch prices will be similar to those

of Dominican Republic’s Punta Cana resorts, starting at about $2,800

per square meter ($260 per square feet) and rising to $4,750 per square

meter. Th ese prices are in accordance with the views of analysts of the

regional real-estate market, the source added.

Macdonald says: “We expect the prices to rise in proportion with the

interest from international buyers that we have received, since all know

that the purchases will off er good capital-return opportunities as demand

exceeds supply and Cuba regains its natural position as the jewel of the

THE U.S. GOVERNMENT

ESTIMATES THAT CUBA COULD

HAVE 4 BILLION TO 6 BILLION BARRELS OF

CRUDE RESERVES YET TO BE

DISCOVERED.

Oil Rig in Cuba.



Caribbean.”

Esencia is backed by two heavyweights of international architectural

design, Rafael de la Hoz of Spain and Britain’s Conran & Partners. In

addition, Esencia has a renewable energy division, Havana Energy, that

features biomass projects and is led by Brian Wilson, a former British

energy minister.

Esencia’s travel division features bespoke tours now supported by plans

for a chain of bijou hotels in a country where accommodation has long

been scarce for travelers with a sense of adventure. And the company’s

trading division represents Cuban products such as rum, shellfi sh and

cigars.

THE OLD GUARD OF INVESTORS

Companies such as Repsol, Odebrecht and Esencia form part of a new

wave of investors attracted by Raul Castro’s movement for reform. Th e

largest foreign investor remains Canada’s Sherritt International, which

produces oil and nickel -- the latter is the nation’s leading export -- as

well as electricity produced by natural gas in a combined-cycle power

plant. In tourism, Spanish hotel chains such as Barcelo, Blau, Iberostar,

Melia and Riu operate under management contracts; the French

drinks group Pernod-Ricard produces Havana Club rum; Spain’s

Altadis, a unit of Britain’s Imperial Tobacco, produces and exports the

legendary cigars.

Canada’s Cerbuco bottles beer for the local market; Switzerland’s

Nestle bottles mineral water and soft drinks; and Mexico’s Altex

produces fl our for domestic consumers.

Cuba also has formed overseas joint ventures. It has investments in

the production of pharmaceuticals in Brazil, China, India and Iran; in

hospitals in Algeria and China; in construction projects in Angola and

Vietnam; and a hotel in China. Cuba also has invested in Angola’s oil

industry and in several companies in Venezuela.

U.S. EMBARGO

Th e U.S. embargo is solid. With the exception of cash purchases of food

and medicines, Cuba can’t trade with the United States. Nor can it use

the U.S. dollar or welcome regular U.S. tourists. Ships that dock in Cuba

are not allowed to visit U.S. ports within the next six months.

Th e U.S. Treasury Department applies the embargo on Cuba

throughout the world. Raul Castro was not allowed to stay in a Hilton

hotel in Trinidad last year. Repsol opted to pull its American Depositary

Shares out of Wall Street. Spain’s Telefonica and BBVA bank have been

under pressure from the U.S. authorities because of their links to Cuba.

And Odebrecht could be facing a problem in Florida under a local law

supported by the Cuban-American lobby.

- With reporting by Gerardo Arreola in Havana.

Right now, the key to the Cuban eco-nomy lies in Venezuela. Trade between the two countries reached more than $6 billion in 2010, twice as much as the previous year and three times more than the $1.9 billion with China.

Cuba supplies Venezuela with a wide range of services provided by 40,000 professionals stationed there. They in-clude doctors, sports trainers, computer engineers, agronomists and security specialists. In return, Venezuela receives oil on highly preferential terms under a swap agreement.

Cuvenpetrol, a joint venture by the two governments, operates a Cuban refi nery at Cienfuegos that is being expanded from 65,000 barrels per day to 150,000. Another Cuban refi nery is to be upgraded and a third to be built by Cuvenpetrol.

Cuvenpeq plans petrochemical pro-jects in Cuba that will involve Chinese and Japanese engineering. A regasifi ca-tion plant to receive liquefi ed natural

gas (LNG) aims to provide fuel for the nation’s power plants.

Another binational company, Tele-comunicaciones Gran Caribe, laid an undersea fi ber-optic cable to provide speech, data and image communica-tions between Cuba and Venezuela. The project was to have been concluded by last summer, but no news has emerged. Reports that some of the project’s executives were arrested and charged with fraud have been neither confi rmed nor denied.

But a big question mark hangs over cooperation between the two countries. President Hugo Chavez hopes to win re-election this year in Venezuela, but the opposition to his rule is more united than ever, and the re-emergence of his cancer casts a big doubt on his physical ability to contest the election.

Jorge Piñon, a U.S.-Cuban former top international oil-industry executive, now an academic and consultant on Cuban

energy, takes a somber view.“Cuba consumes about 150,000 ba-

rrels a day of oil and produces about 50,000,” Piñon says. Basically, Ve-nezuela makes up the rest with exports provided in exchange for services under the swap agreement. “But for practical cash-fl ow purposes, Cuba re-ceives at today’s prices about $3 billion of oil that does not impact its balance of payments,” Piñon says.

“If Venezuela were to change its contractual arrangement with Cuba, there’s no doubt in my mind that the Cuban economy would collapse. That is why people on both sides of the politi-cal argument are increasingly agreeing that no obstacles to fi nding oil should be placed in Cuba’s ways.”

“Cuba once was dependent on oil from the Soviet Union, and it is now on Venezuela,” Piñon says. “It needs to be independent.”

-- Ronald Buchanan

THE KEY LIES IN CARACASTHE KEY LIES INY CARACAS

Caribbean.” Canada’s Cerbuco bottles beer for the local market; Switzerland’s


BY JOACHIM BAMRUD

I nvestors looking to enter a new Latin American market or

expand into another often are faced with only limited information

restricted to a specifi c country. Meanwhile, international rankings

typically cover only a select group of countries in Latin America.

To make life a bit easier for investors, Latin Business Chronicle – the

digital sister publication of Latin Trade magazine – has developed 10

unique benchmarking indexes that enable executives to compare key

conditions in 18 or more countries in Latin America.

Th e indexes cover the business, entrepreneur, labor and tax

environments and education, globalization, infrastructure, security,

technology and tourism levels.

WINNERS & LOSERS

In general, two countries shine on the indexes. Th ey are Chile and

Panama. Chile tops four of the indexes (business, entrepreneur, labor and

tax) and comes in second on two others (infrastructure and security).

Panama tops three indexes (globalization, infrastructure and

technology) while coming in second in two (business and entrepreneur).

Meanwhile, Venezuela is the clear loser. It ranks last on two

indexes (business and entrepreneur) and second-to-last on two others

(globalization and security).

SPECIAL REPORT: BENCHMARKING

BENCHMARKING IN LATIN AMERICA

Analyzing the best and worst countries in Latin America in business, entrepreneur, labor and tax environments and education, globalization, infrastructure, security, technology and tourism levels.

BUSINESS ENVIRONMENT

Th e Latin Business Index, which spans 28 components

and 18 countries, is the most extensive index measuring the

business environment in Latin America.

Th e fi ve key categories and their components in the latest index are: • Macro environment: Percent GDP growth in 2009, 2010,

estimated 2011 and forecast 2012, and percent infl ation for

those years.

• Corporate environment: taxes, labor environment, access

to capital for entrepreneurs, ease of doing business and

economic freedom.

• Globalization and competitiveness: globalization, competitiveness,

tariff s and security.

• Infrastructure level: transport, technology penetration, access to water

and quality of electricity supply.

• Political environment: political freedom, political stability, political

outlook, judicial independence, business policies of government,

transparency and intellectual property rights.

Chile tops the index, followed by Panama, Peru, Uruguay and Mexico.

Th e worst countries? Venezuela, followed by Bolivia.

EDUCATION LEVEL

Th e Latin Education Index, which covers 19 countries, is based on the following fi ve criteria using data from the United Nations Educational, Scientifi c and Cultural Organization and the World Economic Forum:

• Quality of primary education.

• Mean years of schooling.

• Expected years of schooling.

• Combined gross enrollment ratio in education.

• Adult literacy rate.

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A common standard for comparing education internationally – the

Program for International Student Assessment (PISA) from the OECD

– has not been included as it only encompases eight Latin American

countries.

Uruguay leads the way, followed by Argentina. Th e worst country?

Haiti, followed by Guatemala.

ENTREPRENEUR ENVIRONMENT

Th e Latin Entrepreneur Index, which spans 18 countries, looks at fi ve

key factors that aff ect entrepreneurs:

• Number of procedures for starting a business.

• Time to start a business (number of days).

• Cost to start a business as a percent of income per capita (including all

offi cial and legal fees).

