Monday, December 21, 2009

brazil pioneers technology using ethanol to generate power

Petrobras, the public sector petroleum company of Brazil has developed this technology. It is starting in December 2009, commercialisation of this technology in a plant at Juiz de Fora in Minas Gerais state. Capacity of the plant is 45 MW. The turbines are made by GE.

Brazil is the first country to produce power from sugarcane ethanol. Brazil already leads the world in the use of ethanol as fuel for cars. Brazil is well prepared to straddle successfully both the worlds of fossil fuels ( having discovered enormous petroleum reserves) and the renewable sources of energy.

Thursday, December 17, 2009

Latin America will grow by 4.3 % in 2010

This good news comes from ECLAC ( Economic Commission for Latin America and Caribbean- which is part of the United Nations) in their 10 December 2009 report.

The GDP of the region which fell by 1.8% in 2009 due to the global crisis will resume growth in 2010 with 4.3 %. The region had an annual average growth of 4.8% in the period 2003-2008. In this period, the region enjoyed a current account surplus as well as primary surplus, accumulated foreign exchange reserves, reduced external debts, booming exports and strong macroeconomic fundamentals. This is the strength which helped the region to withstand the global crisis in 2008-9 with only moderate adverse impact and bounce back in 2010.

The 4.3% growth of Latin America in 2010 is higher than the growth projected for developing countries ( 4%) except China and India.

Brazil will be the 2010 champion of the region with the highest growth of 6%. Ooops... I do not recall Brazil topping the growth chart of the region in recent times. Uruguay and Peru will be runners-up with 5% each.
Mexico, the second largest economy which suffered the worst GDP contraction of the region in 2009 with 6.7% will grow by 3.5%. Argentina, the third largest market will grow by 4%.
It is no surprise that the least growth in 2010 in the region will be in Honduras, which is in a political crisis.
While South America is expected to grow by 4.7% in 2010, the Caribbean and Central America are projected to grow by around 2%.
Inflation in the region in 2009 is estimated to have declined to 4.5% from 8.3% in 2008.

Peru gets third investment grade rating in December 2009

Peru clinched its third investment grade rating from Moodys, a major credit evaluation agency which has praised the country's ability to withstand the global downturn better than some of its peers. The new rating is Baa3 from the earlier Ba1
Moody´s said " the decision to raise Peru's foreign currency ratings was driven by indications of increased shock-absorption capacity relative to similar or higher-rated sovereigns.¨ This will help Peru to lower its borrowing costs and attract foreign investment flows, which will contribute to higher growth.

Fitch and Standard & Poor's had given investment grading to peru last year. Peru´s economy has been a shining star in the last few years.

Peru and Brazil are the other Latin American economies with investment grade ratings.

Chile is becoming a OECD member in January 2010

The Organisation for Cooperation and Development (OECD) has announced that Chile has been invited to become the 31st member of the Organization. Chile will formally accept this invitation when an Accession Agreement is signed in the presence of Secretary-General Angel Gurría and President Bachelet on January 11, 2010. The country has been in negotiations to join the organization for two years. This eans that Chile´s investment and tax policies will have to be in conformity with OECD standards.
Currently, Mexico is the only Latin American member of the organization.

Saturday, December 05, 2009

short skirts and Big B arouse global interest in Brazil

A quick clarification before the reader lets his imagination fly….
B....stands for Business.
Last month, Geisy Arruda (seen below), a 20-year old student of Bandeirantes University in Rio de Janeiro aroused global media attention with her short skirt.

The Brazilians say that a ¨speech should be like a miniskirt…short enough to arouse interest and just long enough to cover the area of interest.¨

Brazil has always aroused the interest of the outsiders with tiny bikinis and mammoth carnival, sexy Samba and lusty Lambada, balmy Bossanova and fantastic football, amazing Amazon and bewitching beaches of Copacabana and Ipanema.

But now the country has started attracting a new kind of attention from global business leaders who find it as irresistible. Here is an example. Petrobras, the state oil company of Brazil plans to invest 174 billion dollars in the period 2009-13 in exploration and production of the recently discovered offshore oil fields. This is the world´s largest corporate investment plan at this moment. Obviously this news is sheer excitement for companies from around the world.

Which city in the world has the world´s largest fleet of private jets and helicopters? Not Newyork nor Tokyo. It is Sao Paulo. Tiffany and Bulgari have more stores in Sao Paulo than in any other city in the world. Sao Paulo has the largest Ferrari sales and the second largest sales of Lombarghini and Porsche in the world.

Brazil´s riches go beyond the salons of Sao Paulo. Brazil is becoming a global player and provider of energy and food to the world which is getting increasingly concerned with energy and food security and climate change.

Brazil is well positioned in both the sectors of fossil fuels and renewable energy. It has recently discovered very large offshore oilfields which will make it as a significant oil exporter. Brazil is the global leader and pioneer in the use of fuel ethanol for automobiles. Today more than ninety percent of the cars produced in Brazil have flexifuel engines running in petrol or ethanol or any combination of the two. Embraer has even produced some aircrafts running in ethanol. Eighty percent of the electricity generated in Brazil comes from hydroelectric source. The 12,000 MW Itaipu hydroelectric station is one of the largest in the world. Brazil has the highest share of renewable energy in power generation, among the large economies.

The Amazon forest of Brazil contributes twenty percent of earth´s oxygen and has become the Lungs of our planet. Brazil is also blessed with twenty percent of the fresh water supply of the world.

Brazil has the largest surplus land availble for agriculture. It is using currently 52 million hectares for crops. It can increase agricultural land by another 100 million hectares, without touching Amazon or the sensitivity of environmentalists. Besides the land under crops, Brazil has 172 million hectares under pasture for cattle. Brazilian agriculture is big business with its huge farm sizes which lend themselves to large scale commercial farming using heavy machineries, investment and innovation. Most cultivation is rainfed and don’t need irrigation canals or borewells as is the case in India. Brazilian productivity is one of the highest in the in the world thanks to the fertile soil, scientific and commercial farming practices and constant innovation and research and development. Brazil is the world´s largest exporter of beef, chicken, sugar, soya, orange juice and coffee.

Brazil is also rich in mineral resources. Vale, the Brazilian company is among the top global mineral players.

With such rich natural resources, Brazil was considered as a country of the future. But the joke in the past was that it would always remain as a country of the future. Now, the Brazilians have woken up. They are convinced that their time has come. They are determined to unlock their potential. There is a paradigm shift in the mindset of Brazilians. There is a new confidence, optimism and vision among the political and business leaders.

The Brazilians have liberated the country decisively and irreversibly from the past curses of hyper inflation, excessive external debt and unstable currency and exchange rates. They have made macroeconomic fundamentals as strong, healthy and predictable. They have even started lending money to IMF !. The government policies are based on a broad consensus. The government has found an equilibrium between pro-poor and pro-business policies. There is no ideological polarisation nor extremist political parties. Whoever wins the next presidential elections in October 2010 after Lula, the country is not going to change its pragmatic direction. Brazil is now the role model for Latin America where there is a resurgence of Left in recent years.

