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Leasing Boom in Latin America

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The Dominican Republic posted Latin America’s highest leasing growth last year.


BY CHRONICLE STAFF

LEASING GROWTH
Despite the global economic downturn last year, Latin America’s leasing industry grew significantly, according to -- The Alta Group’s sixth annual report on equipment leasing in Latin America, The Alta Group LAR 100.

The industry expanded by an estimated 25.3 percent, or 19.7 percent when adjusted for exchange rate fluctuations. “This growth is remarkable given the 1.9 percent decrease in the region’s Gross Domestic Product (GDP) that was reported by the United Nations Economic Commission for Latin America,” Rafael Castillo-Triana, managing principal of Alta’s Latin American Region (LAR), said in a statement.

 

The Dominican Republic experienced the strongest leasing growth (48 percent) in 2009, followed by Mexico at 32 percent.  The Dominican Republic, the largest economy in the CAFTA trade block, posted Latin America’s highest economic growth last year. Brazil, which has the region’s largest leasing industry, increased its regional market share to 67.8 percent.  Leasing in Chile, Colombia, Peru, and Bolivia also expanded.

But Castillo-Triana warns against some troubling trends affecting the industry. “Despite positive overall gains, the Latin American leasing industry is facing many challenges to its continued growth and survival,” he said. “One is the global economic crisis, which has decreased demand for capital goods, the availability of funding, and the development of resources.

Meanwhile, the region’s extreme tendency to give banks preferential treatment over captives and independents, is creating great concern about the future of the industry, Castillo-Triana adds . “Additionally, there are some worrisome economies in the region, in particular those of Venezuela, Argentina, Bolivia, and Ecuador,” he said.

Other key findings:

  • In 2009, the presence of multinational leasing companies declined in most Latin American countries, however, new multinational players emerged in Brazil.
  • Bank-owned lessors consolidated power.
  •  A vendor financing boom continues in the region.
  • Delinquency rates were lower than in 2008.
  • Alta’s ranking of the Top 100 largest companies was headed again by a company of the Itau Group of Brazil.


CORRUPTION:
VENEZUELA WORST

Venezuela is now the most corrupt country in Latin America, according to the 2010 Corruption Perception Index from Transparency International.

 

Last year Haiti ranked as the worst in Latin America, but its score improved, while that of Venezuela worsened. Globally, Venezuela now ranks 164th of 178 nations. That means corruption is worse than in countries like Russia and the Democratic Republic of Congo and barely better than countries like Angola and Equatorial Guinea. 

Chile remains the most transparent, followed by Uruguay and Costa Rica. This year, Brazil came in fourth place, along with Cuba, when it comes to transparency. This despite the recent corruption scandals and estimates that corruption costs $41 billion to Brazil’s economy each year.

 

FRAUD: LATIN AMERICA’S POOR RECORD

Latin America as a whole fares poorly compared to other regions when it comes to fraud, even if it is not the worst performer, according to Kroll’s Global Fraud Report 2010-11 released last week.

 

It has the second highest number after Asia of companies affected by at least one fraud in the last year (90 percent) and the highest incidence of regulatory or compliance fraud (21 percent) and ranks second in five other types of fraud covered in the survey: information theft (35 percent), management conflict of interest (27 percent), vendor or procurement fraud (22 percent), IP theft (10 percent), and money laundering (9 percent), Kroll says.

 

“Another serious concern for Latin America is that far more companies report an increase in their exposure to fraud than in other regions,” the risk consultancy points out. “A full 85 percent of Latin American companies believe they have become more vulnerable compared with 75 percent of companies in Asia or the global average of just 73 percent. In fact, more companies in Latin America, 34 percent, cite high staff turnover as a contributor to fraud.”

Latin America also reports the second highest increase in exposure to fraud, after Africa at 18 percent, resulting from increased collaboration between firms. It trails Asia with 16 percent of respondents citing more aggressive regulatory enforcement in helping to uncover fraud.

 

WHAT’S IN A NAME? 

Mexico’s Grupo Bimbo has been strategically placing billboards in Philadelphia that aim to offset the negative connotation of the name Bimbo, the Philadelphia Inquirer reports. The billboards include the words: "Say 'Beembo!' "

"The humorous billboards are a fun way of helping consumers relate to the brand's name BIMBO (pronounce Beembo), which is also the name of our bear character. BIMBO is derived from the Italian word bambino, meaning little boy," Bimbo Bakeries USA said in a release quoted by the newspaper. 

Leonard Lodish, the Samuel R. Harrell professor of marketing at the
University of Pennsylvania's Wharton School, is one who thinks Bimbo will have a difficult time shaking the cultural weight of its name in the United States. "I think Grupo Bimbo is foolish to use that name here," he told the Philadelphia Inquirer.  The issue is a common one, he said, as companies expand into new markets. Chevrolet confronted the issue when it introduced the Nova into Latin American markets, he said. "Multinationals have to be very careful if they are going to try to have a world brand," Lodish said. "They have to look at what a name means everywhere."


FAKE PRESS RELEASE, WEB SITE
The Rainforest Action Network created a fake press release from Chevron and linked it with a fake web site, in part to bring attention to the lawsuit against the US oil giant in Ecuador for alleged contamination.  

“The activist organizations behind [the] actions are clearly not interested in engaging in rational conversations on energy issues,” Chevron said in a statement. “We fully expected that our critics would try to mimic our ads.  However, these organizations went as far as forging our logo, web assets and issuing fake press releases.”

 

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