• Access to loans (ease of access to obtain a bank loan with only a good

business plan and no collateral).

• Venture capital availability (for entrepreneurs with innovative, risky

projects).

Th e index, which uses data from the World Bank and the World

Economic Forum, shows Chile as the best country, followed by Panama.

Worst for entrepreneurs? Venezuela, followed by Nicaragua.

GLOBALIZATION LEVEL

Th e Latin Globalization Index of 18 countries looks at six factors that

measure a country’s links with the outside world:

• Exports of goods and services as a percent of GDP.

• Imports of goods and services as a percent of GDP.

• Foreign direct investment as a percent of GDP.

• Tourism receipts as a percent of GDP.

• Remittances as a percent of GDP.

• Internet penetration.

Th e index uses data from the World Bank, the United Nations

Economic Commission for Latin America and the Caribbean, the

International Monetary Fund, the International Telecommunications

Union and the Santiago Chamber of Commerce.

Th e most globalized country in Latin America? Panama. Th e least

globalized? Brazil, followed by Venezuela.

INFRASTRUCTURE LEVEL

Th e Latin Infrastructure Index, which spans 18 nations, provides

rankings in four key categories and 24 subcategories, using data from

the World Bank, the World Economic Forum, the International

Telecommunications Union and Computer Industry Almanac.

Panama has the best overall infrastructure, followed by Chile.

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Expressway in a tunnel, Santiago, Chile



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Latin Business Index

BEST WORST

Chile VenezuelaPanama Bolivia

Latin Education Index

BEST WORST

Uruguay HaitiArgentina Guatemala

Latin Entrepreneur Index

BEST WORST

Chile VenezuelaPanama Nicaragua

Latin Globalization Index

BEST WORST

Panama BrazilParaguay Venezuela

Latin Infrastructure Index

BEST WORST

Panama NicaraguaChile Paraguay

Latin Labor Index

BEST WORST

Chile HondurasMexico Bolivia

Latin Security Index

BEST WORST

Costa Rica HaitiChile Venezuela

Latin Tax Index

BEST WORST

Chile BrazilParaguay Bolivia

Latin Technology Index

BEST WORST

Panama CubaUruguay Nicaragua

All indexes, except Latin Security Index, developed by Latin Business Chronicle. Latin Security Index developed by FTI Consulting

BENCHMARKING CHART

Th e index’s four key categories are transport, technology, electricity

and water. Transport covers 16 subcategories, such as the cost, time and

documents required to export and import containers; the quality of

seaports, airports, roads and railway and overall logistics performance

– which, in turn, includes factors such as customs effi ciency, ease of

arranging competitively priced shipments, competence and quality

of logistical services, ability to track and trade consignments, and

timeliness of shipments in reaching a destination within the scheduled

or expected delivery time.

Panama has the best overall infrastructure, followed by Chile. Th e

worst? Nicaragua.

LABOR ENVIRONMENT

Th is index looks at 18 factors that determine overall labor conditions

in 18 countries in Latin America. Th ey include:

• Fixed-term contract fl exibility.

• Minimum wage.

• Payments and restrictions for night and holiday work.

• Paid annual leave.

• Regulations and payments for redundancy.

• Flexibility of wage determination.

• Cooperation in labor-employer relations.

• Brain drain.

Skyscrapers seen from city old quarters. Panama City, Panama



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It also includes education (mean and expected years of schooling) and

a health factor, such as life expectancy at birth.

Chile has the best labor environment in Latin America, followed by

Mexico. Th e worst? Honduras, followed by Bolivia – two poor countries

that desperately need more jobs.

SECURITY LEVEL

Th e Latin Security Index takes into account how each country in Latin

America is doing related to public insecurity, with a special focus on the

business community.

Th e index of 19 countries was developed by FTI Consulting, which

polls its own multinational clients and also analyzes public crime data

from police and NGOs.

Costa Rica is the safest country for multinational executives, followed

by Chile. Th e most dangerous country is Haiti, followed by Venezuela.

TAX ENVIRONMENT

Th e Latin Tax Index uses four factors – corporate tax rates, tax rates as

a percentage of profi ts, the number of payments involved and the time

required to comply – to compare both the level of taxes and the ease or

diffi culty of payment across 18 countries.

Chile has the best tax environment, while Brazil has the worst. At

17 percent, Chile’s corporate tax rate is the second-lowest in the region,

after Paraguay (10 percent).

Brazil, meanwhile, is one of the three countries with the highest rate

in Latin America (34 percent). Even worse: It has set a world record in

number of hours necessary to comply with tax regulations (2,600 hours,

or 3.6 months), the index shows.

TECHNOLOGY LEVEL

Th e Latin Technology Index provides a unique comparison of the

technology level of 19 Latin American countries by looking at

the penetration rates of the Internet, broadband Internet, personal

computers (PCs), wireless subscribers and fi xed telephone lines. It uses

2010 technology data from the International Telecommunications

Union, Computer Industry Almanac and the Santiago Chamber of

Commerce and population data from the International Monetary Fund

and the Population Reference Bureau.

Panama has the highest technology level in Latin America, followed

by Uruguay. Th e lowest level is found in Cuba, followed by Nicaragua.

Th anks to continued strong growth in wireless penetration as well as

a recent spurt in Internet and broadband penetration and a doubling in

PC users, Panama managed to lead the index for the fi rst time.

Cuba has Latin America’s lowest wireless penetration rate: 8.9

percent, which is 10 times lower than the regional average of 101

percent. Cuba also has the lowest broadband rate (0.03 percent). Th at

compares with the regional average of 4.7 percent.

Meanwhile, Cuba also can “boast” the fi fth-lowest PC penetration

(9.8 percent) and Internet penetration (15.1 percent). By comparison,

the Latin American average PC penetration is 16.3 percent, and the

region’s average Internet penetration rate is 29.3 percent.

TOURISM LEVEL

Th e Latin Tourism Index measures the impact tourism has on a country.

It looks at international tourist arrivals (as a percent of population) and

international tourism receipts (as a percent of GDP).

Uruguay tops the index, followed by Costa Rica. Brazil is at the

bottom.

No country hosted a greater share of international tourists than

Uruguay. Its 2.3 million arrivals equaled 70 percent of Uruguay’s

population.

[email protected]

Venezuela ranks last on two indexes,business and entrepreneur, and second-to-last on two others,

globalization and security

Oil rig in Monagas state,Venezuela

What do

have in common?

Arcos DoradosBurger King

CartierCaterpillar Chevron

Continental AirlinesCredit Suisse

DellDHL Express

FedEXGoldman Sachs

Hamburg Sud

Hewlett-PackardHSBCIDBKraft

Morgan StanleyOracle

PepsiCoSAP

The World BankTime Warner

UPSVisa

They all rely on Latin Business Chronicle when doingbusiness in Latin America and the Caribbean.

www.latinbusinesschronicle.comSubscribe today ahora también en español

News, analysis and statistics available anytime, anywhere.

TO SUBSCRIBE VISIT US ONLINE OR CALL 1.800.765.0453

Mention LT AD and receive a complimentary issue of Latin Trade Magazine TOP 500-July/August

BY JOSEPH A. MANN JR.

INDUSTRY REPORT: TOP 100 INSURERS

COVERING THE RISK OF ACCIDENTS AND DISASTERS

T he insurance sector in Latin America

is growing briskly, buoyed by an

expansion of the middle class in

several countries, economic stability and

generally good prospects for continued

economic growth throughout the region.

Property and casualty insurance (P&C)

covers a wide range of risks for businesses,

individuals and governments – automobile

accidents, fi nancial loss from natural disasters,

fi re, theft, marine and aviation accidents,

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PROPERTY AND CASUALTY INSURANCE

demand – is important and has an impact

on insurance,” Serrano said. He also expects

continued premium growth in 2012.

In Brazil, for example, “the middle class

consumes everything,” he noted. “Goods,

services … and insurance.”

Insurance premiums in Latin America,

including life and non-life products, represent

about 3 percent of world premiums, Serrano said.

Still, insurance companies – both national and

international – are eager to grow their portfolios:

“It’s a small market, but it off ers double-digit

growth in income and profi ts,” he said.

Despite some disasters, such as the Chilean

earthquakes, insurance companies are very

profi table. Th e LatinoInsurance CEO added:

“In 2010, their average ROE (return on equity)

was 17 percent.”

Once the large international insurance

companies were allowed to have 100 percent

ownership, they began buying local companies

and had an important impact on the Latin

American market, said Kathleen B. Smith,

managing director for Latin America and

the Caribbean at Marsh Inc., the worldwide

insurance brokerage and risk management fi rm.

“Before, businesses had to depend on local

companies, and they had limited capacity,”

Smith said. “Th e market is much more diverse


industrial accidents and others. In technical

terms, property insurance protects individuals

or businesses from the loss of property or

the loss of income related to that property.

