bhp billiton and rio tinto approve $3bn spend to …...macquarie to invest in m bhp billiton and rio...

BHP Billiton and Rio Tinto approve $3bn spend to ensure water supply for Escondida

BHP Billiton and Rio Tinto have approved a combined $3.26 billion of spending on a new desalination plant for the giant Escondida copper mine in Chile. New BHP chief executive Andrew Mackenzie and Rio boss Sam Walsh are both focused on cutting spending where possible, but this project is needed to sustain the existing operations in the dry Atacama desert.

Escondida will need more water once a $US3.8 billion project to build a new 152,000 tonne a day concentrator, which was approved last year, is completed. BHP’s share of the spending on the new 2,500 litre a second desalination plant is $US1.972 billion and Rio’s share is $US1.03 billion. BHP owns a 57.5 per cent stake in the mine and Rio owns a 30 per cent stake with Japanese partners holding the remainder.

‘Significant milestone’ Construction on the new facility will begin this month and the facility will be commissioned in 2017. BHP copper president Peter Beaven said securing a sustainable water supply in the region was a priority for all Chilean copper producers and the construction of this plant was a “significant milestone” for BHP’s business. “The new desalination facility will minimise our reliance on the region’s aquifers, which will help us to meet our environmental commitments and enable us to achieve our long-term business strategy,” he said. The project will include two pipelines, four high pressure pump stations, a reservoir at the mine site and high voltage infrastructure to support the system. ↑Return to Index

Virgin Australia introduces codeshare agreement with Delta into Mexico

On July 2, Virgin Australia and Delta Air Lines announced an extension to their codeshare agreement, to include services to Mexico.

This issue (Click on heading to open article)

BHP & Rio approve $3bn spend for Escondida 1 Virgin Australia’s code share to Mexico 1 Inaugural Latin Finance Investors’ Forum 2 El Salvador’s Ambassador presents credentials 3 2013 Sydney Dinner Update 4 Australia’s mining credentials showcased 4 Chairman’s message 5 Sydney Dance Company to tour Latin America 6 Macquarie to invest in Mexico 6 Boost for Condor Blanco in Chile 7 Colombian troupe to visit Australia in 2014 7 Reduced growth outlook for Latin America 8 Strong investment flow into Peru’s mining sector 8 First Latin America Innovation Summit 8 Leaders in Latin America telecoms 9 America’s lead in tourism gains in 2012 9

Peruvian economy grows at 6% 10 Analysis: Investing in Latin America 10 Top tips for exporting to Brazil 13 Women entrepreneurs in Latin America 14 Opinion: China should become more Brazilian 14 Mexico sees $315bn investment program 15 Opinion: Is Colombia the Indonesia of LatAm? 16 Mining services shake-out 17 21

st NSW Export Awards 18

Cuba to test free-market policies 19 Buenos Aires to host 2018 Youth Olympics 19 Costa Rica the new Innovation leader in LatAm 19 Peru’s tourism revenue to hit $10bn by 2021 20 Cuba’s financial reforms 20 For the diary 21

PATRON MEMBERS

Edition: July, 2013

Newsletter of the Australia-Latin America Business Council

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www.alabc.com.au Tel: 02 9357-4441

As part of the agreement, Virgin will add its VA code to Delta flights to six Mexico cities, including Mexico City, Cancun, Guadalajara, San Jose Del Cabo, Puerto Vallarta and Cozumel, allowing Australian travellers to book flights to Mexico on a single ticket.

Virgin Australia chief commercial officer Judith Crompton said codesharing to Mexico will meet demand to the growing tourist destination. “Mexico is very popular with Australian leisure travellers and I am delighted

we can now offer these cities on codeshare flights from Australia,” she explained. Velocity Frequent Flyer and SkyMiles members will be able to earn points and status credits on these new routes. ↑Return to Index

Inaugural LatinFinance Latin America Investors Forum identifies broad range of opportunities One of Latin America’s most prestigious financial publications, LatinFinance (part of the Euromoney Group), hosted its inaugural Latin America Australia Investors Forum (LAAIF) at the Sheraton on the Park Hotel in Sydney on July 16-17.

LAAIF was designed to connect financiers, institutional investors, advisors, government officials and corporates from Australia with their counterparts in Latin America. The Forum addressed the full spectrum of investment, trade and business linkages that now connect Latin America and Australia, including: Debt & Equity Capital Markets, Oil & Gas, Agribusiness, Infrastructure, Project Finance, Renewable Energy, Retail, Trade Finance and much more. The event provided the 150 participants with informative presentations, interactive panel discussions, and private 1-1 meetings. The Forum’s keynote address was delivered by the Minister of Foreign Affairs, Senator Bob Carr (pictured below). Another major address was provided by the New South Wales Deputy Premier and Minister for Trade and Investment, Mr Andrew Stoner (pictured on following page).

The Australian corporate and financial sector representatives included Mark Johnson, chair of the Australian Financial Centre Forum; John Brogden, CEO of the Financial Services Council; Chris Gale, chair of COALAR and Managing Director of Latin Resources; Mark Ramsey, Head of Latin America of Macquarie Capital; Ben Bolot, Chief Risk Officer and General Manager, International Development of Origin Energy; Robert Grant, CEO of Pacific Hydro; Karin Kobelentz, Director of Structured Trade and Project Finance at EFIC; and Mark Goddard, Executive Director of Debt Securities at Westpac. Amongst the speakers

and participants from Latin America were, Bernardo Guillamon, Manager of the Office of Outreach and Partnerships, Inter-American Development Bank; Gabriel Felpeto, Director of Financial Policies & International Emissions, CAF: Arturo Silva-Santisteban, Head of Corporate Finance, Tax & Treasury,, Enersur; Carlos Mendoza, Managing Director – Co-Head of LatAm Debt Capital Markets, Deutsche Bank; Nicolas Sorensen, CIO, Chilean Economic Development Agency – Corfo;


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Jozef Henriquez, Head of Syndications in the Structured & Corporate Finance Department, IDB; Germán Ríos, Director of Strategic Affairs, The Development Bank of Latin America – CAF; and Nicolas Muñoz, Investment Officer, Ministry of Economy – Foreign Investment Committee of Chile. The first day comprised a series of thought-provoking panels focused on power generation and infrastructure; capital allocation and portfolio management;

international trade and export facilitation; natural resources; investing in Latin American securities; and the overall range of opportunities on offer and the scope for partnerships between players in all the related markets. Another highlight of the Forum was the scope that it provided for attendees to participate in one on one meetings with one another in a structured format. Those persons who availed themselves of this opportunity commented on how useful they had found the meetings. With a solid foundation now established and the profile of both CAF and the IDB more visible in the local market, the challenge is to ensure that the 2014 version of the Forum is even bigger and better. This is certainly something that the ALABC intends to make a priority over the next 12 months. ↑Return to Index

