Sunday, December 26, 2010

Hola Business News - December 2010

Latin American GDP growth in 2010 exceeeds expectations
The GDP growth in 2010 is estimated to be six percent, according to the Annual Report on the region released by ECLAC (Economic Commission for Latin America and Caribbean of UN) last week. In its December 2009 report, ECLAC had projected 4.3% growth for 2010, revised this in July 2010 to 5.2% and now finally to six percent.

Welcome to the New Latin America which has started surprising experts positively.
Such a high growth coming after a GDP contraction of 1.9% in 2009 caused by the global economic and financial crisis of 2008-9 and in the backdrop of the crisis in Europe and uncertain outlook in USA is commendable. This shows the new resilience and strengthening internal fundamentals of Latin American markets. The main driver for the growth is domestic demand although South America has benefitted from high commodity prices and increase in exports to Asia.

Another surprise. The country which has the highest growth in 2010 is Paraguay with 9.7%. This is followed by Uruguay with 9%, Peru-8.6%, Argentina-8.4% and Brazil-7.7%. The four Mercosur countries are among the top five in the whole region. This reminds us of the World Cup 2010 when the four Mercosur countries reached the quarter finals.

South America has shown a growth of 6.6% despite the 1.6% GDP contraction of Venezuela ( which is an exception to the new paradigm of the region) this year. The only other country which sufffered negative growth this year is Haiti with 7%.

Mexico, the second largest market of the region has grown by 5.3% bouncing back from a 6.1% contraction in 2009. Central America has grown by 3.5% in 2010.

Unemployment rate in the region has come down to 7.6% from 8.2% in 2009. This is expected to decline further to 7.3% in 2011.

Inflation has gone up from 4.7% in 2009 to 6.2% in 2010. It should be noted that inflation is in single digit in all but two countries. Venezuela has not only the highest inflation ( 29%) in the region…but also in the world. Argentina also has a double digit inflation.

ECLAC has predicted 4.2% GDP growth for the region in 2011. Some country-wise projections for 2011 are: Haiti-9%, Panama-7.5%, Peru and Chile -6%,Argentina-4.8%, Brazil-4.6% and Mexico-3.5%.

One should not be surprised if the Latin American markets exceed these expectations again…

The growth in 2010 is not a one-off wonder. Except for 2009, the region has shown a new trend of consistent growth since 2003. The average growth in the last eight years is 4.2%. The highest growth was 6.1% in 2004.

According to another report, Latin America’s growth rate could outstrip the global average for the next seven years. This means the second decade of this century is going to be the growth decade even when there is talk of a ¨lost decade¨ in Europe. Some experts suggest that Europe should learn from Latin America which has bounced back from its own Lost Decade of the eighties and the debt crisis. There are no more IMF cases in Latin America. Brazil has become a net creditor to IMF now.

More cheerful news from some markets
Brazil has overtaken Germany as the fourth-biggest car market in the world with a 2010 sale of 3.45 million vehicles, 10 percent more than last year. There are now 30 million vehicles in Brazil which means there is one for every seven inhabitant of the 191 million population.

Brazil has discovered huge oil reserves with a potential to produce 5 million barrels per day. Argentina has discovered a large gas field in 2010. They are just starting the off-shore exploration. Colombia, Peru, Ecuador and Cuba have intensified exploration. With these, Latin America is going to be an important source of oil and gas for the world.

In the case of renewable energy sector, Brazil is the leading exporter of fuel ethanol and Argentina is the largest exporter of biodiesel. Some other countries in the region are following their examples.
Latin American pharma market, which is worth 50 billion dollars and its imports of 10 bn $ are expected to increase in 2011 and coming years, especially in the generic sector.

Colombia is a hot destination for energy investment and Peru for mining.

Panama has got investment grade in 2010. The others who have already got are: Brazil, Chile, Mexico and Peru. Future candidates are Uruguay and Colombia.

Higher commodity prices and increase in demand have stimulated investment in mining and agribusiness. For example Vale, world’s largest iron-ore producer of Brazil is expected to invest $68 billion in 27 projects over the next five years. Peru is expecting 40 bn$ investment in the mining sector in the coming years.