Casualty insurance principally protects persons

or businesses against legal liability caused by

injuries to other people or damage to someone

else’s property.

Premiums for all types of insurance in

Latin America grew by double digits in

2011, said Juan Fernando Serrano, CEO of

LatinoInsurance, a market-information and

consulting fi rm that closely follows insurance

developments in the region. Serrano estimated

that some countries – such as Brazil and

Ecuador – had premium expansion of more

than 20 percent last year, and the area as

a whole grew by 12 percent to 15 percent,

benefi tting life and non-life products alike.

“Economic stability in Latin America –

supported by commodity prices and strong



The Latin American countries with the most developed insurance industries today are Argentina, Brazil, Chile, Colombia, Mexico and Peru – as well as the U.S. market of Puerto Rico

now, since diff erent insurance companies

and brokers brought their skill sets and new

products to the region.”

Th e Latin American countries with the

most developed insurance industries today are

Argentina, Brazil, Chile, Colombia, Mexico

and Peru – as well as the U.S. market of Puerto

Rico, Serrano said. Aside from Brazil, the

largest markets for P&C insurance are Mexico,

Puerto Rico, Venezuela, Argentina, Chile,

Colombia and Peru.

Although life insurance is leading the pack,

P&C lines have strong growth potential in

Latin America, according to Rafael Casas,

president of MAPFRE America, the region’s

largest supplier of P&C coverage.

“Currently, large companies are covered by

P&C insurance more than small and mid-

sized companies,” he noted.

And since the level of P&C penetration in

the region is lower than in more-developed

markets, the sector has strong growth prospects

– especially in the current world economic

context, where Latin America expects

continued economic expansion and increasing

acquisitive power.

SOME EXAMPLES:

According to LatinoInsurance’ Serrano these

are examples where P&C coverage is growing:

• Automobiles – this is one of the fastest-

growing sectors. With expansion of the

middle class, demand for cars and other

vehicles has increased, and loan rates are lower

than in the past. More policies are being

written, both for compulsory (SOAT) and

non-compulsory vehicle insurance.

• As trade increases, there is more demand for

cargo- and transportation-related insurance.

• New airports, roads, electric-power systems

and other infrastructure projects require

insurance from governments and private

companies alike. Th is is especially true in

areas subject to earthquakes, hurricanes and

other natural disasters.

• Surety bonds. When new projects are

developed, governments demand performance

bonds from contractors. Also, builders and

other investors want to cover risks associated

with developing multimillion-dollar projects.

• Credit insurance – a small but growing sector

to protect against risk in accounts receivable.

WHHO IIS CCOVEEREEEDD?

Multinational companies with operations in

Latin America and multilatinas – which have

operations and personnel far beyond their

home countries – have used a combination

of international insurance companies and

local companies to cover a variety of risks. In

recent years, they have turned increasingly to

“captives,” or self-insurance companies.

Esteban Madero, a vice president at Marsh,

said Latin American and Caribbean businesses

have increasingly focused on captive insurance

organizations to transfer risk.

Venezuela’s PDVSA has a captive insurance

company, Serrano said, and Mexico’s PEMEX

asks insurance companies for bids every two

years. Each company has assets worth many

billions of dollars.

In contrast, P&C coverage among small and

mid-sized businesses (SMEs) varies.

Moreover, companies that have bank loans

usually are obliged to obtain insurance under

terms of the loan agreement.

HOOOW SSOMME CCOMMMPPPANIES COOVVEER RRISSSKK

Big companies typically don’t like to reveal their

insurance coverage. But publicly traded fi rms

sometimes publish information on the topic.

Caterpillar, which has manufacturing

operations in Mexico and Brazil and other

countries, also is self-insured through captive

insurance companies, including Caterpillar

Insurance Co. Ltd. in Bermuda, according to

the company’s 10-K for 2011.



Ranked by Total Written Premiums in millions of US$ as of December 31st 2011 & December 31st 2010

IN LATIN AMERICATOP 100 INSURERS

1 1 BRADESCO (Brazil) ML 20,703.3 30.49% 13.5%2 2 ITAU (Brazil) ML 10,108.6 36.27% 6.6%3 3 MAPFRE (Spain) MN 7,509.7 14.77% 4.9%4 4 ZURICH-SANTAND (Spain) MN 6,630.6 8.24% 4.3%5 6 PRINCIPAL (United States) MN 6,366.1 29.37% 4.1%6 5 ING (Netherlands) MN 6,066.9 22.02% 3.9%7 8 PORTO (Brazil) ML 5,117.2 13.95% 3.3%8 7 MET LIFE (United States) MN 4,027.0 -12.26% 2.6%9 9 LIBERTY (United States) MN 3,741.1 20.86% 2.4%10 10 CNP (France) MN 3,546.8 22.59% 2.3%11 11 GENERALI (Italy) MN 3,087.2 26.96% 2.0%12 13 ALLIANZ (Germany) MN 2,803.6 23.33% 1.8%13 14 SURAMERICANA (Colombia) ML 2,693.0 21.53% 1.8%14 12 GNP (Mexico) L 2,679.9 16.75% 1.7%15 16 HSBC (England) MN 2,610.9 25.92% 1.7%16 15 BBVA (Spain) MN 2,459.7 14.06% 1.6%17 17 AXA (France) MN 2,279.0 10.12% 1.5%18 18 TRIPL-S INC (D) (Puerto Rico) L 1,998.1 0.00% 1.3%19 24 INBURSA (Mexico) L 1,760.6 57.13% 1.1%20 20 BRASIL (Brazil) L 1,738.6 23.09% 1.1%21 21 RSA (England) MN 1,623.0 24.83% 1.1%22 19 CHARTIS (United States) MN 1,526.5 5.24% 1.0%23 22 ACE (United States) MN 1,400.4 17.40% 0.9%24 27 CARDIF (France) MN 1,363.8 43.95% 0.9%25 23 HDI (Germany) MN 1,359.1 19.93% 0.9%26 28 MERCANTIL (Venezuela) L 1,217.3 30.44% 0.8%27 25 NYLIFE (United States) MN 1,208.7 12.11% 0.8%28 29 CITIGROUP (United States) MN 1,104.7 23.22% 0.7%29 33 SANCOR (Argentina) ML 1,060.4 42.18% 0.7%30 26 TOKIO (Japan) MN 1,019.0 -1.55% 0.7%31 32 QUALITAS (Mexico) ML 904.4 16.27% 0.6%32 43 HORIZONTE (Venezuela) L 893.0 57.65% 0.6%33 35 SOMPO (Japan) MN 887.5 24.04% 0.6%34 31 RIMAC (Peru) L 886.6 13.33% 0.6%35 40 PENTASEC (Chile) L 848.0 40.06% 0.6%36 37 CHUBB (United States) MN 833.0 21.16% 0.5%37 41 ALTAMIRA (Venezuela) L 810.7 39.01% 0.5%38 34 QBE (Australia) MN 802.6 9.28% 0.5%39 30 BRASIL VEICULOS (Brazil) L 782.7 -12.51% 0.5%40 36 INS (Costa Rica) L 746.6 5.22% 0.5%41 44 PREVISORA (Venezuela) L 742.9 34.01% 0.5%42 38 PACIFICO (Peru) L 720.1 17.30% 0.5%43 47 CONSORCIO (Chile) L 717.7 39.66% 0.5%

Company (HQ)Ranking

2011 2010Company

Type

2011 Total Written Premiums

% Δ

2010 vs 2011 2011 Market Share

ML: Multilatins MN: Multinationals L: Latins



44 45 FED. PATRONAL (Argentina) L 698.0 30.90% 0.5%45 54 HARTFORD (United States) MN 691.4 54.34% 0.5%46 39 BOLIVAR (Colombia) ML 683.6 12.25% 0.4%47 53 OCCIDENTAL (Venezuela) L 682.2 51.96% 0.4%48 48 ATLAS (Mexico) L 614.2 25.24% 0.4%49 42 MULTINACIONAL (Venezuela) ML 604.2 5.68% 0.4%50 50 BANCO (Uruguay) L 568.0 19.34% 0.4%51 49 UNIMED (Brazil) L 562.5 15.85% 0.4%52 52 MASSACHUSETTS (United States) MN 556.1 23.30% 0.4%53 56 SAN CRISTOBAL (Argentina) L 555.7 29.38% 0.4%54 60 COLPATRIA (Colombia) L 532.9 34.68% 0.3%55 62 SEGUNDA (Argentina) ML 521.1 32.84% 0.3%56 58 ASSURANT (France) MN 518.7 30.01% 0.3%57 46 CONSTITUCION (Venezuela) ML 517.7 -0.68% 0.3%58 63 BCI (Chile) L 486.8 34.89% 0.3%59 59 AEGON (Netherlands) MN 464.3 16.69% 0.3%60 64 PROVINCIA (Argentina) L 456.8 37.10% 0.3%61 55 ABA (Mexico) L 454.0 2.27% 0.3%62 51 BANESCO (Venezuela) ML 428.8 -5.00% 0.3%63 57 UNIVERSAL (D) (Puerto Rico) L 406.5 0.00% 0.3%64 66 CRUZ SUR (Chile) L 398.7 46.12% 0.3%65 65 ALFA (Colombia) L 384.2 19.81% 0.3%66 72 BICE (Chile) L 368.4 52.05% 0.2%67 61 SAFRA (Brazil) L 348.3 -11.33% 0.2%

Company (HQ)Ranking

2011 2010Company

Type


% Δ


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Chile-based LAN Airlines S.A., with 150

passenger and cargo aircraft and operations in

many countries, said in its 2011 annual report

(SEC Form 20-F) that its insurance coverage

for 2011 cost $16.3 million. Th e publicly traded

international airline has hull insurance that

includes, among other things, “all risk,” war and

allied risks, plus liability for spares, passengers,

cargo, mail, baggage and third parties.