It is therefore, not surprising that Brazil is part of the BRIC which is increasing its weight in the global balance. But Brazil has some distinct advantages in comparison to the other three BRIC countries. It has one language and one faith and does not face any ethnic, religious, linguistic conflicts , terrorism or troublesome neighbours. Although Brazil has got more people of African origin (70 milion) than USA, there are no hyphenated Brazilians as the Afro Americans in the US. Brazil is a true melting pot, a perfect blend of café com leite… coffee with milk ( black and blonde), as the Brazilians describe skin colour. Brazil has borders with ten countries but it does not have any border disputes. On the other hand Brazil has been enthusiastically taking initiatives for integration of the region through Mercosur and Unasur (south american union, with all the 12 countries of the region) and makes use of this collective strength for its regional leadership.

Sure… Brazil faces other kind of problems such as poverty, crime, drugs and arms. But these can be controlled internally since there are no external trouble makers.

It is this new profile of Brazil which has aroused the interest of the global political and business leaders who have started courting Brazil seriously. The thirty percent increase in FDI in Brazil in 2009 is a reflection of the new confidence of global business in Brazil. The award of the World Cup 2014 and Olympics in 2016 are stamps of recognition of the New Brazil.

Realising the growing importance of Brazil, the Government of India has established a bilateral strategic partnership and a trilateral alliance in the form of IBSA. India has been working closely with Brazil in the Doha Round and in the issue of expansion of the permanent membership of the UN Security Council. India´s bilateral trade with Brazil reached 5 billion dollars in 2008 and is set to increase rapidly in the coming years. Indian companies have invested in Brazil in sectors such as IT, pharmaceuticals, energy, agribusiness and engineering. Even Bollywood has been attracted by the carnival land. The film Dhoom II was shot in Rio.

India has become a household experience in the last one year because of the prime time soap opera Camino das Indias ( route to India), telecast Monday to Saturday in the popular Brazilian TV channel Globo. This Indian story with Indian costumes and customs with Brazilian actors has generated tremendous interest in India. Camino in Portuguese means route or way. Brazil was discovered accidentally by Pedro Alvares Cabral who wanted to find the route to India. Now the Indians and Brazilians have found their own and common routes to a new promising future.

Wednesday, November 25, 2009

Bharat Petroleum and Videocon consortium strike offshore oil in Brazil - November 2009

The consortium has discovered additional oil in an exploration acreage in the Campos basin, off the Brazilian coast. The discovery is more than 90 feet of high-quality oil in their Wahoo-2 well block, also identified as BM-C-30, The well is five miles to the north from the original Wahoo discovery well. In October 2008, the consortium had made its first discovery in the block during drilling of Wahoo well.

The original cost of acquisition of the ten offshore blocks was 280 million dollars.

ONGC Videsh Limited ( OVL) of India has invested almost a billion dollars in the acquisition of offshore blocks in Brazil

Thursday, November 12, 2009

Renuka Sugars of India acquires Brazilian firm for US$ 240 million in November 2009

Shree Renuka Sugars Ltd (SRSL), one of the largest Indian producers , has acquired Brazil’s Vale Do Ivaí SA Açúcar e Álcool (VDI) at an enterprise value of $240 million.

SRSL will pay $82 million now and the balance over eight years. It plans to finance the acquisition by leveraging the $105 million it raised through a qualified institutional placement (QIP) of shares in July.
The company operates eight sugar mills, five owned and three leased, with a cumulative daily crushing capacity of 35,000 tonnes.
The acquisition of VDI includes two sugar and ethanol production facilities in the southern Brazilian state of Parana, with a combined cane crushing capacity of 3.1 million tonnes a year. VDI holds strategic stakes in several logistics assets, including terminals for storage and loading of sugar and ethanol at the port of Paranagua.
The acquisition also includes 18,000 hectares of cultivable land under VDI, through which the company meets the larger part of its sugarcane requirements. The land is on long-term lease and used to cultivate cane with an average yield of 95 tonnes a hectare, with recovery of 13 per cent. In India, the yield (around 60-65 tonnes per hectare) and the recovery (a maximum of 11.5 per cent) are lower.

More Indian companies are planning to enter the Brazilian sugar sector

Sunday, October 25, 2009

Argentine President´s Visit to India 14-15 october- outcome for Indian business

Liberalisation of Argentine Visa
Under the visa Agreement signed on 14 october during the visit of President of Argentina to Delhi, the Argentine government has agreed to grant five year multientry business visas to Indian visitors....and that too free of cost. Stay during each visit is 90 days extendable by another ninety days. Fantastic... Let us thank the President and the Foreign Ministry of Argentina. The embassy of India in Buenos Aires will do the same thing for Argentine business visitors give free coffee under their Cafe con Visa system

Trade target of 3 billion dolars for 2012
The two governments have set 3 billion dollars as the target. The exports of India should double to one billion dollars from 492 million in 2008 and Argentine exports to reach 2 billion by 2012 from 836 million in 2008.

Invitation to invest in Argentina
The Argentine President in her adddress at the busines seminars and meetings in Delhi and Mumbai invited Indian cos to invest in Argentina. She spoke of the new paradigm of stability and growth of the economy, availability of natural resources and creative human resources of Argentina.

She had a meeting with Rattan Tata in Mumbai and in this meeting also the discussion focussed on investment in Argentina.

Joint Ventures
During the business seminar in Delhi, Ashok Leyland signed a JV with TBA of Argentina for making buses and trucks.

Sonali Tractors of India signed agreement with Apache of Argentina for collaboration in assembling agro machinery in India.

Pharma issue
This was taken up strongly by the Prime Minister of India himself with the Argentine President that India should be included in the list of 26 countries from which Argentina allows imports of pharmaceuticals. This is mentioned in the joint statement too.

Wednesday, October 07, 2009

Inflation in Latin America

Inflation used to be a curse in Latin America. Many countires of the region have suffered Hyperinflation in four digits and three digits. The joke in those days was that one could never tell the exact figure of Latin American inflation and Indian population. By the time one finishes the sentence, both would have gone up !

The governments of the region have tamed it decisively in the last decade. The average inflation of the region has remained in single digit in this decade.

The projection of average inflation in 2009 is 6.1% and in 2010 it is 5.2%, by Latin Business Chronicle and IMF. In an act of extraordinary courage they have even projected the inflation for the period 2010-14 as 5. 2%. This is remarkable. This is the twenty first century Latin America, which I call as the New Latin America, in which things have become predictable. No one would have dared to do such a five year projection even as lates as 1989, when the Argentine inflation was over 3000 percent.
There are , of course, exceptions to the single digit inflationary trend in the region. Venezuela is on the top with the highest inflation in the region with 29.5%. It is expected to increase to 30% in 2010 and more to 32.4% in 2010-14.
Argentina has the second highest inflation with 20%. Costa Rica is third with 8.4%.
Brazil is little over 4 percent in the next five years.
Mexico´s inflation of 5.4% this year is projected to go towards 3 percent in the coming years.
Colombia´s inflation of 4.6% this year is expected to decline to slightly over 3% in the next five years.
Besides inflation, the Latin American governments have also brought under control external debt and exchange rates which have also become predictable.

Wednesday, September 30, 2009

Gaturro - Cartoon film - Argentine humour with Indian technology

Gaturro is the product of Argentine humour and imagination combined with Indian ingenuity and technology. It is a 90 minute 3D animated cartoon film.

