LatAm INVESTOR Magazine

Q2 2015The UK’s only Latin America-focused investment magazine

ALSO INSIDE:

Santander AM’s top Latin American fund managers explain their favourite investmentsMexico’s President, Enrique Peña Nieto, explains why UK investors should back Mexico

Analysis from Control Risks/Market Moving Events in Q2

LatAm INVESTOR Q2 2015|2

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Editorial Managing Director - James McKeigueLatin America Editorial Director - Carla FierroFinance Editor - Daniel MullarkeyAdvisor to the Editor - Edward Longhurst-PierceSenior Writer - Sam JollSenior Writer - Alisdair JonesSenior Markets Analyst - Cris HeatonCentral America Correspondent - Louisa ReynoldsPeru Correspondent - Darwin Cruz

Production and Commercial Art Director - Tania SchoemanAdvertising Sales - Terri HaddonHead of Digital - Ian Gibson

Editorial queries: [email protected] queries: [email protected]: [email protected]

Tel: 0207 097 5121www.latam-investor.com

EDITOR’S LETTER

Contents

Printed in the UK byThe Magazine Printing Company

using only paper from FSC/PEFC supplierswww.magprint.co.uk

A testing year ahead for Latin AmericaDear reader,

Spring has finally arrived and Britain no longer feels like such a cold, dark place to live and work in. Things are also looking up in Latin America, where economic growth has started to improve after a bleak 2014. According to London-based consultancy, Capital Economics, average growth across the region picked up in the fourth quarter of last year, reaching 1.5% from 1% in both the third and second quarters.

Of course the story changes from country to country. Latin America’s largest economy, Brazil, continues to struggle and most analysts expect GDP to contract by 1% in 2015. It’s a far cry from the heady days of 2010, when Brazilian GDP was expanding at 7.5% a year and British investors were piling into the country. The big question for investors is: when does Brazil become a buy again? We asked exactly that – and more – to Santander Asset Management’s top Latin American fund managers, Alfredo Mordezki and Jose Cuervo. You can read that interview on page 10.

The Mexican economy, on the other hand, is picking up speed. It’s still not growing at the pace that investors hope for ‘Mexico’s Moment’ but its definitely going in the right direction. As Mexican president, Enrique Peña Nieto, makes clear on page 48, the country is ready and waiting for British investors. Growth is also picking up in Peru and Chile, after a difficult 2014 for both. All three of these countries have been covered by LatAm INVESTOR special reports in recent issues, so if you want more detail on the opportunities there log on to www.latam-investor.com and download the digital version, for free, from the archives.

But perhaps the most interesting – and least understood – Latin American investment story at the moment is Ecuador. For the last eight years the country has been embarking on a major overhaul of its transport, energy and education infrastructure, which has helped to boost its systematic productivity. Now it is in the midst of an ambitious plan to change its productive matrix to create a more sophisticated and varied basket of exports. The dramatic fall in the oil price has added urgency to this plan and created

some exciting investment opportunities for British investors. We sent a team to Ecuador to investigate the situation on the ground and interview leading players from the public and private sector. The report they produced, after almost two months in the country, can be found in the middle of this issue and it is well worth a read. Ecuador may not be as fashionable an investment destination as the likes of Colombia and Peru, but that means that there’s more scope for interesting bargains.

Elsewhere in the magazine you’ll find our usual features. Analysts from leading financial information firm, Markit, crunch the numbers for us on page 8 to identify the latest Latin American investment trends, while on page 56 we have the latest upcoming private equity deals and projects in the region.

Finally, as always, I’d like to thank you, the readers. We received a lot of story ideas and interview suggestions in the last quarter – so thanks for that. We’ve incorporated as many of them as possible into this edition so please keep them coming. And if the quarterly wait for the next issue seems too long, remember you can keep up with breaking stories at www.latam-investor.com or via Twitter, LinkedIn or Facebook.

Until next time,James McKeigue

Editor’s Letter 3

Stories Behind the News 4

Market Analysis 8

Porfolio Manager Interview 10

Country Analysis 14

City View 16

Ecuador Report 19

Academic Analysis 46

Canning House 48

Investor Contacts Directory 50

Property 52

Latin America in the UK 54

Upcoming Deals 56


STORIES BEHIND THE NEWS

Americas Summit Cheers Investors

What’s happened: At an

historic Summit of the

Americas the US displayed

a new foreign policy that seems likely

to encourage increased trade and

investment within the Americas.

How will it affect investors? The

handshake and the one-hour ‘affable’

meeting tells us that the US and Cuba

are progressing firmly down the path

of friendship. Straight after the Summit

Cuba was removed from the US’s list of

countries sponsoring state terrorism,

a move that makes it much easier for

American firms to do business with

the country. Already a US telecoms

firm has signed a deal to provide long-

term telephony to Cuba while online

accommodation platform Airbnb has

started listing Cuban apartments for its

US customers.

The US has committed a lot of foreign

policy errors in Latin America but at the

Summit, Obama recognised that “the days

in which our agenda in this hemisphere

presumed that the United States could

meddle with impunity, those days are

past”.

This promise of a different policy in

the future bodes well for US-LatAm

relations. The rapprochement with Cuba,

for example, isn’t just about those two

countries. It also removed one of the

traditional obstacles to better relations

with the rest of Latin America. Likewise

when the US made the diplomatic

blunder of declaring Venezuela a ‘threat

to national security’, which went down

like a lead balloon with other Latin

American countries, it made amends by

sending Secretary of State officials to

Venezuela before the Summit. There was

even a short meeting between Obama

and Venezuelan president Maduro on the

sidelines of the conference.

America’s decision to re-engage with the

region, and its realisation that it has to

do so by building consensus, has good

consequences for investments in Latin

America and should help to boost asset

prices. There are also specific sectors that

will benefit. For example, prior to the

Summit, Obama visited the Caribbean

where he unveiled a new initiative to fund

renewable energy projects. The idea is to

help Central American and Caribbean

economies face up to an energy future

without Venezuelan subsidised oil. Overall

it was a good Summit for investors in the

region.

One is defintely going in October but will the other join her?

One is defintely going in October but will the other join her?


emerges it gets closer to Rousseff, who

was previously chairman of the Petrobras

board. So far there is no direct link to

Rousseff but most corruption-weary

Brazilians now assume that she must have

known something.

The other factor in the protests is Brazil’s

flat-lining economy. The country’s GDP

is expected to contract by around 1% in

2015, which would be its worst recession

in 25 years. This is compounded by strong

inflation, which will see price rises of

around 8% this year. Unfortunately for

Rousseff there is not much she can do to

counteract falling growth. With ratings

agencies increasingly negative on Brazil’s

sovereign debt she has been forced to

implement tax hikes and spending cuts,

which has fuelled public anger.

Most analysts still believe that Rousseff

won’t be impeached. Yet her survival as

a weakened president could well mean

that Brazil shies away from the difficult

decisions it needs to make to restore

its economic competitiveness. At some

point Brazil will become a ‘buy’ again

for international investors yet, with the

scandal and the economy continuing to

throw up nasty surprises, it may not be for

some time.

What’s happened? Two years into

his presidency, Enrique Peña Nieto is

struggling to convince voters that his

reforms will boost the economy.

How will it affect investors? When

Peña Nieto managed to pass a package

of historic reforms it heralded a new era

for Mexico’s economy. Economists always

recognised that these were long-term,

structural measures yet for a government

that won a close election victory it was

always vital that they showed short-

term benefits. In the last two years Peña

Nieto’s approval rating has been hit by

corruption scandals and security issues,

which means that he needs the reforms

to show some positive effects more than

ever. However, so far the results are mixed.

Economic growth has disappointed. It

had been hoped that the reforms would

unleash a wave of investment-led growth

Brazilian voters are getting angry

Brazil Protests as Economy Falters

What’s happened? Brazil’s economic

woes show no sign of improving, which

is piling the pressure on scandal-hit

president Dilma Rousseff.

How will it affect investors? Despite

winning election less than six months

ago, president Rousseff now finds her

popularity at just 13% - an all time low.

Much higher is the 63% of the population

that want to impeach her, according to a

poll by local pollster Datafolha. Even more

worrying for Rousseff is that disgruntled

voters are now taking to the streets,

with an estimated 1 million protestors

attending a recent anti-Rousseff march.

One reason for her plummeting

popularity is the ongoing Petrobras

scandal. This incredibly complex bribery

scheme involved contractors giving

kickbacks to politicians and Petrobras

executives in return for inflated contracts

being awarded and approved. Voters

have known about the scandal for more

than a year but as each fresh detail

Jury Out on Mexico’s Reforms


STORIES BEHIND THE NEWS

but that hasn’t really happened. Mexico’s

GDP grew 2.1% in 2015 and is expected

to grow by 2.8% this year, which, for many

Mexicans, isn’t enough to justify the

controversial reforms. One reason that

growth has slowed is the falling oil price.

It hit export revenues, which is forcing

the government to retrench spending

and means that state oil firm, Pemex, has

less to invest. It also looks like cooling

some of the interest in the landmark

energy reform that policymakers had

been hoping would attract large amounts

of foreign direct investment.

Yet there are some considerable silver

linings. The falling oil price has caused the

Mexican peso to depreciate – especially

against the strongly performing US dollar.

Given that 80% of Mexico’s exports go to

the US, this should give a big boost to

manufacturers. Indeed robust growth of

the manufacturing sector is one reason

Market Watch

that unemployment continues to fall,

although low wage growth means that

many Mexicans don’t feel better off –

hence their continued scepticism about

the reforms. Especially given that last

year’s tax reform has hit their disposable

income.

One area where the reforms seem to

have delivered is telecoms, where mobile

phone bills, which are some of the most

expensive in Latin America, have started

to come down. The electricity generation

reform, which doesn’t get as much

international investor attention as the

changes in the hydrocarbon sector, also

seems to be having an early effect, with

utility bills falling.

With his approval rating at a record low of

25% Peña Nieto will be hoping that more

sectors start to demonstrate the reform

impact over the coming years.

MARKET WATCH

Jan 7

Jan 15

Jan 22

Jan 30

Feb 6

Feb 13

Feb 20

Feb 27Mar 9

Mar 16

Mar 23

Mar 31

130

120

110

100

90

80

MERVAL Index

IBOV IndexMEXBOL IndexIGBC Index

127.75107.85104.96 89.10

Normalized as of 01/02/2015Last Price

Many Mexicans remain unconvinced

by Peña Nieto’s recipe for reform

The Argentine equity market was the star performer, with a 27% for the Merval gain over

the quarter. Colombia’s IGBC Index had the worst showing, down more than 10% since January.


What’s happened? Investors are

already starting to evaluate the likely

candidates for Argentina’s October

presidential elections and prepare for the

opportunities a new government may

bring.

How will it affect investors? As regular

LatAm INVESTOR readers will know,

Argentina’s stock market has been one of

the stronger performing Latin American

investments over the last 12 months.

It’s a striking example that orthodox

business environments aren’t always the

ones that produce the best returns. But

while the market may have performed

well, foreign direct investment has

remained low as investors shied away

from a Kirchner administration that was

perceived as confrontational towards

large international investors.

Yet now, for the first time in more than a

decade, Argentina seems likely to have a

non-Kirchner government. The likely new

candidates are Daniel Scioli, Governor

of Buenos Aires Province, Mauricio

Macri, Mayor of Buenos Aires City, and

Sergio Massa, Mayor of Tigre. Despite

the fact that they hail from different

parties – Macri opposes the current

government while the others are part of

it – they will face the same issues when

they come to power. Namely: fixing the

fiscal imbalances, resolving the holdout

dispute and controlling inflation.

For ordinary Argentineans the high

inflation rate – estimated at about 40% - is

the biggest bugbear. It eats into the value

of their savings while obtaining hard

currency, such as dollars, is extremely

expensive because of an overvalued

official exchange rate. The inflation

is linked to the fiscal imbalance, as

Argentina is funding its deficit by money

printing, so any long-lasting solution to

the former would have to involve getting

the country’s books in order. The holdout

dispute is not really an issue for most

Argentines as many of them side with

the state against the funds that hold

defaulted sovereign paper. Yet whichever

candidate wins will probably be keen to

resolve the issue as it will open up access

to international capital markets and give

their administration more conventional

financing options.

Judging from early signs it seems that all

three will adopt a more market friendly

approach than current president Cristina

Kirchner. And with Argentine equities and

corporate bonds performing strongly it

appears that the market is also pricing

in a new era. Time will tell if investors are

being overly optimistic or if it really is

‘different this time’.

Currency Watch

Currency Last quarter Current rate to GBP* % Change from last quarter

Argentine peso (ARS) 13.05 13.15 -0.77

Brazilian real (BRL) 4.11 4.49 -9.25

Chilean peso (CLP) 937.32 909.56 2.96%

Colombian peso (COP) 3,629.56 3,717.82 -2.43

Peruvian nuevo sol (PEN) 4.52 4.63 -2.43

Mexican peso (MXN) 22.67 22.63 0.17

*As of 15/04/2015

Most currencies across the region depreciated against sterling over the last quarter. The worst performer was the Brazilian

real, which dropped almost 10%. However, the Chilean peso bucked the trend, gaining around 3% against the pound.

Investors Look to Post-Kirchner Argentina


MARKET ANALYSIS

It’s been another lively quarter for Latin American markets.Markit Senior Research Analyst, Colin Brunton, explains how it affects investors...

It was a tough quarter for manufacturers in both Brazil and Mexico.

In Brazil, hopes had been raised by a strong end to 2014, yet the first

few months of 2015 quickly dashed that optimism. In March we saw

the deepest decline in Brazil’s manufacturing output for three-and-

a-half years. One reason was the stagnant local economy, where

demand and new orders fell. Another issue is strong inflation, which

is pushing up costs. That also impacted the sector’s international

competitiveness and hit export order growth. Sadly there is still no

sign that the weaker real is having a positive impact on Brazilian

manufacturing exports.

Mexico has also had a poor start to the year but with one crucial

difference – Mexican manufacturing is still growing, albeit at a lower

price. Anything above 50 represents expansion and Mexico has now

been in this positive territory for a year-and-a-half. March saw the

slowest growth since October 2014 as manufacturers complained

that while the weaker peso was increasing the costs of imported

inputs it had yet to be reflected in greater exports. Nonetheless,

renewed hiring in the sector suggests that producers remain

optimistic.

HSBC Brazil Manufacturing PMI and HSBC Mexico Manufacturing PMI

48

49

51

52

53

54

56

57

50

58

PMI

55

BRAZIL MARKIT PMI

MEXICO MARKIT PMI

HSBC Brazil Manufacturing PMI and HSBC

April ‘13

May ‘13

Jun ‘13

Jul ‘1

3

Aug ‘13

Sep ‘13

Oct ‘13

Nov ‘13

Dec ‘13

Jan ‘14

Feb ‘14

Mar ‘14

Apr ‘14

May ‘14

Jun ‘14

Jul ‘1

4

Aug ‘14

Sep ‘14

Oct ‘14

Nov ‘14

Dec ‘14

Jan ‘15

Feb ‘15

Mar ‘15

© Markit Group Limited. These data are protected by copyright. No part of it may be reproduced, stored in a retrieval system or transmitted in any form or by any means.


in association with

19 Jan ‘1

4 Feb ‘15

18 Feb ‘15

5 Mar

‘15

18 Mar

‘15

1 Apri ‘

15

1 Jan ‘15

50

100

150

200

250

300

BRAZIL MEXICO COLOMBIACHILE PERU

Markit LatAm Sovereign 5-Year CDS

120

119

118

117

121

122

123

20 Jan ‘1

4 Feb ‘15

20 Feb ‘15

5 Mar

‘15

11 Mar

‘15

18 Mar

‘15

31 Mar

‘15

6 Jan ‘15

Markit iBoxx USD Emerging Markets

Brazil was the major story of the quarter. Spreads rose from January

to March as investors digested the constant flow of bad economic

news coming out of the country and priced in another ratings

agency downgrade. Yet when ratings agency S&P did downgrade

Brazil it was by less than expected and didn’t relegate the paper of

Latin America’s largest economy to junk bond status just yet. That

was followed by a particularly dovish Federal Reserve meeting that

gave Brazil, and the rest of the region, a reprieve as it downplayed

the likelihood of imminent US rate rises. The result is that all spreads

started to move down at the end of the quarter.

For the first time in a long time it was

a good quarter for holders of Latin

American sovereign debt, as US dollar

denominated debt gained almost

1% over the period on a total return

basis. Improved growth in countries

like Chile, Mexico and Peru, coupled

with the dovish Federal Reserve

meeting, helped to stoke demand

among international investors for

LatAm debt.



Markit iBoxx USD Emerging Markets Sovereigns Latin America Index


PORTFOLIO MANAGER INTERVIEW

LAI: One of the biggest investment themes at the moment is falling oil; how will lower prices affect Latin America?

JC: To answer that you need to take one step back and make some

sort of forecast. That’s never easy with oil but ask yourself: are we

likely to see oil at $40 for the next five years or will we have some

sort of a rebound? If you look at the fundamentals they point to oil

at around $65 as that’s the price at which marginal supply equates

to marginal demand. So it should revert to that unless there are big

changes in the industry.

But that’s not going to happen in the short-term because there are

many incentives for high-cost producers to carry on for longer than

you would think. For example some are hedged for most of 2015 so

they’re not really feeling the pain yet. But after that it should gyrate

back.