Trade in 2010

Last year our trade with Latin America was 17.2 billion dollars. In 2010, it should cross 20 billion dollars. My next newsletter will have the trade figures for the whole year. Meanwhile here are some trade figures which will give an idea of the boom in our trade.
-India- Brazil bilateral trade in the period January- October 2010 reached a record 6.2 billion dollars. India´s exports- 3.4 bn and imports 2.8 bn
-India´s exports to Mexico in Jan-Sept 2010 jumped to 1227 million dollars from 850 million in the same period last year.
-India- Argentina trade reached a record 2.1 bn $ in jan-oct 2010 doubling from the 2009 figures. India´s exports increased from 374 m$ in the period Jan- Nov 2009 to 511 m $ in the same period in 2010.
- India´s exports to Colombia increased to 491 m$ in the period Jan- sept 2010 from 365m $ in the same period last year.
- India´s exports to peru in the period Jan- Oct 2010 were 410 m$ as against 263 m$ in the same period last year
- India´s exports to Chile were 301 m$ in Jan- oct 2010 as against 233 m$ in the same period last year.

Petroleum crude, soy oil and copper are the principal items of our imports. Latin America is becoming a significant source of crude oil for India. India imported around 300,000 barrels per day in the period jan- oct 2010.

Chemicals, pharmaceuticals,engineering products, textiles and diesel oil are our major exports.

Suggested Focus of exports in 2011

Indian companies need to target the small and medium countries for trade besides the large ones. Small countries does not mean small trade. Example ..China´s exports to Costa Rica were 767.1 million dollars and imports 711.6 million dollars in 2010. Chinese export to Costa Rica is double the export of India to Argentina.

Autoparts to Brazil is emerging as a growth area for India´s exports.

Exports of equipments and machinery for mining,oil and gas exploration and production and infrastructure projects in the region.

Because of the strong Real ( 1US$= 1.7 Reais) Brazilian exports have become less competitive and imports cheaper. Indian exporters should take advantage of this and intensify their exports to Brazil.

Major investment by Indian companies in Latin America in 2010

- Renuka sugars acquisition of two sugar groups in Brazil for 350 million$
-Godrej acquisition of 2 Argentine cosmetic cos for about 40 m$
- Aegis group (part of Essar) acquisition of Argentine BPO company Actionline which has 5000 staff. This is the largest Indian BPO in Latin America. With this, the number of Latin Americans working in Indian IT, BPO and KPO companies in the region has gone upto 17,000.

Suggestions for focus of Indian Companies in 2011

Investment in the mining sector in Peru, Bolivia, Colombia, Brazil, Argentina and Chile.

Investment in agribusiness in Argentina, Brazil and Uruguay. The Mercosur region has the potential to bring 100 million hectares of additional land for cultivation, increase agriproduction and become an agircultural super power. Indian companies can source soy and sunflower oil, sugar, ethanol and pulses through investment in the region

Investment in commercial forestry and paper pulp in Argentina, Brazil, Uruguay and Chile and take back timber and paper pulp.

Establishment of IT, BPO and KPO operations in Argentina, Brazil, Mexico and follow the new trend of Indian IT companies getting contracts from Latin American clients.

Acquisition of pharma companies in Argentina, Brazil and Mexico

Contracts, subcontracts and supply of equipments and materials to Brazil which is embarking on massive infrastructure development for the 2014 World Cup and 2016 Olympics

Contracts and supplies to the 224 billion dollar five year investment plan of Petrobras for exploration and production of off-shore oil. This is the largest corporate investment plan in the world at this moment.

Investment in the petroleum exploration and production sectors of Brazil,Colombia,Argentina. Colombia expects investment of 28 billion dollars in oil exploration and production in the next four years and increase the oil production to 1.4 million bpd by 2014 from 963,000 bpd in June 2010. Colombia is emerging as South America's third-largest oil producer behind Brazil and Venezuela.
Look at the Chinese companies who have spent $20 billion this year in the following deals:
CNOOC paid $3.1 billion for a 50% stake in Argentina’s Bridas Energy in March.
Sinochem Group, paid $3 billion to Statoil for 40% of its Brazilian offshore field, Peregrino, in May.
Sinopec, made a $7.1 billion investment into the Brazilian subsidiary of Repsol YPF in October.
CNOOC agreed to pay $7.06 billion for a 60% stake in Argentina’s Pan American Energy in November.
In addition, China has invested in Venezuela, which include
· 40% stake in Junin 4 block of Orinoco belt expected to produce 400,000 bpd
· Another 40% in Junin 1 with capacity to produce 200,000 bpd
· A refinery with capacity to process 200,000 bpd

Opening of more embassies

India has opened embassy in Guatemala-2010.

Costa Rica has opened embassy in New Delhi-2010

More embassies likely to be opened from both sides..