Gaturro is a popular comic character created by the famous Argentine cartoonist Christian Dzwonik (Nik ). He has used Gaturro to make jokes on Argentine politics, society and everyday life. Gaturro is an ingenious cat, with interesting and funny perspectives of the world and the Argentine political situation. Gaturro is presented as an antihero, observer of the world and eternally in unrequited love with Agatha, the female cat character. Some say that Gaturro is like a typical Argentine macho.... lot of show and lot more madness !! There are more than 30 Gaturro books. They have become popular not only in Latin America but even in France, Norway and Spain. Gaturro has its own website

Here is the 39 year-old Nik

Here is a sample of Gaturro cartoon, in which the change of his mood from Tuesday to Monday is depicted. Monday at the end is the dead day !!

The Gaturro film is the story of his love with Agatha. Since Agatha is hard-to-get, Gaturro tries all kinds of brave and foolish tricks to catch her attention. In this pursuit, Gaturro makes a mess of himself, gets into all kinds of troubles, passes through hilarious situations and finally realises that it is better to be oneself rather than role playing.

Here is Gaturro, the showman..

Illusion Studios of Argentina are coproducing this six million dollar film in collaboration with Toonz Animation of India. They signed the coproduction agreement in May 2009. The production has already started and the movie will be released in 2010. Jose Luis Massa CEO of Illusion Studios, the two-year old firm of Buenos Aires , is excited like Gaturro with the Indian collaboration. It has ambitious plans to be a major player in Latin America

For Jayakumar, CEO of Toonz Animation, Trivandrum-based company, this is the first joint venture with Latin America. Toonz Animation is an established global player and has a staff of over 500.

I am sure Gaturro is going to inspire more such joint ventures between the Argentine talents and Indian technology. The Argentine human resources are very creative, imaginative and inventive. This is the assessment of the seven Indian IT companies which employ 800 Argentine staff in Buenos Aires. The city of Buenos Aires inspires imagination with its the largest number of theatres, music concerts, literary and cultural activities in Latin America. The Colon Theatre of Buenos Aires is one of the best in the world.
I hope Nik will start a new series of Gaturro going to India in search of a Bollywood actress......

Monday, September 21, 2009

Mexican company invests in Indian cinema halls

Mexican cinema chain Cinépolis will invest 160 million dollars in south India for setting up multiplexes across the four states. This will make India the country with their largest market outside Mexico. They will open around 500 screens, 50 per cent of which will be in the southern cities, in the next seven years and for every screen, they will be spending around $700,000.” Most of the funds would go in rentals and in developing screens. The amount would be funded through internal accruals. Cinépolis is in talks with 200 mall developers and had signed up for around 110 screens in eight cities, of which 62 per cent are in the south. It would commence operations by the second half of 2009. Its first screen is scheduled to be launched in November at Amristar. The company, the fifth largest theatre chain in the world, is aiming to move up to the fourth slot. It operates more than 2,000 screens in six countries.

Monday, August 03, 2009

Brazil ...out of the crisis induced by global meltdown

According to a cover story in Exame magazine (one of Brazil´s main business publications) Brazil is getting out of the crisis. Various key indicators confirm that economic activity and job creation have already undertaken a recovery process.

While in the United States General Motors is facing all kinds of problems, and selling part of their European assets, in Brazil a R$ 2 billion investment plan is in place to expand production. The Brazilian auto industry expects to sell 3 million units in 2009, a historic record in a year in which everyone expected the worst.

A recessionary scenario was looming in the last 6 months, with reduction of the GDP, absence of credit, lack of confidence, production interruption and slowing of sales. This reality is now only seen in the rearview mirror. Brazil is, in fact, experiencing the next phase: recovery and growth.

Employment is also entering a considerable recovery process, after predictions pictured a dark. 300,000 new jobs were created on the first 6 months of 2009, in the economy as a whole. In the end of last year 800,000 jobs were lost in the country, but in 2009 a positive balance of 600,000 is expected.

It is interesting to note that a country that has always been hit hard by the world´s economic turmoils, this time is keeping its head out of the water based mostly on internal demand. In the survey conducted by the magazine, most businessmen have expressed optimism about growth.

Wednesday, July 29, 2009

Confident Indian company achieves success in Latin America

Confident is both adjective and noun in this story.

It is the name of a small but confident company from Coimbatore which has inspired confidence among Latin American clients and got 500,000 dollars of orders for its textile machinery in Peru, Ecuador, Dominican Republic and Argentina.

Confidence is embedded in the name of the company itself.
It is Confident Engineering Pvt Ltd.
Their email is

More precisely it is the self confidence of Rathnakumar, the Managing Director of the company who has managed to inspire the confidence of the textile companies of South America.

Hardwork and perseverance have complemented the confidence of Rathnakumar in bringing about success in Latin America. He has spent the last one month in Argentina, Peru and Ecuador. He came with the CII delegation on 28 June and is leaving from Buenos Aires on 31 July. He spent ten days in each country. He is planning to come back to the region in the next three months and target Brazil and Colombia.

Rathnakumar has appointed dynamic and proactive agents in these three countries. These agents had taken him to visit over 30 textile plants. He convinced the technical staff and management of some of these companies that he could help them reduce their cost of production with his dyeing and finishing and effluent treatment machinery which costs just half the price of those which they import from Europe.He carried a small prototype of his Effluent water treatment plant and gave demonstration to the clients using their plant waste water. Confident Engineering has innovated a new technology to treat waste water of dyeing plants through an electrocoagulation method without the use of chemicals. They are applying for patent for this.

Rathnakumar wanted to participate in an exihibition in Buenos Aires in 2008 and paid 1500 dollars for the stall. But the Argentine embassy in Delhi did not give him visa. He lost the money and the opportunity. The Embassy wanted him to produce a original invitation from an Argentine client attested by an Argentine notary public. This is an unauthorised procedure being adopted by some corrupt elements in the Argentine embassy in Delhi, in violation of the Argentine government procedure. Was Rathna Kumar deterred. No! He waited and got the visa now without an invitation letter. He does not have any rancour. He is focussed on the future potential and does not bother about past setbacks.

In Peru, he got order for 70.000 dollars for a machine which he has never made so far. He showed the client a French machine in a Peruvian plant and told him he could make a similiar one. The client was convinced by the confident competence of Rathnakumar and gave him the order.

What difference did he find in business with South American clients? He says here they dont want to open LC . Most of them prefer to deal in cash. They pay an advance amount by TT and the rest they pay later. They retain a percentage of payment as guarantee for performance of his machine. Of course, Latin American importers open LCs for large orders.

Confident Engineering is a small scale enterprise with a turnover of just 1.5 million dollars and 40 employees. Their machines cost from 20,000 to 100,000 dollars. The company was started by Rathnakumar, an electronics engineer and his partner in 2003 with an investment of 20,000 dollars. Rathnakumar had worked with Larsen and Tubro for six years but left it to follow his enterpreunerial instinct. He got a breakthrough in Bangladesh for his dyeing and finishing machines. Now he has set up a fullfledged office in Dhaka to manage supply of machines and service them. Then he got some orders from Indonesia and Srilanka.

Now his focus is on Latin America. He expects to get orders worth five million dollars in the next few years. He has already established his reputation in Peru, Ecuador and Dominican Republic and now in Argentina. His next targets are Colombia and Brazil.