If we look at Mexico it is hedged for 2015, so it’s fine for this year. If

oil bounces back to $65 by 2016 then Mexico is OK. The big driver

in Mexico is the energy reform and most of that will get done at

$65 – so in that scenario it won’t be a big hit for Mexican economy.

Colombia on the other hand is affected more directly and it also

has a greater fiscal impact from low oil. In Colombia you see many

projects just being shut down and capex will come back quite a bit,

AM: If you look at the whole of Latin America you see Venezuela,

Colombia and Mexico are really the only ones hit. That said there is

a wider array of possible consequences. For example, in Argentina

you’d expect that low oil prices would hurt the Vaca Muerta

shale development, which would reduce future FDI inflows and

international reserves replenishment. So there is a wide array of

implications, but you must remember that there are also a lot of

countries that are actually oil importers in Latin America.

LAI: Brazil has had a terrible few years; has it got to the point where it’s a buying opportunity for our readers?

AM: I think from the point of view of local rates, there is an

opportunity but looking at the currency itself we don’t think it’s

a great opportunity at present levels. In fact we forecast some

depreciation by the end of the year so we don’t think it has a lot of

potential. On the rates, especially short rates, that are discounting

stronger path of hiking there is an opportunity.

Latin America CallingSantander Asset Management has just moved its headquarters from Madrid to London. We sit down with two of its top LatAm fund managers to ask them where they’re putting their money at the moment…

Jose runs the Santander Asset Management Latin American

Equity Fund. He joined SAM in July 2011 and is responsible of

all of the firm’s regional Latin American equity investments. He

started his career in 1996 as a North American equities analyst

while at Philips, Hager & North Investment Management Ltd. in

Vancouver.

Alfredo runs the Santander Asset Management Corporate Bond

Fund. Alfredo joined SAM in 2010, and is responsible of all of the

firm’s regional Latin American fixed income investments. Before

joining SAM he worked for BBVA in New York and Madrid, as

head of Latin American Credit Trading. He has close to 20 years

financial experience.

Jose Cuervo – Global Head of LatAm Equity

Alfredo Mordezki – Global Head of LatAm Income


JC: The main problem with Brazil is the lack of productivity and it’s

an issue that goes back a few years. The strength of the real two

or three years ago was part of problem, so the weaker currency is

part of a solution. Of course a weaker currency will bring its own

problems in the form inflation, which is why the government is

trying to slow down consumption. But for investors looking at the

real you can’t realistically say that Brazil will come out of this with

stronger currency as it needs a weaker currency.

Another factor here is the currency swaps that the Central Bank has

been engaging in. At one point they’d swapped about 2/3rds of

their reserves away, which is extremely dangerous. They now seem

to be on a path to reduction, which if they take to zero, can only be

a negative for currency.

LAI: So where are the opportunities for LatAm INVESTOR readers?

JC: Brazil has an external imbalance, it has a current account deficit,

and policymakers will be looking to fix that. This means lower

consumption, higher investment and higher domestic industrial

production. So I think it’s fair to assume that over the next few

years anything to do with consumption will be weaker, while stocks

related to production or investment will be stronger.

2016 can be the year when we finally see the economy pick up.

I think equity market will focus on negatives over the next few

months but then later, once we get past some issues and we get

some good signs, then multiples will go up. Earnings growth won’t

be there but multiples will go up.

AM: On the credit side we like the food industry. Brazil has a very

strong food industry and there are many interesting players there.

We have to go case by case, not everyone is in the same cycle. Cattle,

poultry, each subsector has its own dynamic and we need to look

at the leverage, credit quality and debt profile for each name but in

general it’s one of the sectors that we prefer.

The other interesting area is the pulp and paper sector, which

is a good exporter. Here we have already seen the capex cycle

going down because new facilities have been incorporated into

production, so free cashflow will increase, which is what we like. We

think it could be a safe haven in this environment.

LAI: And what about Mexico? It encouraged so much optimism but the jury is still out on whether it will deliver.

JC: From an equity point of view Mexico has always been an

interesting market because you can actually have a positive view

and have a negative position. For example, right now we have a

positive view on the Mexican economy and we think the potential

GDP in Mexico is probably going to have the biggest delta in Latin

America. We’re positive on industrial names that play to exports,

manufacturing, and reforms. But we’re negative on the consumption

side. That’s because the fiscal reform has added taxes and the oil

price is going to hit government spending so the consumer will be

subdued for a year or two.

So we’re positive on the general economy but because the equity

market is consumer focused – supermarkets, telecoms etc make up

80% of listed stocks – we’re not positive the Mexican market.

AM: We weren’t that bullish when everyone else was getting excited

about the big ‘Mexican Moment’. One reason was that we weren’t

sure if reforms would come out as the market hoped. Actually we

were wrong with that and we have to admit that the government

surprised us in a positive way, not only the passage of the reforms

but also the implementation of the legal framework that was put in

place. But even then, after the reforms, we still weren’t bullish. We

understood that tax reform would hit consumers and it would take

a while for the benefits of higher investment to compensate for that

because everyone was in ‘wait and see’ mode. We were right on that,

which is why we saw GDP growth doing nothing in the first year of

reform.

Now, however, we’re a bit more bullish. We think around 70% of

what was expected to come in from oil reform will still come in.

We are not seeing companies running scared because of the oil

price. We expect stronger companies, majors that have been in

the sector for a long time and have the financial muscle to finance

themselves even in this oil price environment, to be active in seeking

SANTANDER AM LATIN AMERICA EQUITY OPPORTUNITIES

Fund Benchmark

0%

2.4%

1.8%

0.6%32.5%33.1%

0%

50.6%49.9%

Brazil

Mexico

United States

Chile

Peru

9.9% 9.7%

2.9%

0%0.5% Others

Colombia

1.6%4.4%

Panama


TECHO, a youth-led NGO, present in 19 Latin American countries, engages corporations with local communities, to overcome poverty in the region.

To find out more about TECHO’s construction of housing, about our social development programmes or about how we are continuing efforts to over-come Latin American poverty from our new European office, write to our European Director Sebastian Smart ([email protected]).

“you can't see,but it exists”


PORFOLIO MANAGER INTERVIEW

opportunities. Maybe some particular niches, such as shale, may not

be as appealing as it would have been a year ago but we still expect

sizeable investments to come in.

LAI: In recent years many Latin American firms took advantage of low bond yields to raise record amounts dollar-denominated debt; is this increased leverage, especially with the rising dollar, a worry for investors?

No. The first flaw in this theory is that a lot of these bonds come

from a substitution from loan debt to corporate debt. Secondly, you

have deeper swap markets, so many of the companies that issued

in dollars were actually arbitraging and taking advantage of the

low rates and then swapping back into local currencies to match

their local currency revenues. The third factor is that much of the

dollar debt is matched by dollar revenues as you may find that many

companies with 100% of revenues denominated in dollars. The final

reason why these fears are misplaced is that in Latin America come

from the “Use of Proceeds” of this new debt. In the last four years,

40% of bonds issued have been dedicated to retire higher coupon

debt. So, new bonds don’t always mean extra leverage.

LAI: Of course Latin America is more than just Mexico and Brazil; can you tell our readers about some exciting opportunities in the rest of the region?

JC: There are times when smaller countries offer a lot of value

and times when they don’t. Right now they’re not so attractive.

The one non-consensus area where we are bullish on the equity

side is the salmon sector in Chile. For the most part they’re local

firms and they’re benefiting from great conditions at the moment.

There’s a very good demand supply imbalance. On the demand side

economic, demographic and health factors are pushing salmon

consumption upwards. On the supply side it is very limited and

takes time to increase. Chile had problems with a disease that wiped

out nearly a third of the salmon stock a few years back. A lot of new

regulations were put in place as a result and Chile now has some

of the healthiest salmon in the world. There is also a consolidation

going on, so it’s a good sector to be in and quite independent from

many other drivers that are moving things elsewhere.

AM: This year the Dominican Republic has been the Latin American

country with best performance regarding GDP growth: above 7%.

Even their local rates are very interesting, with double digit levels

in this world of zero interest rates. Local currency has also been

supported so real returns for dollar investors have been great. We

like Central America, which we play through some of the Colombian

banks that have been buying assets in Central America. We also

have some energy investments in El Salvador and some projects

SANTANDER LATIN AMERICAN CORPORATE BOND

Fund Benchmark

30.4%29.9%

Others

6.5%

5.7% 12.2%

Mexico

23.3% 14.1%

Brazil

11.7% 5.4%Chile

Colombia

Cayman Islands

4.8% 10%

9.3%

3.1%

12.9%

1.8%

8.9%

Peru

Panama

in Panama. Outside Central America we have investments in

Paraguayan banks that have been present in the corporate dollar

bond market and we’ve seen four different issues coming from

there. It’s a small country, a bit over exposed to the livestock sector

but still solid.

LAI: So is now a good time to buy into Latin America?

AM: I think that 2014 is the proof that you can be profitable without

being optimistic. There was a lot of volatility in the markets and the

return was quite positive. Now the most important point from a pure

corporate bond perspective is that we start the year very cheap, not

only compared to the US but also against other emerging markets.

I’m not saying that there is no reason for that but if you look at how

emerging markets sold off you see a huge disparity in corporate

credit levels between Asia and Latin America and investors should

profit from this. You need to do your homework but there is an

opportunity,

JC: I think there are sufficient reforms and policy changes on the

table in Brazil, Mexico and Colombia that suggest this is starting to

turn.

The key question is: when will the market stop looking at 2015, which

will not be a good year, and start pricing in possible improvements

in 2016? I think that will be the inflection point.


Venezuela, Latin America’s biggest oil producer, is in the grip of an economic and political crisis. Control Risks Analyst, Oliver Wack, looks at how it could play out during 2015…

A Bleak Outlook for Venezuela

Amid declining economic

indicators and growing political

polarisation, the pieces appear

to be falling into place for new violent

protests, political instability and an even

worse business environment. While these

developments hardly come as a shock

to those who have followed Venezuela

over the past few years, even seasoned

observers are impressed at the speed

with which things are unravelling, partly

as a result of the collapse of world crude

oil prices. The question of whether the

government will be willing – and able –

to make the necessary adjustments to the

economy will be decisive in determining

the future of President Nicolás Maduro,

his government, and the country as a

whole.

Weak presidentEver since he succeeded former

president Hugo Chávez (1999–2013) in a

controversial and extremely close election

following the latter’s death in March

2013, Maduro has been fighting an uphill

battle to combat deteriorating economic

indicators and put the economy on track

towards recovery; he also struggles with

declining popularity (around 24% in

December 2014 according to a Datanálisis

poll) and growing public discontent.

Despite being Chávez’s chosen successor,

Maduro’s governing style has suffered

from his lack of charisma and, as a result,

waning influence across different sectors

of the government and his party. This

means that the president has significantly

less decision-making power—including

on economic matters—than his

predecessor did.

Amid continuing debates within the

government over how to combat

runaway inflation – at more than 64%

in 2014 it was among the highest in the

world – the government has launched

an ‘economic offensive’– including ever

stricter enforcement of price controls, the

imposition of draconian fines on alleged

wrongdoers, and even the detention of

company executives – to combat alleged

speculation in food prices and hoarding.

However, these measures are unlikely

to have their desired effect given that

huge distortions in the economy, which

stem in part from the heavily regulated

foreign currency exchange and allocation

system, have gradually hollowed out the

country’s production and importation

capacity, leading to shortages of basic

products. Government price controls

further reduce incentives for producers.

This situation is aggravated by the fact

that Maduro does not only appear to

be in a weak position with regard to

popular support, but also within his

United Socialist Party of Venezuela

(PSUV) and more broadly within the

chavista movement itself. As a result, the

president has to tread a fine line between

attempting to make adjustments to fix the

economy on the one side and alienating

his support base in the population and

in his own rank and file on the other.

For example, government attempts to

dramatically overhaul the Byzantine

exchange rate system are rendered

more difficult by the fact that many

key stakeholders in the government,

including from the Bolivarian National

Guard (GNB) and the armed forces,

are benefiting very handsomely from

manipulating the exchange rate in their

favour. Likewise, the implementation of

announcements to reduce subsidies and

raise gasoline prices will have to consider

the significant backlash that this policy

may have especially with lower-income

Venezuelans. Maduro is therefore caught

between a rock and a hard place and, as

a result, government moves that could

genuinely put the economy back on track

will remain elusive for the foreseeable

future.

Growing angerHowever, the policy of muddling through

may no longer be a viable option,

and time may be running out for the

government. Even before the recent

drop in crude oil prices, the country’s

economic woes were having increasingly

political consequences. In early 2014,

student protests in San Cristóbal (Táchira

state) quickly spiralled into broader unrest

led by government critics across major

urban centres. The protests tapped into

general dissatisfaction about product

shortages, the country’s overall economic

trends, growing international isolation

and rising crime rates. They eventually

became violent with rioting, and semi-

Oliver Wack, Control Risks Analyst

COUNTRY ANALYSIS


permanent barricades mounted in major

cities including the capital Caracas,

San Cristóbal and Valencia. Repressive

policing and violent clashes between pro

and anti-government protesters led to

the deaths of more than 40 people across

the country. As the economy continues

its downward trend, three factors will be

chief in determining whether new rounds

of violent unrest will rock the country in

2015.

Firstly, with prices for Venezuelan crude

expected to stay below the $70 mark

for the rest of the year according to

analysis company Oxford Economics,

the government will continue to face a

considerable financing gap, with many

observers pointing to the fact that oil

prices would need to be more than

twice their current levels in order for it to

balance its budgets. Politically speaking,

the extent to which the government will

be able to maintain levels of spending,

and especially social spending, in the face

of reduced availability of hard currency

will be paramount in defining whether

at least lower-income Venezuelans, many

of whom continue to see the current

government as the lesser of two evils,

will continue to support Maduro, or will

eventually turn their backs on him and

take to the streets.

Secondly, low oil prices and the reduced

availability of foreign currency as a

result will also pour fuel on the existing

economic fire, given that they will make

it even harder for companies to import

raw-materials or consumer goods that are

missing on supermarket shelves. So far,

the government has had some success

in shielding at least its core supporters

from shortages. However, a dramatic

deterioration of the situation leading

to increased scarcity of basic consumer

goods, food items and pharmaceuticals

for lower-income Venezuelans would

likely be the straw that breaks the

camel’s back. If prices stay low the

situation will get increasingly difficult

for the government. Finally, much will

depend on the behaviour of the political

opposition in the face of the political and

economic situation. Deeply divided on

the issue during the protests in 2014, it

appears as though one year later there

is a growing consensus that protests

may not be the ideal tool with which

to pressure the government. Indeed,

government provocations such as the 20

February arrest of Caracas metropolitan

mayor Antonio Ledesma were not met by

outbreaks of rioting as opposition leaders

urged their followers to maintain calm.

However, as was evident in San Cristóbal

and to a lesser extent Caracas in February,

the student movement continues to

operate somewhat independently from

opposition political parties and it is at

least questionable to what extent it can

be controlled if the situation gets worse.

In that sense, a key issue to watch will be

the legislative elections scheduled for

later this year and the implications that,

for example, a government decision to

postpone or suspend the elections could

have.

Given this complex situation, companies

operating in Venezuela will continue to

face a range of legal, operational, security

and integrity challenges throughout

2015, and likely beyond.

Tough business environmentFor one, as the government becomes

increasingly desperate, the increase of

hostile rhetoric and populist policymaking

towards the private sector will increase. In

recent weeks, stepping up the so-called

‘economic war’ has led the government to

expand the verification of price controls,

publicly accuse companies of misdeeds

and – without waiting for companies’

justifications – to arrest senior executives,

occupy retail stores and take over their

operations. As the situation deteriorates,

the government remains highly likely to

use whatever tools are at its disposal to

persuade the broader public that it is not

only fighting, but indeed winning the

economic war.

Moreover, while street protests are

highly unlikely to directly target major

companies and foreign investors in the

country, incidental risks arising from the

high likelihood of outbreaks of violence

persist for all personnel living and working

in the proximity of frequent unrest

hotspots, which include upscale Caracas

neighbourhoods. The government’s

recent approval of the use of lethal force

against protesters, thereby significantly

raises the likelihood of armed violence.

2015 has already proven to be an

extremely interesting time in Venezuela,

and the rest of the year promises to

be equally as absorbing. For foreign

investors in particular, being prepared

to deal with the constant shifts in the

operating environment as well as likely

contingencies will be vital to ensuring

continued success in the market.

Surprisingly - things have been even

worse without Chavez ...

in association with


Lord Mayor of London, Alan Yarrow, reflects on the burgeoning trade and investment relationship between Latin America and the City…

Building Bridges

I recently had the honour of hosting Enrique Peña Nieto, the

Mexican President, at the City of London State Banquet. It was

a fitting time for such an event: the Latin American economy is

particularly vibrant at the moment, with many opportunities for

extremely exciting partnerships. During our discussions we touched

on a number of ways for the City to support Mexico’s growth.

Only last year my predecessor as Lord Mayor, Dame Fiona Woolf,

visited Latin America and I will follow in her footsteps in July this

year, taking in Mexico, Peru, Columbia and Brazil. Like all my overseas

visits I will be accompanied by a delegation of senior British business

leaders, and together we will try to drum up more business for the

“Square Mile’s” world-leading companies.

Mexico is an illustration of the region’s immense promise and its

economy looks very positive at present. It is an open market for

companies with an international outlook and there are exciting

opportunities for firms offering financial and professional services.

