Translatinas

Translatinas
Pursuing Intraregional Opportunities
Summary
The regional expansion of the LATAM companies has been an important
phenomenon of the last decade
Why are Translatinas expanding abroad? Risk diversification versus market
seeking
The direct investments done by the Translatinas outside of their country of origin
have accounted for an important part of the FDI flows in LATAM.
Translatinas, “a lonely Brazilian and Mexican race?”
Case studies: Examples of Regionalization
Translatinas’ financial needs
Conclusion
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Why are Translatinas expanding abroad?
Risk diversification versus market seeking
Push factors: Competition as a blessing in disguise.
•
Between 1991 and 2001, the ownership of the 500 largest companies in Latin
America changed dramatically…
•
… With non Latin multinational ownership growing to 39% from 27%. The rising
global competition pressured local Latin companies.
•
The most ambitious are aiming to compete with the world’s largest companies
beyond Latin America. However to date only a very happy few local Latin firms
have taken on the world or tried to create large multinationals.
•
Investors are welcoming such expansion recognizing the value of combining
emerging markets companies with great growth potential with OECD companies
with brand recognition and access to large scale markets.
OECD Development Centre
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The cost of capital
•
Upon securing top positions at home, some Latin firms started to expand more
aggressively abroad.
•
Typically they followed a translatina cycle starting to increase exports to
neighboring countries; then establishing alliances to obtain access to
distribution channels; and subsequently setting up small operations abroad or
making acquisitions.
•
But this ultimate stage hard to reach. With the exception of a very happy few
(e.g., CVRD, Cemex, Gerdau) translatinas remain heavily constrained by the cost
of capital to expand abroad.
•
It is worth to notice that depending on its expansion strategy (i.e., South-South
vs. OECD countries) the impact on cost of capital could be significant. For
instance, Techint, Gerdau and Votorantim are benefiting from a more “OECDlike” strategy vs. Petrobras with its South-South approach.
OECD Development Centre
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2
The direct investments done by the Translatinas outside of their country
of origin have accounted for an important part of the FDI flows in LATAM
Brazil
Direct Investment Abroad (DIA), 1980 – 2004
(in USD mln)
Mexico
Argentina
Chile
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Source: CEPAL
DIA Flow (left axis)
DIA Stock (right axis)
We have seen a major increase of M&A activities sponsored by
Translatinas, together with a significant increase of “South-South” FDI
flows past 5 years
South-South FDI on the rise
USD bln
Acquisitions in LatAm by LatAm companies from 2000-2006
USD mln
Brazil
Mexico
Chile
Argentina
Colombia
Others
Total
Including internal
market
62.8
21.7
10.8
5.4
4.3
3.2
108.3
Excluding internal
market
5.6
10.2
2.3
3.5
1.2
0.5
23.2
180
163.5
159.3
154.7
160
135.3
140
129.6
120
100
90.3
80
60
49.7
33.1
40
20
53.0
47.4
38.3
14.0
0
1995
1999
2000
Total FDI inflow s
2001
2002
2003
South - South FDI
So urce: Glo bal Development Finance, 2006
OECD Development Centre
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3
In 2005, more than 50% of the M&A operations in
Latin America have been driven by local firms
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The emerging Translatinas:
A lonely Brazilian and Mexican race?
Number of firms in Forbes 2000
The 50 more profitable firms
20
19
Number of firms in Forbes 2000
16
44
15
34
10
22
17
7
6
5
3
1
China
India
Brazil
Mexico
1
1
1
1
Panama
Peru
Venezuela
Chile
0
Brazil
Source: Forbes The world´s 2000 largest
public companies, 2007
Mexico
Chile
Argentina Colombia Ecuador
Source: America Economia 2005
OECD Development Centre
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4
Brazilian Firms have started to expand overseas: global
or pure regional players?
50
Top 100 firms in Latin-America
Rk
Firm
Sector
45
40
40
30
20
8
10
3
1
1
1
1
Peru
Venezuela
0
Brazil
Mexico
Chile
Argentina Ecuador
Colombia
Source: America Economia 2005
3
12
32
48
21
63
40
66
144
94
20
62
52
208
102
143
31
16
Petrobras
Petroleum
Vale do Rio Doce
Mining
Grupo Votorantim
Holding
Usiminas
Steel
Gerdau
Steel
Gerdau Açominas
Steel
Telesp
Telecom
CSN
Steel
CST
Steel
Cemig
Electricity
Electrobras
Electricity
Embraer
Aerospace
Ambev-CBB
Drinks
Aracruz Celulose
Paper
Balgo Mineira
Steel
Cosipa
Steel
Telemar Norte Leste Telecom
Odebrecht
Holding
Utility
Exports
04 (US$ Mill) % of sales % of sales
6.728,7
16,5
11,2
2.433,5
23,5
30,6
1.544,6
26,6
18,9
1.137,3
24,7
9,1
1.066,7
14,4
11,6
935,6
24,5
22,4
821,7
16,4
746,6
20,2
20,2
611,9
31,9
53,5
521,7
19,4
487,2
6,5
473,1
12,3
86,9
437,6
9,7
402,5
31,3
61,8
391,6
15,5
363,2
18,8
33,5
345,5
5,9
320,2
3,9
-
Source: America Economia 2005
OECD Development Centre
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Translatinas are spread out in the whole region
Mexico
Vitro
Bimbo
