New measures in Venezuela will make it even harder for foreign companies to repatriate profits.
BY CHRONICLE STAFF
VENEZUELA EVEN WORSE
Venezuela’s recent and planned measures against the falling Bolivia currency will only weaken it further, while making it even more difficult for foreign firms to repatriate profits, UK-based risk consultancy Exclusive Analysis warns.
The government of President Hugo Chavez recently suspended trading of dollar-denominated bonds and announced it would introduce a band for trading of dollars in the parallel market. “This would only accelerate the depreciation of the Bolivar further,” Exclusive Analysis says.
The Bolivar has depreciated 50 percent since January in the black market and the government blames speculators for the tumbling of the Bolivar, but the rapid depreciation is explained by capital flight, declining oil revenue inflows and soaring inflation, it points out. Venezuela will have the highest inflation rate in the world this year, according to a Latin Business Chronicle analysis of estimates for 183 countries from the International Monetary Fund (IMF).
Venezuelans have increased purchase of dollars to preserve their real income and the tightening in currency controls means that businesses will struggle to secure imports. “Tightening of currency controls will further impair businesses’ ability to source imports, expand operations and repatriate profits,” Exclusive Analysis says.
BRAZIL LEGAL NEWS
Baker & McKenzie just announced that Uruguayan native Eduardo Leite will become chairman of its executive committee in October. Leite, a past chair of the Latin America Regional Council, is currently head of Baker & McKenzie’s Global Energy, Mining, Petrochemicals & Infrastructure group in Brazil and executive vice president of the China-Brazil Business Council. Leite holds dual Uruguayan and Brazilian citizenship.
The news comes shortly after Milbank, Tweed, Hadley & McCloy and Shearman & Sterling announced key appointments in Brazil. It started with Millbank hiring Andrew Belá Jánszky, the head of Shearman & Sterling’s Latin American practice and managing partner of its São Paulo office, to head up Millbank’s new office in São Paulo -- the firm’s first office in Latin America. Millbank also hired Tobias Stirnberg, a senior associate in Shearman & Sterling’s São Paulo office, as a partner in its new Brazil office.
Within 24 hours, Shearman announced that it had appointed Robert Ellison as the managing partner of its São Paulo office and partner Antonia Stolper as leader of the firm's Latin America group. Ellison, a member of the firm's Capital Markets practice, played a lead role in the Santander Brasil and VisaNet IPOs last year. Stolper has lived and worked in the region for more than 30 years. The defection of Jánszky came after last year's news that Shearman's Brazil expert Richard Aldrich left after a 26-year career at the firm to join Skadden Arps as head of its São Paulo office. (See Aldrich: Successful Skadden Anniversary).
LBC IN TWITTER STORM
Spanish crooner Alejandro Sanz denounced that followers of Venezuelan president Hugo Chavez had hacked into his Twitter account after he had commented on the recent news that Haiti and Venezuela are the most dangerous countries in Latin America for executives. That report was based on the Latin Security Index from Latin Business Chronicle.
PANAMA HOTEL BOOM
Panama, the best place to do business in Latin America in the 2010 Latin Business Index from Latin Business Chronicle, is seeing an unprecedented boom in hotel construction. In fact, it only trails Brazil, Latin America’s largest economy and host of the 2014 World Cup and 2016 Olympics, in terms of hotels under construction or in the pipeline, according to market researcher STR.
Panama now has 2,777 rooms in the construction phase and 5,094 in the pipeline. That compares with 3,536 rooms under construction in Brazil and 7,854 in the pipeline.
“To put the news into perspective, Brazil is slightly smaller than the U.S., while Panama is about the size of North Carolina,” points out International Living, which gives a detailed overview of upcoming hotels in Panama.
As Brazil gets closer to the World Cup and Olympics it is still far from prepared to handle the expected traffic in international visitors, a new report from Brazil’s institute of applied economic research (IPEA) shows. IPEA is a a body linked to the Planning Ministry. The report looked at 10 of the 67 airports operated by government-backed Infraero and found that all were operating beyond their capacity at peak times.
“The IPEA study on airports is particularly damaging as this sector has received increased government attention since two serious accidents in the course of a year revealed deep structural problems,” HIS Global Insight says. “It suggests that even though long passenger delays have become less frequent and new investments are being made by Infraero, problems persists. This is a particular concern as the upcoming 2014 World Cup and 2016 Olympic Games are expected to increase passenger numbers and put the airport system under even greater strain.”
The study says that Guarulhos airport in Sao Paulo has a capacity of 53 operations an hour, but peak demand of 65. As traffic jumps at the airport, so do complaints about long lines and slow service, as Latin Business Chronicle recently reported.
In a worrying sign, Brazilian officials dismissed the report, claiming it contained errors. “Despite the [government’s] reservations, however, it is clear that more investment is needed in the sector," IHS Global Insight says.
The Dominican Republic, the fastest-growing economy in Latin America last year, managed to boost its GDP by 7.5 percent this year. The fastest growing sector was construction, which expanded by 19.4 percent, the central bank reported.
That news was followed by the results in recent congressional elections, showing a boost by the PLD party of President Leonel Fernandez, who is popular among foreign investors. The party won 104 of 176 seats in the Chamber of Deputies and 28 of 32 Senate seats. More importantly, they will serve for a six-year period – beyond Fernandez mandate, which ends in August 2012. Fernandez, who won re-election in 2008, can’t run for another term. “The preservation of a PLD majority in congress should guarantee policy continuity,” JP Morgan analyst Franco Uccelli said in a recent commentary.
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