It also remained remarkably resilient during the financial crash, a

resilience that owes a great deal to its sound regulatory framework,

solid management of public finances and taxation reforms. These

rapid changes are mirrored to varying extents across the rest of Latin

America, which is enjoying stronger economic growth than Europe.

Growing linksFortunately, the UK is in a good position to take advantage of

this encouraging economic outlook. One factor is our strong

historical links. London was a centre of activity for the leaders and

supporters of independence movements across Latin America, in

time becoming more closely associated with the movement than

any other world power. For Mexico in particular we were the first

European country to recognise the country’s independence in the

mid-nineteenth century, a relationship that is still important to

Mexican administration. Indeed President Nieto has previously said

that the UK is one of ‘Mexico’s closest allies.’

But our position is strong for other, more current reasons as well.

Backed by a supportive government, our ambitious companies

are extremely keen to trade with Latin America. Through the

government’s efforts with the ‘Canning Agenda’ to re-balance the

economy, and move it away from its heavy reliance on the EU, we

are now seeing more focus on Latin America. We’ve opened new

Embassies in countries like El Salvador, Paraguay and Haiti and a

Consulate-General in Recife, Brazil. And we’re creating new networks

of trade experts to identify and promote trade opportunities for UK

companies. For British companies there has never been a better

time to trade with Latin America.

The Rt. Hon The Lord Mayor of the City of London, Alan Yarrow

CITY VIEW


Despite its current woes, the EU remains the world’s biggest

economic bloc, accounting for around a quarter of global GDP. It

is the biggest investor in Latin America, accounting for 43% of all

foreign direct investment in the region. In fact the EU invests more in

Latin America than in China, India and Russia combined. This trend

is likely to continue with the EU recently signing a number of trade

agreements with Latin American countries.

A lot done – more to doYet things are not always as good on the surface as they seem. The

UK still trades more than twice as much with Belgium than we do

with the whole of Latin America. As the former Foreign Secretary

William Hague put it, “for too long the British presence in Latin

American has been too small, too reticent and too modest.” Latin

America can offer UK companies huge growth opportunities, yet, UK

exports make up little more than 1% of Latin America’s total global

imports.

One of the key messages that I want to get across during my year as

Lord Mayor is that the City can be Latin America’s partner of choice.

Take an area like public private partnerships (PPP). The City has a

wealth of expertise and knowledge in the innovative financing

models that are needed to get visionary construction and

infrastructure programmes off the ground. One good example is

Latin America’s infrastructure programme offer great opportunities for the City’s finance firms.

the transport network in the Colombian capital, Bogotá. At present

Bogotá lacks an underground system. This undermines local efforts

to create a thriving economic hub as reliable and fast public

transport is a key driver of urban growth. When the time comes

to make a decision, the City’s firms will be there to help raise this

finance and get these projects off to a quick start.

Shared targetsSome people talk about global trade as a competition where one

country’s success is another’s failure. I don’t agree. I think we’re all

in the same boat, facing similar challenges and opportunities.

Companies in the UK and Latin America, for example, all have to

find and tread a path to sustainable economic growth and support

a modern market economy, with a good standard of living and

opportunity for all. Those are universal aims.

But we are still a long way away from the ambitious global trade

target of £1trillion in exports by 2020. So my message is simple: get

out there to new markets, because we in the City are fully behind

you when you take that ambitious step and trade with the world.

As I said at Mansion House recently to the cheers and nods of

agreement from an assortment of powerful and influential business

leaders in the room – UK plc has always been faced with a choice: be

open and thrive, or wear blinkers and fail. And nowhere is that more

apparent today than in Latin America.


MARKET-MOVING EVENTS CALENDAR

April

Friday 24th

2:00 PM – Mexico – Retail Sales MoM

2:00 PM – Mexico – Retail Sales YoY

2:30 PM – Brazil – Current Account

2:30 PM – Brazil – Foreign Direct Investment

8:40 PM – Colombia – Interest Rate Decision

Thursday 9th

3:00 PM – Mexico – Inflation Rate YoY

Wednesday 8th

12:00pm – Chile – Inflation Rate YoY

Thursday 14th

1:00 PM – Brazil – Retail Sales YoY

8:00 PM – Argentina – Inflation Rate MoM

11:00 PM – Colombia – Industrial Production YoY

11:00 PM – Colombia – Retail Sales YoY

Wednesday 20th 8:00 PM – Argentina – Unemployment Rate

8:00 PM – Argentina – Balance of Trade

9:00 PM – Paraguay – Interest Rate Decision

Friday 22nd



6:00 PM – Peru – GDP Growth Rate YoY

Tuesday 5th

1:00 AM – Colombia – Inflation Rate YoY

6:00 PM – Paraguay – Inflation Rate YoY

Tuesday 12th

2:00 PM – Mexico – Industrial Production YoY

6:15 PM – Uruguay – Industrial Production YoY

Wednesday 6th

3:00 PM – Mexico – Business Confidence

10:30 PM – Colombia – Balance of Trade

Friday 17th

10:30 PM – Chile – Interest Rate Decision

Wednesday 29th 10:00 PM – Brazil – Interest Rate Decision

Thursday 23rd

2:00 PM – Mexico – Economic Activity YoY

3:00 PM – Brazil – Business Confidence

8:00 PM – Argentina – Balance of Trade

Tuesday 14th 1:00 PM – Brazil – Retail Sales MoM

1:00 PM – Brazil – Retail Sales YoY

11:00 PM – Colombia – Industrial Production YoY

11:00 PM – Colombia – Retail Sales YoY

Monday 27th 2:00 PM – Brazil – Consumer Confidence

2:00 PM – Mexico – Balance of Trade

2:00 PM – Mexico – Unemployment Rate

Thursday 30th 1:30 PM – Brazil – Nominal Budget Balance

2:00 PM – Chile – Industrial Production YoY

2:00 PM – Chile – Retail Sales YoY

2:00 PM – Chile – Unemployment Rate

3:00 PM – Mexico – Interest Rate Decision

5:00 PM – Colombia – Unemployment Rate

8:00 PM – Argentina – Industrial Production YoY

Tuesday 28th

2:00 PM – Brazil – Unemployment Rate

May June

Friday 15th



Tuesday 19th

1:30 PM – Chile – GDP Growth Rate YoY

1:30 PM – Chile – Current Account

Thursday 21st 1:00 PM – Brazil – Unemployment Rate

2:00 PM – Mexico – Economic Activity YoY

2:00 PM – Mexico – GDP Growth Rate YoY

Monday 25th 2:00 PM – Mexico – Balance of Trade

2:00 PM – Mexico – Current Account

Thursday 28th

2:00 PM – Mexico – Employment Rate

Wednesday 27th 2:00 PM – Brazil – Consumer Confidence

Friday 29th 12:00 AM – Uruguay – Balance of Trade

Monday 1st

12:00 AM – Peru – Inflation Rate YoY

2:00 PM – Brazil – HSBC Manufacturing PMI

2:00 PM – Chile – Retail Sales YoY

3:30 PM – Mexico – HSBC Manufacturing PMI

7:00 PM – Brazil – Balance of Trade

Thursday 4th

3:00 PM – Mexico – Business Confidence

3:00 PM – Mexico – Interest Rate Decision

6:00 PM – Uruguay – Inflation Rate YoY

Monday 8th

1:30 PM – Chile – Balance of Trade

3:00 PM – Paraguay – Balance of Trade

Tuesday 9th

2:00 PM – Mexico – Inflation Rate YoY

Wednesday 10th

1:00 PM – Brazil – Inflation Rate YoY

6:00 PM – Uruguay – Unemployment Rate

9:00 PM – Nicaragua – Inflation Rate

Tuesday 30th 2:00 PM – Chile – Industrial Production YoY

2:00 PM – Chile – Unemployment Rate

8:00 PM – Argentina – Industrial Production YoY

10:00 PM – Uruguay – Balance of Trade

Monday 15th


Wednesday 17th

12:00 AM – Uruguay – GDP Growth Rate YoY

10:30 AM – Brazil – IBC BR Economic Activity

Wednesday 24th 2:00 PM – Brazil – Economic Activity YoY


Friday 26th 2:00 PM – Mexico – Unemployment Rate5:00 PM – Colombia – Unemployment Rate8:00 PM – Argentina – GDP Growth Rate YoY

Monday 22nd

2:00 PM – Mexico – Retail Sales YoY


8:00 PM – Argentina – Current Account

10:00 PM – Colombia – GDP Growth Rate YoY

Friday 12th

12:00 AM – Peru – Interest Rate Decision



Friday 10th

2:00 PM – Mexico – Industrial Production YoY

2:00 PM – Mexico – Industrial Production MoM

Wednesday 15th

10:30 AM – Brazil – IBC BR Economic Activity



Face-to-Face: Minister of Tourism, Sandra Naranjo, on the future of Ecuadorian tourism

Adding Value: Ecuador is starting to leverage its agricultural wealth

Brave New World: High-tech industries are springing up in Ecuador


COUNTRY REPORT | PANAMACOUNTRY REPORT | ECUADOR

Contents

Building a New Ecuador 24

An Ecuadorian welcome 34

21A Brave New World

28 Adding Value

26Plenty of Room at the Inn

20Introduction

38Time For Change

42Harvesting Profits

45Final Word

40S2M-CICEB Ecuador-UK Trade & Investment Mission

Ecuador’s CenturySo far the 21st century has belonged to

the emerging markets, with investors

enthralled by the rapid progress of

the likes of China and Mexico. Yet the

‘Ecuadorian economic miracle’ has gone

largely unnoticed by British investors.

Since the nadir of 1999, which saw the

collapse of the country’s financial system,

a huge rise in unemployment and mass

emigration to Europe, Ecuador has been

steadily rebuilding its economy.

One consequence of the crisis was the

switch to a dollarised economy, which

has helped to defeat inflation and

restore business confidence. It helped

too that the dollar weakened during the

first decade of the century, helping to

keep Ecuadorian exports competitive.

But the biggest boost came from oil,

which reached, and remained at, record

prices for most of the last fifteen years.

There’s no doubt that these benign

external factors helped push economic

growth, with nominal GDP more than

quadrupling over the period.

But Ecuador’s success isn’t all down to

favourable world events. Even more

important has been the economic

stewardship of the government of Rafael

Correa, who came to power in 2007. In

the West Correa is often portrayed as

a firebrand socialist along the lines of

Hugo Chavez. But for investors, who

care more about returns than speeches,

he has proved a remarkably successful

overseer of the Ecuadorian economy.

Since he came to power, real GDP growth

has averaged 4% per year, employment

is below 5% - a record low for Ecuador –

and inflation has been kept control.

But perhaps the best measure of

Correa’s success is coming now. That’s

because the external environment for

Ecuador, and many of Latin America’s

other commodity producers, has got

considerably more challenging over the

past year. Opec’s smallest member has

been hit by a falling oil price, which is

down roughly 50% since summer 2014.

Given that oil made up more than half

of Ecuador’s exports and one-third of

its fiscal revenues, the low oil price is a

big blow for both the economy and the

government. Meanwhile the dollar has

become the world’s best-performing

major currency, making Ecuadorian

products less competitive than their

international rivals.

The government has been quick to

respond. On the fiscal side Correa has

found a way to fund the deficit in the

short-term. A visit to China at the start of

the year resulted in a $7billion loan, while

the well-timed return to international

capital markets in 2014 means that

future bond issues are another option.

The government also announced budget

cuts of $1.4billion to cut the shortfall

between government spending and

receipts.

And, in an attempt to east pressure on

the trade deficit cause by the falling

value of oil exports, a set of short-term

import taxes, known as salvaguardias

(safeguards), were also introduced.

It’s hoped this will reduce imports by

$2.2billion per year.

But what will most help Ecuador are the

measures taken during the good times.

This government has invested $8billion

in the road network since 2008. This

has boosted the competitiveness for

local manufacturers, helping to offset

the rising dollar. Education spending

in real terms has also doubled, which is

producing a more talented and flexible

labour force. Finally, the government has

been involved in a sustained effort to

change the country’s productive matrix.

This last move is both the hardest

and the most historically significant.

Since independence Ecuador has been

a producer and exporter of various

commodities, leveraging its substantial

bounty of natural resources. Yet Correa’s

government is now trying to promote

value-added industries so that Ecuador

can sell processed and finished goods

instead of raw materials.

In short Ecuador finds itself undergoing

an economic transition. And the current

crisis is accelerating the process as

falling oil prices mean that attention

and resources are being diverted to

new industries. The combination of low

asset prices and government support

mean that there has probably never

been a better time for British investors

to consider Ecuador. And this report,

compiled by a team that spent almost

two months in-country, outlines the

challenges and opportunities that await

those LatAm INVESTOR readers that do.


A Brave New World

When the founding father of Singapore,

Lee Kuan Yew, died in late March

his epitaph was as obvious as it was

impressive. In less than half a century

Lee had propelled Singapore from

the Third World to the First World and

bequeathed a modern, rich country to

his compatriots. What makes this feat so

remarkable is that few other countries

have managed it. South Korea is one

example, Finland another, but, for the

large part, developing markets have

found that while it’s relatively easy to

become a middle-income economy, it’s

very hard to become a rich one.

To make the jump, countries need to

invest in good education system, have

sophisticated technology and services

sectors – since these are normally the

most productive parts of a modern

economy, and invest heavily in research

and development.

And that is what Ecuador is trying to

do. The plan is to change the country’s

productive matrix so that it no longer

relies so heavily on commodity exports

but earns more from high-tech, value-

added industries.

“This year we have been very disciplined

and narrowed down our priority areas

to four sectors”, explains Carlos Lara,

Pro Ecuador’s Director of Investment.

“These areas are being opened up to

international investors and benefit from

specific incentives.” One of these areas,

forestry, builds on Ecuador’s established

background in agribusiness, but the

other three - software, pharmaceuticals

and the auto industry – represent a new

direction for Ecuador’s economy.

Partnering the private sectorLara admits that it won’t be easy for

Ecuador to establish itself in these

highly competitive global sectors but he

believes the country’s strategy should

help it succeed. The key element of the

plan is the partnership between the

public and private sector. “As a country

we have the human resources, the

infrastructure and the services but we

accept that we also need the expertise

and experience of private-sector firms to

help develop these new areas.”

To help kickstart these new industries

the government is providing initiatives to

encourage private sector firms to thrive.

Software, for instance, is being led by

Yachay – an ambitious digital city project.

There is also a long-running national

broadband campaign which has helped

boost Ecuador’s internet penetration

to 70% from just 7% less than ten years

ago. These government schemes were

an important first step but there has also

been an important reaction from the

private sector.

“The national broadband programme

really pushed internet usage in Ecuador”,

says Katherin Miño, General Manager

of PuntoNet, a Quito-headquartered

internet service provider. “It made people

realise that the internet is not a luxury for

the rich but a necessity for the whole

society.”

But while the broadband programme is

a well-established success the Yachay

project is at a much earlier stage.

The vision is eventually for a ‘city of

knowledge’, with a large university

campus and research clusters with

private sector company involvement.

“Yachay will be successful”, says Miño,

confidently. “It is not just a university but

the first model of smart city – a digital

city. It will be a successful model because

it will develop the technical engineers

in the field. We have a lot of graduates

that come out of university and are good

on theory but don’t have the practical

experience so Yachay will be good for

giving them day-to-day experience of

working on problems and collaborating

with the private sector.”

International alliancesIn essence Yachay is a good example of

the hybrid model of co-operation that

Ecuador needs to jump-start these new

industries. The other type of co-operation

that Ecuador needs is with international

firms. Not just for capital, though that is

welcome, but for know-how too. Take the

pharmaceutical industry, for example.

Set up in 1940 Life was Ecuador’s first

pharmaceutical company and one of its

most well-known. Over the years Life has

gone from being independent to being

part of Dow Chemicals Group, to now

being independent again. Yet General

Ecuador’s plan to change its productive matrix is an attempt to rewrite its economic destiny. It’s a tough task but a strong alliance between the public and private sector might just see Ecuador succeed where most other emerging markets have tried and failed…



Manager, Héctor Enríquez, believes

that regardless of ownership, the firm

always needs to be open to international

partnerships.

Life currently manufactures generic

versions of drugs developed elsewhere

but there has been talk of Ecuadorian

firms developing more sophisticated

drugs, such as oncology products.

Enríquez believes it is possible but that

international alliances are the best way

to achieve it. “Today pharmaceutics is

a global business. Ecuador can create

a niche in certain areas but we need to

work with international partners if we

want technology transfer. Developing it

ourselves would cost too much and take

too long.”

Life has a long history of working with

international names. For example it

previously manufactured drugs for Astra

Zeneca and Enríquez is open to similar

partnerships with other British firms in the

future. “We have world-class equipment

and operate to the best standards – we

could partner any international firm.”

Strong partners like that exist across

many of these ‘new’ industries. Take

Electrocable for example. It is an

Ecuadorian manufacturer of medium

voltage cable that was originally set up

to fill a gap in the local market and now

exports to the US. Given that Ecuador

has no copper reserves and no large

local market to build scale there are no

natural advantages to making cable in

the country. Yet the firm’s Vice President,

Chemel Neme Macchiavello, believes

that is no excuse for failure. “Look if you

need to have cheap copper or some

other advantage to make a business then

you haven’t got a very good business.

We invest in technology and produce

the products that our clients want.

That’s what makes a good business.”

Electrocable now has a joint venture with

a US cable manufacturer to produce new

products in Ecuador.