How did the Latin Americans treat Rathnakumar in his business and personal interactions in the last one month, I asked him. He found the Latin Americans pleasant and friendly. Of course, they needed to be convinced that they could risk their money with a small company in a remote corner of India. But they were willing to listen to him with open mind.

The Latin American textile industry had been importing from Europe and Japan. But now they want to try lesser expensive sources such as China and India. In these days of global financial crisis, local credit crunch, tough market conditions and globalised competition, the Latin Americans are focussing on cutting the cost of production. For this, they are turning to ess expensive import sources such as China and India. They mentioned to him about their preference for India over China beacuse of cultural reasons. They told him that they could understand and communicate and trust the Indians better. They looked at him as a person from the well-known land of Yoga, Meditation, Sai Baba, Hare krishna, Mahatma Gandhi....

What about language and food? I ask him.
This mild mannered Sambar- Idly South Indian smiles and says ¨No problem. I have already picked up some basic spanish in my two trips. I can understand the technical and price parts of the negotiations. Now I plan to take a crash course for a couple of weeks.¨I advised him to try the Instituto Hispania in Chennai.

Food. He eats whatever Latin America offers except beef. He does not miss Iddly Sambar in this one month absence from India. He liked the ceviche of Peru and empanada ( latino samosa ) of the region.

In my last blog story I wrote about the Latin American success of TCS, which is a big company. But in the case of Confident Engineering, it is the story of success of a small Indian company. I hope this will inspire and motivate the small and medium exporters of India.

What our exporters need for business with Latin America is ....Confidence ! Confidence in Latin America !

Indian exports to Latin America increased by 50 percent in 2008 to 7.5 billion dollars from 5 billion in 2007. What else is needed to inspire confidence?

Friday, July 17, 2009

Gabriel Rozman… Uruguyan Wizard of TCS

During the India- Latin America Business Seminar in Buenos Aires on 2 July, when it was announced that a Senior Vice President of Tata Consultancy Services ( TCS) in charge of Latin America, Spain, Portugal, Middle East, Africa and East Europe, would make a presentation, the audience expected to see a Chandrashekar or Srinivasan. They were surprised and puzzled when Gabriel Rozman, a Uruguyan came on the stage. The Argentine dignitary sitting on the stage next to me shrugged his shoulders,raised his eyebrows and looked at me. I told him Gabriel Rozman is a Uruguyan of Hungarian origin, holding a US passport. Most of the time he is up in the sky in planes crisscrossing the oceans. Even when he is next to you, he is constantly fiddling with his Blackberry. He has houses in Punta de Leste, Buenos Aires and NewYork and may be he is buying one in Mumbai.

Picture above: Rozman speaking at the Seminar.

It is not only the audience in Argentina who are puzzled by the unexpected Rozman-TCS combination. Clients in Latin America, US, Europe and the emerging markets are also taken aback when Rozman markets TCS services to them. He reels off the history and reputation of TCS and Tata Group with passion and pride. His opening line is ¨somos el grupo mas importante de la India - We are the most important group of India¨. Rozman is a regular speaker on India and IT at the international and regional business conferences in Latin America.

Rozman joined TCS in 2001 and started the company´s operations in Uruguay in 2002 with 15 staff. Today the company employs 800 Uruguyans and plans to expand and double the strength in the next few years. The Uruguay Center of TCS provides offshore IT services to US, Europe and Latin America. Being a small country, Uruguyan IT human resources are obviously limited. To meet this challenge, TCS has started a Regional Training Center in Montevideo for Uruguyans and Latin Americans. This has already trained over 500 professionals and the target is 3000 within the next two years.

When Rozman proposed to TCS that Montevideo would be the launching pad for Latin America, the bosses in Mumbai were skeptical. They knew Brazil, Argentina and Mexico. But Uruguay.... hmm... such a small country with a tiny amount of human resources and unviable local market ! To answer these questions and convince the company, Gabriel arranged the visit of Ratan Tata, the Chairman of the Tata Group to Uruguay in January 2004. Tata had readily agreed after seeing the business climate of Uruguay and the seriousness of the Uruguyans.

Picture above: from left to right, Rozman, Ramadorai CEO of TCS, Rattan Tata and Battle President of Uruguay.
To my knowledege, this was the first ever business visit of Ratan Tata to Latin America. It was after this visit that the Tata group has started taking Latin America seriously.

From Uruguay, Rozman expanded the TCS operations to Brazil, Argentina, Mexico, Ecuador, Colombia and Chile through the organic as well as the inorganic route. Rozman managed to get President Felipe Calderon himself to inagurate the Mexican centre of TCS in 2007. Rozman got two large contracts of more than 150 million dollars each from Banco Pichincha in Ecuador and the Mexican pension fund system. Six percent of the global revenue of TCS comes from Latin America.
Currently, TCS employs around 6000 Latin Americans including 2000 Chileans, 1700 Brazilians, 1000 Mexicans, , 800 Uruguayans, 150 Argentines and a few hundred Ecuadorians and Colombians. Latin Americans form 48% of the non-Indian staff of TCS, whose total strength is close to 100,000.

Rozman´s conquest of Latin America lead to his promotion in January 2008 from Head of Iberoamerica to the next level of Executive Vice President for Emerging Markets. As part of TCS’ Executive Leadership team, he is responsible for leading the company’s strategy to enter new markets and other strategic corporate initiatives.

Rozman is undoubtedly the secret behind the success of TCS in Latin America. I remember when I was Consul General in Sao Paulo, TCS was struggling to enter Latin America through Brazil. The Indian representative of TCS who was working on the Latin America entry strategy in SaoPaulo was frustrated that despite the impeccable reputation and competitive pricing the Latin Americans did not take TCS seriously. The Latin American clients were willing to pay more to North American IT companies who would in turn outsource the job to India. It was Rozman, with his multicultural skills, who changed their mindset and made them feel confident and comfortable in dealing directly with Indian IT companies. Rozman´s Latino charm, understanding of Indian culture and American style of aggressive marketing paid off. It was only after his success in opening Latin America for TCS that other Indian IT companies including Infosys, WIPRO have started entering this region. But the business of other Indian IT companies is a very small fraction of the turnover of TCS in the region even now.

Rozman has used diplomacy too. He has succeeded in convincing Ramadorai, the CEO of TCS to become the Honorary Consul of Uruguay in Mumbai. I guess the patriotism of Rozman is also behind the success of a Uruguyan architect Carlos Ott who got a contract to build the 250 million dollar IT complex of TCS in Chennai. It will be one of the largest IT complexes in the world with 30,000 staff .

The TCS success in Latin America has pioneered a new 12/ 12 business model for Indian IT companies for delivery of offshore services to North American clients. Twelve hours of service from Latin America ( the same time zone as that of North America) and twelve hours from India. This is better than the 24/7 model in which Indians dont get time to sleep. In the 12/12 model. the Indians get time to sleep while the Latin Americans work !
The second advantage is the multilingual skills of the Latin Americans. They are proficient in Spanish, Portuguese,Italian, French and German since their grandparents or great parents came from Europe. Of course, many graduates speak English. One should also remember that USA has about 50 million Hispanics who have become the largest minority there and Latin America is a base from which to reach out to the US Hispanic market.
Latin America, like India, has lot of young people. They are better tuned to American and European culture, fashion and mindset than the Indians. They are also creative, imaginative and free-spirited. These traits are especially useful for design and creative work.
Gabriel Rozman-TCS success is an example of the emerging strategic win-win partnership between India and Latin America in the IT sector. I hope this will be an inspiration for more Latino Rozmans and Indian companies.