El Salvador’s ambassador takes up residence in Canberra

On June 26, El Salvador's ambassador to Australia, Mr Manuel Alfredo Gutierrez Ruiz (pictured below with Governor General Quentin Bryce), presented his credentials to the Governor-General Quentin Bryce at Yarralumla, and upon doing so his nation

became the 100th to have a resident diplomatic mission on Australian soil. At the time, Foreign Affairs Minister Bob Carr said that he welcomed the appointment of Ambassador Gutierrez Ruiz, as Australia and El Salvador celebrate their 30th anniversary of diplomatic relations in 2013. El Salvador became the first resident Central American Embassy and the 12th Latin American Embassy in Canberra when it opened in 2012. There are many Salvadorans in Australia (the 2006 census found 9400 El Salvador-born people in Australia. The Embassy is located at 3/110 Giles Street in Kingston. The telephone

number is (02) 6232 7222. ↑Return to Index


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2013 Sydney Annual Dinner - 22 August - Book now to avoid missing out! The Australia-Latin America Business Council’s 2013 Sydney Annual Dinner promises to be one of the best ever. Featuring Mr Mike Smith, Chief Executive Officer of the ANZ Bank, as our guest of honour and key note speaker, the dinner has also attracted other high profile guests such as Michael Hawker, Chairman of the Australian Rugby Union, Bruce Gosper, Managing Director of Austrade, HE Pedro Villagra, Ambassador of Argentina and Dean of the Diplomatic Corps, and Andrew Hunter, the new Chief Executive Officer of EFIC, amongst others. Mr Smith has been Chief Executive Officer of ANZ since October 2007. Earlier in his career, Mr Smith served as Chief Executive Officer of HSBC Argentina Holdings SA and was appointed Chairman of HSBC in Argentina in 2000. Prior to his appointment to the ANZ role, Mr Smith was President and Chief Executive Officer, The Hongkong and Shanghai Banking Corporation Limited; Chairman, Hang Seng Bank Limited; Global Head of Commercial Banking for the HSBC Group and Chairman, HSBC Bank Malaysia Berhad. Mr Smith is Chairman of the Australian Bankers’ Association and a Member of both the Business Council of Australia and the Asia Business Council. Mr Smith was made an Officer of the Order of the British Empire in 2000 and a Chevalier de l’Ordre du Merite Agricole in 2007. The 2013 Sydney Annual Dinner will bring together ALABC members and guests, including senior business leaders from organisations throughout Australia and from a wide variety of industries, as well as Australian and Latin American Government officials who have interest in doing business in Latin America and in Australia’s overall relationship with the

region.

GOLD SPONSOR

Silver Sponsor

When: Thursday 22 August 2013 (7.00pm—10.30pm) Where: Dockside, Level 2 at Cockle Bay Wharf, Darling Harbour, Sydney For more information or to discuss special seating or dietary requests contact Rosie Atherfold: [email protected] or call 02 9357 4441 ↑Return to Index

Australia’s mining credentials featured in Latin America

The June edition of Mineria Pan-Americana, a highly rated Spanish-language Latin American regional mining publication contained a special report highlighting Australia’s engagement in Latin America’s mining sector and featured an interview with the chairman of the Australia-Latin America Business Council, Jose Blanco. You will find the coverage (only available in Spanish) in the following link, with the relevant pages being 22-23 and 40-47: http://www.mydigitalpublication.com/publication/?i=162559 ↑Return to Index

http://www.mydigitalpublication.com/publication/?i=162559


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Chairman’s Message This edition of Latam News contains information about a number of events that showcase the exciting opportunities that continue to be on offer in Latin America and the activities of a selection of Australian companies that are getting on with building their businesses in the region. It also contains several articles that comment on the current economic situation in the region, which reflects many of the same issues that the Australian economy is experiencing, particularly as regards the slowdown in the mining sector on the back of lower prices for many minerals. The simple fact is that economic activity in most of the Latin American markets is not as buoyant today as it was 12 or 24 months ago, but it is important that we understand the developments taking place and that we do not lose perspective of the reality of the situation. The danger is that we extend the pessimism that appears to currently prevail about the state of the Australian economy (which I consider to be exaggerated and unfounded) to the Latin American markets. There is no justification for doing so based on the current situation or on what is likely to happen in the foreseeable future. As the CEO of Goldman Sachs, Lloyd Blankfein, said about the local economy at a recent conference in Sydney: “. . . people are always distraught, overwrought, wringing their hands about how horrible things are and to my observation, they don't look that bad.” He added: “You've now sunk to a level that we're trying to get up to, so my heart goes out to you.” A similar assessment can be made of the better performing economies in Latin America, which have at their disposal monetary ammunition and fiscal ammunition that would be of considerable envy to a finance minister in Europe. These economies are still delivering solid growth rates and are at stages of development which mean that they have considerable scope for investment and consumerism. The challenge is for Australian companies to ensure that they have the right level of understanding of what the true economic picture is in the region and that they continue to invest astutely so as to take advantage of the opportunities on offer and of the weakness of some competitors from other markets that are also targeting the same markets. Success will come to those companies that have the right personnel and strategy, and who do not ‘blink’ at the first hint of dark clouds on the horizon. Nothing illustrates some of the challenges faced better than the recent inaugural Latin Finance Australia Latin America Investor’s Forum held in Sydney. The event brought together some high profile and very well-credentialed speakers and participants from both Latin America and Australia, and delivered some very in-depth analysis of the opportunities on offer in the region and the issues faced in taking advantage of them, yet it was disappointing to see that the turnout from local companies and institutions was less than it should have been. What a missed opportunity for those that didn’t attend! Those that did attend will no doubt have come away excited by the opportunities that were highlighted. They will also have benefitted from the excellent one on one meetings that the Forum facilitated. All in all, an extremely worthwhile initiative and one that can only get better in coming years. All credit to Latin Finance and its key sponsors, CAF and the IDB, for their effort. The forthcoming Sydney dinner of the Council, which this year will feature the ANZ Bank CEO, Mike Smith, as guest of honour and keynote speaker should help to maintain the momentum towards greater engagement with the region, bringing together as it does each year key players from the Australia – Latin America relationship. This is one event that you shouldn’t miss if you have Latin America on your radar. Over the coming months I will be travelling to a number of state capitals (Brisbane from August 27 to 29; Perth from September 2 to 5; Melbourne from September 10 to 12; and then the region during most of October) and look forward to making contact with as many members and allies as possible. If you would like to arrange a meeting for when I am in any of those cities, I invite you to contact me directly or through the Council secretariat. I would welcome the opportunity to talk with you about your engagement with Latin America or what you believe the Council should be doing to enhance its performance and thus add greater value to your business. I would like to take this opportunity to welcome to the Council team our new Marketing Manager, Rosie Atherfold, who brings to the Council enormous experience and enthusiasm. Please do not hesitate to contact Rosie in the secretariat should you ever require any assistance. Jose Blanco Chairman ↑Return to Index


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Sydney Dance Company to tour Latin America

Sydney Dance Company, Australia’s leading contemporary dance company, has achieved world-class recognition for the quality of its performances under the artistic direction of Rafael Bonachela and his predecessors. Sydney Dance Company was established in 1969 and has flourished as the flagship of contemporary dance in Australia ever since. The company gained an international reputation in excellence under the artistic directorships of Graeme Murphy AO for three decades. Spanish-born Rafael Bonachela commenced as Artistic Director in 2009 and under his direction, Sydney Dance Company has garnered countless accolades, awards, and invitations to present overseas. Sydney Dance Company is now recognised by the Australian government as one of the Major Performing Arts Companies in Australia. Sydney Dance Company will be touring Peru, Ecuador, Colombia and Mexico during September and October, and would like to invite expressions of interest for companies to partner with them on their “2013 Latin American Tour”. A partnership with Sydney Dance Company offers the opportunity for cultural diplomacy and community engagement through the universal language of dance. As such, it could be of interest to that growing band of Australian companies operating in Latin America who would like to boost their profile and help showcase the best that Australia has to offer. For more information contact: Janine Collins, Development Director Sydney Dance Company Tel: +61 2 9258 4832 Email: [email protected] ↑Return to Index