Made in EcuadorOf course international investors don’t

just look at the company they will

partner, sell to or buy from. The general

investment climate is also a crucial

factor in determining the success of an

investment. The government recognises

this and has been working hard on

improving the business environment. In

recent years Ecuador has risen in various

regional business rankings, yet Lara

believes that the reality on the ground is

probably even better than these rankings

suggests.

“Ecuador is a great place to produce. We

have a capable labour force, low energy

costs, which will get even cheaper when

more hydroelectric energy comes online

in 2016, great transport connectivity with

some of the best roads in Latin America,

commercial agreements that tie us to

the world’s major markets and, finally,

Corporate Social Responsibility Update

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®

Silvia Carrera, General Manager of

Manpower Ecuador

MANPOWER ECUADOR

We align the vision and values of Manpower Inc., which operates across half the world through its team of highly competent and committed workers and is at the forefront of the most demanding enterprise solutions across the globe, using quality, efficiency and effectiveness for success in business. Because of that we think it’s possible to establish ourselves in the highest growth and development of Ecuadorian, Latin American and global business. In this scenario, we are ready to provide:

The best selection in human talent, using methodologies, systems and tools that allow us to perform a search process, evaluation and selection of staff whose challenge is to exceed customer expectations. Our success is guaranteed because we have experts in the field.

Specialised Technical Services, which effectively resolve the management of its resources, for example: Payroll Administration, Payroll Outsourcing.

Consulting and Training and all subsystems of Human Resource Management: Organisational Development, Competency Model Management, Safety and Occupational Health, Employee Satisfaction Measurement, Performance Assessment, Outplacement, among others.

With this know-how, we also support with great creativity and innovation in marketing activities, to create a high impact between brands and consumers.

Please visit our website www.manpower.ec


investment contracts and incentives

that make it favourable for companies

to choose Ecuador as their hub for

international business.”

One person that agrees with Lara

about the strength of the labour force

is Silvia Carrera, the General Manager

of Manpower. “In recent years this

government has made a massive effort

with education, reforming the quality

and the focus. As a result we now have

a pool of graduates that are very strong

in technical areas such as physics, maths

and IT. Almost everyone that comes to us

as job candidates now has bachelor or

masters degree and the quality has gone

up across the board.” The improvement

in quality has come at a good time, says

Carrera, as the appreciating dollar makes

Ecuadorian workers more expensive

than some of their counterparts in

neighbouring countries. “I really think

that the Ecuadorian workers need to

compete on quality and productivity not

price.”

International companies coming to

Ecuador will find a deep and qualified

labour force. “Employment is low but

because of the demographic situation

there is a steady stream of graduates,

which means that the labour market is

very dynamic.” But while this flow of new,

technically-focused graduates is good for

the economy it can also pose challenges

for firms setting up operations in

Ecuador. “One problem can be that these

graduates feel over-qualified”, explains

Carrera. “This means that there can be

high churn rates as they keep switching

employers looking for the job that they

feel they deserve.” And that’s where

recruiters like Manpower come in. “It’s all

about understanding the candidate and

the needs of the employer. Spending

more time on getting the right employee

at the beginning can save a lot of money

further down the line.”

For international firms looking at coming

to Ecuador Manpower also offers market

studies and analysis services, which

allow companies to test the water before

committing too much capital.

UK plc in EcuadorAnother important first port of call for

UK companies coming to Ecuador is

the British and Ecuadorian Chamber of

Commerce and Industries, Guayaquil.

Unlike most countries, where there is

just one British chamber of commerce,

Ecuador has two. “It’s because Ecuador’s

economy is organised around the two

commercial poles of Guayaquil and

Quito”, explains Chamber Chairman,

Nicolas Armstrong. “We’re independent

from the Quito chamber but we’ll link

up with them for certain events and we

share some members.”

The Chamber’s membership is an

interesting snapshot of British business

in Ecuador. Large industrial names such

as Unilever and SABMiller sit alongside

shipping and logistic interests, like

Seatrade, which has a direct route to the

UK, and smaller firms set up by British

expats in the country. There’s also a

smattering of large local corporates,

such as Consorcio Nobis, one of the

biggest real estate development firms

in the country. “It’s a good mix but

we’re looking to grow our membership”,

says Armstrong, “we want to represent

companies along the whole coast.”

The list of names shows how accessible

Ecuador is for UK firms and Armstrong

feels that most British investors would be

surprised by just how good the business

environment in Ecuador is. “Since Rafael

Correa became president perhaps the

political rhetoric has seemed a bit anti-

foreign investment. However, in reality,

on the practical side of things, business

for people here in Ecuador has been

very good for the last seven years. The

business climate has been positive and

companies here have been able to crack

on, do our business and grow.”

Perhaps the most decisive factor working

in Ecuador’s favour as it attempts to

change its productive matrix is the quality

of local firms already working in these

‘new’ sectors. In addition to the names

mentioned above there are a number

of other success stories. This means that

there is no shortage of good-quality local

firms for UK investors to work with

Whenever countries around the world

have succeeded in establishing new

industries and jumping up the global

development table it’s because they’ve

managed to find a way to harness the

power of the private and public sector.

Ecuador is doing that but it will also need

international capital and expertise. And

that presents a great opportunity for

British investors and businesses that can

help develop Ecuadorian industry.

Nick Armstrong, Chairman of the

British Ecuadorian Chamber of

Commerce and Industry, Guayaquil

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C I P O R T

Av. Francisco de Orellana y Miguel H.AlcívarEdificio Las Cámaras Piso 7 Oficina 702 - Telf: 2680485

Guayaquil - Ecuador

Some of the most fervent advocates of this government’s

infrastructure programme can be found on either side of the

country’s biggest bridge. Los Caras. Before the $100million

project residents of San Vicente and Bahia de Caraquez were

forced to take boats to travel between the two. Now they can

cross the two-kilometre bridge in a matter of minutes. “It has

changed the lives of people on both sides of the Rio Chone”, says

Elias Loor, a prominent local businessman.

The bridge, which had been promised by previous administrations

but never delivered, is a perfect example of the building boom

that has powered Ecuador’s economy over the last eight years.

Because in addition to linking up two relatively small towns

on Ecuador’s coastline it also facilitates the transport of goods

from northern and central parts of the country to Manta, a fast-

growing port that provides a direct link to Asia.

In total, Ecuador has spent around $8billion on improving its

road transport network since 2008. It’s also invested $320million

in 21 new or refurbished airports, while there are new gas

pipelines and power plants. Meanwhile there has been a rapid

growth in public and private residential real estate development

with the country undergoing a much needed expansion of its

housing stock.

Changing finance modelBut now a change is afoot. Much of the infrastructure boom

was financed from oil earnings so with the price of oil falling

Ecuador will now have to find other finance sources, explains

Alberto Acosta Burneo, Editor at Grupo Spurrier, an independent

economic consultancy and publisher. “The government has a

fiscal rule that says current expenses must be financed by fiscal

revenue, such as taxes, so any funds for investment must come

from oil or external debt. So now the government has the hard

task of shifting the model for investment in infrastructure from

public to private.

“And that’s what the government is trying to do. We are seeing

that pragmatic concerns trump any ideological opposition to the

private sector”, says Acosta. “For example, previously the private

sector couldn’t develop power plants larger than 40 MW but now

that restriction is being dropped and companies are being invited

to invest. Indeed there was a presidential decree that established

the rules for private public partnerships (PPPs) to allow the private

sector to invest in sectors that were reserved for government.”

That transition may be a challenge for the government but many

within the industry regard it as an opportunity. Rafael Miranda

Roca, founder of Ciport, Ecuador’s leading marine construction

company, is optimistic about the future. Ciport has been involved

Building a New EcuadorThe most tangible sign of Ecuador’s economic growth has been the construction industry. Roads, airports, ports and whole new neighbourhoods have sprung up over the last decade. Now, with falling oil prices set to reduce government investment budgets, there will be more opportunities for the private sector…


in some of the country’s biggest infrastructure projects, from

the Los Caras bridge to the Marine Terminal for Gas Tankers

in Monterverde Ecuador. But despite the fact that it thrived

under the old model, Miranda Roca has no fear about the new

conditions.

“This government is very pragmatic and wants to team up with

the private sector. After all, there are still lots of stuff to build

here.” Miranda Roca points to the plans for new deep-water ports

in Posorja and in Manta. “It seems that the government will use

the concession model and invite a leading international player,

such as APM or Hutchison Whampoa, to develop the project.

We’ve worked, indirectly, for these types of clients in other ports,

such as Callao in Peru, so I have no doubt we will do so again

here in Ecuador.”

Miranda Roca isn’t just optimistic about Ciport’s prospects – he

also believes that it’s a great time for British investors to look at

Ecuador’s infrastructure and construction sector. “The size of the

new projects meant that Ciport will look to make alliances with

other international and local contractors to improve our chances

of obtaining work.” Ciport already has experience working with

European names, such as Spain’s FCC in Peru, and Miranda Roca

is open to new partnerships with British firms.

21st Century CitiesBut the construction opportunities aren’t just focused around

‘productive infrastructure’ such as roads, ports and power stations

– Ecuador’s fast-growing cities make urban development an

interesting investment theme too. “Ecuador’s rapid economic

growth has put pressures on the existing city development

models”, explains Jaime Rumbea, Executive Director of the

Association of Ecuadorian Residential Real Estate Developers

(APIVE, by its Spanish acronym). “There has been a rapid growth

of gated communities across all price segments of the market

and now there is talk of more mixed-use projects.”

For city dwellers in Guayaquil or Quito, the desire to get out of

crowded city centres echoes the ‘flight to the suburbs’ witnessed

in several US or European centres. Yet poor planning and rapid

population growth mean that Ecuadorian cities have acute traffic,

energy and waste disposal issues. Davide Stronati, a sustainable

urban infrastructure expert at Mott MacDonald, believes that

this is a common problem across Latin America. Speaking at a

Sustainable Urban Development conference arranged by the

British and Ecuadorian Chamber of Commerce and Industry,

Guayaquil, Stronati explained that finding and financing the

solutions to these problems will be a growing investment trend

in coming years. “For every new urban infrastructure project the

focus will be on the environmental impact that it will have and

the improvement in quality of life that it can offer citizens.” And

judging by the full house at the conference it’s a theme that

companies from both Ecuador and the UK are already exploring

with interest.

In theory you’d expect the housing market in Ecuador to be

facing a bleak future as falling oil revenue starts to impact

the country’s economic growth. Yet those within the industry

remain quite bullish. “I think we will see a shift in focus”, says

Mario Burbano, Director of Stategy for Mutualista Pichincha, one

of Ecuador’s biggest real estate developers. “Of course residential

housing isn’t completely removed from the wider economy yet

there is a big need in certain areas that will continue to be filled,

even during slower growth.” He highlights lower priced housing

– units sold for below $60,000 – as an area that should continue

to remain interesting for investors. Pichincha is planning to open

up several international finance vehicles that will allow British

investors to gain exposure to the theme.

Ecuador’s building boom became the symbol of the Ecuadorian

economic miracle, with the construction industry growing at

10% per year. This year growth in the industry is likely to come

in at 6% - that’s lower but it’s still enough to create plenty of

opportunities. Moreover, the emergence of PPPs and concession

models should lead to more deals being offered to the private

sector. Needless to say, it’s an area that LatAm INVESTOR readers

should keep an eye on.

Rafael Miranda Roca, founder of Ciport



... it would be impossible for the

government to work alone to boost

productivity

LatAm INVESTOR sits down with Ecuador’s new Minister for Tourism, Sandra Naranjo, to discuss Ecuador’s burgeoning tourist industry…

Plenty of Room at the Inn

LatAm INVESTOR: The ‘All you need is Ecuador’ campaign has generated a lot of headlines recently, especially with $3.5million Super Bowl advert; can you tell our readers the strategy behind the campaign?

Minister Naranjo: The ‘All you need is

Ecuador’ campaign was launched in April

last year and I think it’s a watermark in

the promotion of this country’s tourist

industry. It has been a well-conducted

campaign that has attracted a lot of

attention and so far, in terms of impact,

around 660 million people have seen it.

The reason why we broadcast in Super

Bowl is that the USA is one of our main

source markets for tourists. US tourists

also have high average expenditure and

there is a great connectivity between

the two countries with about 70 flights

per week. We thought it was important

to give a very powerful message of

what Ecuador is doing and I think that

advertising in the Super Bowl shows that

the country is playing in the big league.

It’s a strong signal of what tourism

means for country and our commitment

to that sector. We’re also very happy in

terms of results as the latest data shows

that around 66 million people saw it on

TV, while another 67 million saw it via

social media, so it achieved a total of 133

million views in just one week.

The advert also generated a lot of free

press. Ecuador was the first country to

advertise in the Super Bowl so we made

a bit of history. There were articles in

the BBC, Wall St Journal and Bloomberg,

among others, talking about our move.

LAI: It’s all very well that people see the advert but do you think it will be effective

in persuading people to visit the country?

MN: The thing with a campaign like

this is that it’s cumulative and the effect

builds up over time. So in fact we will be

running the campaign throughout the

year and the Super Bowl was just a part

of that. Of course the ultimate aim is that

more people visit the country, not see the

advert. According to our analysis it will

take less than a 1% increase of number

of annual visitors to cover the cost of the

advert. But we’re more ambitious than

that and we’re hoping for 5%. We expect

to see the first impact on visitors during

the summer because generally that is the

peak time for the US market..

LAI: Ecuador is situated in a very competitive tourist neighbourhood, with Peru offering Machu Picchu and Colombia having Cartagena; what are Ecuador’s competi-tive advantages with regards to attracting tourists?

MN: We have many! First we have the

Galapagos Islands, which is something

unique to this country and probably the

most well-known thing about Ecuador.

Now our main challenge is to show that

Ecuador is much more than just the

Galapagos. I think Ecuador’s advantage

is that it’s a very small territory that has

four very distinct climatic zones. You

have jungle, mountain, coastal and the

Galapagos. Each of those regions also

has its own culture and gastronomy and

because the territory is so small a visitor

Ecuadorian Minister of Tourism, Sandra Naranjo


The Galapagos gives something that no other country can offer

Ecuador boasts a rich variety of incredible landscapes

can enjoy them all in a shorter space of

time than elsewhere. For example, here

in Ecuador it’s possible to breakfast in the

Amazon, have lunch by a volcano in the

Andes, then dine on the seafront before

taking a plane to Galapagos – all in just

one day.

LAI: So how can LatAm INVESTOR readers invest in Ecuador’s tourism industry – where are the opportunities?

MN: I think it is a very good moment for the

tourist industry currently. This government

has recognised the importance that

tourism has for economic growth and

social development. Another factor is

the attitude – we as a government are

supporting the private sector, we’re not

trying to do it alone. The Ministry of Tourism

works hand-in-hand with investors; I see

investors in our industry as long-term

partners because that’s what they are for

us. We help them with paper work and

travel the country with them highlighting

potential opportunities.

There is lots of potential here for investors.

Ecuador saw tourist visitors rise by 14% last

year, three times faster than world rate.

The best opportunities are those to do

with increasing our supply to high-quality

hotels and services. Another interesting

niche is housing for expats. Ecuador has

become the number one destination for

North American retirees, so we’re seeing

lots of exciting projects in this part of the

market. Along the coast of Ecuador, in the

Andes and even in the jungle we have seen

work begin on around $600million worth

of planned projects.

LAI: What type of visitor are you hoping to attract and what type of tourist industry are you trying to create here?

MN: Ecuador has been ranked in the top

25 globally in terms of potential of natural

and cultural resources. That’s an incredible

potential that we have but also a challenge

because they are resources that you have

to preserve. We believe that tourism has to

be a long-term business so we are not just

thinking of this generation but looking to

the future by trying to make it sustainable

in the long run. This acts as a constraint as

we can not be a mass market for tourism

like the Dominican Republic. Instead

we have to focus more on increasing

expenditure per tourist than tourist visitor

growth.

Of course we can’t just expect tourists to

turn up here and spend more money we

need to persuade them to stay longer and

doing that means creating new products

and new reasons to stay. One way we

can do this is by connecting the regions.

This country has invested about $8billion

in roads and developed 14 airports in

what is a small country, so the internal

connectivity is really good. The other way

to encourage visitors to spend more is

through the quality of the infrastructure

and the services. If you only have lower-

priced services, then tourists can’t spend

even if they want to. We are conscious

that we need to increase the quality of

our services so that we can increase the

quantity of the visitor spend.


COUNTRY REPORT | ECUADOR

For centuries Ecuador has been an important producer of raw agricultural commodities. Now the government wants to capitalise on that strength and become a force in value-added food production…

Adding Value

For any country to be a success in

today’s global economy it needs to

play to its competitive advantages.

And, as we’ve discussed elsewhere in this

report, one of Ecuador’s main assets is

its incredible agricultural potential. But

while Ecuador is a powerful producer

of ‘soft commodities’, until now it has

done a poor job of extracting the most

value from its resources. Take chocolate

for example. Ask anyone in the world

where the best chocolate comes from

and they will likely say Switzerland - an

absurdity given that Switzerland doesn’t

have a single cacao tree. Since colonial

times Ecuador has exported raw cacao

for Europeans to export, but is Ecuador

really incapable of producing its own

finished chocolate?