Tuesday, July 14, 2009

cost of living in Latin American cities

According to a Mercer survey, quoted by Latin Business Chronicle of July 2009,

Caracas has replaced Sao Paulo as the most expensive city in Latin America for foreign executives. Caracas is now more expensive than cities like London and Helsinki.

The survey looks at the comparative cost of over 200 items, including housing, transport, food, clothing, household goods and entertainment in 143 cities worldwide, including 16 in Latin America.

Other cities that became more expensive since the last year survey include Buenos Aires, Panama City, Santo Domingo and Quito.

Monterrey in Mexico has replaced Paraguay's capital Asuncion as the least expensive city in Latin America.
Cities that became less expensive include Sao Paulo, Rio de Janeiro, Guatemala City, Bogota, Lima, Santiago, Montevideo, San Jose, Mexico City, Asuncion and Monterrey.

Here is the list of Latin American cities with their world ranking in terms of cost of living:

World Rank - City

15 -Caracas, Venezuela
72 -Sao Paulo, Brazil
73 -Rio de Janeiro, Brazil
93-Panama City, Panama
104-Santo Domingo, Dom. Rep.
112-Buenos Aires, Argentina
119-Guatemala City, Guatemala
120-Bogota, Colombia
122-Lima, Peru
128-Santiago, Chile
131-Montevideo, Uruguay
132-San Jose, Costa Rica
136-Quito, Ecuador
137- Mexico City, Mexico
141-Asuncion, Paraguay
143-Monterrey, Mexico

Thursday, June 25, 2009

Elgi launches 100% subsidiary in Brazil

Elgi Equipments, a leading manufacturer of compressors in India has launched a 100% subsidiary at Sao Paolo in Brazil to directly market its products. It would also start manufacturing the products in the country soon.

Elgi is based in Coimbatore in the state of Tamilnadu.

"Initially, the new company would concentrate on marketing our products in Brazil. We would import the products from India and then stock them in a warehouse and make it available off-the-shelf," said Elgi Equipments MD Jairam Varadaraj.

Elgi has made the first stage investment of around two million dollars. After an 18-24 months gestation period, the new company would set up a manufacturing plant and commence commercial production, he said. ‘Elgi Compressores Do Brazil’ would engage in marketing of electric and diesel screw compressors. It would also set up a wide network of distributors with main focus on service and after marketproducts.

"So far, we sold close to 100 pieces in Brazil through distributors. Since we find acceptance for our products, we decided to start a new company to sell our products there," V T Govindarajan, Director – Global Business, Elgi Equipments told Economic Times of India.

He said Brazil accounts for about 4% share of the global market for industrial compressors. "We are aiming to capture 10% of the Brazil market for screw compressors within a period of four years" Mr Govindarajan added.

Last year, Elgi established two overseas subsidiaries, one in Sharjah in the Gulf and ‘ a wholly owned manufacturing plant at Jiaxing in China with a marketing office in Shanghai. In 2008-09, Elgi’s compressor segment posted a turnover of Rs 471 crores, of which 17 % was from international operations.

Tuesday, June 23, 2009

Patni Computer Systems Opens First Delivery Center in Latin America- June 2009

Patni Computer Systems of India announced the opening of a new delivery center in Queretaro,Mexico to augment its global delivery capabilities and serve the North American and Latin American markets. The Center will offer Patni’s full range of services and solutions covering IT consulting, software development outsourcing, contact center operations and business process outsourcing.

Patni is opening the delivery center in a temporary facility in Tecnologico de Monterrey’s Queretaro campus with an initial seating capacity of about 100 full-time workers. The center will move to a permanent location at Technology Park of Tech De Monterrey in October this year. Patni is planning to gradually expand employment to about 300, with the bulk of the jobs being filled with local workers.

With an employee strength of over 14,500; multiple global delivery centers spread across 12 cities worldwide; 27 international offices across the Americas, Europe and Asia-Pacific; Patni has registered revenues of US$ 719 million for the year 2008.

Saturday, June 20, 2009

TCS opens third Global Delivery centre in Mexico

Tata Consultancy Services (TCS) has opened its third global delivery centre in Queretaro, Mexico and seventh in Latin America. The other two Mexican centres are in Mexico City and Guadalajara in Jalisco state.

The company expects to hire 500 professionals during the current financial year for its new centre. With over 1,000 people in Mexico alone, TCS plans to take the headcount to 5,000 by 2012.

TCS has a presence in Brazil, Chile, Argentina, Uruguay and Mexico. The total headcount in Latin America is over 5,000. Contribution from Ibero America, which covers Latin America, was 4.7 per cent of the company’s revenue for 2008-9.

The new delivery centre in Mexico will provide advanced IT services, consultancy, test factory, business process outsourcing, contact center, IT infrastructure solutions, industrial & engineering services and solutions based on exclusive TCS products to existing and potential customers.

TCS established its operations in Mexico in 2003 and already serves more than 30 local clients in addition to international clients across various industries, including telecom, finance, banking, manufacture and retail.

Monday, June 15, 2009

Infosys Opening unit in Brazil

India’s second biggest software exporter Infosys Technologies plans to open a software development and back office centre in Brazil later this year, as the company seeks to serve its US customers better by establishing a near-shore presence.

Apart from being a local delivery centre, the new unit will also help Infosys gain more business from the regional market, V Balakrishnan, chief financial officer of Infosys, told Economic Tiems of India in an interview. “Some of our US customers asked for a centre in Brazil, as the country falls in the same time zone,” Mr Balakrishnan said. The centre is expected to begin its operations within next three-four months, and is expected to employ around 100 professionals initially across the functions of IT and back office projects.

TCS and Wipro already have centres in Brazil. While TCS has around 1,700 people in Brazil with development centres in Brasilia and Sao Paulo servicing around 30 clients, Wipro has a BPO centre in Curitiba providing shared services to AmBev, a leading brewery company.

Brazil recorded IT exports worth $1.4 billion for 2008 registering 75% percent growth and employs around 1.7 million people in the sector. Infosys joins the likes of TCS and Wipro Technologies in having their operations in Brazil.

Saturday, May 30, 2009

Simmar Pal Singh - Peanut Prince in Argentina

During my golf game at the Rio Cuarto Country Club on 16 May, the Argentine players asked me where they could buy a Turban and how to wear it. I asked them the reason for this special interest. They showed me a villa within the country club complex and said ¨Here lives an Indian Maharaja. He looks handsome with his Turban. When he goes to the night clubs , he gets premium service and gets it free because they think he is a Maharaja.¨ The Argentines wanted to wear Turbans and get the same special treatment at the night clubs.

The envy of the Argentines is Simmar Pal Singh, a Sikh from India. I clarified to the Argentines that Turbans do not mean Maharajas. They asked me to shut up and not to reveal this secret at the night clubs ! I told them that Simmar Pal is not a Maharaja by birth but has become a Peanut Prince of Argentina.

Here is Simmar Pal in dark suit on the left. In the middle is Nityanand, from Coimbatore, who is the manager of the peanut processing plant. On the right is Narinder Pal Singh, Olam manager in Brazil.