Macquarie to invest in Mexico energy project

The Macquarie Mexican Infrastructure Fund, has announced that it plans to invest 465 million pesos (about US$37million) in a power project being developed by Spain's Acciona in the western Mexican state of Nayarit. The fund will provide 49 per cent of the capital for the project, with Troy Energia investing the other 51 per cent. The news was made public by the Bank of New York Mellon, which is the depository bank for Macquarie, in a filing with the Mexican Stock Exchange. Mexican state-owned development bank Nacional Financiera, or Nafin, will provide 522 million pesos (about US$41million) to finance the debt for the project. Acciona is building a 28.8 MW hydroelectric power plant "within an existing dam on the Santiago River," Macquarie executive Nick O'Neill said. The project's goal "is to regulate water discharge from the existing hydroelectric infrastructure belonging to (the state-owned) Federal Electricity Commission," O'Neill said. The electricity "will be sold via a self-supply agreement" with an unidentified Mexican company that will run for 15 years, Macquarie said. Acciona will handle the engineering, hiring and construction of the power plant. Construction of the power plant is slated to start this month and be completed in late 2015. ↑Return to Index

mailto:[email protected]


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Condor Blanco Mines secures off-take agreement to boost Chile project

Condor Blanco Mines saw its shares surge as much as 66% recently on news that it expects substantial cashflows from a newly signed iron ore off-take with a Hong Kong investor and trading group. Under the binding agreement, Jiangxi Resources will buy iron ore from Condor’s Marianas Tailings project in Chile for $US55 ($A60.77) per tonne, with the price annually adjusted based on the Platts Iron Ore Index. Deliveries will total 153,000-189,000 tonnes in the first year, gradually ramping up to between 1.3

million tonnes and 1.5Mt by the fourth year. Jiangxi has also proceeded with the planned acquisition of 22.8 million shares in Condor, which saw Condor management state that “This has cemented a strong relationship that will form the foundation for future ore sales”. Marianas is being used to provide a rapid start-up, fast-payback, low-capex cash generation in

support of Condor’s over-arching strategy to develop more extensively in the country. Condor managing director Glen Darby called the off-take deal an important milestone in the history of the explorer. “It brings the company one step closer to generating significant cash flows in the short to medium term which will enable us to continue with our exploration plan in northern Chile,” he said. “Becoming a cash-flow generating producer so early in Condor’s life is unique.” ↑Return to Index

Colombian troupe coming to perform in Australia Australian entrepreneur, Brian Manison, is planning to bring a group of talented young Colombian performers to Australia in 2014 for the production of “Out of the Flames”. A regular visitor to Medellin since 1987, in 2011 Mr Manison was invited to meet a group of young people from Moravia and surrounding barrios who were participating in a contemporary dance program. Moravia is a barrio in Medellin, Colombia that grew up around a “temporary” garbage dump – El Morro – in the 1970´s.It became a smouldering, smoking and sometimes menacing presence in and over the city. Moravia was at the end of the line – if you arrived in Medellin looking for work one of the last resorts was picking up and recycling materials in El Morro. In 1983 El Morro was officially closed and people started building their homes on top of the dump. At its worst it was a feared no-go area which symbolised the deepening social divide in Medellin. At its inspiring best it was an example of community building in the most difficult circumstances. “Out of the Flames” is the story of the young people in Moravia, of their exuberance, enthusiasm and willingness to help themselves. All the young people in the production will participate in a number of programs to help them improve their health, learn skills and be competitive in the job market. These include:

The English Language Program aims to make all people in the project independent users of English according to the B1/B2 descriptors specified in the Common European Framework. English is the language of the world economy and people in Colombia who are bilingual will have an advantage.

The Life Skills Program is designed to give people the knowledge and understanding to improve their relationship skills and deal with specific issues such as adolescent pregnancy, domestic violence and peer group pressure.

The Health Program includes a number of subjects such as physical conditioning, nutrition and healthy sexual practices. The Professional Development & Employment Program aims to develop work related skills such as information and

communication technology and place people in work. The Flames Music Scholarship Program will send young Australian musicians to Colombia to study, work and perform in

Colombia as part of their professional development. Further details about this production are available at: http://outoftheflames.org.au/ ↑Return to Index

http://outoftheflames.org.au/


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Growth outlook for Latin America is reduced

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) on 24 July lowered its 2013 growth outlook for the region to 3%, from a previous estimate of 3.5%. The reduced outlook for 2013 is partly due to slow growth in Brazil and Mexico, the region's two largest economies. Countries that were growing at a faster pace such as Chile, Panama and Peru also faced a slowdown in recent months, the ECLAC

said in a statement. The grim global outlook will continue taking a toll on the region, whose economy largely depends on exports of commodities to Europe and China. Commodities prices have decreased in recent months. Consumption will remain a driver of economic growth while investment as a contribution to gross domestic product will be modest, the ECLAC said.

The ECLAC estimated Brazil, Latin America's largest and the world's sixth-biggest economy, this year will grow 2.5%, down from 3% it anticipated in April. Brazil grew only 0.9% in 2012 versus a 2.7% increase in 2011. The U.N. commission expected Mexico will grow 2.8%, versus a previous estimate of 3.5%. Paraguay led growth estimates this year with a 12.5% increase in GDP, followed by Panama with 7.5%, Peru with 5.9%, Bolivia with 5.5%, Nicaragua with 5% and Chile with 4.6%. In 2012, the region grew 3% versus 2011, with the European recession, the Chinese deceleration and slow U.S. growth all weighing on Latin American and Caribbean economies. ↑Return to Index

Peru mine investments seen at $7-8bn in 2013 Peru's National Mining, Oil and Energy Society, or SNMPE, expects mining investments in the Andean country will total $7 billion to $8 billion this year, which would be a slight decrease from 2012, state news agency Andina reported. "There are a lot of investments from mining companies, which should reach between $7 billion and $8 billion in 2013," SNMPE President Eva Arias was reported saying. Peru's mining investments have increased steadily over the last few years, reaching a record high of $8.6 billion in 2012 as companies develop new mines and expand current operations. In the first five months of this year, mining companies have invested $3.8 billion, according to the Mines and Energy Ministry. Ms. Arias said that mining investments could total $10 billion in 2014, however this will depend on the global economy. "This will be clearer in October, because in the last quarter is when we'll really know what the program for 2014 is going to be," she said. While Peru has a pipeline of mining investments worth more than $50 billion, many of those projects are being reviewed as companies look to reduce costs amid a sharp decline in metal prices. Companies may decide to delay development of some of their less profitable projects if metal prices don't recover. Peru's mining sector has been a key driver of the country's decade-long economic boom. Peru is a major global producer of copper, gold and other minerals. ↑Return to Index

First Latin American Innovation Summit

The first Latin American Innovation Summit (Cumbre de Innovación) opened in Santiago, Chile on 30 July. The Summit calls on Latin American leaders to develop a regional agenda for innovation that will promote economic development and education in their countries. The Summit took place from July 30-31 at the Movistar Innova Center, Santiago. Leading the Summit wass John Kao, Chairman of the Institute for Large Scale Innovation (ILSI), author of Innovation Nation and former Harvard Business School Professor and co-chair Luis Stein, CEO of Virtual 21 and Vice President of ALETI, who leads Chile’s 2020 technology and innovation policy. The Summit was presented in a joint partnership between ILSI and the Government of Chile.


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“Latin America recognizes the importance of developing innovation strategies to inform the future and to make great strides in areas of technology, the economy and, significantly, in education,” said John Kao, Chair of the Summit. “As innovation becomes a priority for nations around the world, the urgency of generating a Latin American policy for innovation is seen clearly by President Piñera and leaders throughout the continent.”

The Summit featured a number of speakers and highly interactive work sessions in both small and large groups. Among those scheduled were: Felix de Vicente, Chile’s Minister of Economy; Lorraine Hariton, Special Representative for Commercial and Business Affairs, US Department of State; Dr. Howard Alper, Chair of Canada’s Science, Technology and Innovation Council; and Steve Blank, a world-renown author, educator and entrepreneur.