The answer, according to Santiago

Peralta, CEO of Pacari Chocolate, is a

resounding ‘no’. Pacari is one of three

local producers that are re-writing

the centuries-old chocolate trade. It

is producing finished chocolate in

Ecuador and then exporting that to

Europe. “Breaking into a market against

established, and very large, competitors

isn’t easy”, admits Peralta. “We can’t

compete on the same products as they

have much larger economies of scale. So

instead we have created a unique, and

in my opinion far better, product.” Pacari

makes organic chocolate from raw cacao.

Whereas a typical European chocolate

bar – for example think Cadburys in the

UK – might have 5% cacao, Pacari’s bars

typically have 70%.“

Pacari owes much of its success to

local ingredients. Ecuador has a distinct

aromatic strain of cacao that gives a rich

flavour and it also has any number of

delicious fruits to create fusions. Yet this

advantage doesn’t just help producers

of luxury niche products. Shrewd

Ecuadorian producers are also using

these advantages for the mass consumer

market.

One company that’s been pioneering

value-added processed foods from local

ingredients long before this government

came to power is Grupo Oriental.

Spearheaded by Wilson Kung Pik León

Lee, known locally as Don Wilson León,

the firm is based in Quevedo – one of

Ecuador’s most productive agricultural

zones.

León’s story is a remarkable one,

and demonstrates the potential for

international investors to succeed in

Ecuador’s processed foods sector. León

arrived in Ecuador from Hong Kong

1975 looking to make his fortune. He

made straight for Quevedo, which is a

hub for Chinese immigrants in Ecuador.

When he arrived his fellow countrymen

helped him get on his feet, yet despite

Quevedo’s big presence in the country

León spotted an opportunity that

others seemed to have missed. Despite

Ecuador growing considerable amounts

of soy there was no locally-produced

soy sauce or salsa China (Chinese sauce)

as it’s known in Ecuador. So, in an early

example of import substitution, León

decided to start producing his own. His

first clients were Chinese restaurants

– Ecuador, like neighbouring Peru, has

experienced considerable Chinese

immigration over the years – before his

salsa China gradually became a favourite

among Ecuadorian housewives. Indeed,

Chinese food is very popular in Ecuador.

Grupo Oriental has invested heavily in food production technology



Don Wilson León Lee, Executive

President of Grupo Oriental

From that humble beginning León has

gone from strength-to-strength and

Grupo Oriental now produces more than

200 processed food items. The success is

partly down to the firm’s ability to spot

changing trends in the food industry. For

example, Grupo Oriental introduced a

range of ready meals to the Ecuadorian

market when León realised that the same

social changes that made these products

popular in Europe and America were also

starting to drive demand in Ecuador.

More recently the group has focused on

health foods; using local ingredients to

produce tasty but healthy snacks.

León recognises that Grupo Oriental has

benefited from the wide variety of crops

that Ecuador can produce. “The main

advantage of Ecuadorian agriculture is

the variety and quality of the products

that we can find locally. Without a doubt

this has allowed us to offer, nationally and

internationally a wide range of processed

food. The terrain of this beautiful country

has a nature, a life, a fertility that very

few others possess. And that’s why we

can make international-quality products

with high nutritional standards and

why Ecuadorian food products can be

found around the world, providing the

ingredients for infinite national and

international makes.

According to León one of the group’s

competitive advantages is that it controls

the whole production cycle – from farm

to finished product. As a result it can

control quality and give added value

to its brand. For example Oriental even

exports salsa China to China, which

speaks volumes about the quality of the

product.

But while Ecuador’s unique geographic

and climatic conditions have long been

a big boon to food producers, two

newer factors also look set to give local

agribusiness firms a boost. The first one,

which is already starting to have an effect,

is the salvaguardias (safeguards), import

taxes that were introduced in March as

a temporary measure to reduce imports.

The taxes don’t apply to any of the raw

materials that local producers use, but do

apply to finished or processed consumer

goods that are imported to the country.

As a result locally-produced food has

suddenly got a lot more competitive

in the Ecuadorian market against its

international competition.

Take Corporación Superior, for example.

The firm began life as a miller of imported

wheat in 1970. But around 12 years ago

it decided to expand its business lines

and start producing finished, wheat-

derived products such as biscuits, pasta

and snacks. “The salvaguardias make a lot

of sense for the processed food market”,

says David Vergara, Executive Director

of Corporación Superior. “For example

the Ecuadorian confectionary market

is dominated by international names

despite the fact that local producers can

make products of the same quality.” For

Vergara’s company the new taxes have

come at the perfect time. “We have spent

the last 12 years developing a range of

excellent products, so we are optimistic

that we can make the most of this

temporary measure.” It’s not that local

companies need protection, says Vergara,

but this move will push consumers to try

more Ecuadorian-produced food and

they will be pleased with the results.

Another interesting example is pet

food. Previously premium dog or cat

food was imported but now Agripac

is manufacturing it locally, explains

Gustavo Wray, General Manager of

Agripac. “We hired a very good manager

with experience in that area, invested in

a factory line and developed a product

called Nutra Pro, which is competing with

other premium dog food brands. Now

with these salvaguardias our product

will be more competitive against the

imported options.”

The second factor that is causing

optimism in agribusiness is the trade

agreement with the EU. The deal that

was signed in 2014 is due to be ratified

by European member countries in 2016

and will gradually see tariffs fall on

Ecuadorian goods entering the European

market. That may seem contradictory

to the boost they’re getting from the

salvaguardias but most Ecuadorian

producers are firmly fixed on winning

more exports.

“Signing a deal like this is of great

importance for the future of Ecuador”,

says León, whose company already

exports to European countries like

Spain, “especially when you consider

the size of the European market and

the potential it has. But we believe that

this agreement shouldn’t just be used to

push agricultural commodity exports but

agro-industrial ones as well. Indeed one

of the markets with the best potential for

our products is precisely the EU.”

“As an industry we believe that these


types of agreements help us expand to

those countries in the EU that we haven’t

reached yet”, says León. We are confident

that Grupo Oriental will be representing

both Ecuador and Latin America in these

European markets in the best possible

way. After all, we’ve been preparing for the

last 40 years to take advantage of every

one of the opportunities and challenges

that have presented themselves.”

Another industry player that is optimistic

on Europe is Wilmington Ramirez, CEO

of Don Joaquin Gourmet. An offshoot

of ProveAgro, an Ecuadorian maker of

everything from ketchup to caña (a

local firewater), Don Joaquin Gourmet

specialises in luxury sauces, condiments

and spices made from local ingredients.

“Our products target specific high-value

niches – for example some are gluten

free, kosher and vegan – that are very

sought-after in the European market. Our

local sales can help cover costs but really

the long-term vision for these types of

products is the European and North

American markets.” The firm is innovating

with new flavours that don’t yet exist in

Europe. Creations such as the chilli with

passion fruit dip to accompany snacks,

should help the brand to differentiate

itself from competition in European

supermarkets.

Vergara believes that, even before the

deal was signed, this government’s

measures have been making Ecuadorian

agro-industry more competitive. “One

big improvement has been transport

infrastructure. If you look at the roads,

it’s now much quicker and safer for us

to get our goods across the country.

We’ve also seen a massive difference

with the airports. The economic growth

has also helped local demand grow,

which has given us the scale we need to

start making products for international

markets.”

León recognises the ‘important’ help

of the national government to agro-

industrial producers across the country.

Nonetheless he believes that “you can

always do more”. He suggests “training

schemes and a technology programme”

to improve the sector as “subsidies and

tariff exemptions aren’t the only way.”

But the government isn’t just looking to

help local producers; it is also keen to

attract international investors that can

help boost Ecuador’s agro-industries. The

first point of contact for any international

investor looking to take advantage of the

excellent conditions available at present

is Pro Ecuador. And Carlos Lara, Director

of Investment at the organisation, is keen

to welcome international newcomers.

“It’s well known that Ecuador wants

to change from being exporter of raw

materials to producing value-added

goods. So as a country we are creating

incentives for firms that want to come

here and help us develop technology

and create added value here in Ecuador.”

One firm that is testament to this is

Salpa – a Swiss chocolatier that recently

developed cacao plantations and a

processing plant in Ecuador. Salpa has

invested almost $10million in developing

about 550 hectares of cacao plantations

and building a plant to treat cacao locally,

which is the first step to eventually

carrying out much more processing

in Ecuador. Founder, Paul Burros,

acknowledges that Pro Ecuador has been

a big support. “We ask them questions

once or twice a week, perhaps about the

tax situation or financing issues, and we

get very good help.”

Ecuador’s agro-industries are enjoying

a perfect mix of natural and man-made

advantages. Those international investors

that invest now can expect to reap plenty

of rewards.

David Vergara, Executive Director of Corporación Superior


PRO ECUADOR AS YOURBUSINESS ALLY

The Investment Department of PRO ECUADOR and its 30 Commercial Of�ces (OCES) around the world, organise business missions, where potential investors that are interested in accessing new markets receive a bespoke agenda of meetings with representatives from public and private institutions from the sector of their interest. These missions help provide a broad perspective of the local business environment.

Contact us and get our services:

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• 85% of highway system has been renewed and enlarged with public investment of more than $8billion

• 21 new or refurbished airports with public investment of more than $320million

• 8 new hydroelectric plants for 2016 with a public and private investment of more than $4.5billion

• $0.08 Kw/hr, one of the lowest energy costs for business in the region $0.29 per litre of diesel, the lowest cost of fuel for industry after Venezuela

• $0.72 per cubic metre of water, one of the lowest costs of water for companies in the region



An Ecuadorian WelcomeEcuador is a small country crammed with some of the world’s most impressive tourist attractions yet it receives less visitors than most of its neighbours. Now the government and the private sector are working together to boost the tourist sector, which is throwing up lots of investment opportunities…

This year’s Super Bowl was a

classic. The outcome of the final

of the USA’s American Football

competition was decided by a last-

minute touchdown. It was the closest

Super Bowl in recent history. But the

final was also memorable for events off

the field. Ecuador’s decision to broadcast

an advert in the commercial break made

it the first ever country to buy a space

in the event, which is the world’s most

expensive advertising slot.

Like most pioneering moves the

decision to spend $3.5million on the

30-second advert courted both praise

and controversy. The decision was

the brainchild of Ecuador’s Minister of

Tourism, Sandra Naranjo, who makes

a good case for the advantages in

her exclusive interview with LatAm

INVESTOR, which you can read elsewhere

in the report. But regardless of whether

you agree or disagree with the move one

thing is clear. It signals that Ecuador is

now serious about promoting its tourist

industry.

That’s the view among the private sector,

where hoteliers and tourist operators

love the new promotion efforts. “I’ve

been in this industry for a long time”,

says Diego Utreras, Executive Director of

the Hotels Association of Ecuador, “and

this is a big change from the old days.

Before the government used to spend

around $4million on promoting Ecuador

as a tourist budget, now it spends around

$60million to $70million so that’s great

for us.” So far this greater budget has been

reflected in visitor numbers. The amount

of tourists coming to Ecuador in 2014

rose by 14% and another rise is expected

for this year. “It feels like it’s going to be

a good year”, says Gino Luzi, General

Manager of Grand Hotel Guayaquil. “Of

course it’s too early to tell what impact

the advert is having as tour operators put

their packages together very early but so

far guest numbers are looking up.”

Strong selling pointsOf course it’s easier to market something

if it has strong selling points – and

fortunately Ecuador does. “We’re very

lucky in the sense that we have an

amazing range of natural resources

to offer tourists”, says Utreras. “Visitors

can enjoy the world’s most bio-diverse

jungle, active volcanoes, snow-capped

mountains, pristine beaches and, of

course, the Galapagos Islands. And that

geographic diversity has helped create

fascinating and distinct cultures and

communities in each of these areas,

which all come with their own local

cuisine.”

The fact is that very few countries in

the world can offer a similar breadth of

experience. And size is another factor,

says Yamil Simon Munaro, founder of

Quito-based Simon Car Rental. “Even if

another country had all of the attractions

that Ecuador does, it would take tourists

much longer to get there. Ecuador is

a small country with great roads which

means that cash-rich, time-poor tourists

from Europe can squeeze everything into

two or three weeks.” Indeed, while it’s not

part of the Ministry of Tourism’s remit,

Simon believes that the work to improve

Ecuador’s road network – approx

$8billion has been invested since 2007

– has had a big impact on the sector. “I

see it with my clients. It has opened up

new destinations and made more places

accessible. It’s also great for me because

the cars get damaged far less frequently.”

But Ecuador isn’t just trying to get more

tourists. It’s also trying to leverage its

amazing tourist assets to persuade

visitors to spend more. As Minister

Naranjo explains, the vision for tourism

isn’t for a high-volume market but

instead high-spending customers. For

that to happen Ecuador also needs to

develop the infrastructure, services and

experiences that will encourage these

visitors to spend money and recommend

the country to friends back home. And

it’s here that Ecuador faces the biggest

challenges.

More regulation pleaseOne bone of contention in the industry is

the system of standards and regulations.

This may sound odd to readers in the

UK but hotel owners and operators in

the private sector actually want more of

them. One man well-placed to explain

is Marco Ruiz, the President of Pronobis,

which is the largest Ecuadorian real



estate developer and a significant player

in the tourist market. It has developed

approximately 800 rooms of high-

quality hotels, such as the Wyndham in

Guayaquil, it is currently building a new

5-star hotel in Quito Airport and is also

planning a massive, internationally-

focused beachside real estate project.

“At the moment Ecuador has lots of

informal players in the tourism market,

which isn’t ideal for attracting the high-

end traveller. The problem with informal

players is that the standard varies greatly

from one place to another. High-net-

worth individuals are very loyal to certain

brands of hotels and resorts and these

people have particular standards of

living. Ecuador doesn’t really cater for

that at the moment - or if it does it’s in a

boutique, small way.”

This view is shared across the industry. For

example, Utreras notes that he has been

waiting for 12 years for a government

to do something about the inconsistent

and poorly enforced standards system.

But now, finally, it seems that the

problem is about to be fixed. The Minister

of Tourism, Sandra Naranjo, mentions in

her interview that this is one of her key

priorities and private sector players like

Ruiz are optimistic that this “will help to

separate the good from the bad”.

Luzi also welcomes the move although he

believes that the private sector is doing a

good job of pushing up standards. “There

are seven culinary schools in Guayaquil

alone. That gives hotels here a good

pool of chefs to choose from. It also

helps that we have top brands like the

Marriot, Wyndham, Hilton etc, here in the

country. They produce and train good

workers, which raises standards across

the industry.”

Another challenge is the set of import

taxes, known as the salvaguardias,

says Michel Thorin, General Manager

of the Sheraton Quito. “As a hotel we

have to offer international standards.

We can’t offer caña instead of whiskey,

so obviously these taxes could have a

big impact. If they make staying here

more expensive than in neighbouring

countries then visitors may think twice.”

Diverse opportunitiesGiven the diverse nature of Ecuador’s

tourist offering it is little surprise that

opportunities can be found in a range

of areas. In the major cities of Guayaquil

and Quito one of the most exciting parts

of the market is the business traveller.

Guayaquil benefits from a former airport-

turned convention centre and Quito,

while hoping the same will happen to

its old airport, can make the most out of

several mid-sized venues.

“Business travellers make up most of my

customers”, says Luzi. “But even though

these people are here for business, they

still want to be able to enjoy life outside of

work hours. We’ve benefited a lot in recent

years from the regeneration of Guayaquil.

We’re situated in the restored centre,

where visitors can see historic buildings,

walk along the new promenade and still

be right in the heart of downtown.”

Grand Hotel Guayaquil is one of the city’s

icons, sharing the block with Guayaquil’s

neo-Gothic cathedral. Perhaps the most

concrete sign of Luzi’s optimism is the

$5million refurbishment programme

currently being carried out on Grand

Hotel Guayaquil. “It is almost finished and

has really rejuvenated the place.”

But investors looking to establish

business hotels in Ecuador would need

to be sure to thoroughly research local

rates of return, cautions Thorin. His firm

is a third-party operator of almost 60

hotels across Latin America, which gives

it a good platform to make comparisons.

“Here in Ecuador a 5-star room will

go for around $105 to $110 per night.

That’s far cheaper than in Colombia,

where you’re looking at $160. You can

still have profitable operations here but

it’s a different market to neighbouring

countries.” Also a law banning casinos

means that hotel operators can’t rely on

them to supplement profits as they do in

other Latin American countries.

There are also plenty of opportunities

in Guayaquil’s hinterland. Surprisingly,

given that it is generally well-conserved

and unspoiled by urban developments,

Ecuador’s jungle tourist market is already

quite mature. The excellent roads have

made it much more accessible, while

the ecologically sensitive nature of the

terrain means that it’s better suited to the

host of boutique, ‘eco lodges’ that have

sprung up.

For Mora, whose firm is also a member

of the British Chamber of Commerce,

the Andes also have interesting tourist

potential. “Walking holidays, hiking,

community experiences – these are

also very popular with European clients.”

However, he warns that interaction with

Andean communities needs to be well

managed so that it works for both sides. Ecuador’s coast more to offer than just beach


“I think that there is this perception that you can turn up with a

tour group and you’ll be greeted with open arms by an idyllic-

looking community. It’s not like that. You really need to research

the community to make sure that it’s the type of experience

that your clients want and then speak with the community to

make sure that they are interested too.” He suggests that the

government could help prepare the communities so that they’d

be better able to capitalise on tourist interest in their way of life.

Surprisingly, given that it’s normally the first target for tourism

developers, Ecuador’s coastline remains remarkably untouched.