Since 2006, LAN has negotiated common

terms for hull all risk, aviation legal and spares

coverage together with British Airways, Aer

Lingus and their affi liates, the report said,

which gives the airlines premium reduction

and coverage improvements.

THHHE MMOSST EXXPEEENNNSIVE COVVERRRAGEE.....

THHHAT ONE YOOU DDID NOTT BUUY....

Th e cost for P&C insurance against natural

disasters depends on the level of risk and

location, Marsh’s Smith said.

“One of the biggest factors in determining

the cost of your coverage is your loss

experience,” she noted, so even companies in

risky geographical areas are judged more on

their own loss experiences. Some of the most

expensive insurance, she said, covers machinery

breakdowns at complex operations.

In parts of the Caribbean, for example,

which potentially face hurricanes and

fl ooding each year, “there seems to

be plenty of supply and demand for

catastrophic coverage, but the cost is very

high,” Smith said.

“For insurance companies, it’s all about

spreading the risk. Catastrophic models dictate

how much insurance a company can write, and

at what price.” But, as insurance experts say, the

most expensive insurance is the coverage you

don’t buy.

68 76 ESTAR (Venezuela) L 331.2 48.62% 0.2%69 70 VIDACAMARA (Chile) L 324.4 24.86% 0.2%70 73 ESTADO (Colombia) L 302.2 26.64% 0.2%71 67 PREVISORA (Colombia) L 301.4 12.03% 0.2%72 71 EURO (Chile) L 294.9 20.62% 0.2%73 133 ALIANÇA BRA (Brazil) L 279.3 236.83% 0.2%74 77 MAGALLANES (Chile) L 275.0 28.65% 0.2%75 100 NACION (Argentina) L 273.3 71.64% 0.2%76 69 COOPERATIVA (D) (Puerto Rico) L 265.1 0.00% 0.2%77 85 BANCHILE (Chile) L 255.6 34.31% 0.2%78 75 GMX (Mexico) L 252.9 13.20% 0.2%79 81 PRUDENTIAL (United States) MN 252.6 28.25% 0.2%80 74 CARONI (Venezuela) L 250.6 8.39% 0.2%81 68 INTERACC (Mexico) L 247.3 -7.87% 0.2%82 88 NOBRE (Brazil) L 240.8 31.50% 0.2%83 80 ALFA (Brazil) L 240.2 21.89% 0.2%84 82 BERKLEY (United States) MN 237.9 20.94% 0.2%85 79 MITSUI SUMITOMO (Japan) MN 231.0 13.40% 0.2%86 106 SMG (Argentina) L 225.3 58.67% 0.1%87 91 POSITIVA (Colombia) L 221.6 26.44% 0.1%88 83 CAPEMI (Brazil) L 220.7 15.58% 0.1%89 122 AGROAS (Mexico) L 216.9 114.90% 0.1%90 89 OHIO (United States) MN 215.6 19.11% 0.1%91 95 WARRANTY GROUP (US) MN 211.5 23.46% 0.1%92 103 PIRAMIDE (Venezuela) L 209.9 43.89% 0.1%93 78 INTERNACIONAL (Panama) L 209.2 0.00% 0.1%94 113 VENEZOLANA (Venezuela) L 205.9 70.83% 0.1%95 86 ASSA (Panama) ML 203.6 7.64% 0.1%96 105 RIVADIVA (Argentina) L 200.0 38.43% 0.1%97 93 CATATUMBO (Venezuela) L 195.7 13.11% 0.1%98 84 ASOCIACION (D) (Puerto Rico) L 190.5 0.00% 0.1%99 115 LIDERAR (Argentina) L 189.2 59.48% 0.1%100 92 TRAVELERS (United States) MN 189.0 9.04% 0.1%

Subtotal Top 100 Insurance Groups 141,850.2 92.3%335 Remaining Groups 11,755.4 7.7%

TOTAL REGION 153,605.6 100.0%

Company (HQ)Ranking

2011 2010Company

Type


% Δ


Compiled by: LATINOINSURANCE Sources: Written premiums by line of business fi gures published by the insurance regulators of each country included herein.

BY TOM AZZOPARDI

SPECIAL REPORT: MBA

After a decade of robust economic

growth, Latin America’s leading

business schools are building

on the region’s newly won reputation for

business smarts and fi nancial prudence.

Although they might yet not compete

with the big schools of Europe and North

America, they are proving to be increasingly

viable alternatives for executives throughout

Latin America and beyond.

Although courses in business

administration have a veritable tradition

in the United States – the Tuck School of

Business at Dartmouth College began to

off er the world’s fi rst master’s degree in

business administration in 1900 – the MBA

truly began to become a global phenomenon

only during the long post-war economic

boom, when leading U.S. schools began to

export their model of executive education to

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EXECUTIVE

the global fi nancial crisis largely unscathed.

And its business schools are beginning to

pitch their claim to executives throughout

the world.

Chile’s leading business schools – such

as Adolfo Ibanez University and the

Pontifi cate Catholic University in Santiago

– are living proof of how Latin America’s

improved fortunes can benefi t a school’s

reputation.

Twenty years after the end of the

Augusto Pinochet dictatorship, Chile has

ushered in its fi rst democratically elected

right-wing government in half a century,

while its economic model remains largely

unquestioned and its companies go from

strength to strength.

“Chile is an extraordinary example for the

region, and the experience in Chile sells very

well abroad,” says Hernan Palacios, director


campuses in Europe and Latin America.

But while schools in Europe thrived and

now rival their U.S. forebears in prestige

and might, the development of business

education in Latin America was checked by

30 years of economic and political instability,

says Dr. Jorge Talavera, dean of the ESAN

graduate business school in Lima, Peru.

Th ere were some benefi ts.

Th e uncertain times “prepared people and

professors to face unusual problems,” adds

Armando dal Colletto, dean of Business

School São Paulo. “Some creative solutions

came from that time,” he adds, some of

which could now apply to the debt crises

and stagnant growth facing developed

economies.

However, times are changing. Latin

America is now an important motor of the

world economy – and one that has survived

GETTING AN

EDUCATION


of the Catholic University’s MBA UC.

Th e school environment plays a very

diff erent role at Central America’s

prestigious INCAE Business School.

According to Dean Guillermo Selva, the

live-in experience enjoyed by students in the

Global Executive MBA program sets the

school apart from its competitors. Students

spend one week a month studying at the

school’s Francisco de Sola campus on the

forested outskirts of Managua.

Set up in 1964 by teachers from the

Harvard Business School at the behest of

U.S. President John F. Kennedy, the school

usually is listed near the top of any ranking

of regional MBA programs. With lodging,

catering and even laundry service provided

on-site, executive students can fully immerse

themselves in study from Wednesday to

Tuesday, including the weekend.

“Th ey really have time to think and to

dream… and to learn from the teachers

and each other. Th is is what they remember

about the course,” Selva says.

Th en, unburdened with homework, they

return to their careers and home life to stock

up on real-life experiences to share when

they return to classes in three weeks’ time.

Most executives planning to take time out

to study, however, usually are interested in

what happens inside the classroom.

Teaching methods in Latin America

closely mirror those used in most U.S.

business schools, unsurprising given the role

of U.S. universities in the development of

executive education south of the border. At

Peru’s ESAN, teaching staff draw heavily

on case studies in the classroom, refl ecting

the role the Stanford Graduate School

of Business played in its founding half a

Teaching methods in Latin America closely mirror those used in most U.S. business schools, unsurprising given the role of U.S. universities in the development of executive education south of the border.