“The outcomes from the Summit are intended to advance the policy agenda for Latin America as well as inform the Pacific Alliance and the World Economic Forum,” said Luis Stein, co-chair of the Summit. “What we began in Santiago this week, will set us on a strategic course into the future.” Eighty representatives from more than twenty countries attended the invitation only Summit. Countries represented at the Summit include: the United States, Chile, Argentina, Colombia, Bolivia, Brazil, Peru, Venezuela, Uruguay, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Mexico, Panama, Spain, Canada, Rwanda and Australia. For more information about the Summit and ILSI, please visit, www.cumbreinnovacion.com. ↑Return to Index

Chile, Brazil and Argentina top telecoms investment in Latin America

Chile is the Latin American country with the highest rate of investment in the telecom sector, according to a report of Ovum and AHCIET's observatory based on 2011 data. In that year, Chile spent $69.83 per capita, followed by Brazil with $63.36 and Argentina with $59.94. Investment drops to $31.34 for Mexico, which occupies the fourth place in the ranking. Colombia, which is expected to experience great growth in the telecoms market in the coming years, is in the fifth place with $30.64 per capita. The report points to Argentina, Colombia, Chile, Mexico and Brazil as the countries with the greatest investment growth during 2008 and 2011. Argentina was spending $1,200 million in 2008, while by 2011 it had doubled its budget to $2,500 million. Colombia's investment grew 46% to $1,400 million and Chile's increased 40% to $1,200 million. However, these numbers are still well below México, which invested $3,500 million in 2011, and Brazil ($2,000 million). The report writers cite Chile's case as especially interesting because, in spite of being a small country with a medium economy, it registered the greatest growth in the region. They also point out that a high rate of investment will decrease the cost of access to new broadband and Internet technologies. ↑Return to Index

America’s region leads tourism gains in 2012

The sixth annual Tourism Index published by Latin Chronicle magazine shows that the Americas led the way in global tourism gains in 2012, with tourist receipts in the region up 7 per cent year over year. Overall, tourism contributed $69billion to the region's economies, which made up 1.2 per cent of GDP.

http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.cumbreinnovacion.com&esheet=50680488&newsitemid=20130729006601&lan=en-US&anchor=www.cumbreinnovacion.com&index=1&md5=cea11265cf83c2690e4ca0b78b5f8e87


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Mexico remains far and away the region's premiere tourism destination, welcoming almost four times as many visitors as Brazil, which came in second. Chile and Ecuador saw important gains year over year, with visitors up 13.3 per cent and 11.5 per cent, respectively, and similar increases in tourism receipts. But Venezuela registered the region's largest year over year increase: visitors to that country were up 19.3 per cent to 710,000 visitors. However Venezuela remains the country least dependent on tourists: tourism made up just 0.2% of GDP. ↑Return to Index

Peruvian economy maintains 6% growth in second quarter

Despite the difficult international environment, the Peruvian economy has maintained a six per cent growth rate in the second quarter of the year, President Ollanta Humala announced in his most recent address to the nation. The president opened his Independence Day speech to Congress with a summary of the economic achievements during the first two years of his five-year term. "My government has managed the economy with greater responsibility and the indicators show that we have made the right choices over the past two years," said Humala, noting that Peru remains one of the world's fastest growing economies. Since taking office in July 2011, the head of state said that 800,000 jobs have been created, while unemployment was reduced by seven per cent. Humala added that the country's economy is diversifying as non-traditional exports account for a third of total shipments which total more than US$ 11 billion while services exports reach US$ 5 billion despite the difficult international context. The responsible management of the economy "will allow us to deal with the complex external situation," he continued, adding that the Andean country "has solid economic indicators to address the international crisis." "Our high international reserves, low debt levels, higher purchasing power of a thriving middle class, and the remarkable entrepreneurial effort of the population are the main assets of this scenario," he stated. ↑Return to Index

Analysis: Investing in Latin America – “Tremendous Growth”, but not without complications

(Editor’s Note: This article was published on June 26 on “Universia”@Wharton)

Can the major economies of Latin America continue their strong growth performance? What investment opportunities appear most sustainable in the coming years? At the Wharton Latin America Conference 2013, a panel of representatives from four of the largest financial research firms in the region provided some answers to these critical questions. The four advisors were:

Alberto M. Ramos, head of the Latin American economic research team in the global investment research division of Goldman Sachs;

Luis Oganes, head of Latin American research in the emerging markets research group of J.P. Morgan;

Alberto Ardura, head of Latin American capital markets and treasury solutions, Deutsche Bank, AG;

and Jose Maria Farres, managing director of LATAM investors sales at Citi. In his introductory comments, Ramos of Goldman Sachs argued that “the outlook for the Latin American region in the short term and medium term is relatively fair,” but he added that “there is a lot of heterogeneity.” Reflecting a common theme by other speakers, he said: “Latin America may be bifurcating along two different paths, where you have one group of countries that are pursuing more orthodox, conventional policies and they are doing relatively well; and another group that is pursuing populist experiments and their performance is a little bit more complicated.” The first group comprises such countries as Colombia, Mexico, Peru and Brazil, while the second includes Venezuela, Ecuador, Bolivia and Argentina.


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‘A Once-in-a-lifetime Opportunity’ Ardura from Deutsche Bank agreed. “Our region has been blessed by a once-in-a-lifetime opportunity for growth,” he said, but Venezuela, Bolivia, Argentina and Ecuador are “going in the wrong direction.” The prospect of “tremendous growth” in the rest of the continent has come partly as a result of good fortune – founded on strong demand for commodities by China – and partly by design, said Ardura. Governments in the region “learned from the boom and bust years when their economies would go into crisis every five or six years. Partly as a result of one-time opportunity luck, [and] because of the huge inflow of capital given the low rate environment, [and because] cheap capital is looking for opportunities… and partly because of the commodities play. China has driven [up prices for] most of our region’s commodities” -- including copper, silver and soy beans – which “has been a blessing for our economies.” Reprising the recent history of the continent, Ramos recalled that many of the countries in the region “capitalized on the opportunity” to “overcome what were perennial obstacles to growth,” beginning in the 1990s, when commodity prices rose and global liquidity was abundant. “They used this good period to improve their fiscal policy; reduce their debt load [and] reduce from a financial viewpoint some of the [factors] that had made the region extraordinarily vulnerable to external shocks. Today, we have a lot of macro-resilience both on the fiscal side and on the monetary side, which allows the policies to mitigate the fiscal shocks. But the region is not immune, since [its countries] are integrated into the global economy. But they are resilient, and have enough room to mitigate the impact of external shocks.” Describing the current period as an era of “self-praise,” Ramos noted that “in a certain sense, we managed to change the nature of the region.” A Shortage of Investment What’s missing in this picture? The panelists agreed that investment in the region is insufficient -- rarely amounting to more than 20% of national GDP. At a time when China is investing more than 40% of its GDP, emerging economies such as Colombia and Peru are investing between 26% and 28% of their GDPs. Brazil is the ultimate example of a country where investment is insufficient. Growth is about capital accumulation, Ramos said. “If you don’t invest, then you don’t grow. Brazil is the ultimate example of a country where investment levels are insufficient” to sustain higher levels of growth. “The challenge is to reform; to increase productivity growth, to open trade. We need capital to invest more… The agenda is not simple, but it is very well known. We don’t need to reinvent the wheel.” On the positive side, “We were able to reduce the beta,” a clear indication that “the region today is a much more stable micro-reality” than in the past, said Ramos. “We should be able to deliver growth rates like what China and India are doing today; but it’s not easy because there are structural issues to overcome. The region is still undergoing reforms, but there are still structural impediments.” For his part, JP Morgan’s Oganes said that Latin America’s potential growth this year is a fairly healthy 3.8% to 3.9%, compared with about 2.5% in 2012. “These kinds of numbers can be sustained without putting much pressure on inflation.” Economists vary in their forecasts for Brazil, the region’s largest economy, ranging from 3.5% on the low end to about 4% on the high end. According to Oganes, “This is good for us, but we should not get overly excited; the tide is quite high for us now. Ample liquidity; cheap money for anything. But the tide could go down, and we know many countries are going to be caught with their pants down.” Added Oganes, “The road ahead won’t be easy, but Latin America is still attracting capital. The region is still enjoying quite a push from commodity prices. No one is expecting oil to go back to the fifties or sixties; it will probably stay close to where we are, and other commodity prices are expected to remain high. The conditions are still going to be good ones. The key is to make sure that we do enough in the region to take advantage of this.” Jose Maria Farres from Citi stressed the importance of making structural reforms, such as modernizing infrastructure in Brazil, and restructuring the telecom and energy sectors in Mexico this year. Farres noted that Mexico’s potential growth rate of 3.5% per year contrasts with its average annual growth rate of just 1% during the last ten years. The fact that Mexico is growing at two percentage points below its potential growth rate “shows that Mexico has problems.” He added that enacting these reforms is a “problem” because of political opposition, but it is “critical” for Mexico to make them. Although the members of the panel agreed that demand for Latin American commodity exports has played a significant role in buoying Latin American economic growth, they disagreed about the potential impact on the region of a potential slowdown in the Chinese economy. Ardura noted that the political landscape of the region is now characterized by three kinds of countries.