“We’ve really not developed our beach zone as much as

you would think”, explains Norman Bock Torres, Executive

President of Quito Metropolitan Hotels. “Ecuador has a series of

advantages for investors in the coastal area. If you look at land

prices we are still lower than most places on the Caribbean,

the Atlantic and Pacific Coast. Beachside land here in Ecuador

is much cheaper than in Colombia for example. Some of those

advantages are being eroded, for example cost of construction

here was the cheapest and now it is getting more expensive.

But overall it’s a very competitive package.”

Golden retirementBut the most promising niche of all is the international retiree.

Over the last ten years Ecuador has become one of the world’s

premier retirement destinations for retired North American

citizens. For example International Living Magazine ranks it as

‘The World’s Number 1 Retirement Haven’.

A combination of safe streets, good private medical services, a

benign sunny climate, friendly locals, great food and excellent

connectivity with the US have all helped. So too has the fact that

Ecuador is a dollarised economy. The removal of the exchange

rate factor makes financial planning easier for US retirees who

are often living off set returns from fixed income investments.

This is a growing and wealthy market for investors to tap

into. Indeed Pronobis is doing just that with an ambitious

internationally-focused real estate project on Ecuador’s coast.

Just an hour’s drive from Guayaquil, Karibao will be a high-

end residential development set in 50 hectares of land. It’s the

largest project of its type ever tried in Ecuador and will be a

‘mini city’ with up to 4,000 apartments and a hotel spread

across 38 buildings.

The idea is to build a self-contained experience, explains

Ruiz. “Folks won’t need to leave the project as they will have

just about everything and transport within the development

will be via environmentally-friendly golf carts. But the really

unique thing about Karibao is the crystal lagoon. The project is

using cutting edge technology to create an artificial, but living,

lagoon which will be in the centre of the development.”

This type of development is exactly what Minister Naranjo

means, when she talks of building the tourist infrastructure

and services needed to attract the high-spending visitor. But

there is still much more that needs to be done. And that’s why

investors looking at the sector should investigate Ecuador’s

tourist opportunities further.

Marco Ruiz, President of ProNobis



Time for Change…We caught up with Victor Jurado, Executive Director of Pro Ecuador, to find out how international investors can be part of Ecuador’s economic transition…

LatAm INVESTOR: Pro Ecuador is a relatively new institution; can you explain how you help investors?

Victor Jurado: We were set up at the

end of 2010 and we’re the official agency

for promoting of non-oil exports and

attracting investment - so it’s a double

mandate. On the export side we use

trade shows, fairs, B2B events etc to

help Ecuadorian-based firms export

more. When it comes to attracting

investment we don’t get involved with

the government’s strategic sectors,

such as the hydroelectric plants, ports

and refinery, but rather we focus

on opportunities in the productive

sector. Here we offer investors advice,

consultancy and help them understand

not only the investments that exist

but how things work with regards to

government incentives etc. We can find

them the meetings they need with the

private and public sector, even up to

a Presidential level, depending on the

need and level of the business.

Victor Jurado, Executive Director of Pro Ecuador

LAI: It’s an interesting time of transition for the Ecuadorian economy; where are the opportunities for British investors?

VJ: It’s important that your readers realise

that Ecuador is currently embarking

on a change of the productive matrix.

Needless to say much of the investment

that is needed and the opportunities that

exist are found around this public policy.

We are trying to add value to the

traditional export offer. So if you look

at an area like agriculture we are trying

to add value with more agro-industry

and processed foods. We are trying to

involve more science in our products

and in the longer term we are aiming

to build expertise in bio-technology.

We already have some exciting projects,

for example one of the world’s most

developed aquaculture laboratories is

in the province Santa Elena. It’s a good

example of how we’re adding science

to our natural strengths. We also have

a lab in the jungle that specialises in

biodiversity and draws on the fact that

our part of the Amazon is the most bio-

diverse place on earth. But there are

many other areas where this could be

happening. Water management and

waste-to-energy projects are just some

ways that we could use technology to

add value to our natural resources in the

future.

We’re also keen to push software

development and, again, we’re looking

at how that could relate to our existing

economy. So, for instance, when we

attended the recent BIOFACH – an

international organic food fair – we

didn’t just bring the usual selection of

agricultural products. We also brought

some Ecuadorian technology companies

that make devices for smart farming. One

example is a firm that makes drones with

special infra-red sensors that can fly over

a large plantation and let farmers know

which parts need more irrigation.

LAI: The government’s recent import taxes, ‘las salvaguardias’ (the safeguards), surprised many in the business community; how will they impact the competitiveness of Ecuadorian production?

VJ: This is a temporary measure that is

addressing the balance of payments

problem caused by falling price of oil.

Also – and this is especially relevant

from Pro Ecuador’s point of view – it’s a

response to the devaluation that we’ve

seen take place in the currencies of

competitor countries such as Colombia

and Peru. Their devaluation has reduced

the costs of their exports, which makes

ours less competitive. As a dollarised

economy we can’t manage our currency

so we’ve had to use the salvaguardias.

But I want to clarify something: this

measure has important exemptions. Raw

materials or capital goods that are used

for local production are not subject to


this tax. Of course it’s hard to calculate

exactly which materials or machinery is

needed for production so there may be

some cases where exemptions should

be extended. The government is open to

that and is prepared to listen and respond

to local producers if they have been

affected. So, ultimately, this won’t have

an impact on exporters. This measure is

intended to boost the competitiveness

of Ecuadorian producers and balance

the effect of the devaluations of our

competitors.

LAI: ‘Never waste a good crisis’ is a saying that many investors follow; does the falling oil price make this a great time to invest in Ecuador?

VJ: Yes I think it is. Without doubt

the current situation has created

opportunities. But more than that it’s

also good timing because a lot of what

the government has done in previous

years – ie investing infrastructure and

improving Ecuador’s macroeconomic

position – has helped to create

excellent conditions for international

investors right now. In fact it’s not just

international investors. Recently the

major players in the Ecuadorian private

sector had an important meeting with

the private sector where they discussed

the emerging investment opportunities

in the country. This shows that now is a

great time to invest here.

LAI: Ecuador’s trade deal with the EU is very exciting news for British investors; how do you think it will impact Ecuador’s foreign trade and how will Pro Ecuador take advantage of this historic agreement?

VJ: This is a great agreement for our

institution and the country as the EU is

the main market for non-oil Ecuadorian

exports. But for us it’s not just about

the quantity of trade but also the

quality. European trade involves ‘the

four principles’ – namely, respect for

the worker, who is paid a fair wage; the

consumer, who receives good quality;

the society, as the firms pay their taxes;

and the environment. Some countries

are guilty of ‘social dumping’ where they

export products made by child labour

or with a terrible environmental price

- we don’t. We produce responsible,

sustainable exports that fit well with the

needs of the European market.

It’s clear that this agreement will create

opportunities for us and we have a few

years until it is fully implemented, which

gives us time to take advantage. So we

are working with local producers – and

international investors that want to set

up export operations – to help them

spot the opportunities in the European

market.

We’re also aware that the agreement

works both ways so we will be helping

local producers that feel threatened by

incoming competition and helping them

find ways to partner European firms.

Ecuador has already established itself in areas of light manufacturing such as textiles.



Roberto F. Salazar-Córdova**

S2M-CICEB* Ecuador-UK Trade & Investment Mission

Ecuador has been identified globally as a country of

opportunities for developing large-scale mining and further oil

exploration. However, the fall in commodities prices since 2014,

and expected to remain for 2015-19, creates challenges for the

economic growth of the country, which has been led by public

investment during last seven years.

As a solution, and as the major change seen in public policies

during the period that started in 2007, the national government

expects to attract private and international investment, not

only to recover oil production and reduce energy subsidies,

particularly from 2016 onwards, but also to develop infrastructure

projects, and diverse economic activities in agriculture, industry,

and services1.

The results of the new openness of Ecuador will be seen from

2017 onwards. Until then the country will rely on debt issuance,

the introduction of trade tariffs, and other short-term measures

of economic policy required to cope with the unfavourable

external scenarios where weaker oil export prices will limit fiscal

revenues required for investment.

Figures published by the Central Bank of Ecuador show that the

country has recorded a twin fiscal-trade deficit. On the trade

side, the deficit has reached a negative figure of approx $6billion

in January of 2015. Historically, the Balance of Trade in Ecuador

has an average of minus $2.1billion (1985-2015), with a range of

$7.2billion in December of 2014, and $6.2billion in May of 2008:

On the other hand, the fiscal figures are related to negative

external factors created by the fall of the price of oil (Ecuador’s

main export, and the second source of fiscal income after taxes):

BRENT OIL’S DISMAL 2014

Here’s a look at how Brent prices have fared over the last seven years:

2009 2010

20112012

20132014

$150

$120

$90

$60

$30

With this scenario in mind - and the urgent need of recovery

of international trade and private investment - a group of 22

members and delegates of the Ecuadorian Hexagon (private

sector, public-local government sector, NGOs, indigenous

communities, researchers, and experts) working on projects

financed by national and international organisations, visited

London, Nottingham and Cambridge during the last week of

March 2015.

The Hexagon Dialogue was organised by S2M Foundation,

a member of CSR360 Global Partner Network (convened by

“Business in the Community”)2, and received support from the

British-Ecuadorean Chambers of Trade and Investment, as well

as partial funding from the EU “Global Finance Project”.

The objectives of the mission included the development of

common understanding among participants, training in issues

of responsible business, fair trade++, agreements required for

creating trust, the promotion of public-private-community

partnerships, national and international alliances, and

channelling industrialised agri-products coming to the UK from

rural producers to Ecuadorian immigrants and British citizens

alike. Plus the creation of an activity programme for years 2015-

2016 between S2M Foundation and the Universities of Hult,

Nottingham, and Cambridge.

0

Jan 2006

In billions

of dolla

rsJan

2008

Jan 2010

Jan 2012

Jan 2014

EQUADOR BALANCE OF TRADE8

6

4

2

-2

-4

-6

-8

* Joint effort of S2M Foundation (Sustainability, Measurement and Mediation) /Hexagon Group and CICEB

** CEO, Hexagon Group LAC (Head of Mission on Behalf of S2M Foundation and CICEB).

[1] See: www.eluniverso.com/noticias/2015/02/25/nota/4590211/gobierno-abre-puertas-inversion-sector-privado-decreto

[2] See: www.csr360gpn.org/partners/profile/s2m-foundation/


This way, the delegates have agreed to coordinate a Programme

of Action to be convened via S2M Foundation (Ecuador-

UK) having them as local partners, and including the British

stakeholders which hosted events during the mission. The goal

is to create a non-for-profit scheme and model of organisation

having as a major aim the common interest in serving the

community through future activities of training, education and

technical assistance that would add value throughout sectors,

government, business and the third-sector organisations in

Ecuador and the UK.

Ideally, that programme should work at the largest scale possible

in order to become a solution that would pragmatically upscale

and use concepts of CSR, sustainability, measurement of impact

and mediation with different stakeholders, and create a high

level of cooperation among local and international business, the

third sector, government, communities and the media in order

to improve social and environmental conditions in Ecuador

during years 2015-2020.

This way, the Hexagonal Group would become a leadership

team focused in driving social and environmental cooperation

projects (as part of the Tzapapentza Program) giving priority to

actions between local and international business, but involving

as partners institutions of the third sector, government,

communities and the media, and promoting further

commitment of other institutions interested in becoming allied

ones in the implementation of Triple Bottom Line responsible

business practices.

The development objective agreed after the mission is to

implement this programme as a means to increase business

involvement in the community, developing meaningful

collaboration between businesses and organisations advancing

sustainable trade and investment.

Finally, a tool has been identified as the best means for creating

trustable trends of trade, investment, sustainable economic

development, and impact on poverty: the S2M certification on

Salazar & Visser´s CSR2.0 view on Sustainability, Measurement

and Mediation (S2M), that will be promoted among the members

of the delegation in order to generate private and social results

under the S2M Software, Tool, and International Certification

Standard.

The corporation that will lead this last part of the work during

year 2015 will be SERTECPET, the Oil-Services Ecuadorian

Corporation, together with the Prefecture of Morona Santiago

Province, the British-Ecuadorian Chambers of Trade and

Industries, S2M Foundation, and Hexagon Group.

The delegation had extensive dialogues with the different

members, received information about success stories of

corporations such as Anglo-American, Marks´ & Spencer,

Techo UK, and got training on methodologies and tools for

responsible trade and investment, provided by organizations

such as BITC, Chrysalis Futures, Kaleidoscope Future, ICCSR

(International Centre for Corporate Social Responsibility -

Nottingham University) and CISL (Cambridge Institute for

Sustainability Leadership - Cambridge University). The meetings

with corporations were hosted by Hult University (London) and

organized by S2M Foundation (UK) developing a line of work

with Ecuadorian and Latin-American immigrants in the UK and

Europe. With all this support, the delegates and counterparts

reached agreements orientated towards the goals of the mission.

The next steps agreed and prioritised (by a majority vote among

delegates) include the following fifteen actions:

1. Promote trade and public–private–community partnerships (81%)

2. Attract foreign investment with technological innovation (81%)

3. Develop creative ideas benefiting small enterprises (78%)

4. Protect the economic value of natural resources (78%)

5. Create a common strategic planning for the short, medium and

long run (78%)

6. Enhance corporate sustainability and socio-environmental

responsibility (75%)

7. Identify strategic donors and sources of potential business

cooperation (75%)

8. Act to re-establish trust between economic agents and socio-

environmental actors (72%)

9. Meet regularly for better exchange of experiences and culture

(72%)

10. Institute Hexagon Dialogue at a larger scale, with more actors (72%)

11. Work on leadership (67%)

12. Develop incentives and create mechanisms of stimulus for growth

(67%)

13. Generate long-term agreements via mediation, creating viable and

joint actions (67%)

14. Do teamwork with all sectors (67%)

15. Support and name this agenda as “Tzapapentza Program” (in the

Ecuadorian Amazon) (61%)



Harvesting Profits

Last year Ecuador exported

$2.4billion of shrimp, $2.5billion

of banana and $1billion of tuna,

making it a major global player in all

three. Ecuador’s highlands are also home

to world-beating agriculture. On the

cool, green slopes of the Andes, Ecuador

has developed an extensive fine flowers

industry and today the country is the

world’s third-largest flower exporter. So

it’s clear that the country knows how

to convert its natural resources into

international commercial success.

But Ecuadorian agriculture is undergoing

a transition. While the success stories

above will remain the country’s key

cash crops, Ecuador is seeing a fast

growth in other areas. In some cases

these are century-old crops that have

long-been neglected, in others these

are experimental new products being

grown in for the first time. But it’s these

lesser understood niches of Ecuadorian

agriculture that could offer the most

interesting opportunities for investors.

Essential recoveryMaize has been grown in Ecuador for

thousands of years and was a staple of the

Inca-era Reino de Quito. But during the

20th century the unthinkable happened

and Ecuador became an importer of corn.

The same happened with rice, which,

while a relative newcomer to Ecuadorian

agriculture, has also become an integral

part of the local food basket.

The main culprit is poor productivity,

explains Juan Manuel Pérez, General

Manager of Crystal Chemical, an

Ecuadorian producer of crop protection

chemicals and fertilizers. “If you look at

any crop its yield is lower than the Latin

American average. Take rice for example;

Uruguay produces ten to 12 tonnes per

hectare, while here the average is four

tonnes. With corn you had a similar

situation.”

So when the government of Rafael Correa

came to power it made reversing this

trend one of its key priorities. “We had the

chance of talking with the president in

2006”, says Pérez. “Back then he asked us

what was going wrong with Ecuadorian

agriculture. We told him that one of the

main issues is that farmers were not

A rich sea, hot humid lowlands, hundreds of miles of cool Andean mountains and swathes of dense jungle - Ecuador offers just about every farming environment possible.

Juan Manuel Pérez, General

Manager, Crystal Chemical


using certified seeds. Fortunately the

government listened and responded.”

In 2012 the government launched Plan

Semilla de Alto Rendimiento (Plan High-

Efficiency Seed). It offered small farmers

- less than ten hectares - subsidised

seeds and technology in a bid to boost

production. The five-year programme

offered a staggered discount, from 50%

in the first year before gradually being

scaled down to finish in the final year. The

idea is that with each year the farmer’s

financial benefit from the increase in

productivity is enough to offset the

reduction in subsidy.

The crucial element to the programme’s

success, says Pérez, was that while the

funding came from the government,

it was implemented by private-sector

suppliers like Crystal Chemical. “We as

a company had to support the farmer

and give them complete package.

We used certified seed, fertiliser and

crop protection to help them raise

production. It was a great success and

in first three years we saw average maize

productivity go from three tonnes per

hectare to six tonnes, so it doubled. This

year the government announced that

no corn imports were needed so it’s a

programme that has worked.”

Pérez is so confident about growing

agricultural demand he has created

Chemical Logistics - a specialized

chemical storage and distribution

service for international producers

of agrochemicals that want to sell in

Ecuador.

Gustavo Wray, the General Manager of

Agripac, one of Ecuador’s leading seed,

fertilizer and feed suppliers, believes the

government’s willingness to work with

the private sector is the reason for its

success. “Agriculture in Ecuador is very

complex because there is such a variety

of crops here, with different climates and

geographies – so it would be impossible

for the government to work alone to

boost productivity. It needs specialists in

different areas and that’s where Agripac

comes in.”