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SPECIAL ADVERTISING FEATURE


SPECIAL REPORT: MBA

century ago, Talavera says.

But in other ways, Latin American

schools vary in focus.

INCAE, like its Costa Rica home, has

developed a reputation for sustainable

development, a specialization that attracted

students from across Latin America and

beyond.

In Argentina, IAE is trying to stand

out by fl agging its strength on developing

economies. “We want to be known as

the school which knows the most about

emerging markets in Latin America,” says

the school’s dean, Marcelo Paladino.

Santiago’s Catholic University prefers

to focus on the development of soft skills

required by modern business executives,

such as leadership and negotiation, rather

than fi elds of knowledge such as fi nance or

marketing.

“We are looking to produce chief

executives,” Palacios says.

But curricula require constant updating,

especially given the hair-raising turbulence

seen over the past fi ve years.

At INCAE, course material has been

tweaked to put greater emphasis on the

globalization of the economy, as well as

on issues such as corporate ethics and

sustainable development, Selva says. More

external teachers are being recruited so

students can better understand the threats to

modern society.

“Although this is experiential learning,

we don’t want them to lose contact with the

world outside,” Selva says.

At UC in Chile, they are planning a

complete redesign of the MBA program to

be implemented next year to refl ect not only

changing circumstances but also executives’

shifting priorities.

“Fifteen years ago, few MBA students

Business schools need to be more imaginative in dealing with new challenges

A specialization in international fi nancial

markets and the rapid growth of the fi eld created a need for certifi cation for professionals who sought to advance in their careers and to establish a benchmark for excellence and international conduct. The Institute of Chartered Financial Analysts emerged from the original Federation of Financial Analysts a decade after its

creation in the United States in 1947, and work began to organize the course. Today, the CFA Institute is a nonprofi t international association of investment professionals that grants the CFA (Chartered Financial Analyst) Certifi cate and the CIPM (Certifi cate in Investment Performance Measurement).

What is interesting about these certifi cations is that they are international, allowing those who obtain them to operate in any market

in the world. The exams are demanding, and the course is carried out through distance education, specifi cally to allow fi nancial professionals the option of carrying them out without having to take a break in their careers, as is the case for the majority of master’s degrees in other specialties.

In order to register, a student must have four years of qualifi ed experience in fi nancial markets, a university degree and must be able to speak English, the language

the course in which the course is taught.

The CFA establishes two dates each year to take the exam in each country where it has representation. The program currently has a network of 135 associations in 58 countries. In June 2012, for example, the exam can be taken in more than 90 countries, including Argentina, Brazil, Chile, Colombia, Guatemala, Mexico, Panama, Peru, Puerto Rico and Venezuela.

A DIPLOMA FOR THE FINANCIAL WORLD

IN LATIN AMERICA, THE FOLLOWING UNIVERSITIES ARE MEMBERS OF THE PROGRAM: • INCAE Business School (Alajuela, Costa Rica).• Insper (São Paulo, Brasil).• Instituto de Estudios Superiores de Administración (IESA) (Caracas, Venezuela).• Instituto Tecnológico Autónomo de México (ITAM) (Ciudad de México, México).• Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM)- (Monterrey, México).• Pontifi cia Universidad Católica de Chile (Santiago, Chile).• Pontifícia Universidad Católica do Rio de Janeiro (Rio de Janeiro, Brasil).• Universidad Adolfo Ibáñez (Santiago, Chile).• Universidad del CEMA (Buenos Aires, Argentina).• Universidad del Pacifi co (Lima, Perú).• Universidad de San Andres, Facultad de Administración (Buenos Aires, Argentina).• Universidad Torcuato Di Tella (Buenos Aires, Argentina).


SPECIAL REPORT: MBA

thought about starting their own business;

today everyone wants to be an entrepreneur.

Th at’s been a major change,” Palacios says.

But others contend that business schools

need to be more imaginative in dealing with

new challenges. IAE’s Paladino notes that

MBAs rarely consider the impact companies

have on society and vice-versa – a key issue

in emerging markets.

“Most business schools are totally asleep

on these issues and have no answers,” he

says.

With change becoming ever more rapid,

schools are increasingly teaching executives

not how businesses overcame hurdles in the

past but how to tackle new situations on

their own terms.

“Th e challenge for executives is to face

new problems that are not solved by old

methods and need new and innovative

approaches. … Companies need to be

learning organizations that adapt to their

environment,” says Sao Paulo’s Dal Colletto.

Although Latin America’s business

schools are attracting more attention

overseas, they still are not competing directly

with the big U.S. and European schools.

Th e huge diff erence in fees means the

schools are largely angling to diff erent

markets. Schools in Latin America often

lack the infrastructure and technologies

enjoyed by global powerhouses. Still, there is

increasing overlap.

Faced with limited demand at home,

European universities have become more

aggressive in recruiting in Latin America,

especially leading Spanish business schools

such as ESADE and IESE, because of

the common language, says Dr. Laura

Zapata, director of the MBA programs at

Monterrey’s EGADE Business School.

In response, local schools are planning

to take the fi ght to the competition. Selva

reveals that INCAE is investing in cutting-

edge technologies and faster admission

processes in order to begin recruiting

directly in Europe and North America.

And regional schools’ much lower fees

could be a selling point to cash-strapped

Europeans and Americans.

A two-year course at a top business school

in Latin America costs about $30,000,

compared with $100,000 for an American

MBA. And despite recent infl ation, life in

Buenos Aires, Lima or Monterrey costs

much less than a year in New York, London

or Paris, notes EGADE’s Zapata.

Growing links between schools in Latin

America and schools elsewhere also help

break down the barriers of geography.

All the leading schools have agreements

in place allowing students to obtain a double

degree from a leading European or U.S.

school (at a fraction of the price) or spend

part of a course abroad.

Such deals are likely to become more

important in the future.

On April 26, the Yale School of

Management announced the launch

of the Global Network for Advanced

Management, the fi rst MBA club to

combine schools from advanced and

developing economies to create business

leaders for the transformed economic

landscape. As well as France’s INSEAD and

the UK’s LSE, the elite roll call also includes

four business schools from Latin America:

INCAE, UC, EGADE and Brazil’s FGV

Business School.

“It’s a great honor to be invited,” says

INCAE’s Selva.

[email protected]

A two-year course at a top business school in Latin America costs about $30,000, compared with $100,000 for a US MBA. And despite recent infl ation, life in Buenos Aires, Lima or Monterrey costs much less than a year in New York, London or Paris


TECH TRENDS

BUENOS AIRES – Schools in Ometepe,

an island on the Lake of Nicaragua, received

5,000 laptop computers for primary and high

school students this year, taking the national

total to 25,000. Argentina has distributed 1.8

million laptops to students, Peru 900,000 and

Uruguay 570,000.

Th is brings cheer to Gonzalo Pulit. His

company, Kuepa, seeks to advance digital

education in Latin America by providing web-

based services to schools for improving admi-

nistration, communication and teaching.

“Th ere are a lot of studies showing that

investment in education is paid back by eco-

nomic development,” Pulit, 44, said at his

offi ce in Buenos Aires. “Governments have

come to recognize this.”

Brazil is stepping up its minimum invest-

ment in education to 7 percent of GDP by

2020. Colombia, Ecuador and Honduras are

making reforms. More countries are handing

out laptops. It’s a start. What needs to follow,

Pulit said, are digital services to capitalize on

the hardware to help improve exam results,

lower dropout rates and graduate innovative

young minds.

Th is is where Kuepa comes in.

Pulit started the company, which now has

20 employees, in 2011 after years in fi nancial

and private equity consulting.

Kuepa’s fi rst product is an online platform

for school management. Teachers can log in to

do administrative tasks, from taking attendance

to drafting class agendas and communicating

with parents. Teacher evaluations and training

can be done, and lesson plans and resources

shared. Kids and parents can keep abreast of

assignment deadlines and exam dates.

Th is, Pulit said, simplifi es administration

so educators can focus on what they do best:

teaching. For school principals and superinten-

dents, the service consolidates reams of memos

and reports. Th ey can check it all out on one

website to help chart the progress of their

students and teachers for decisions on resource

distribution.

Th e second push for Kuepa is digital con-

tent, from animation to 3D graphics and

video explanations of anything from atoms to

trigonometry. Th e impact on teaching is just

as important. Interactive multimedia lessons

can be more gripping for students to grasp and

remember, Pulit said.

Pulit, a diplomat’s son who was educated in

Argentina, Austria, Canada, Venezuela and the

United States, thinks students and teachers are

By Charles Newbery

DIGITAL EDUCATION MAKES ITS PUSH IN LATAM

more than ready for digital education.

