For Companies, 13 Is A Lucky Number

Latin Trade presents its first forecast for the performance of Latin American companies. Sales will show similar growth as in 2012. Mining will recover, and retail will maintain its profits.

The expected economic growth for 2013 in Latin America will offer an opportunity to recover for some of the companies in the region that were affected during 2012, as a result of a slower regional and global economic growth. Most mining companies in the region are among those that are expected to recover. This year will also help sectors such as telecoms and retail maintain their expansion rates.

The mining and energy sector is expected to maintain its leadership in terms of striking the biggest business deals in the region this year. The main goal for integrated oil firms such as Petrobras, Pemex and Ecopetrol is to increase their reserves and production. To achieve this, they have planned multi-billion dollar investments, mainly in exploration and production. Brazil’s state-owned Petrobras, one of the companies in the stock market with the highest revenues in Latin America in 2012, will continue its ambitious investment program, valued at $237 billion from 2012 to 2016. Mexico’s state-owned Pemex will invest some $25 billion this year alone, which could turn out to be the year it radically changes its business model by introducing private investment into its activities, a move proposed by the government.

Other large oil companies in the region, such as Argentina’s YPF and Colombia’s Ecopetrol have planned investments of $7 billion and $9.5 billion respectively. They too will focus on exploration and production. Ecopetrol will also use its investments to expand and improve its refinery capacity and transport. Optimizing refinery activities will require investments of $1.3 billion by Peruvian company Petroperu, and some $800 million by La Pampilla, a subsidiary of Repsol, also from Peru. Braskem, from Brazil, expects more positive conditions for the petrochemical industry this year, and hopes to recover some of its losses from 2012. Braskem’s plans for this year include several expansion projects, such as a mega refinery worth $12 billion, to be built in association with Petrobras. In addition, the company plans to build a polypropylene plant worth more than $3 billion in Mexico, currently under construction. Grupo Ultra, a Brazilian petrochemical company with the highest sales during 2012, is planning to invest $700 million for the expansion of its plants in Brazil, Mexico and the United States. Grupo Ultra might also make more investments in acquisitions. Grupo Copec has announced its intentions of increasing investments in its fuel distribution sector, which could lead to acquiring more assets. However, the investments in Arauco, the cellulose producer, will be shunned by the poor projections in the global market prices of cellulose.

Mining companies are hoping that an expected growth in China’s economy will lead to an increase in the price of raw materials, helping them make up for their losses during 2012. Last year, the companies were affected by a sharp drop in sales and international prices. Brazil’s Vale, one of the world’s largest iron producers, has been recovering over the last few months thanks to an increase in the prices of iron, which has gone up by 70 percent since last September. Vale reported huge losses during all of last year. However, the predicted increase in iron prices in no way compares to the historic prices of 2008. Facing challenges and uncertainty as to the stability and growth in the global economy, Vale has implemented an austere investment plan for 2013, of about $16 billion. Sixty percent of the investment will focus on new projects. It is worth pointing out that some mining, energy and hydroelectric projects could be set back by socio-political or regulatory issues. In the case of Colombia, the construction of the El Quimbo hydroelectric plant, valued at about $800 million and financed by Colombian affiliate Endesa, has been subject to environmental and social protests. Resistance from local communities is also putting at risk the Conga project in Peru, a gold mine planned by US company Newmont and Peruvian company Buenaventura, which plan to invest $5 billion on the project.

The economic slowdown of 2012 was not enough to stop growth for companies selling mass consumer goods, Internet providers, cellular phone services, banks, insurance and health companies. America Móvil, among the five top-selling companies in 2012, plans to expand its business this year, taking advantage of an increasing demand for wireless technology products. The company, controlled by Mexican billionaire Carlos Slim, plans to invest some $10 billion in maintaining and expanding its operations throughout Latin America.

The large supermarket chains will continue to attract more customers by opening new stores and introducing new formats. Chilean supermarkets could be among the big winners this year as the European Casino and Carrefour move out, but only if the Chilean companies’ regional expansion plans prove successful. More good news for Chilean companies is the small growth expected for Walmart this year, although Walmart could launch a surprise by launching new operations in Central American countries or Colombia. Cencosud, which recently bought strategic stocks in Brazil and Colombia, is planning to invest up to $1.2 billion this year to strengthen its presence in Brazil and open new stores in Peru. Falabella announced investments of up to $900 million this year, to launch new stores and shopping malls.