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The first is the “young democracies, some of whom are not true democracies.” This group includes Chile, Colombia and Mexico. The second group of countries has governments characterized by a combination of populism and pragmatism about economic issues. This group comprises Peru -- led by President Ollanta Humala, and Brazil, led by Dilma Rousseff. The third group includes those nations that “have made very poor decisions” in favor of a populism that has led to poor economic results -- Venezuela, Argentina, Bolivia and Ecuador. Oganes noted that the situation in each of these countries is somewhat unique. “The importance of the death of Hugo Chavez is that he has been the leader of the debtors club of Latin America, with his ability to finance and provide political support.” He added, “With his largesse, he provided support for other countries – such as Cuba, Bolivia and Ecuador – creating a bloc of nations that are seen as an alternative to countries that are a lot more conservative and orthodox.” An End to Largesse? Oganes believes that a growing number of Venezuelans “will challenge using their [nation’s] largesse on behalf of other peoples.” He noted, “The influence of this bloc – its political weight –is probably going to start diminishing, so we may see, during the next five years, a bit more of a convergence” between the bloc led by Venezuela, and the other blocs of countries which have opened themselves up to international trade and foreign direct investment. “It will happen sooner or later, because they can’t keep doing what they are doing.” Until a few years ago, Venezuela and Argentina were enjoying a good growth rate, buoyed by rising commodity prices, but lately growth in Venezuela and Argentina has been very low. Sooner or later, these countries will be forced to confront reality. More skeptically, Farres noted that “politics and long-term structural reform are not good partners.” In other words, political considerations have impeded the ability of some Latin American governments to fully implement needed social and economic reforms. “A good example is Mexico,” Farres said. In that country, he noted, it has taken 20 to 25 years to tackle reforms in such sectors as telecommunications, education and energy despite a broad public consensus that such reforms are necessary. In Brazil, politicians still “need to realize that they need to work for the long-term good,” rather than focus on the shorter term, Farres added. Throughout the continent, noted Ardura, “governments need to take advantage of this environment to really create the long-term structural reforms, particularly now that a larger number of people are in school or are just entering the labor market. We have to create the opportunities for those people to really become participants in the growing middle class…. Governments need to take advantage of this [demographic trend] to turn our economies around so they can progress from being based on commodities to more developed countries where the middle class can grow.” An Over-dependence on Commodities? Demand for Latin America’s commodity exports has been buoyed by the fast-growing economy of China, Oganes noted. China has become the number-one trading partner of Brazil, Chile and Peru, and the second-largest trading partner of Colombia and Mexico. Therefore, anything that happens to China will affect Latin America. “So it is important that Latin America not rely on commodities.” Oganes noted that there is another sort of risk on the horizon: Most of China’s growth is derived from expansion of investment, rather than consumer spending. If, as widely expected, China makes the transition toward consumption-based growth, those Latin American countries that depend on exporting their commodities to China could be at risk. “When that happens, Latin America had better be prepared,” said Oganes, because “Latin America won’t be selling as much to China, and global prices [for those commodities] won’t be as high” as a result. “Meantime, let’s enjoy the party.” Ramos disagreed with aspects of that analysis. “The China angle is overstated,” he said, arguing instead that while China’s transition to a consumption-led economy could help lower prices for Latin American commodity exports, such price declines are not likely to happen right away. If only 45% of China’s GDP eventually winds up coming from investment -- rather than the current level of 65% [of China’s GDP] -- then China can “still do a lot” of investing with that much money. Even in such a case, China would still be importing enough Latin American commodities to prop up prices for those commodities. Rather than lament Latin America’s dependence on commodities, Ramos argued, “it is a great thing that Latin America is dependent on them. The important thing is the way that you manage that -- not the fact that you have dependence on commodities. You have to manage it well.” ↑Return to Index


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Top tips for exporting to Brazil

(Editor’s Note: This article was written by Iris Griffiths, managing director of Across Research, and was published in The Guardian.)

As the sixth biggest economy in the world, it's no surprise that Brazil is receiving a lot of attention from the international business community. The potential is huge and for those keen to venture into this expanding market and make their fortune in Brazil, countless opportunities exist in a huge range of sectors. Encouraged by all the success stories, the number of new businesses registered in Brazil grew from 680,881 in 2009 to 1,370,460 in 2010. While many of these will reap the financial rewards of doing business in this vibrant country, many will inevitably fail, and unnecessarily so. The problem? Cultural business shock. The solution? Do your homework.

Brazil has 26 states and one federal district distributed in five regions: north, south, north-east, south-east and central-west. The Portuguese language is the main thing all regions have in common. However, each state or region has a unique cultural profile and a way of doing business – even their tax systems can be different. Findings from a short poll carried out by Across Research through one of the company's social media channels confirm that the Brazilian way of doing business is unlike any other in the western world. Some of the most frequently highlighted issues that businesses encountered when entering the Brazilian market include: • Bureaucracy; • Complex tax system; • High taxes; • Complicated labour legislation. Other issues mentioned included an under-developed infrastructure, language difficulties (little English is spoken in Brazil), costly products and services, a relaxed approach to time-keeping, the influence of social culture on business practices, lack of planning and the Brazilian conviction that it's rude to say no. Inflexibility in adapting to the business culture of Brazil can deter

businesses in their initial approach to the market and can hinder their potential even after the first, most obvious hurdles are overcome. Patience and persistence emerged as the keywords for success among those foreign businesses that have already entered the Brazilian market. Many businesses take their product or service to Brazil hoping to secure a quick profit, but as one respondent said: "Brazil is not a place to make a quick buck. Doing business in Brazil takes time, understanding and perseverance." One of our main tips for overcoming obstacles in Brazil is to be open to new relationships. Brazilians are friendly. Creating personal relationships and taking the time to know the person behind the decision-maker opens up advantages to all those planning a long-term investment and achieving success in the country. It is also important to learn to appreciate the human element of business from the outset and to be prepared to dedicate time in building relationships. Brazil has well-qualified professionals. They are highly skilled and adjust well to pressure. The Brazilians are enthusiastic, innovative, flexible and well known for their optimistic disposition. Their ethnic make-up, composed of a mixture of cultures, seems to be a factor that makes them feel comfortable when dealing with foreigners. Before going to Brazil, research the market, the desire for your product or service and your customer's expectations from the outset. Brazil requires the same products and services as any other market across the globe but you will have to adapt to local market specifics and may well have to give your brand a Brazilian face. Choose your location with care. International companies entering the country may be tempted to think that because all Brazilians speak Portuguese, they all think and consume the same. Sometimes, the business approach that works well in one region will not succeed in another.