Agripac is a special story. Formed 42

Gustavo Wray, General Manager

of Agripac

years ago by Colin Armstrong, a British

national that was representing ICI in

Ecuador, it has grown from having one

shop to 161 that are now dotted around

the country. Armstrong has gone on to

become UK honorary consul in Guayaquil

while Agripac has become an institution

for Ecuadorian farmers.

Agripac’s decision to sell through it’s own

stores, rather than just relying on third-

party distributors, has given the firm a

close relationship with its customers and

subsequently a detailed understanding

of what’s needed to boost production.

Wray believes that finance is crucial.

Indeed, long before the government

programme, Agripac was giving credit

to small farmers. “We actually began

giving finance to small growers of maize

around 15 years ago. They received the

complete package of seeds and fertilisers



and then they paid us after 150 days by

giving us a share of the crop. It has been

very successful and helped Agripac to

grow but it has also involved taking on

risk, and over the years we have learned

how to give credit properly. Sometimes

our suppliers give us less credit than we

give our farmers so we have to manage

our positions carefully. In a market like

Ecuador many farmers are informal

businesses. This means they can’t go

to a bank to get a loan, so we need to

carefully evaluate them before giving the

credit.”

A fresh startAs we’ve mentioned elsewhere in the

report Ecuador is aggressively trying to

change the nature of its trade with the

world. Put simply it wants to export more

and import less. Moreover Ecuador is

keen to diversify its export basket, which

at present relies heavily on oil, shrimp

and banana. The changes are taking

place across the economy but they

are throwing up some very interesting

investment opportunities in agriculture.

Broadly speaking they fall in two

categories: they are either meant to

replace imports - this is the case with

grape - or intended for export, for

example avocados are being grown for

the Italian market. “The great advantage

we have here is that our diverse climate

and geography means that we can

grow practically anything”, explains

Patricio Salazar, President of GPS Group,

a consultancy firm that specialises in

helping agricultural producers expand

to new crops. “Moreover our weather is

remarkably consistent all year around -

this means that we can time our crops

so that our harvest of grapes or avocado

comes in the gap between the harvests

of the traditional producers. That helps

guarantee prices, which is great for

investors.”

The country also has ambitious plans for

coffee, palm oil and cacao. Historically

coffee and cacao were very important

exports for Ecuador but both were hit

by spates of plagues and low prices

at various points in the past century.

Cacao is recovering strongly but coffee

is still at a much more nascent stage. At

present the government is encouraging

farmers to develop 100 hectares of coffee

projects but the long-term target is 1,000

hectares. For grapes the target is also

1,000 hectares.

And this is where LatAm INVESTOR

readers can come in. Ecuador is actively

seeking international investors to help

develop key parts of its agriculture

sector. Pro Ecuador is the body in charge

of handling non-oil investments and

the organisation’s Investment Director,

Carlos Lara, believes there are lots of

ways that they can help international

entrants investing in Ecuador for the

first time. “Pro Ecuador can give all the

necessary information so that they

understand the opportunities and can

calculate the investment potential and

the possible return. So if we take forestry

as an example, we can provide technical

details of the concessions available, we

can make them aware of the various

incentives being offered by the Sub-

Secretary of Forestry and then we put

this information together into a portfolio

for the investors.”

Pro Ecuador also helps potential

investors participate in relevant forums.

For instance, it recently hosted a

Forestry Forum in Guayaquil where

it invited specific investors to get to

know the projects and meet potential

local partners. “The event was a great

success and should lead to some

promising investments.” It’s also worth

noting that the government has put in

place generous incentives to encourage

investors to develop these new crops.

For example avocado projects, which

come under the forestry programme of

the Ministry of Agriculture, Ranching,

Aquaculture and Fishing, receive an

incentive of $1,700 per planted hectare,

which covers approximately 20% of the

cost. With coffee there is a scheme that

offers an even more generous $2,000 per

hectare, which again covers around 20%

growing costs.

Given the success of the government’s

previous agricultural programmes you’d

expect these new plans to be a success.

Moreover they add to the widespread

feeling in the sector that now is the time

to invest. “At present, agricultural land

prices here in Ecuador are cheaper than

in our neighbours”, says Salazar, “but that

won’t be the case when both coffee and

grape plantations have reached 1,000

hectares each.”

The signing of the trade agreement with

the EU is also a positive signal. Wray

is upbeat about the agreement and is

investing accordingly. “With regards to

the EU deal we are optimistic because

our company has a strong UK connection

so we are aware of the possible

opportunities there. We also have

exposure to many of the export crops

that should benefit. For example three

years ago we invested in planes that will

allow us to provide banana fumigation.

In the shrimp sector we are expanding

our feed factory because we are reaching

maximum capacity and we believe that

demand will continue to rise.”

Investing is all about timing. And right

now is the perfect moment to invest in

Ecuadorian agriculture.

Carlos Lara,

Investment Director, Pro Ecuador


Final Word

One thing every Ecuadorian will agree on

is that the country has changed massively

during the last eight years. Whether they

support the government or not they

recognise that on a number of key criteria

Ecuador has improved. Education, roads,

health, airports – these are all areas that

have seen investment and standards soar.

These changes have been aimed at

bettering the quality of life for your

average Ecuadorian, but they’ve also

improved conditions for international

investors. Thanks to these measures

British businesses coming to Ecuador will

be able to find more qualified workers and

use high-quality infrastructure. Another

surprise for UK firms coming to Ecuador

is the positive business environment. As

Nick Armstrong, Chairman of the British

Ecuadorian Chamber of Commerce,

Guayaquil, makes clear in the pages of

this report, the government is a lot more

pro-business than some of the political

rhetoric would have you believe.

But as dramatic as the government’s

early changes were, it was only the first

act. Now, against the dramatic backdrop

of falling oil prices, a far more profound

transformation is underway. As we’ve

discussed in the special report, Ecuador is

an economy in transition. Its policymakers

are working to change the productive

matrix, foster new industries and add

value and variety to the country’s exports.

To help achieve this aim the country has

launched various initiatives to attract

investors. From subsidies for growing

new crops, to building a brand new

City of Knowledge in the middle of the

Andes, the government is doing all it

can to kick-start these new industries.

The scale and breadth of the transition

is impressive - and it’s throwing up a vast

number of opportunities. Given the sheer

number of government schemes and

amount of emerging industries, investors

would do well to contact their local Pro

Ecuador office. As Victor Jurado, Executive

Director of Pro Ecuador, makes clear in

his interview, the organisation can help

investors find investment opportunities

and avail of all the government incentives

available.

Of course Ecuador isn’t giving this money

away for nothing. It’s a calculated risk that

eventually these international investors

will create more wealth through successful

businesses. Yet for Pro Ecuador the quality

of investment is just as important as the

quantity, explains Carlos Lara, Director

of Investment. “It’s important for me to

emphasise that we want the right firms.

We don’t want companies that just come

here to assemble for the local market

because it will cause imports to increase

and the trade deficit to deteriorate. Okay,

there may be some technology transfer

but that’s not enough on its own. We

don’t want firms looking to commercialise

imported goods or sell to the state either.

We look for companies that can help us

change our productive matrix.”

Ecuador isn’t just looking for investors

and businesses. It is also unveiling a new

vision for tourism that hopes to attract

greater numbers of high-end visitors. As

you will have seen in the pictures dotted

throughout this report, Ecuador has some

truly breathtaking landscapes, flora and

fauna. Now, under Minister for Tourism

Sandra Naranjo, it is working hard to make

the most of its natural endowment. “There

are plenty of investment opportunities in

the tourist sector”, says Minister Naranjo,

“and I’m sure LatAm INVESTOR readers

will enjoy coming here to ‘research’

the sector.” When it comes to foreign

investment Ecuador isn’t as fashionable

as neighbours like Peru or Colombia,

yet those who ignore the country are

missing out. The fact that it hasn’t been as

popular as its neighbours, coupled with

the current fall-out from the low oil price,

means that there are plenty of bargains to

be had for British investors.

Ecuador is a country in the midst of an historical transition that’s throwing up plenty of opportunities for British businesses and investors…

Investors seeking more information

on the opportunities in Ecuador may

contact:

Francisco Mena - Pro Ecuador UK

Tel: +44 (0) 2030788040

[email protected]

or John Abell - British and Ecuadorian

Chamber, Guayaquil

Tel: +593 43703870

[email protected]


ACADEMIC ANALYSIS

Cuba – Coming in from the Cold

David Jessop, Director of the Cuba Initiative, looks at the trade and investment opportunities emerging from the changing relationship Cuba and the US.

Last December, US President Barack

Obama and Cuban President Raul

Castro dropped a bombshell and

since then everyone has been trying

to work out where the pieces will land.

When they announced the steps towards

‘normalising relations’ stock markets

rose, politicians complained and Cubans

celebrated on the streets. Now, almost

four months on, analysts have a better

idea of how this will impact businesses

and investors.

Since last December the pace of change

has been rapid. The US and Cuba have

held two bilateral meetings which have

rapidly expanded the dialogue. So far the

talks suggest that US companies could –

eventually – gain access to wide-ranging

parts of the Cuban economy.

The measures will make it easier for US

exporters to sell goods in Cuba and vice

versa; many more US citizens will be able

to travel to Cuba; there would be tri-lateral

talks initiated involving the US, Mexico

and Cuba on the delimitation of maritime

boundaries in the Gulf of Mexico, an area

where significant oil reserves are likely to

be found; US institutions will be permitted

to open correspondent accounts at

Cuban financial institutions; and US credit

and debit cards will be permitted for use

by travellers to Cuba. There was also a

boon for US telecoms companies, which

will eventually be allowed to improve

the telecommunications and internet

infrastructure linking the US and Cuba.

But it’s not just US companies that

could benefit. The US has also removed

Cuba’s designation as a state sponsor

of terrorism. This label has all but frozen

many European investment and trade

deals with Cuba as big international

banks with US exposure faced swingeing

fines if transactions contravened US rules.

Of course reversing half-century of

diplomatic standoff has not been all

plain-sailing. On the American side it’s

important to note that the White House

move to improve relations still doesn’t

affect the trade embargo, which was

made law by the Helms Burton Act

of 1996. With the Republicans, who

traditionally take a tougher line against

Cuba, enjoying full control of Congress,

it’s unlikely that Obama will be able to

change that legislation in his presidency.

On the Cuban side, Castro has made clear

that the process of full normalisation will

be slow as long as the US embargo exists.

Another sticking point is Guantanamo

Bay, which was leased to the US before

the revolution, but has since been

deemed an illegal occupation by Cuban

authorities.

These types of hurdles make it clear

that we can’t expect a deal immediately.

Yet the medium-term prospects look

good. On February 7th, talks between

the two sides established a series of

working groups to tackle some of these

issues. They will also look at some of the

thorny social issues, which can ultimately

impact investments, such as human

rights, marine protected areas and the

prevention of migration fraud.

A window of opportunityIn practical terms for business this means

that the window of opportunity to be able

to invest and sell without US competition

may be closing fast. At a recent event

for British business organised by the

Foreign and Commonwealth Office, the

Minister of State, Hugh Swire, suggested

that companies should act quickly to

explore and enter the market. Although

it’s difficult to forecast a time horizon for

significant change in the US relationship,

it may well be rapid. Many commentators

suggest a timeframe of between two

and five years, noting that most of the

major US lobby groups are already active

in Congress and are seeking to have

the embargo loosened if not eventually

removed.

So far British firms have been slow to seize

the opportunity. Levels of UK-Cuba trade

are very low with the UK exports to Cuba

hitting £22million in 2013, down from

£25million in 2012. Imports are slightly

higher, hitting £105million in 2013, up

from £33million in 2012. But that could

be about to change. The Cuba Initiative

(www.cuba-initiative.org), a bilateral

body chaired in the UK by Lord Hutton,

a former Cabinet Minister will lead a high

level investment mission to Cuba from

David Jessop, Director of the Cuba Initiative


April 27th to 30th 2015. It follows from a

visit by Minister Swire last November the

first by a British Minister for more than a

decade.

Those UK businesses and investors that

manage to establish a foothold in Cuba

before the arrival of US interests should

benefit from a general rise in asset prices

when a flood of American money arrives.

A mix of sectorsDespite its Communist rhetoric Cuba’s

government is welcoming foreign

investors with open arms. The adoption

of Cuba’s new Foreign Investment

Law last March, which establishes

foreign investment as a priority for the

future development of Cuba, allows

foreign investment in all sectors except

education, health and the armed forces

and offers a variety of tax exemptions to

overseas companies.

Cuba is placing emphasis on economic

development zones starting with the 400

sq km zone at Mariel, outside Havana. This

$900million, Brazilian-financed project

involves a major new port, transhipment

and logistics centre and associated

special economic development zone. It

is only about 90 miles from the United

States and is adjacent to many of the

major east-west global shipping lanes.

As such it forms an important part of the

Government’s plans to create new joint

ventures with foreign companies.

There are also many other opportunities

for direct investment. One promising area

is renewable energy, which includes wind,

biomass, photovoltaic solar, hydropower

and biogas. Indeed British firm, Havana

Energy, is already involved in biomass

projects in Cuba. Another area that should

interest UK plc is mining, where there are

considerable deposits of iron, nickel, gold,

silver, zinc, lead, and cobalt. Oil companies

will also be interested in Cuba’s ongoing

search for hydrocarbons, which involves

onshore and offshore basins. Anyone who

has visited Cuba will know that transport

infrastructure is also an area where there

is lots to be done. Upcoming projects

include a marina and port construction,

railways and urban transport. One sector

that is already established is tourism, and

there are plans for new hotels, real estate

developments and golf courses. British

pharmaceutical firms may want to take a

look at biotechnology both in relation to

commercialisation and building plant for

the production of medicines.

Finally, Cuban agribusiness needs

modernisation. agribusiness, which

desperately needs modernisation.

Opportunities in this sector include

Cuba’s location gives it big potential for transhipment

commercialisation of sugar pork, beef

and soya.

The scale of the opening for foreign

investors is huge, though newcomers

must be prepared for a lengthy process. It

is a market which requires time, the need

to build-up trust and a recognition that

decisions are usually collegiate rather

than made by an individual.

So what’s Cuba’s economy like?

The Cuban economy is expected to

grow by 4% in 2015, rebounding from

weak 2014 when it grew just 1.4%. This

growth will be driven by infrastructure

investment, a resurgent manufacturing

sector and energy efficiency gains.

In 2013 Cuba imported over $13billion of

goods and is heavily reliant on imports

of food, oil, machinery and chemicals,

with much of its imports coming from

Venezuela and China. That said, the

country is keen to diversify its economic

relations and to build closer trade and

investment links with Europe. As far as

exports are concerned Cuba exported

over $6billion of goods in 2013 including

sugar, tobacco, coffee and minerals such

as nickel.


LATAM BUSINESS OPPORTUNITIES

Mexican President, Enrique Peña Nieto, headlined the 2015 Canning Conference. He explains why British investors should seek opportunities in Mexico…

It’s such a privilege and honour to

address the Canning House members,

because for more than 70 years this

prestigious institution has promoted

understanding of Latin America politics,

society and economics here in the United

Kingdom. Thanks to Canning House, the

British society has gained more informed

understanding about Latin America. It

is great to see that the enthusiasm that

the 19th Century British Foreign Minister,

George Canning, had for Latin America,

still lives on today.

Indeed, at the beginning of this decade

the then Foreign Minister, William Hague,

created the ‘Canning Agenda’, and

implored the UK to adopt a new approach

to Latin America and the opportunities

that it offers for political co-operation,

trade and investment for the benefit of all

of our citizens.

Hague noted that Latin America was

experiencing a new phase of development

and today the majority of the countries in

the region share important advances. We

see the reduction of poverty, the fight

against inequality and the consolidation

of democratic institutions. To varying

degrees the Latin American countries have

started to modernise their economies to

successfully compete in this global era

and for decades now Mexico has led the

way in this evolution.

Global roleToday our country is a stable democracy

that has had peaceful, orderly changes

of government every six years for more

than 80 years. It’s something that we

share with the UK as we are some of the

few Western counties with that level of

political stability.

From the beginning of this administration more than two years ago, we decided to

project our leadership on the international stage and my country is taking the role that

befits it against today’s global challenges. Mexico’s participation in the regional and

multilateral forums shows that we are a country that’s conscious of our responsibilities

in the world. An example of this is our determination to participate in the peacekeeping

operations of the UN, completing humanitarian operations that benefit everyone.

Aside from an active international agenda we are strengthening our relations with

countries across the world. We are convinced that cooperation for the development

of international trade is the driver for economic growth and, more than anything,

improving the welfare of our societies.

With a view to the future we are establishing technological, cultural and academic

links with other countries. Indeed in this state visit to the UK we are signing important

agreements to reinforce these bonds. Education is particularly important because we

realise that it is the central pillar for promoting the present and future development

of any country. In line with that we have also started many new ways to facilitate

exchanges with countries across the world. One that’s particularly worth highlighting

is the Pacific Alliance, where we have gone further than simply arranging a free trade

agreement and created the free movement of people, goods, services and capital.

This Pacific Alliance will integrate Mexico, Colombia, Peru and Chile, while the United

Kingdom will participate as an observer country. strengthen ties with Europe. Today we

are working to update the framework of our current free trade agreement with the EU.

The opportunities Mexico has one of the largest and most diverse territories on the planet with one of

the biggest and youngest populations in the world. It’s the second-biggest economy in

Latin America and the 15th-largest in the world. It has a stable macroeconomic situation,

healthy public finances, independent monetary policy, a free floating exchange rate and

a robust banking system. Last year we placed a sterling-denominated bond for £1billion

for 100 years, which shows the level of confidence that investors have in our country.