Mabe
Femsa
Cemex Xignux
Del Valle
Venezuela
Grupo Nacional de Chocolate
Carvajal
Organización Corona
ISA
Colombia
Centelsa
Grupo Argos
Ecopetrol
Grupo Team
Brazil
Ecuador / Peru
Alicorp
Grupo Gloria
Paraguay
Falabella
Endesa
Terranova
Masisa
Ripley
CMPC
Enap
Lan Arlineas
Madeco
Celulosa Arauco
Comercial Corza
Grupo Ultragas
SPL
Cencosud
Crodelco
Corbanca
Farmacioas Ahumada
* HQ – Headquarters
Subs - Subsidiaries
Grupo Polar
PDVSA
Chile
Uruguay
Argentina
Gerdau
Petrobras
Const. Norberto Odebrecht
Const. Andrade Gutierrez
Banco do Brasil
Camargo Correa
Votorantim
Magnesita
Imbev
Natura
Itausa
Marcopolo
Coteminas
Friboi
Bertin
Marfrig
Technint
Arcor
Petro. Comod. Rivadavia
Bunge
Sullair
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5
Brazilian Presence in Latin America
Mexico
•
•
•
•
•
Usiminas
Localiza
Unigel
Ultra
Gol
Venezuela
•
•
•
•
Colombia
• Gerdau
• Petrobras
• Vicunha
Andrade Gutierrez
Usiminas
Petrobras
CVRD/Braskem
Ecuador
• Localiza
• Andrade Gutierrez
Peru
Paraguay
• CVRD
• Andrade Gutierrez
• Localiza
Bolivia
• Localiza
• Petrobras
Uruguay
Argentina
Chile
• CVRD
• Localiza
• Gerdau
•
•
•
•
•
•
•
•
•
•
•
Acesita
Belgo/Arcelor
Gerdau
Usiminas
Localiza
Coteminas
CVRD
Localiza
Belog/Arcelor
Gerdau
Petrobras
11
Example of Regionalization: Brewers
(Kaiser)
2004 – SAB Miller
2005 – Inbev
2002 – Ambev
12
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Example of Regionalization: Soft-drinks
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Translatinas’ financial needs
The identified needs of these intra-regional companies are:
– Advisory in the countries where they are newcomers or intend to penetrate.
– To seek for new business opportunities in the countries where they perceive a
potential expansion (M&A, Acquisition Finance, Project Finance).
– The requirement to develop centralized treasuries to optimize funding and
transactional costs across the region.
– Tailored hedging structures including all currencies from the region
– Insure itself against political risks (i.e., expropriation, convertibility, war and political
stresses).
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Conclusions
There are a number of opportunities for regional companies such as mergers,
acquisitions, IPOs, alliances and expansion in Latin America.
The main challenge from a CFO’s point of view is to be able to have financial
partners with capacity to offer customized financial services on a regional
and/or global scale.
Few banks and insurance companies are focused on developing products
and provide support to such “emerging multinationals”.
Translatinas are a phenomena that is here to stay, which provides an unique
opportunity for services providers (i.e., logistics, audit, consulting, legal
companies) to adapt themselves to offer a customized product offering.
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ABN AMRO in Latin America – Strong Regional
Footprint
Brazil is the 3rd home
market for ABN AMRO
after The Netherlands
and the US.
Venezuela
Wholesale Banking
- 1of the 4 Int’l banks with full branch
Mexico
Wholesale Banking
Our regional presence
provides local support
to our international
clients while
maintaining a global
perspective of each
client.
Colombia
Wholesale Banking- 4 Payment & Collections
Centers in major cities
ABN AMRO
complements its strong
presence in Latin
America by partnering
with local institutions
throughout the region.
Brazil
Consumer & Commercial
Banking
1st foreign bank by deposits
and 2nd largest foreign bank by
total assets.
Paraguay
Consumer & Commercial
Banking
- largest bank
- 283 employees
- 15 branches
Peru
Presence through
partnerships with
Banco Wiese
Chile
Wholesale Banking
Argentina
Wholesale Banking
- Present since 1914
Uruguay
Consumer & Commercial
Banking
- largest private bank
- 547 employees
- 23 branches
Commercial Bank
Consumer & Commercial Clients
* Partnership with local banks
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Curriculum Vitae
Carlos Braga is the Commercial Client Segment head for the Spanish Speaking Latin America. Responsibilities include
the coordination of the regional coverage in Argentina, Chile, Colombia, Venezuela, Ecuador and Mexico. He brings to
ABN AMRO’s customers a diversified background as Head of Financial Markets Latin America Business Unit (20022004), Head of Loan Products Latin America group (2000-2002). Prior to this posting Mr. Braga held several postings in
the product & corporate bank areas of ABN AMRO in Brazil and US. Mr. Braga joined ABN AMRO Bank in 1988.
Mr. Braga received his Degree in International Trade Management from UCLA and his MBA from the Instituto Brasileiro
de Mercado de Capitais (IBMEC), Rio de Janeiro. Mr. Braga also has a Degree in Economics from Faculdade Candido
Mendes and a Management Corporate Resources Degree from IMD in Switzerland.
CARLOS BRAGA
CARLOS BRAGA
Executive Director
Executive Director
Commercial Client Segment Head SSC Latin America
Commercial Client Segment Head SSC Latin America
Tel.: 55-11-3174 7475
Tel.: 55-11-3174 7475
fax.: 55-11-3174 7477
fax.: 55-11-3174 7477
e-mail: [email protected]
e-mail: [email protected]
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