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Just as with any business venture, think ahead and plan well for risks. Minimise your risks by seeking the support of reliable business professionals fully conversant with Brazilian business culture and learn how to use the country's warm welcome to foreign businesses in your favour. Keep an open mind when looking for the right local partner for your business and seek recommendations from trusted business contacts. Brazil can be an exciting and potentially lucrative market in which your business can be highly successful – provided you do your homework first. ↑Return to Index

Women entrepreneurs in Latin America

According to the 2013 Women’s Entrepreneurial Venture Scope Index and Report, women entrepreneurs in Latin America and the Caribbean are potentially one of the greatest underutilised resources in the region. More than almost anywhere else, Latin American women are starting businesses because they are identifying opportunities, and their countries have much to gain. As more women in the region have become active in the workforce in the past two decades, national economies have expanded. The abundance in Latin America of opportunity-driven female entrepreneurs suggests that women’s business aspirations may be particularly important to the region’s growth. Nonetheless, many countries in Latin America and the Caribbean are not reaping the full benefit women entrepreneurs present. Improving opportunities for female entrepreneurs in the region requires a better understanding of the business environment and the factors that drive women’s business success. The Economist Intelligence Unit (EIU), in collaboration with the Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group, has created the Women’s Entrepreneurial Venture Scope (WEVentureScope) to meet this need. The WEVentureScope is the first comprehensive assessment of the environment for all female entrepreneurs in Latin America and the Caribbean, creating a standardised framework to help the public and private sectors empower women business owners. The free index and report are available from The Economist webpage. ↑Return to Index

Opinion: Time for China to become more Brazilian (Editor’s Note: This article was written by Dr Markus Jaeger, a Director at Deutsche Bank Research in New York, US, where he is responsible for economic, financial, and political risk research, with a special focus on the larger emerging markets.)

What could China possibly learn from Brazil, economically? After all, real GDP growth in Brazil averaged 2.75% annually over the past three decades, compared to 10% in China. Moreover, Brazil’s consumption-oriented growth model is about to exhaust itself, while China’s investment-focussed strategy continues to generate high, if somewhat diminished economic growth. Factor in the social, environmental and political consequences and it becomes clear that China’s growth model needs to change as well. Therefore: Brazil would be well-advised to become more “Chinese” in terms of savings and investment behaviour, while China would benefit from becoming more “Brazilian” in terms of consuming more (saving less). Brazil’s economic growth has disappointed in the past couple of years. After increasing more than 7% in 2010, real GDP growth decelerated to 2.7% and 0.9% in 2011 and 2012, respectively. Even if real GDP growth recovers to slightly more than 3% this year, it will be below the 4% growth level Brazil got accustomed to over the past decade. While economic growth has disappointed, household consumption has remained resilient due to rising incomes, tight labour markets and the greater availability of household credit. Investment growth, by contrast, has been very weak, especially in the manufacturing sector. This is largely due to rising labour costs, a strong currency and a lack of productivity-enhancing structural reform. Brazil may be showing symptoms of Dutch disease.


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The structural differences between Brazil and China have thus remained very striking. In Brazil, the household sector has limited incentives to generate precautionary savings. An extensive social security and pension regime incentivises households to consume rather than save. In China, the household sector faces the opposite problem: the social welfare regime is not very extensive. In Brazil, the corporate sector is facing very high borrowing costs (in part due to low domestic savings), which limits profitability. In China, the corporate sector has access to very cheap funding due to high savings and financial repression. In Brazil, the exchange rate is overvalued, limiting the incentives to invest in export-oriented industries, while in China the exchange rate - at least until recently - had been undervalued, favouring investment in the export-oriented manufacturing sector. The list goes on. Policy-makers in both countries have acknowledged the need to adjust their economic strategies; and the political incentives to adapt their respective models do exist, too. Both governments have taken a number of measures in the past few years, but respective consumption/ savings patterns have changed only little in the past few years. Chinese savings have declined a little, but investment is actually higher today than it was before 2008-09. (While the combination of higher investment and somewhat lower savings/ higher consumption has helped narrow the politically-contentious external surplus, it has made the economy even more dependent on investment.) Admittedly, neither Brazil nor China has taken overly aggressive measures to achieve their respective objectives. But savings, consumption and investment patterns perhaps only change slowly. Perhaps fundamental factors such as demographic trends and cultural or historically-inherited attitudes (e.g. hyper-inflation) are also at work. This does not mean that government policies will not have any effects – only that they need to be pursued more forcefully if Brazil and China are to shift their economic growth models towards greater investment and greater consumption. ↑Return to Index

Mexico sees US$315bn in 2013-18 infrastructure investment Mexico President Enrique Peña Nieto July 15 said that he expects public and private infrastructure investment of 4 trillion pesos (US$315 billion) between 2013 and 2018 under a development plan that includes roads, ports, telecommunications, water and energy projects. Mr. Peña Nieto, who took office on December 1 last year for a six-year term, said investment in transport and communications is expected to be MXN1.3 trillion in the period. He said the amounts could increase depending on the results of a tax overhaul proposal to be submitted to Congress in September to raise government revenue. Communications and Transport Minister Gerardo Ruiz Esparza said major works include construction or modernization of 5,410 kilometres of highways, the upgrading of six regional airports and a number of sea ports, as well as the construction of three intercity passenger railways, a new line for the Monterrey subway system, and a light passenger-train system in the city of Guadalajara. He added that the administration is also studying possible solutions to relieve congestion at the Mexico City airport. The official reiterated government plans, included in the recent overhaul of the country's telecommunications laws, to auction two digital television networks and build a wholesale telecommunications network to expand access to broadband service. A slow start to government spending this year, which is typical after a change of administration, contributed to disappointing economic growth in the first quarter when gross domestic product expanded just 0.8% from a year earlier. The Finance Ministry said last week that sluggish government spending was addressed in the second quarter and that 99% of first-half government budgets had been exercised by the end of June. Construction has been the laggard among the main industrial sectors, with activity declining 1.7% in the first five months compared with the first five months of 2012. Bank of America/Merrill Lynch estimated in a report that the expected communications and transport investment would be about 60% higher from the previous administration, and that overall infrastructure investment would be about 43% higher in nominal terms. "Looking at the size of the package, and considering oil revenues have been falling, we believe the government will need both a fiscal and an energy reform to finance it," the investment bank said, adding that it isn't likely to be paid for with extra debt issuance. ↑Return to Index


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Opinion: Is Colombia the Indonesia of Latin America? (Editor’s Note: This article was written by Heather West, Managing Editor, Latin America for Mergermarket, and was published in Forbes magazine on March 6.)

For several years now global investors have looked to the Southeast Asian archipelago of Indonesia as one of the great growth opportunities in Asia-Pacific, with its natural resources, its fast-growing economy and 250 million people to pay for Western soft drinks, laundry detergent and banking services. After recently returning from four years in Asia, I now sense the same whiff of mystique and intrigue about Colombia as I did with Indonesia, with optimistic investors citing statistics about its growth potential and yet still huddling up to discuss concerns about illicit activity.