Simmar Pal Singh cultivates 12,000 hectares of peanut farms and another 5000 hectares of soya and corn in Rio Cuarto area in Cordoba province, about one thousand kms from Buenos Aires. His target is to take his company Olam among Argentina´s top three peanut players in the next few years. When he came to Argentina in 2005, his company was 28th in ranking in peanuts and he has already made it as sixth this year. Argentina is the second largest exporter of peanuts after China, accounting for 25% of the world trade in kernels. Rio Cuarto region produces high-quality peanuts with its ideal soil and agroclimatic conditions.

During the dinner at his home, Simmar Pal's wife Harpreet Kaur, an architect with an M.Tech from IIT Delhi, laughed when I told her about the Argentine interest in Turbans. She said that Simmar Pal might have gone to the night club to check the peanuts his company had supplied to the club to serve with the drinks. I believe her. Simmar Pal works sixteen hours a day and has no time for night clubs. This modest young man from Amritsar has fiery ambitions, exceptional talents and is motivated by his success in the last five years. Simmar Pal did his B.Sc Honours in Agriculture from Guru Nanak Dev University and Masters degree in Rural Management from IRMA, Anand. He has worked in Mozambique, Ivory Coast and Ghana before coming to Argentina. He speaks Spanish fluently and his wife and two children have adopted to the life in Rio Cuarto, a small city of 140,000 people.

Simmar Pal works for Olam, the 5.6 - billion dollar Non-Resident Indian company headquarterd in Singapore. It is a leading global supply chain manager of agricultural products and food ingredients. Their 9000 employees worldwide operate an integrated supply chain for 20 products in 60 countries. It is a global leader in many of these businesses including Cocoa, Coffee, Cashew, Sheanuts, Sesame, Rice, Cotton and Teak Wood. Olam has a turnover of 500 million dollars in Brazil and employs 930 Brazilians. In their operations in Colombia and Peru they have sixty employees. More info

Simmar Pal came to Argentina in 2005 for buying peanuts for the company. When he found that the farmers preferred to sell their products to established companies and were hesitant to deal with new buyers, he proposed to his company that they should go into farming themselves. This was something new for the company which had been operating only in the field of trading and processing. Seeing the fire in Simmarpal´s belly and shine in his eyes, they wanted to give him a chance. He started off with leasing of 700 hectares of land and grew peanuts. It was a sucess. The company let him lease additional acreage. This year he has cultivated 17000 hectares including 2000 hectares in the province of salta about 700 kms away from Rio Cuarto. He has plans to continue the increase in acreage and grow other crops such as wheat, soya and pulses. Some of these and especially pulses could be exported to India.

Picture below is Peanut harvesting by the machine in Simmar Pal´s farm:

Olam has acquired two peanut processing plants. When I went to visit one of the plants, the mayor of the village Dalmacio Velez, of 2000 people, was there. He made a speech expressing his happiness with Olam which has turned around the factory and has given jobs to his village people.

Simmar Pal employs 140 Argentines, most of them in the processing plants. In the farm, he has very few people since the farming in Argentina is mechanised and everything is outsourced. Simmarpal contracts other companies for seeding, spraying of pesticides, harvesting etc. I did not mention ploughing because, in Argentina they dont plough the land anymore. They practise what is called as Direct Seeding ( siembre directa) which means they dont prepare the land with ploughing after the previous harvest. They let the residues from the previous harvest to rot and become manure. Seeding is done with a special machine which puts the seed inside the earth along with fertilisers without opening the earth around the seed.The land retains its moisture and organic materials. This is environment-friendly and sustainable agriculture.

The farming in Argentina is done in large scale, technology-driven and is globally competetive. It is done commercially, scientifically and professionally. The farmers consider 2000 hectares as the minimum land holding necessary to do cultivation on their own. When they have less, or when they dont want to dirty their hands, they rent out their land to companies and individuals who do professional cultivation in large scale. Seventy percent of the cultivation in Argentina is on rented land. Simmarpal paid last year 700 dollars per hectare. He has rented the 17000 hectares from 40 owners with holdings ranging from 40 hectares to 3000 hectares.

An Argentine company called as Los Grobo Group cultivates over 200,000 hectares with its professional management. I told the owner of this company, who has got his own aircraft, that the secret of his success is his previous incarnation in Gujarat. His name is Grobocopatel.... Patel is the last part of his name and the gene behind his entrepreunerial talent! No wonder, he is a follower of Saibaba and practises meditation and yoga.

Simmar Pal employs four agronomists and pays them 45,000 dollars each per year. He uses the consultancy services of four more agronomists. The Argentine agronomists get as much salary and prestige as the software specialists. Last week, I visited the farm of a friend Francisco Okecki in Buenos Aires. He is an agronomist who manages 20,000 hectares including 1000 hecatres which belong to him. He is so passionate about agriculture as much as as I am about Latin America.

What Simmar Pal Singh is doing in Argentina has a lesson for India, which is going to face in the long term shortage of agricultural land and water for irrigation for its population which is increasing by 15 million per year and a population equal to Argentina every 32 months ! But Argentina, which has almost the same area as that of India has a small population of 4o million and plenty of land and water. Argentina is an agricultural power house. It exports 50% of its agriproduction of 100 million tons. It is the world’s largest exporter of soy oil and sunflower oil, the second largest exporter of corn, third largest producer of beef , soyabeans and biodiesel and fourth largest of wheat. Argentina is the fifth largest producer of wine in the world. It has significant potential to increase its area under cultivation ( from the mere 32 million hectares at present, in contrast to India´s 130 million hectares ) and production.

In India, we have irrigation canals, dams, ground water pumps and issues of water table going down and free electricity for farmers. Argentines are free from these issues since their agriculture is almost entirely rain-fed. There is irrigation only for a few specialist farms and some vineyards. Indra, the Rain God takes care of the rest !

Argentina has developed an efficient infrastructure, logistics and network for transportation and shipping. The food processing industries of Argentina are one of the most advanced in the world and globally competitive. For example, the oil crushing capacity of Argentina is the third highest in the world- even ahead of Brazil- with the latest technology and plants.

The Argentines have innovated a new system of storage of grains in open air instead of expensive concrete and steel silos. They have developed polythene silobags which can store 200-400 tons on the field itself. The grains are pumped into the bag by a machine and can be stored for upto 15 months. The bag is ripped open at the time of transfer to the trucks. The Argentines have exported this new technology and bags to a number of countries and want to export to India too. Cost of this new type of storage is four dollars per ton.

Argentina could be a longterm source of supply of grains, oil seeds and pulses to India. Already India is importing from Argentina soya and sunflower oil for about 700 million dollars a year. There are occasional imports of wheat.

The Indians could go beyond imports and invest in Agribusiness in Argentina. There is no restriction on foreign investment in agriculture in Argentina. A number of foreign companies and individuals own land here. Cost of the most productive land is 15,000 dollars, which, I am told is cheaper than in Punjab. The Argentine yield per hectare is about three times higher than that of India in soya, peanuts and some other crops. The Solvent Extractors Association of India has formed a Consortium of companies interested in investment in agribusiness in South America.

I hope the Indian enterpreneurs will come to invest in Argentina, inspired by the successful example of Peanut Prince.... Simmar Pal Singh !