Mexico and Britain – A Shared Future

Mexican President, Enrique Peña Nieto, adressing investors at Canning House


in association with

The most exciting investment story taking place in Mexico right now are the structural

reforms that are radically changing the country. The whole package is made up of 11

individual reforms that will work together to make our country more competitive and

create exciting opportunities for international investors in the process. Of particular

interest to British investors is the labour reform, which will create a more flexible labour

force, a tax reform that will boost the state’s investment power, a finance reform that

will enhance access to credit, a telecommunications reform that should improve quality

in the sector, a competition reform that will make the Mexican business environment

more competitive and an education reform that will boost the long-term potential

of our human resources. There are also political and governance reforms, that should

help to create a more just and fair society. But perhaps the most important reform is

in energy, where an old model of resource development that was clearly tired and

exhausted will be replaced by a system that, while maintaining the state’s sovereignty

of resources, offers more incentives to the private sector. The reforms will lead to higher

GDP growth in the years to come.

Mexico and the UKWe are working together with the UK in the multilateral environment on themes such

as the reform of the UN Security Council, climate change, open governments and the

international cooperation for development. On the economic side we also have a solid

base. Since 2000 trade between us has more than doubled, growing by 109% and

today it’s in the order of £2.8billion per year. Yes that’s a big figure but it’s still way

below the enormous potential of trade between us. That’s why we put together a group

of high-level companies from both counties so they could explore the investment

opportunities. In Mexico more than 1,500 companies have received British investment,

especially in the financial, mining, industrial manufacturing area. The UK is the seventh-

biggest foreign investor in Mexico but, again, the potential could be so much more –

especially given the window of opportunities that has recently opened in our country.

Indeed strong economic prospects are another thing we share with the UK, which has

managed to retain a dynamic economy despite the slowdown in the EU. This year the

ties between the two countries will be stronger than ever. That’s because 2015 is the

year of the United Kingdom in Mexico and

Mexico in the United Kingdom. The idea is to

promote a greater understanding between

our societies and a deeper cooperation in all

aspects of our bilateral relationship. Through

artistic expositions, food tours, academic

discussions, business meetings and tourist

ventures we are bringing the best of Mexico

to the UK and the best of the UK to Mexico.

So please take the opportunity to get to

know the Mexico of the 21st Century. A

young country, that’s emerging through

transformation. Mexico is showing the world

that by democracy and institutional channels

it is possible to achieve deep change as we

are undergoing one of the biggest, deepest

and fastest evolutions that our country has

ever had.

EPN with Canning House President Miriam

González Durántez & CEO, Robert Capurro

Where the UK meets Latin America and Iberia

For more information contact:[email protected] | +44 (0)20 7811 5603

14/15 Belgrave Square, London, SW1X 8PS www.canninghouse.org | @canning_house

Find out more about how we can help you and your company through Corporate Membership:

www.canninghouse.org/corporate-membership

Become a Corporate Member of Canning HouseSince 1943 – the UK’s leading forum for informed comment, contacts and

debate on Latin American politics, economy, and business.


INVESTMENT CONTACTS DIRECTORY

ArgentinaIgnacio PereyraInvestment Development OfficerEconomic & Commercial SectionEmbassy of the Argentine Republic in the UK65 Brook Street, London W1K 4AHTel: +44 (0) 207 318 1300 / 1332Fax: +44 (0) 207 318 [email protected]@argentine-embassy-uk.orgwww.argentine-embassy-uk.org

GuatemalaLesther OrtegaMinister CounsellorEmbassy of Guatemala13 Fawcett Street, London SW10 9HNTel: +44 (0) 207 351 3042Mob: +44 (0) 789 621 0203henning.droege@guatemalanembassy.co.ukwww.investinguatemala.org

HondurasAndrea Argueta-ScheibMinister Counsellor, Economic AffairsEmbassy of Honduras115 Gloucester Place, London W1U 6JTTel: +44 (0) 207 486 4880Mob: +44 (0) 777 253 5929Email: [email protected]: [email protected]

MexicoMario Alberto Gonzalez AlvarezFirst SecretaryProMexico, United Kingdom8 Halkin Street, London SW1X 7DWTel: +44 (0) 207 811 [email protected]@promexico.gob.mxwww.promexico.gob.mx

NicaraguaGuisell MoralesFirst Secretay / Chargé d’Affaires a.i.Embassy of Nicaragua to the United KingdomSuite 31, Vicarage House, 58 - 60 Kensington Church Street, London W8 4DBTel: +44 (0) 207 938 [email protected]

PanamaAna DíazCommercial Attaché to the United KingdomEmbassy of Panama40 Hertford Street, London W1J 7SHTel: +44 (0) 207 493 4646Fax: +44 (0) 207 493 [email protected]

PeruAlejandro ManriqueHead of Trade & InvestmentEmbassy of Peru in the UK52 Sloane Street, London SW1X 9SPTel: +44 (0) 207 235 [email protected]

VenezuelaRoberto BayleySecond SecretaryEmbassy of the Bolivarian Republic of Venezuela1 Cromwell Road, SW7 2HWTel: +44 (0) 207 584 4206Fax: +44 (0) 207 589 [email protected]

CubaCarlos AlfaroEconomic CounsellorCuban Economic- Commercial Office in London167 High Holborn, London WC1 6PATel: +44 (0) 207 836 3606Fax: +44 (0) 207 379 [email protected]

Dominican RepublicJohanna Sánchez MawkinCounsellor for Trade and InvestmentEmbassy of the Dominican Republic139 Inverness Terrace, London W2 6JFTel: +44 (0) 207 727 [email protected]

EcuadorFrancisco Mena Guarderas Head of Ecuador Trade OfficePRO ECUADORSecond Floor, 67-68, Jermyn StreetLondon, SW1Y 6NYTel: +44 (0) [email protected]

ChileCristián LópezHead of Trade and Investment OfficeEmbassy of Chile6th. Floor, 37-41 Old Queen Street, London SW1H 9JATel: +44 (0) 207 233 [email protected]

ColombiaAndres SarmientoInvestment SpecialistProColombia, London office2 Conduit Street, London W1S 2XBTel: +44 (0) 207 491 [email protected]@procolombia.cowww.proexport.co

El SalvadorRosella Badía de Funes Minister CounsellorEmbassy of El Salvador8 Dorset Square, London NW1 6PUTel: +44 (0) 207 224 [email protected]

BrazilDaniel Costa FernandesHead of Investment, Trade, Tourism and OlympicsEmbassy of Brazil14-16 Cockspur Street, London SW1Y 5BLTel: +44 (0)207 747 [email protected]@itamaraty.gov.br www.brazil.org.uk

ChileCristián LópezHead of Trade and Investment OfficeEmbassy of Chile6th. Floor, 37-41 Old Queen Street, LondonSW1H 9JATel: +44 (0) 207 233 [email protected]


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this serene and private, 6 bedroom oceanfront luxury villa has breathtaking ocean

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10,000 square feet. The site of the property is Cap Cana, located in the most eastern

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destination’. Clear blue seas, more than three miles of pristine beaches, elegant

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PROPERTY


Dock your yacht and enjoy…This stunning villa, set against the impressive backdrop of Cap Cana, combines

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wonderful property also features an infinity pool, sun deck, interior patio with

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For more information about these

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+1 809 683 2885


LATIN AMERICA IN THE UK

A snapshot of the latest

Latin American eventsin the UK

The Council of Ibero American Chambers of Commerce in the UK (CIAC) held a Business Risks Mitigation event to discuss the impact of falling oil prices in Latin America.

Mexican Chamber of Commerce (MexCC) events in London.

Hayden Warren Gash, Chairman of the British Colombian

Chamber of Commerce speaking with Adolfo Suarez,

International President of Ontier Spain

Luis Miguel Ramírez, Ontier, Dr Leyva Muñoz, Ontier, Irene Mia, EIU, Haydon Warren Gash BCCC, Seamus Andrew, Ontier, Adolfo Illano, Ontier

Mexico Week Welcome Reception Rafael

Funes General Director of Lovis (centre)

speaks to a packed event

Future Cities, Creative Industries Event, Yves Hayaux du Tilly, Chairman of the MexCC and Partner of Nader Hayaux & Goebel, addresses the audience


A high-level delegation made up of Ecuadorian politicians, businesspeople and community leaders visited Britain as part of the S2M-CICEB Ecuador-UK Trade & Investment Mission

Head of Argentina’s Federal Administration of Public Revenue, Ricardo Echegaray, visited London to discuss the HSBC Switzerland tax scandal.

The S2M Delegation visiting Canary Wharf on their tour of the UK.

A conference held at the Argentine Embassy in London to discuss

the possible impact of the HSBC tax scandal.

Ricardo Echegaray, Argentine Federal Administration of Public Revenue (AFIP), and the Ambassador of Argentina to the UK, Alicia Castro.


UPCOMING DEALS

Liquid Petroleum Gas Supply System for Lima and Callao

Longitudinal of the Sierra Road Project, Section 5

Natural Gas Distribution System Across Peruvian Highlands

Award Date:

TBCQ3 Q4

Combined Cycle Plant Topolobampo II

Plant to Produce Injectable Medicines

Tuxpan-Tula Pipeline

Country: Peru

Project Location: Lima and Ica (Pisco)

Estimated Investment: $250million

Estimated Award Date: Q3 2015

Design, finance, build, operate and maintain a Liquid Petroleum Gas Supply System that guarantees the supply continuity of this fuel for Lima and Callao. At the end of the concession, the systems will be transferred to the Peruvian Government.

The project involves the render - within the framework of the contract to be subscribed - of the service of LPG transport, storage and distribution for various users in Lima and Callao, thus the investor will have to implement the essential infrastructure to render said service; as long as the strategic objective to provide energy security to the Lima and Callao supply of LPG is preserved.

The transport system involves the following assets:• LPG Transport system from Pisco to Lima.• Storage Plant of LPG in the southern area of Lima.• Dispatch system of LPG in the southern area of Lima. The LPG storage will be a strategic reserve to distribute to Lima and Callao in case of a contingency.

Contact: Luis Sánchez Torino, [email protected], tel: +511-2001200 Ext 1213

Wendy J. Huambachano Neves, [email protected], tel: +511-2001200 Ext 1340

Country: Peru

Project Location: Cusco and Puno. Cities: Urcos, Combapata, Sicuani, Puno, Ilave and Desaguadero

Estimated Investment: TBC


The project consists of initial periodic maintenance and the continuous operation and maintenance of the road, in order to maintain the established service levels. The estimated length is 422 km.

Modality: Co-financed, 25 years

Contact: Proinversion tel: +511-2001200 Ext 1292

Country: Peru

Project Location: The various cities that will be supplied with natural gas through pipeline networks: Andahuaylas, Abancay (Apurimac), Huamanga, Huanta (Ayacucho), Huancavelica (Huancavelica), Huancayo, Jauja (Junin), Cusco, Quillabamba, (Cusco) Juliaca, Puno (Puno) and Pucallpa (Ucayali).



The project involves the design, financing, construction, operation and maintenance of the Distribution System of Natural Gas via Pipeline Networks. At the end of the concession, the systems will be transferred to the Peruvian Government.Concession period: 32 years, after the registration of the contract on the closing date.

Contact: Luis Sánchez Torino, [email protected], tel: +511-2001200 Ext 1213

Wendy J. Huambachano Neves, [email protected], tel: +511-2001200 Ext 1340

Country: Mexico



The project will consist of a fixed price contract and comprises engineering, design, supply of all equipment and materials, spare parts and special tools, testing and commissioning service and an electrical substation. The core may have any of the following configurations with: (i) a module composed of three gas turbines, three-heat recovery and steam turbine; or (ii) a module composed of two gas turbines, 2 heat recovery and steam turbine. The combined cycle will operate with natural gas as fuel. The estimated project implementation time is 30 months.

Contact: Federal Electricity Commission Tel: +52 5552294400

Samalayuca - Sásabe Pipeline

Country: Mexico

Project Location: Chihuahua and Sonora



The project includes the design, engineering, supply, construction, operation and maintenance of a pipeline with a capacity of 472 million cubic feet per day (MMcfd). The pipeline will have a approximate length of 558 km and 36 inches in diameter. The estimated project implementation period is 22 months.


Country: Mexico

Project Location: Veracruz, Puebla and Hidalgo



The project includes the design, engineering, supply, construction, operation and maintenance of a pipeline with a capacity of 706 million cubic feet per day (MMcfd). The pipeline will have an approximate length of 263 km and 36 inches in diameter. The estimated project implementation time is 21 months.



Project to generate electricity from geothermal resource utilization in the area of Copahue Volcano

El Melon Tunnel (First re-tender)

Carriel Sur Airport (First re-tender)

Nahuelbuta Road

Supply to Baja California Sur

Country: Argentina

Project Location: Caviahue Copahue, Ñorquin Department, Neuquen

Estimated Investment: $121.5million

Granting the concession for the exploitation of the endogenous vapours that are removed from the site located in the “The Triplets of Copahue” mine - from the construction and operation of a plant generating 30 MW of installed capacity and the commercialization of the electric energy produced in the MEM (Mercado Electrico Mayorista) or through EPEN (Ente Provincial de Energia de Neuquén), for a period of up to 25 years.

Contact: [email protected]

Country: Chile

Project Location: Valparaíso Region.

Estimated investment: $120million.

Estimated Award Date: 2015

Area/capacity: 5.2 km.

Proponent: Public.

The El Melón Tunnel is located in the Petorca and Quillota Provinces of the Valparaíso Region between approximately Km 127.54 and Km 132.73 of Highway 5 North. It has a total length of 5.19 km of which approximately 2,590 metres correspond to the tunnel and the rest to its northern and southern access roads. The project consists of the construction, maintenance and operation of infrastructure to improve the road’s current technical and service standards, including an expansion of its capacity in line with the increase in traffic expected over the coming years. The re-tender envisages improvements in the safety standards of the road and tunnel as well as an increase in its capacity (preliminarily including a new tunnel) in order to increase its design speed and reduce journey times.

Contact: Nicolás Muñoz, Investment Attraction Executive, Foreign Investment Committee, [email protected], tel: +56 2 2663 9200.

Country: Chile

Project Location: Bío-Bío Region


Estimated Starting Date: 2015

Area/capacity: 8,209 m2

Proponent: Public

The project consists of the expansion, relocation and improvement of different installations at the airport including passenger service areas, offices and ancillary buildings, the improvement and construction of access and internal roads and of parking facilities in line with increased demand, the expansion of the capacity and/or relocation of water and energy installations, improvement of the runway, the incorporation of taxiways and the expansion of the aircraft parking area.

Contact: Nicolás Muñoz, Investment Attraction Executive, Foreign Investment Committee, [email protected], tel: +562 2663 9200

Country: Chile

Project Location: Bío-Bío and Araucanía Regions.

Estimated Investment: $237million.


Area/capacity: 55 km.

The Nahuelbuta Road (Road 180) currently provides a direct connection between the Negrete and Los Ángeles municipal districts of the Bío-Bío Region and the Angol and Renaico municipal districts of the Araucanía Region. It has a length of approximately 55 km and the project envisages widening it to two lanes in each direction, raising its standards through the construction of grade-separated junctions with crossing roads and improved safety, lighting and signage standards. The project is expected to have a positive impact by connecting an area of heavy traffic that no longer has sufficient capacity and where safety standards are weak. The new road will benefit forestry industry traffic as well as connectivity between important cities in the Bío-Bío and Araucanía Regions.

Contact: Nicolás Muñoz, Investment Attraction Executive, Foreign Investment Committee, [email protected], tel: +(56 2) 2663 9200.

Country: Mexico

Project Location: Baja California Sur

Estimated Investment: TBC


Capacity: 136 – 227 MMPCD

This project will supply natural gas through to the Federal Electricity Commission (CFE) in the state of Baja California Sur. The project aims to deliver natural gas to new power plants, as well as existing operating with fuel oil and diesel, which can be converted to use natural gas. The carrier will receive natural gas somewhere in the country, will transport it by sea and deliver to the generation plants of the CFE located on the peninsula of Baja California Sur. The carrier may choose the most appropriate technology required to convert, regassify and transport by land to point of delivery. The estimated project implementation time is 35 months.



COSTA RICA

THE LatAm INVESTOR MAP

Latin America’s Financial Market

Development

4.0

4.2

4.7

2.9

3.0

4.8

4.5 4.3

4.9

3.3

3.7

3.8

3.8

3.7

3.7

4.1

The indicators taken in account for this ranking

were: Availability of financial services, Affordability

of financial services, Financing through local equity

market, Ease of access to loans, Venture capital

availability, Soundness of banks, Regulation of

securities exchanges and Legal rights index.

Source: Global Competitiveness Report 2014-2015,

World Economic Forum.

Chile

Panama

Peru

Brazil

Honduras

Mexico

Colombia

El Salvador

Uruguay

Costa Rica

Paraguay

Dominican Republicgua

Nicaragua

Bolivia

Argentina

Venezuela

16

22

40

53

59

63

70

86

87

92

93

99

106

121

129

131

Where they rank in the world

Score

Most developed

Developed

Least Developed


65 year heritage

10 offices

$6bn funds under

management*

40 energy assets**

providing

15m people

with electricity

9540 MW of electricity**

*as of October 2013 **since 2002 to date

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