“Kids are hyper-connected,” he said. “And

teachers understand that the computer is a

way to catch students. It is what kids know.

Th e question is how we can use technology to

improve education and generate more interest.”

Teachers are catching on, and schools are

getting wired. About 37 percent of the Latin

American population has connectivity. Primary

students at the No. 13 “Raul Scalabrini Ortiz”

public School in Buenos Aires began using

laptops for the fi rst time this year.

Ricardo Sobron, the principal, and his assis-

tant, Liliana Silva, view the laptops as another

tool, albeit richer than a chalkboard and text-

books. Th ey are packed with literature, plus

logic and math games. “With the Internet,

we can bring information from remote places

to accelerate the process of investigation and

enrich the content,” Silva said. Digital text-

books are up to 50 percent cheaper.

Publishers in the region, such as Grupo

Planeta, Pearson and Santillana, are entering

the business, mimicking eff orts in the United

States. Th is year, Apple launched iBooks 2,

an e-book application for digital textbooks.

Pulit expects that the iTunes Store eventually

will stock digital textbooks in Spanish for the

region, along with Amazon and Google. He

plans to sell them on Kuepa’s website, building

it into an education hub for the region.

Th e laptops and the new methods are prov-

ing good for sales at Kuepa, the fi rst company

to take a pan-Latin American approach to

digital education services, with an eye also on

Spain and the U.S. Hispanic market. Schools

are testing Kuepa in Argentina, Colombia and

Uruguay. More deals are in the making, as are

plans to open offi ces in key markets and to

outsource sales elsewhere, Pulit said.

With 570,000 schools in Latin America,

much can be done.

Gonzalo Pulit

“There are a lot of studies showing that investment in education is paid back by economic development.”

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MIAMI

A lthough Latin America is not “fully decoupled,” it is “well-positioned with low debt levels and fiscal

deficits” compared with other parts of the world, and concerns for the region are mostly external, according to Kathryn Rooney Vera, director and managing part-ner of macroeconomic research at Bulltick Capital Markets.

Latin America’s GDP this year is expected to grow 3.8 percent or possibly more, Rooney said. “Currency appreciation will continue in Latin America, driven by the famous ‘carry trade’ and the developed world’s expansionist policies,” she said.

Brazil’s GDP is projected to grow by 3.6 percent this year, down from higher rates in re-cent years, Rooney said. The country’s economy remains robust but there are concerns: the national savings rate is low, and the country needs to invest in infrastructure and requires supply-side reform. In spite of these issues, Brazil will continue to be “a story we like” over the next few years.

Venezuela is facing serious challenges. The economy is in shambles, inflation is reaching 35 percent per year, and a devaluation of at least 40 percent is required.

In Argentina, strong growth is expected as commodity prices remain high. Argentine debt is less risky than Venezuela’s, but inflation is running at 24-25 percent. No major devalua-

tion is expected. “Argentina continues to grow despite itself,” Rooney said.

In his presentation on “Building the Enter-prise Value of the Finance Function,” Michael Bremer, SVP, COO and CFO at Discovery Networks, described a “pyramid of opportu-nity” with four stages tracing the evolution of the CFO position.

At the base are accounting, compliance and financial control. Bremer warned that these fundamental tasks must be carried out effec-tively to advance to the next level.

The second level is financial planning, or setting targets and policing costs.

The third stage – business analysis – es-sentially means, “Give us information to help make decisions.”

Strategic partnership stands at the apex of the pyramid: “Produce knowledge that will change the business.” CFOs who reach this level should challenge concepts and drive counter-intuitive insights.

Emilio Fortou, head of Visa’s LAC Mul-tinational Program, said Visa offers multina-tional companies effective means for monitor-ing and controlling travel and entertainment (T&E) programs.

Fortou, noting that Visa has assembled a series of best practices based on widespread corporate experience, suggested that companies centralize T&E expense management and en-sure that T&E policies are well-communicated

throughout an organization, through daily monitoring and regular updates.

In the CFO workshop, Oliver Harmann, CFO at Volkswagen Group Latin America Inc., opened a discussion on the merits of in sourcing vs. outsourcing from a manufacturing point of view.

In the 1990s, he said, Volkswagen saw how Japanese automakers produced cars in half the time and with fewer suppliers than VW by outsourcing work and building cars with modules. VW moved then towards greater outsourcing in an effort to lower manufactur-ing time (via modules delivered to assembly lines) and lower costs.

But, Harmann said, the company disco-vered that outsourced steering modules did not perform up to the company’s standards and customers were not happy with the autos.

As a result, VW again insourced the steering module. The lesson: Outsource everything that does not belong or contribute to core compe-tencies and processes.

The next speaker at the forum, Alex Sotelo, regional controller at Yahoo! Latin America, discussed how linking the accounting and financial processes with other business units requires formal and informal relationship building, effective communication and policy-

setting.

—Joseph A. Mann, Jr

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Building the Enterprise Value of the Finance Function

LT CFO event in Miami

Kathryn Rooney Vera, Director & Managing Partner, Macroeconomic Research,

Bulltick Capital Markets


MIAMI

CONNECTING LATIN AMERICA’S CFO COMMUNITY

LT CFO event in Miami

Jhon Fredy Chavarria, Regional Director of Finance & Business Support, Inter-Continental Hotels Group;

Alejandro Ubeira, VP Corporate Accounting & Reporting-Region Americas-Deutshe Post World Net, DHL

Rogelio Flores, Finance Director, SAS; Rodrigo Llop, Business Development

Director,SAS

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Although Latin America is not “fully decoupled,” it is “well-positioned with low debt levels and fiscal deficits” compared with other parts of the world. KATHRYN ROONEY VERA, Director & Managing Partner of Macroeconomic Research, Bulltick Capital Markets

Salvador Torralbas, CFO, Latin America, Teva Pharmaceutical; Mark Ludwig, Contributing

Editor, CFO Events, Latin Trade Group

Elsa Yep, CFO, SVP Finance & Administration, Universal Music; Carlos Estefan, Director of Finance,

IT, Latin America & The Caribbean, Starbucks Company International

Bob Lee, CFO, Newell Rubbermaid; Emilio Fortou, Head, LAC Multinational Program, Visa; Oliver Harmann, CFO,

Volkswagen Group Latin America, Inc.

Salil Bapat, CFO, Latin America & the Caribbean, Yum Restaurants; Alex Sotelo, Regional Controller,

Yahoo! Latin AmericaMichael Bremer SVP, COO & CFO Discovery Networks;

Peter Stanham, Finance Director, American Airlines

Alex Russell, CFO & VP of Finance, Emerson Process Latin America, Emerson; Richard Burns, Chairman,

Latin Trade Group


B razil’s insertion in the global economy means it is still exposed to a volatile external environment. Neverthe-

less, quantitative easing and the monetary stimulus in developed economies mean that recession probabilities have been reduced to about 50 percent, said Alessandro Del Drago, chief economist at Kinea Investimentos, who forecast an increase in commodity prices in the second half of the year. Del Drago said he was more optimistic for the performance of the Brazilian economy in the short term than the market consensus but more pessimistic in the longer term (from 2014).

Following the huge stimulus provided by the Brazilian Central Bank and supportive govern-ment policies, Del Drago argued that Brazil’s real interest rates are now below their neutral level. A tight labor market – the unemploy-ment rate is at a historical low level – and a high rate of capacity utilization also mean that inflationary pressures will keep the consumer price index above the core of the inflation target.

“Market expectations are rising for 2014-15, and this is no good for investment,” he said.

The current model favors domestic con-sumer demand rather than investment. “The government has been giving incentives to con-sumers and not to investors,” Del Drago said.

The second part of the discussion focused on ways in which the companies can benefit

their bottom lines by improving their working-capital strategies.

Emilio Fortou, head of LAC Multina-tional Program at Visa, presented the main findings of a survey related to the use of credit cards. In Latin America, two-thirds of respondents are now using commercial payment cards (up 18 percentage points compared with 2008), and 78 percent are do-ing so in the United States. Credit-card use continues to grow, and there is more scope for expansion in terms of cross-border transac-tions especially, as 72 percent of respondents said they plan to use mobile payment in the next three years. Moving to an electronic format helps reduce cost, manage cash flow and increase DPO (Days Payable Outstand-ing), Fortou said.

Marcelo Giugliano, CFO of Goodyear, presented the result of a Working Capital Management program implemented since late last year worldwide, but with a greater focus in Latin America, he said. The “negative working capital for sustainable growth” program has allowed the company to enhance its ability to manage working capital, reduce inventory and achieve its financial results.