They should not forget the Turbans...

Monday, May 25, 2009

China becomes the biggest trading partner of Brazil

In the first four months of 2009, China, overtook USA, as the biggest trading partner of Brazil. The bilateral trade will increse more with the following two agreements signed during the visit of President Lula to China last week:

Beijing announced a 10 billion dollar loan to Petrobras in exchange for supply of 200,000 barrels of crude oil over the next ten years.

The Chinese agreed to lift restrictions on import of Brazilian chicken and agreed to import more meat from Brazil.

Incidentally, Brazil is the largest exporter of chicken in the world. Their exprts in 2007 were 3.2 million tons

Agreements were also signed for supply of bio fuel to China, joint launch of two satellites etc.

Friday, May 22, 2009

Mexican multiplex chain to invest in India

Mexican global multiplex operator Cinepolis plans to invest 340 million dollars in India for its film exhibition business over the next seven years. It has already established an Indian subsidiary that is in talks with mall developers for opening 500 movie screens by 2016. In the first phase of expansion, the company will open 110 screens across eight locations. The company said it will open its first multiplex in India by the second half of this year.

A $675 million film exhibition company, Cinepolis operates over 2,000 screens globally, 90 per cent of which are located in Mexico. The company, which is currently the fifth largest theatre chain in the world, is aiming to move up in the ladder to the fourth slot and its India venture is part of the company's plans to expand its global footprint.

Cinepolis also plans to introduce the concept of a megaplex where each theatre will have up to 14 screens. "We will make India the country with our largest presence outside Mexico. We will open around 500 screens in the next seven years and for every screen, we will be spending around $700,000," Cinepolis India country head Milan Saini said today at the launch. "We are also looking at launching our operations at a smaller scales, whereby we may convert some of the single screens into multi-screen property. There is a space constraint issue here and we have to adjust our business plans accordingly," Saini said. Most of the fund would go in rentals and developing of screens and the amount would be funded by internal accruals, he added.

Source- IBEF

Wednesday, April 22, 2009

Latin American economies expected to contract in 2009

According to the April 2009 World Economic Outlook issued by IMF, the Latin American region will suffer GDP contraction of 1.5 % in 2009. The region grew by 4.2 % in 2008.

Mexico will be the worst hit with a contraction of 3.7%, while Brazil´s GDP will reduce by 1.3% and that of Argentina by 1.5%.

Bucking the trend, Peru will see a GDP growth of 3.5%, followed by Uruguay with 1.3% and Central America by 1.1%.

Average inflation of the region in 2009 is forecast to decline to 6.6% from 7.9% in 2008.

The region’s current account deficit will widen to 2.2 percent of gross domestic product in 2009, from about 0.75 percent in 2008.

The IMF predicts the region’s economy will rebound in 2010, expanding 1.6 percent. In 2009, Mexico will see a 3.7 percent contraction in GDP, while Venezuela’s economy will shrink 2.2 percent, the report said.

Saturday, March 21, 2009

New Flight connection from India to South America

South African Airways is starting direct flights from Johannesburg to Buenos Aires from 1 April 2009. Here are the schedules:

From Buenos Aires – J-burg – Mumbai
Weds and Fridays :
Buenos Aires – J’burg 1930 – 0855 hrsJ’Burg – Mumbai – 1130 – 0030 hrs

From Mumbai- J’burg – Buenos Aires
Weds-Fridays and Sundays:
Mumbai-J’burg 0230 -0755 hrs J’Burg – Buenos Aires 0950-1730 hrs

This connection has two advantages over connection through Europe. It is cheaper. Secondly there is no need for transit visa in Johannesberg. In the case of Europe, transit visa is needed to pass through airports such as Paris, Frankfurt and London.

Similiar advantage is there in the case of the Emirates direct flight between Dubai and Sao Paulo.

Wednesday, February 04, 2009

Latin America and the financial crisis - Article by Jorge Heine

Here is the Article of Prof Jorge Heine published in Hindu newspaper of 4 feb 09.

Jorge Heine holds the Chair in Global Governance at the Balsillie School of International Affairs and is a Distinguished Fellow at the Centre for International Governance Innovation in Waterloo, Ontario. He serves currently as Vice-President of the International Political Science Association.

He was earlier the Ambassor of Chile to India. He is the top India expert from Latin America