Presidential Elections in 2011

Peru – April
Nicaragua – June
Guatemala- September
Argentina – October

Forthcoming events in 2011

Rio Carnival 4-8 March
Made in India Exhibition of CII in Sao Paulo 8-11 March
What a coincidence ! Exihibitors can dance samba at the carnival in Rio and move on to Sao Paulo for the business…

Indo-LAC business conclave of CII in New Delhi, 24-25 February 2011. Mr Danilo Astori, Vice President of Uruguay expected to be the guest of honour.

Ongoing negotiations to expand and widen the India-Mercosur PTA . Indian companies, export promotion councils and trade and industry bodies should approach Commerce Ministry with their wish lists and contact Anil Mukhim JS

Business Plus

My favourite Latin American author Mario Vargas Llosa from Peru won the Nobel prize for literature in 2010. My blog on this..

For those who want to understand the new Latin America I recommend the following two books:
- Brazil on the rise by Larry Rohter
- What if Latin America ruled the world by Oscar Guardiola Rivera

The Argentine film ¨The secret of your eyes¨ won the Oscar in 2010.

An Argentine musician Martin Felix Folatelli, living in Benares for the last several years is producing fusion music …Benares Milonga and Mate- Chai…

Latin America is the latest flavour in Bollywood.
Mexican actress Barbara Mori was the heroine with Hrithikesh Roshan in the film Kites released in 2010.
Dhoom II film and TV reality show ¨Fear factor¨ were shot in Rio de Janeiro.
Rajnikanth danced with Aishwar Rai in Machu Pichu (in Peru) for the film Robot.
A 28- member team of Indian TV stars are in Buenos Aires right now (staying here for 40 days) to shoot a reality show ¨Zor Ka Jhatka¨ (Wipe Out). This will be hosted by Shahrukh Khan in Imagine channel in January 2011.
The music director of Dhobi Ghat , the film directed by Kiran Rao and produced by Aamir Khan ( being released on 21 January) is an Argentine, Gustavo Santaolalla.
Giselle Monteiro, the Brazilian Bollywood actress of Love Aajkal fame is acting in another film ¨Always kabhi kabhi¨ being produced by Shah Rukh Khan
An Argentine- India coproduction film on Tagore and Victoria Ocampo is on the works and is likely to materialise in 2011.

Loca loca loca….

The most anticipated event in 2011…. Shakira´s tour of Latin America starting in March 2011 covering Argentina (Shakira´s boyfriend is Argentine..), Brasil, Colombia, Costa Rica, Chile, Ecuador, Guatemala, México, Paraguay, Perú, Puerto Rico, República Dominicana and Venezuela (with even more countries to be announced). The tour will be part of The Pop Festival, a brand new festival that will bring international music stars to Latin America, and which will also showcase the latest in contemporary art and technology. Here is her latest song to celebrate the new year..
Loca loca loca…. Loca means crazy

cheers….for more business and businessplus with Latin America in 2011…

Wednesday, December 08, 2010

Increasing reliance of Reliance Petroleum on Latin American crude oil

Reliance imported about 300,000 barrels a day of crude on average from Latin America during the first ten months of 2010. This accounted for about a quarter of the company’s total imports during the period, compared with 13 percent in the same period of 2009.

Reliance refinery complex in Jamnagar in Gujrat, India has refining capacity of 1.24 million barrels a day, the largest at a single location.

About two-thirds of Reliance’s imports from Latin America during the first 10 months of 2010 came from Venezuela which accounted for 59 percent, Mexico 21 percent and Brazil 14 percent.

Reliance is expected to increase crude imports from Latin America as it seeks better refining margins by processing heavier and cheaper grades of oil.

In 2009 Reliance bought 155,000 bpd from Latin America. This went up to 380,000 barrels a day in the first four months of 2010.

In dollar terms Reliance imports of crude oil from Latin America in 2010 ( Jan-Oct) are about 7.5 billion dollars and in 2009 imports were 4.2 billion dollars.

The crude oil imports of Reliance accounts for over forty percent of India´s imports from Latin America. Crude oil is the leading item of India´s imports from latin America.

Reliance´s export of diesel oil to Brazil in the period Jan-Oct 2010 was 1.4 billion dollars. This topped India´s exports to Brazil and constituted 41 percent of India´s exports to Brazil. In the same period Reliance imported 900 million dollars of crude oil from Brazil which accounted for 32 percent of India´s total imports from Brazil. Overlall, Reliance accounted for 30 percent of India´s trade with Brazil in the period Jan-Oct 2010.

Reliance is also investing in oil exploration in Colombia and Peru.