Many ask, why Colombia? After all, the name is still largely synonymous with the drug trade for many Americans who watched Hollywood flicks in the 90s. And a simple scan on Amazon for books about Colombia will return results primarily for travel guides, and one titled: Bang Colombia: Textbook On How To Sleep With Colombian Women. Another on the list is More Terrible Than Death: Drug, Violence and America’s War in Colombia. While we can’t say coca fields have vanished from the Andean nation, its GDP grew at 4% in 2012 and ratings agencies have granted the country investment grade debt. It also has close to 46 million people, making it the third most populous country in Latin America after Brazil and Mexico. Its inhabitants are not concentrated in one big city, but in several, with Bogotá at more than 8 million people, Medellin with 3.5

million and Cali at 2.4 million. And aside from the statistics, M&A advisors and executives say Colombia is a good place to do business. Robert DiCianni, senior vice president at Pan-American Life, a New Orleans-based insurance company, told Mergermarket that Colombia was one of its growth drivers, calling it a “top of the line economic country.” Pan-American’s operations grew in Colombia by 50% in 2012, he noted. Interestingly, and perhaps as a reflection of Colombia’s popular medical tourism industry, it is seeing strong sales in coverage for complications with plastic surgery. As it turns out, closing deals in Indonesia can be challenging. Bribery and corruption are rampant, and investment bankers have relayed tales of reaching the final stages of a deal, only to be confronted with demands to pay off the owner’s uncle’s cousin. In the latest news, Singapore’s DBS Bank, which is in the process of acquiring a stake in Indonesia’s PT Bank Danamon, has hit a bump in the road after the Indonesian government placed new restrictions on ownership of local banks. Luckily, limits on foreign direct investment are not a problem for those considering acquisitions or investments in Colombia. In fact, most sectors are entirely open to foreign investment. What Colombia does lack is infrastructure, with proper highways only recently beginning to replace two way roads. This, however, is also seen as an opportunity. “While Colombia was nearly a failed state in 2002 due to its serious problems with drug-related violence, today it has become very viable and profitable,” noted Alejandro Pinzon, a senior associate at the law firm Pardo & Asociados in Bogotá. “Things have changed because violence fueled by drug money has been substantially reduced,” he said, attributing the improvements partly to the policies of Colombia’s former president Álvaro Uribe and to an increased police presence across the country. For those convinced Colombia may be one place to drop some cash or hunt for a nice family owned business, some of the top sectors for foreign investment are in oil and gas, coal, gold, infrastructure development and retail. Or for those interested in jostling for some market share in its thriving financial services industry, expect tough competition from players like Bancolombia and Sura, both of which have outbound expansion plans of their own. Looking further at the parallels between Indonesia and Colombia, it occurred to me that both make up part of the CIVETS, the next generation of promising emerging markets: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. And consider their figures for population under the age of 25: 43.7% for Indonesia, and 44% for Colombia. The two even share a parking spot on the equator. It can’t be ruled out that Colombia is a space to watch. ↑Return to Index


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Mining services shake-out to produce winners and losers (Editor’s Note: This article was first published in www.highgrade.net)

Global financial services firm Ernst & Young is predicting a shake-out in the mining services sector over the next 6-12 months as businesses adjust to the mining investment slowdown, though some supply companies are seen to be well positioned to take advantage of opportunities and emerge stronger.

E&Y Oceania corporate restructuring leader Vince Smith said the shift by miners from construction to production, and the increased focus on productivity, would produce winners and losers in a looming shake-out in the mining services sector. Despite a slew of forecast profit downgrades from mining services businesses this year there was more pain to come as the impact of the slowdown in mining investment reverberated through the sector, he said. “There have been few receiverships or distressed sales at this point, but we expect this to change in the absence of pro-active consolidation and rationalisation across the sector,” Smith said.

“Some companies with lower gearing are well positioned to take advantage in this market.” E&Y analysis of ASX-listed companies generating a significant proportion of their revenue from mining services shows nearly half (49%) have issued profit downgrades in the past six months, with a third of these in the past three months. The total market capitalisation of the 84 listed mining services companies had declined 16% in the period December 31, 2012, to June 13, 2013. Smith said there would be close scrutiny of the upcoming reporting season but warned debtors and investors should look “beyond the financials”. “The reasons behind the downgrades come as no surprise, with the most cited primary reason being deteriorating market conditions, followed by impairment of assets and deferral of projects,” he said. “Picking winners and losers among mining services business requires looking beyond the financials.” E&Y Asia-Pacific mining & metals transactions leader Paul Murphy said mining services businesses which had continued to perform to expectations had done so because they had diversified businesses, strong tender and management practices, had pre-emptively managed costs and knew how to drive mine site productivity. With about a quarter of all mine contracts due for renewal this year and miners pushing hard to reduce costs, those businesses able to diversify and deliver productivity improvements would be best positioned. “The future of individual businesses in the sector – both listed and unlisted – is dependent on a range of factors beyond their forecast profit and capital position. There are growth opportunities there for the right businesses,” Murphy said. He said key factors impacting the prospects of individual mining service businesses in the current market included equipment and people utilisation levels, exposure to various stages of the mining lifecycle, quality of forecasts, systems and people, contract profile (margins on renewals and tenure), cost reduction options and initiatives, and required debt and equity levels to support new strategic direction. E&Y says the 84 ASX-listed companies examined generated a significant proportion of their revenue from mining services, either through equipment or non-equipment (eg, labour and consumables) services. The large majority of the listed players were diversified into infrastructure, utilities and commercial and government projects not directly related to mining and were therefore exposed to broader market trends. “The structure of the listed sector has changed little since 2011 but during this period there has been significant growth in the unlisted sector, with an estimated 300-400 sizeable unlisted mining services business,” E&Y said. EY’s research indicated mining services providers were typically trading at 6x EBITDA, but this had significantly varied over time. During 2011 and 2012, equipment and non-equipment mining services companies traded at similar multiples but had now diverged to 6.1x (equipment) and 3.9x (non-equipment). A key driver of this was the assumed asset backing for equipment businesses and the assumption that equipment could be utilised in other industries, but “this should be questioned given softening equipment utilisation rates and a potential oversupply of equipment in the second hand market”.

http://www.highgrade.net/


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Specialised mining service providers had traded significantly below diversified providers since 2011 but this gap had narrowed as miners turned to niche players for innovative and cost effective mining and processing solutions. E&Y said sector debt levels were the highest they had ever been, with the current debt to book equity ratio close to 50%, and sector debt net of cash having almost doubled since 2006 to $11.8 billion. “The averages mask the outliers with some very strongly positioned and conservatively geared companies ready to take advantage of the near term pressure in the mining services sector,” its report said. E&Y global mining and metals leader Mike Elliott recently told HighGrade much of the hype about the mining boom being over confused “the investment and price components of the boom, with the volume that has been created as a result of this”. “Those METS [mining equipment, technology and services] companies that are most highly leveraged to volume, rather than price, will continue to enjoy the unprecedented level of mineral production which is occurring globally,” he said. ↑Return to Index

51st Annual Premier’s NSW Export Awards Have you have taken your vision of growing a global business and made it a reality? Apply for an Export Award today and put your company in the running to be recognised as a NSW Export Champion: www.exportawards.gov.au This year marks the 51st Annual Premier’s NSW Export Awards, and the start of an exciting new chapter in the history of the Awards. With the introduction of new and more commercially relevant award categories and the launch of a revised application process, applying for an award in 2013 will be easier than ever. The NSW Export Awards are about rewarding businesses, regardless of their size or location, that have shown a commitment and determination to grow their global business and who, against adversity, seek new ways to compete on the international stage. Whether your company is large or small, by winning an export award, you will have the opportunity to raise your company’s profile in both Australia and overseas. You will also be exposed to valuable business and networking opportunities, and be honoured for your continuous hard work and success. The 2013 National awards categories are:

Agribusiness

Architecture, engineering, infrastructure & construction

Creative Industries

Education & Training

Environmental Solutions

Information & Communication technology

Manufacturing

Medical, Healthcare & Biotechnology

Minerals, Energy & related services

Professional & Business services

Regional Exporter

Small Business The Premier's NSW Export Awards are managed by the Export Council of Australia (previously AIEx) and supported by many sponsors, in particular NSW Department of Trade & Investment, whose assistance makes these awards possible. For more information please visit www.exportawards.gov.au For more information on the Premier’s NSW Export Awards and the application process, please contact Lisa McAuley from the Export Council of Australia: [email protected] or 02 8243 7400. ↑Return to Index