Latin America and the financial crisis

For the first time in a century, Latin America has managed to at least partially “cushion” itself from the seismic waves of economic turmoil in the U.S. and Europe.
The United Kingdom will face a 2.8 per cent negative growth rate in 2009, the worst economic performance since World War II (in fact, the British economy has already shrunk by 2.7 per cent since last April). In Spain, unemployment has reached 14 per cent, and the government is offering a “golden handshake” to recent immigrants to leave the country for three years. Ireland, so often held up as an example for the developing world because of its relentless tax-cut ting, is in dire straits, and Iceland is bankrupt.
In the United States, Dow Jones slipped below 8000 in the very week President Barack Obama took office, the automobile industry continues its downward spiral (Toyota has already displaced GM as the world’s largest automaker) and in one day in January, some leading companies announced shedding 72,000 jobs. In California, unemployment is just below 10 per cent, and the State faces a staggering deficit. In Canada, which lost 34,000 in December, Ontario, the nation’s industrial heartland (40 per cent of Canada’s GDP), is in trouble and looking for ways to renegotiate existing financial arrangements with Ottawa.
Projections indicate that the developed world will have a negative growth in 2009. What about Latin America?
The standard line is that “when the United States sneezes, Latin America catches a cold.” And that was exactly what happened in the past. The Great Depression had a devastating effect on Latin America — so much so that in the late 1930s and early 1940s, it begot the import-substitution-industrialisation (ISI) strategy, as governments realised that in times of global slowdowns they could not be left at the mercy of having enough hard currency to buy essential goods from the industrialised North; they needed some installed capacity of their own.
Something similar happened in the early 1980s when rising interest rates in the U.S. pushed the region into its worst debt crisis and a “lost decade,” in which countries like Chile saw 14 per cent negative growth in 1982 and unemployment rates of 30 to 35 per cent for several years. According to the conventional wisdom, Latin American economies should be in the doldrums, with the Northern recessionary waves hitting Southern shores with a multiplier effect leading to an even deeper economic downturn there.
Yet, this isn’t happening. Yes, this is a global recession and the region has not been spared. Growth will be cut in half; commodity prices have dropped and so have export volumes, thus affecting regional exports which reached a record $902 billion in 2008. International credit has tightened, and some projected FDI is not materialising. Remittances to the region, which also reached a record ($67 billion) in 2008, will take a hit.
After six consecutive years of over 4 per cent economic growth rates, the region is projected to grow 1.9 per cent in 2009. Unemployment, at 7.5 per cent in 2008, is projected to rise to between 7.8 and 8.1 per cent. Whatever else it may be, this is not a recession.
Countries like Peru, the star economic performer over the past few years, may grow as much as 5 per cent in 2009, with smaller economies like Cuba, Panama and Uruguay clocking 4 per cent or more. And the larger economies like Argentina (2.6 per cent), Brazil (2.1 per cent), Chile (2 per cent) and Venezuela (3 per cent) should perform quite respectably. In fact, South America as a whole, according to ECLAC, will grow at 2.4 per cent. It is Mexico (0.5 per cent) and many Central American and Caribbean nations that will be especially affected by the drop in tourism and in remittances and by lower demand in the U.S. market.
This does not mean that if the financial meltdown continues to wreak havoc on the North and the economic wreckage is extended over time, it will not eventually have a greater impact in Latin America. My point is a different one. For the first time in a century, Latin America has managed, if not totally, to “decouple,” at least to partially “cushion” itself from the seismic waves of economic turmoil in the U.S. and Europe, markets on which it traditionally depended. The fact that several countries from the region (Brazil, Mexico and Colombia) are placing bonds in international markets in these difficult times speaks for itself.
That this should happen at a time when eight of ten countries in South America are ruled by Left or Left-of-Centre parties is ironic. For much of this decade, we have repeatedly been told how Latin America, by veering towards the Left, was once again “missing the boat” on economic development, and how it risked being caught in a time warp, left behind by the twin imperatives of globalisation and economic interdependence, beholden to outmoded ideologies at a time of the end of ideology.
Instead of dollarising their economies (as Ecuador did in 2000, much to its subsequent chagrin) and opening themselves up to whatever Washington demanded, many countries (led by Brazil) preferred a different path, one that turned out to be not so misguided after all. If anything, many Latin American governments seem to have shown a better understanding of the perils of unfettered globalisation and “casino capitalism” than several of their counterparts in the North.
What does the Latin American Left stand for today and what has it done in government?
Far from the “populism” so much of the Western media labels it with, the modern Left in the region today embodies a set of beliefs very different from the mid-20th century populist movements associated with this term.
It is fully democratic, believing in free and fair elections, having strongly opposed the military regimes supported by the Right in the 1970s and 1980s; it is secular, standing apart from the integrista Catholicism of so many conservative forces in the region; it is committed to greater social equality in a region with the dubious distinction of having the highest economic inequality; it believes in diversifying trading and investment partners, as well as the number and variety of export products, thus moving away from the econom’a monoexportadora syndrome of the past; finally, it is fiscally responsible — starting from the premise that only by having macroeconomic equilibria (that is, if the government balances the books) and tackling inflation will you be able to make progress. Prudent economic policies combined with aggressive social programmes — like Brazil’s Bolsa de Familia or Chile‘s recent pension reform — are at the heart of this approach.
It is these principles and the policies that flow from them that have allowed the countries in the region to bring down their foreign debt from 37 per cent of the GDP in 2000 to 20 per cent today. They have permitted Brazil to start a $48-billion infrastructure programme, and Chile to launch a $4-billion stimulus package to deal with the global slowdown.
But the region being partially cushioned from the worst effects of the latter is also due to something else. For large export-oriented economies today, diversifying their export markets means targeting Asia. This is what South America’s leading economies have done. China, Japan, South Korea and India are the prize markets. For Chile, in 2007, China was its number one export market (displacing the U.S.), Japan was number three, South Korea six and India 10 (displacing Germany). Asia received 43 per cent of Chile’s exports that year; not surprisingly, a dip in the U.S. market, which gets a little over 20 per cent of Chilean exports, is not a major blow to its economy. Though Chile, because of its Asia-Pacific orientation, is a bit of an extreme case, for Argentina, Brazil and Peru the pattern is not too different.
In this context, a critical question is whether the “Asian giants,” China and India, will also be dragged down by the recession in North America and Western Europe. Initial indications are that they have already been, with their growth projections going down from double digits to 6-7 per cent. A second question is to what extent this growth will be export- or internal demand-driven. China’s $ 600-billion stimulus package is designed to pump up domestic demand in an economy that until now has been largely driven by exports. India, on the other hand, has based its high growth mostly on its internal market.
These are, make no mistake about it, perilous times, and the treacherous waters of the world economy need to be navigated with a steady compass. Nonetheless, it is refreshing to see, for once, that Latin America may well grow its way through a global recession, as opposed to being once again the region most seriously affected by it.

Wednesday, January 28, 2009

Brazil emerging as a major oil producer

Petrobras, the national oil company of Brazil has announced( January 2009) plans for investment of 174 billion dollars in the period 2009-13 in exploration and production of its newly discovered oil fields. The scale of investment is a confirmation of the emerging new status of Brazil as a major oil producer in the region and in the world.

production in 2008 was 2.18 million barrels per day and the target is 3.31 million by 2013 and 5.1 million by 2020.

Oil reserves in the new fields discovered in 2007 are said to be 100 billion barrels. The current level of proven reserves is 14 billion barrels.

This development is of direct interest to India and Indian business. We have been importing crude oil from Brazil for the last 4-5 years regularly.This can increase in the years to come and Brazil could be a regular source in Latin America besides venezuela, mexico and ecuador.

ONGC Videsh Ltd ( OVL) has already acquired some oil concessions in Brazil and has invested around a billion dollars.

Brazil has one of the best technologies and expertise for deep sea exploration and production.

Reliance which has been importing crude oil from Brazil has also been exporting diesel oil to Brazil regularly. In 2008 their exports of diesel oil was around 1.8 billion dollars, half of our total exports to Brazil last year. This is likey to continue for some more years since Brazilian refining capacity does not yet match its crude production or requirement of refined products.

More immediately, the massive Brazilian investment in the oil sector offers opportunities for our companies to supply equipments and machinery to the new projects.

Saturday, January 17, 2009

In 2008, Latin American growth slowed down but not India´s exports

According to the December 2008 report of ECLAC ( Economic Commission for LatAmerica and Caribbean) the GDP growth of Latin America and Caribbean in 2008 is estimated as 4.6%. This makes it as the sixth consecutive year of growth for the region, a record in the last forty years. From 2003 to 2007, the region grew by an annual average of 5%. The growth was combined with reduction in poverty, increase in employment and surplus of fiscal and external accounts in general.

Uruguay had the highest GDP growth of 11.5 % in Latin America. Peru was the number two with 9.4% followed by Panama with 9.2%. Brazil, the largest market of the region grew by 5.9% while Mexico the second largest market grew by 1.8% and Argentina the third largest market grew by 7%.

In 2009, GDP growth for the region is projected to decline to 1.9%, following the global crisis and slowdown of economies. The highest growth projected is 5% for Peru, followed by Panama at 4.5% and Uruguay 4%. The lowest growth predicted is 0.5% for Mexico. Brazil growth is forecast at 2.1% and that of Argentina 2.6%.

Although the region is better prepared than before to handle external shocks, the global crisis and slowdown will drive down export volumes and prices, remittances, foreign direct investment and the demand for tourism services. In addition, external financing will be more expensive and will be more difficult to obtain for the countries of the region.

Average inflation of the region is expected to go down to 6% in 2009 from 8.5% in 2008.

According to Latin Business Chronicle estimate, exports of the region in 2008 grew by 18% to 902 billion dollars. Imports increased by 23% to 857 billion dollars in 2008. Service exports went up by 18% to 116 billion dollars while imports increased by 20% to 145 billion.

India´s exports to the region had increased by 25% in 2008. Brazil remained as the top destination with 2.7 billion dollars. Mexico maintained its second position with 1012 million dollars in Jan- Sept, followed by Colombia with 452 million dollars in Jan-Oct, Peru with 478 million in Jan-Nov and Argentina with 386 million in Jan-November.