An innovative CFO workshop concluded this edition of the CFO Forum, which gathered about 30 corporate finance professionals at the Sheraton São Paulo WTC Hotel on April 24th. Milton Brandt, director of finance at

Unilever, introduced the first discussion topic: shared services. Unilever has been outsourcing its shared services since 2007, but Brandt said it is critical that the service provider finds another customer to get a critical mass.

Pablo Edelstein, CFO of Dow Latin America, reflected on a different experience. A transactional-services center was set up in São Paulo in a joint venture with Tata in 2007, which covers the whole of Latin America. In spite of some initial difficulty, the experience was a positive one, but Edelstein emphasized the need to have both the expertise and the leaders to complete the process successfully.

Talent management was the second issue covered during the workshop. Brandt said its company offered a mix to retain talents: opportunities to go to the top level of the company, remuneration and regular feedback sessions. At Dow, Edelstein said 10 percent of executives have high potential and require special treatment. They need to be challenged and motivated. “People leave their supervisors, not their companies,” he said.

Furthermore, Cristiano Furtado, CFO at Marsh, said some staff members are being trained abroad (in the United States and else-where in Latin America) and that an emphasis has been placed on variable remuneration to keep staff members motivated. However, he said this might work for some time, but not

forever.” –Thierry Ogier

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“PEOPLE LEAVE THEIR SUPERVISORS, NOT THEIR COMPANIES”, Pablo Edelstein CFO of Dow Latin America

Latin Trade Group LT CFO event São Paulo, BrazilAlessandro Drago, Chief Economist, Kinea

Investimentos


SAO PAULO


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“I waited for 42 years for Brazil to be an interesting place to be. And now Brazil is a good place to be.” MARCELO GIUGLIANO, CFO, Goodyear

Marcelo Giugliano CFO Goodyear

Diego Rodriguez, Head Commercial Solutions, LAC Visa;Mark Ludwig, Contributing Editor, Latin Trade Group;

Alessandro Drago, Chief Economist, Kinea Investimentos

Milton Brandt, Director of Finance, UnileverWilliam Calvache, VP of Finance, Latin America World Fuel

Services; Alexandre Carvalhal, CFO, SAP Brazil

Claudio Akihama, Director, Controller, Sky Brasil Serviços Ltda.; Federico Bove, Director, Datarisk

Global; Rogério Menezes, Director of Finance, Akzo Nobel Ltda. (Papel e Celulose)

Cristiano Furtado, CFO, Marsh

Milton Brandt, Director of Finance, Unilever; Sandro Freitas, Director of Finance, Discovery

Networks Brazil; Rosemary Winters, Chief Executive, Latin Trade Group; Rogério Menezes, Director of

Finance, Akzo Nobel Ltda. Marcelo Giugliano, CFO, Goodyear;

Diego Rodriguez, Head Commercial Solutions LAC, Visa

Pablo Edelstein, CFO, Latin America, Dow Brasil, Latin America Headquarters


BUENOS AIRES

A CFO’s role is a work in progress – new challenges are emerging all the time, requiring today’s CFOs to have

skills far beyond the old number-crunching abilities. Having a strategic outlook, being able to do long-term planning, fully understand-ing their markets opportunities and pitfalls, being effective team players and helping make decisions on key issues such as mergers and acquisitions or disinvestments are but some of the skills in demand.

As if all this were not daunting enough, CFOs in Latin America, and in Argentina in particular, face the added difficulty of wear-ing all those hats in an environment where governments can seize major companies (as just happened with the recent expropriation of Argentina’s oil producer YPF from Spain’s Repsol), where cost and prices can go through the roof, and where legal security cannot be taken for granted.

“The role of today’s CFO is actually that of a deputy CEO,” Jose Manuel Vazquez, CFO at leading Argentine dairy producer SanCor, told dozens of fellow corporate leaders who took part in an LT CFO Forum in Buenos Aires, summarizing a consensus view. SanCor, a cooperative that in 2010 had US$1 billion in sales, accounts for 90 percent of Argentina’s dairy exports.

Deloitte managing partner Claudio Fiorillo agreed. “In the past, CFOs used to be ac-

countants who made their entire careers in one single company. No more,” he stressed. Today, leadership, teamwork, big-picture thinking and an ability to adapt quickly to changing scenarios are a must, he said.

Accordingly, at Deloitte they are redefin-ing the CFOs’ role. To the traditional skills, new aptitudes must be added, including those of strategist and of “catalyst” or “evangelizer,” developing the ability to convert others to his or her cause. Proficiency in those areas is put-ting CFOs in the direct succession line to the position of CEO, Fiorillo said.

Economic guru Miguel Angel Broda warned forum participants that doing business in Argentina is not for the faint of heart – after several years of strong growth, the country is heading into dire straits. Heavy government intervention in economic affairs comes hand in hand with what he sees as GDP growth of only about 2.0 percent in 2013 and 2014 and rampant inflation as high as 30 percent. Yet, Broda remains optimistic for the long term. And he has one piece of advice for Argen-tine politicians : Look within the region for examples of how to conduct business.

But not all is an uphill struggle. Visa can come to the rescue by helping CFOs and cor-porate travel managers cut costs, add transpar-ency and automate, monitor and standardize expenses and transactions, said Luis Emilio Fortou, the Latin America and Caribbean

Region representative of Visa’s Global Com-mercial Expansion Team.

“The Visa card is just one element in our integral solutions,” he added. When company officials use a corporate card to make business payments and transactions or while on the road, that information is automatically fed into the company’s enterprise resource planning (ERP) system and other cost-monitoring tools, giving CFOs more elements, time and leeway to focus on strategic thinking.

Another way to cut costs and increase processes efficiency is through shared services, said Pablo Morales, Global Financial Services Center Director at Nalco, which recently merged into Ecolab to create an $11 billion turnover, 40,000-employee company that has become the global leader in water, hygiene and energy technologies and services.

Since its implementation in 2004, the company has been saving millions of dollars in recurring expenses because of labor cost arbitrage and increased specialization and scale, along with other improvements and indirect benefits, Morales said.

Yahoo Argentina’s Gabriel Patalano shared with colleagues from larger operations the experience of what it is like to be the finance manager of a small operation – particularly if, like him, one comes from a much larger setup,

such as IBM.

—David Haskel

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The role of the CFO is being redefi ned and now in the direct succession line to the position of CEO

Kathryn Rooney Vera, Director & Managing Partner, Macroeconomic Research,

Bulltick Capital Markets

Claudio Fiorillo, Socio Director Financial Services Industry, Deloitte & Co. SRL; Felix El Idd, CEO, Datarisk Global; Emilio Fortou, Head of LAC Multinational Program, Visa; Alvaro Garcia, Director - Representative

CAF Argentina; Miguel Angel Broda, Founder & CEO, Estudio Broda & Asoc; Mark Ludwig, LT CFO, Contributing Editor, Latin Trade Group; Rosemary Winters, Chief Executive, Latin Trade Group


BUENOS AIRES


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Miguel Angel Broda, Founder & CEO, Estudio Broda & Asoc.

LT CFO event in Buenos Aires Pablo Morales, Director Global Financial Services, Nalco

Claudio Fiorillo, Socio Director Financial Services Industry,Deloitte & Co. SRL; Ademir Santos, CFO, Philips Argentina Dario Bursztein, CFO, XEROX

Jose Manuel Vazquez, CFO, SanCor

Raul Francos, CFO, Aeropuertos Argentina 2000

Pedro Arnt, CFO, MercadoLibre Argentina


Latin Trade: What do you like most about traveling to Monterrey?Carlos De Leon: Monterrey is a fast-

paced metropolis that combines all the con-

veniences of a modern city – excellent shop-

ping; all types of cultural expressions, such as

concerts, art exhibitions, sports, theater and

gorgeous museums ranging from Mexican

history to modern and contemporary art;

and a wide variety of eco-tourism activities.

The whole city is surrounded by mountains.

Jose Luis Anaya: Monterrey is a nice,

modern city with a lot of options for accom-

modations, depending upon where your

business is located. Near the hotels are plenty

of restaurants and shops, and business cen-

ters where businessmen can rent an office for

a meeting for hours or a day or two.

Mark Ackerman: Living in Mexico

City, traveling to Monterrey gives me the

opportunity to see another part of Mexico. I

always enjoy listening to a northern Mexican

accent. “Regios,” as people from Monterrey

are called, take their beef seriously, as most

northern Mexicans do, so the dining is very

good unless you´re a vegan. Above all, as

Mexico´s industrial city and due to its

proximity to the U.S., the tempo of the city

is a notch or two above Mexico City in the

business environment.

LT: What do you like the least?De Leon: As at any large urban center, I

do not like the rush-hour traffic. If I could

advise something, plan ahead and you will

not waste your precious time. If you rent a

car, review your routes with your concierge

before you leave the hotel.