Applications Close:

19 August 2013

Finalists Announced:

September 2013

Awards Presentation:

16 October 2013

http://www.exportawards.gov.au/

http://www.exportawards.gov.au/



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Cuba to test free-market policies to boost agricultural ouput

Cuba will carry out free-market policies in its second largest island, as a test, in a bid to increase national food production, official media reported on July 25. The choice of the Isle of Youth in May would make it easier for the government to control and track the experiment of the new policies, which will deregulate the farming business so as to increase productivity. The project is expected to begin in January 2014. "The main problem of limited food production in Cuba is lack of inputs and how they are distributed, and that is what this

project aims to change," state-run daily Juventud Rebelde quoted Vice President Marino Murillo as saying. Official figures released earlier this month showed Cuba imported about 80 per cent of its food last year, at a cost of more than 1.9 billion US dollars. Murillo, who heads the Comprehensive Development Plan, said Cuba could save millions of dollars for food imports annually if large tracts of land were more efficiently exploited. The Agriculture Ministry is currently working to develop the methodology to be applied in the district, and ways to overcome local drawbacks such as limited shipping and storage capacity.

Thanks to the economic reforms launched in July 2008, as much as 70 per cent of the country's agricultural land is operated by cooperatives and farmers who lease the land from the government. The government has distributed 523 billion hectares of idle land to more than 174,000 local farmers. The figure is expected to rise in the coming months. ↑Return to Index

Buenos Aires to host 2018 Youth Olympic Games

The 3rd Summer Youth Olympic Games will be hosted by the city of Buenos Aires in 2018, International Olympic Committee (IOC) President Jacques Rogge announced on July 4 following a vote by the IOC members at an Extraordinary IOC Session in Lausanne.

Buenos Aires (Argentina) was elected ahead of Glasgow (Great Britain) and Medellín (Colombia). Prior to the vote, the Candidate Cities each had 15 minutes to give a presentation to the Session, followed by questions. Evaluation Commission Chair Claudia Bokel addressed the Session on behalf of the Commission. “We had three excellent candidates from which to choose a host city today, each with the capability of staging memorable Youth Olympic Games in 2018,” said IOC President Rogge. “I would like to congratulate Buenos Aires and their bid team for their dedication to and enthusiasm for the Youth Olympic Games project. I have no doubt they will build on the successes of Singapore 2010 and Nanjing 2014 to provide a platform on which the best young athletes from around the world can compete and learn about the Olympic values.”

The announcement was the culmination of a bidding process launched in September 2011, which originally included six Candidate Cities - the three other cities were Guadalajara (Mexico), Poznań (Poland) and Rotterdam (Netherlands). After a thorough review of the Candidature Files and other relevant documentation submitted by five of the Candidate Cities (Poznań withdrew from the bidding process), the IOC Working Group, led by Claudia Bokel, presented a report to the IOC Executive Board (EB). Based on this report, the EB announced Buenos Aires, Glasgow and Medellín as shortlisted candidates at a meeting in Lausanne in February 2013. ↑Return to Index

Costa Rica is the new Latin American leader in Innovation According to the Global Innovation Index of 2013, Costa Rica has taken the 39th place on the global innovation ranking and it’s the first country in Latin America to appear in the list. The study was published by INSEAD (European Institute of Business Administration), WIPO (World Intellectual Property Organization) and the University of Cornell.


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The report, that includes 142 countries around the globe, ranks the innovation performance based on 84 indicators like political and business environment, human capital, education, infrastructure of ICT’s (Information and Communication Technologies), market sophistication, investment and knowledge creation and diffusion.

Costa Rica is the second country with the largest increase in the ranking (behind Uganda), having climbed 21 positions since last year. Also, it’s the top performer in the region of Latin America and the Caribbean, ahead of Chile and Barbados. The world’s top 5 innovators are Switzerland, Sweden, United Kingdom, Netherlands and United States of America. This index allows each country to evaluate their situation and identify their strengths and

weaknesses. Costa Rica, for example, is very well positioned on business density, high tech exports and imports and knowledge diffusion but not so well on investment, engineering students and market capitalization. Alejandro Cruz the Minister of Science, Technology and Telecommunications, said that “Costa Rica has made significant progress in the articulation of the academic, governmental and productive sectors. The improvement in the rate of innovation is a clear sign that Costa Rica is moving to become a knowledge economy fully integrated with international markets… this administration is taking care of significant challenges that still exist in the area of human capital and infrastructure, so it is expected that the positions occupied by the country in future editions will be even better “. This study is published since 2007, and has become the main instrument to measure the innovative capacity of the countries around the world. ↑Return to Index

Peru’s tourism income likely to hit US$10bn by 2021 Peru's tourism sector is expected to generate US$10 billion in revenue in 2021 through an aggressive promotion strategy to increase tourist arrivals to 10 million, National Chamber of Tourism (Canatur) said on July 16. The Inter-American Development Bank (IDB) said in the prior week that tourism is likely to be the second source of revenue for Peru in 2021 as it generates US$3.3 billion in revenue. The revenue, which accounts for eight per cent of the gross domestic product, is expected to represent 10 per cent in 2021, the IDB said. Canatur's head, Carlos Canales, said that Peru should see tourism as an economic activity by increasing promotion and diversifying the tourist supply. He added that Peru is able to surpass the goal, set by Peru's Ministry of Foreign Trade and Tourism (Mincetur), to double the number of foreign tourists to 5.1 million annually and generate over US$6.8 billion in revenue. ↑Return to Index

Cuba announces financial reforms to open up foreign investmen

Cuba is ready to open up, its government says. The country has outlined a plan to deregulate state-owned companies and attract more foreign investment that brings technology, financing and jobs to the island, Vice President of the Council of Ministers Marino Murillo announced. “We will be working for deep reforms for the rest of the year and well into the next,” Murillo, who is in charge

of the reform commission, told Reuters. “The very first step has been to eliminate prohibitions and restrictions.” Murillo said that the government was planning to give companies more autonomy and give entrepreneurs more freedom to grow. He clarified, however, that “the model of the revolution is based in social propriety, and not private, even though the latter creates jobs.”

The plan is to allow state-owned companies to keep 50 per cent of profits, after taxes, and then reinvest them in production. Up to now, all profits went to the government.


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News agency Prensa Latina reports that reforms include shutting down all companies that lose money for more than two years. “Our goal is to improve business efficiency and finish with the debt that has been dragging our economy down,” Murillo said. The other key aspect of the reform is to open the country to foreign investment. “We are aware that our island needs more foreign investment,” Murillo admitted. He specified, nonetheless, that the government will only welcome foreign companies that bring technology, financing and jobs. There is one particular group of investors the government is hoping to attract: Cubans abroad. Llanio Gonzalez, consul in the Cuban Interests Section in Washington, said that the reforms will make it easier for Cuban families who emigrated to the U.S. to move back or invest in the country from afar. "Our country is in a process of huge change, not only economic but also political. And in the new foreign investment law, all Cubans are of course included," the diplomat said to a group of expats who have been lobbying against the embargo from exile. Gonzalez met up with several expat groups in Miami on Sunday and exposed the conditions in which the reforms on immigration from 2010 can help them invest in their home country. Gonzalez sustains that it is not the Cuban government that does not allow the return of Cuban expats, but the U.S. embargo on Cuba. "Cubans living abroad have been included in investment laws, but the embargo laws do not allow you to adhere to [its] provisions," he said. ↑Return to Index

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Contact: Rosie Atherfold, [email protected] or Tel: 02 9357 4441 Please visit our website www.alabc.com.au for regular updates. ↑Return to Index






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