Anaya: In summer, the climate is uncom-

fortable. It is hot; traffic is heavy especially

in rush hours, and it takes a long time to get

anywhere.

Ackerman: Summers can be brutally hot.

LT: What are your preferred hotels when visiting Monterrey on business?De Leon: The Habita Hotel and Safi

Royal Luxury Valle. But if I need to stay

close to downtown, then the Sheraton

Ambassador (a true classic) and the Gran

Hotel Ancira.

Anaya: What’s good is that there is a range

of acommodations to suit every budget,

from Holiday Inn Express to luxury hotels

such as the Quinta Real and Ancira Hotel

downtown.

Ackerman: Camino Real, Quinta Real,

Safi and, if you are into old-style hotels, the

Ancira, in downtown.

LT: What restaurants do you recommend?De Leon: A must-visit is San Carlos (great

traditional Northern Mexico and Mexican

food), which has two locations (Monter-

rey and San Pedro - Valle); Pangea in the

elegant Del Valle zone is one of the best; and

also a couple of great options nearby are El

Granero (a business must) and the Hawaii.

If you want to blend in with the locals, you

must try La Nacional, a traditional cantina

with great dishes and a refined bohemian

atmosphere.

Anaya: Typical regional food can be found

at El Papalote (there are several of them,

moderate price range); Hawaii (international

menu, more expensive); cabrito (baby goat, a

specialty of Monterrey) can be found at El

Rey Del Cabrito (can be grilled, served with

sauces, baked; expensive price range).

Ackerman: El Gaucho and El Mirador, but

there are many more. The traditional local

dish is cabrito al horno, or roasted goat.

LT: What practical advice would you give to someone who is visiting Mon-terrey for the first time on business?De Leon: Stay close to the area where you

will be attending your meetings. Monterrey

is a large city. Therefore, managing your dis-

tances will benefit your entire stay. The locals

are service-oriented, and they will provide

you with detailed information if you ask for

instructions. If you are driving, do not forget

to carry a map.

Also, If you have some free time, there are

lots of adventure-nature tours and activities.

Anaya: Finding English-speaking business

people is not a problem; like in any big city,

avoid non-tourist areas; all taxis are metered

and safe. You can change money in hotels or

at the many money-exchange places.

Ackerman: Mexico is very much a rela-

tionship country. Be friendly; demonstrate an

appreciation of the city and country. If you

have some downtime, try some of the bet-

ter restaurants, walk around the Macroplaza

downtown where locals congregate.

—Mark Chesnut

Monterrey: First-hand tips for visiting Mexico’s northern business hub.

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Insights and advice from Carlos de Leon, general manager of Hotel Catedral in Puerto Vallarta and a Monterrey native; Jose Luis Anaya, the Guadalajara-based owner of Photofolio, a store in Monterrey; and Mark Ackerman, national sales manager for Hertz Corporation in Mexico City.

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What restaurants in Monterrey would you recommend for aprofessional lunch or dinner? I definitely recommend the award-win-

ning restaurant Los Vitrales, considered

one of the best in town – open 24 hours

a day, seven days a week. Also, El Tio,

El Gran San Carlos and La Nacional

are great places to have dinner.

What kind of cuisine should I try during my visit?As a typical northern state, the most

famous and delicious dishes are made

from meat such as baby goat, barbecues

and discada (pork and beef mixed with

tomato sauce). Beer is the most famous

drink, due to the fact that the biggest

breweries are in the northwest, with

several kinds to taste, dark and light.

I have 24 hours in Monterrey.What itinerary would you recommend?A walking tour in historic Monterrey,

the Santa Lucia river walk, Horno3,

the art museum MARCO and Mexican

National History Museums.

Sheraton Ambassador is located in

downtown Monterrey, so it is an

excellent location to start the route.

Santa Lucia river walk is a great way

to spend a special day where you will

learn about the history and culture of

Monterrey.

Either by boat or on foot, the two-

kilometer route is full of unique art-

works, delicious restaurants, cafés and

shops.

Can you suggest one or two places to shop?Galerías Monterrey and Valle

Oriente Malls, just 15 minutes away

from Sheraton Ambassador. They are

the most fashionable in town, where

shops such as Liverpool, Levis, LOB,

Mango, Zara, Adidas, Nike, Marti and

many others are available, as well as

services like travel agencies and banks.

Morelos Ave. is located in the

Monterrey historic district, where

several boutiques, jewelers, music and

video games stores, local and fast food

restaurants, and art and crafts mar-

kets are located — there are even live

music and urban shows are on this

major avenue.

Where are the must-buys?The most popular items that visitors

take home are handmade arts and crafts.

What safety measures do you recommend? We suggest using common precautions

as when traveling to any foreign country.

We recommend our guest be always

accompanied if they are doing activities

outside of the hotel, take cabs arranged

by the hotel, take a reasonable amount

of cash for their daily expenses, use

safety boxes in the room and leave their

passport, visa, jewelry and credit cards

inside.

I have many meetings in the city. What is the best way to get around?A taxi hired at the hotel. The cost per

hour is 200 pesos ($15).

What is the appropriate amount to tip a taxi driver and in restau-rants?Taxis: 20 pesos per tour ($1.5). And

from 10 percent to 15 percent of the

check in restaurants.

Ask the Concierge

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The 229-room Sheraton Ambassador Monterrey Hotel is centrally located near the Macroplaza, one of Monterrey’s main geographic hubs. The property has a health club, outdoor pool, tennis and racquetball courts, plus 11 meeting rooms and a Grand Ballroom that accommodates 750 people. Concierge Andres Santiago offers his tips for making the most out of a trip to Monterrey.

Sheraton Ambassador Monterrey Hotel

MONTERREY, MEXICOON THE ROAD

Intelligent and relevant.

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cnn.com/international /cnninternational @cnni


One of the toughest advertis-

ing challenges is to develop

a country brand, and the

Peruvian Promotion Commission

(PromPeru) turned to Young &

Rubicam Lima to carry out the task.

“The challenge was to make

the country brand known among

Peruvians themselves,” said Flavio

Pantigoso, executive creative direc-

tor of Y&R. “Later would come the

international campaign.”

The funny thing is that the first

Peruvians involved in the campaign

were … North Americans. In the United States, Nebraska has a town

of 600 residents called Peru. As a result, its residents were a group of

Peruvians who didn’t know what that meant.

So, Y&R sent them a group of 12 Peruvian celebrities from Latin

America: chefs, actors, an AfroPeruvian dance troupe, a folkloric singer,

a lyric singer, two world surf champions and a television host.

After 50 hours of filming the residents of Peru becoming Peruvian,

a 15-minute commercial was put together. As well as serving typical

food and drink, singing, dancing and playing, and giving the Nebraska

inhabitants typical gifts such as ponchos, small statues known as ekekos

and chullos (woolen hats with ear flaps and pompons), the Latin group

even had the Peruvians from Nebraska try surfing. This was done by

spreading out a blue sheet of plastic on the floor and inviting the natives

to cross it on a skateboard, while the South American Peruvians lifted

up one side of the plastic and formed a wave.

“We could have gone for the same old solution and done the zillionth

institutional, solemn commercial

about Machu Picchu, the Incans and

everything else for Peruvians who are

tired of that theme. The key was to

treat Peru like a brand and not like a

state,” Pantigoso said.

“The brief itself gave us the key:

Wouldn’t it be tragic if there was one

single Peruvian on the earth who

didn’t know who marvelous it is to be

Peruvian?”

Educating the Peruvians of

Nebraska, on the other hand, was

a type of reverse colonization that

allowed Mario Vargas Llosa’s compatriots to finally let go of a long-held

belief that “their country didn’t give them enough reasons to feel proud.”

The Peruvians of Nebraska were initially suspicious but later delight-

ed with the discoveries they made – for example, hearing the waltz “La

Flor de la Canela” in the voice of the tenor Juan Diego Flores.

The advertisement piece received several prizes and, according to a

local rating company, earned 97 percent approval and support. However,

perhaps the best indicator of its success was how fast it went viral in the

Internet.

“The documentary was more viewed on the web than the TV and

for several days was the second-most-watched YouTube video in the

film category,” Pantigoso said.

And the greatest gratification, in the words of the creative mind

behind the venture, was that the result became not only a resounding

“lovemark” but also an instrument of national cohesion.

—[email protected]

REDISCOVERING THE IDENTITY OF A COUNTRY

SPOTLIGHT PERÚ

Medium: Television/Cinema/InternetAgency: Young & Rubicam PeruClient: PromPeruProduct: Country brandExecutive Creative Director: Flavio PantigosoProduction: Cine70 FilmsDirector: Ricardo Maldonado

FOR PERU FROM PERU

BY PAULA ANCERY

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