Publish in Analysis - Monday, December 11, 2017
The famous Avenida Paulista in Brazil's business hub Sao Paulo. The Brazilian economy is now recovring after two years of recession, while inflation is falling. (Photo: City of Sao Paulo Government)
The best news in Latin America business in 2017.
BY LATINVEX EDITORS
The best events in Latin American business this year, according to Latinvex editors.
#1 Brazil Economic Turnaround
After two years of recession, Brazil’s economy is expected to end this year with a 0.7 percent expansion, according to an estimate from the International Monetary Fund (IMF). Next year will likely see a 1.5 percent GDP increase, the fund predicts.
That compares with a 3.6 percent decline last year and a 3.8 percent decline in 2015, the worst result in 25 years.
Meanwhile, just as important for a country that has suffered from inflation, the consumer price rate is expected to end this year at 3.7 percent, the IMF estimates. That will be the lowest level in 10 years.
Brazil's inflation during the first 11 months this year reached 2.5 percent, the lowest since 1998, Exame reports. Meanwhile, Brazil's central bank cut interest rates to an all-time low last week, Reuters reports.
President Michel Temer – who was named a Leader of the Year by Latinvex last year -- has managed no small feat, replacing the widespread business pessimism under his predecessor, Dilma Rousseff, with optimism.
#2 Mexico Energy Boom
This year has seen the first major results of the 2013 energy liberalization implemented by President Enrique Peña Nieto (Latinvex Leader of the Year in 2013).Mexico has held several oil auctions granting private and foreign companies historic rights to explore oil. In June, Mexico auctioned two-thirds of the shallow water oil and gas blocks up for grabs, Reuters and Bloomberg reported. Winners included Italy's Eni, Spain's Repsol, Colombia's Ecopetrol, Russia's Lukoil, Mexico's state oil company Pemex and a tie-up between France's Total and Royal Dutch Shell. Mexican energy minister Pedro Joaquín Coldwell estimates the winning bids will generate $8.2 billion in investments, El Financiero reports.
And Chevron, Texaco, BP and Royal Dutch Shell have also opened up the country’s first foreign brand gasoline stations in Mexico’s history. (Local companies Hidrosina and Femsa launched the first private gas stations last year).
Mexico also this year saw the $650 million IPO from private oil company Vista Oil & Gas -- the first E&P-focused company to list in Mexico.
And in July U.S. energy company Talos, Mexico’s Sierra Oil & Gas and the United Kingdom’s Premier Oil announced a “historic and significant” oil discovery in shallow waters of the Gulf of Mexico, which the consortium says is the largest find anywhere in the world in the last five years.
#3 Brazil Energy Privatizations
Brazil’s pro-business government has received widespread praise for its plans to privatize state electricity giant Eletrobras (Latin America’s largest electricity company on the Latinvex 500) and BR Distribuidora, the fuel distribution arm of state oil company Petrobras, through an initial public offer.
The surprise move to privatize Eletrobras sent the utility's shares soaring nearly 50 percent as investors bet the plan augured further moves to loosen the government's grip on the economy, Reuters reported. The country's private electricity companies also praised the move, Valor Economico reported.
Those moves come as China’s State Grid has gradually acquired all of private electricity company CPFL, first by acquiring a $7.8 billion controlling stake in what became the largest M&A deal in Latin America last year, then last month paying an additional $3.5 billion for the rest of CPFL.
Meanwhile, China’s State Power Investment Overseas Co acquired hydro power assets from Minas Gerais state power company Cemig for $2.3 billion in June in what became the third-largest deal in Latin America during the first nine months this year.
#4 Argentina Political & Business Outlook
In October, Argentine president Mauricio Macri and his ruling party secured an important mid-term election victory. Not only did they win more seats in Congress, but Macri’s predecessor, Cristina Kirchner, lagged behind Macri’s Buenos Aires senate candidate in votes. (She secured a seat, anyways, as Buenos Aires has several senator seats). Last week, a federal judge in Argentina indicted former President Cristina Fernandez for treason and asked for her arrest for allegedly covering up Iran’s possible role in the 1994 bombing of a Jewish community center that killed 85 people, Reuters reports.
Macri’s progress and Kirchner’s misfortunes are welcome news for foreign investors, as the latter was known for her investor-hostile economic policies, while the former has been busy regaining investors’ trust through economic reforms and pro-business policies.
#5 Panama Canal Expansion Success
The Panama Canal in June marked its first anniversary after undergoing a multi-billion billion expansion that enabled passage of larger vessels.
While the expansion was marred by cost overruns and delays, experts say the first anniversary exceeds expectations, with record revenues and traffic.
“The performance of the new set of locks after one year has exceeded most expectations,” says Richard Wainio, a former planning director of the Panama Canal Commission who recently served as Port of Tampa CEO and follows canal development closely.
Paul Bingham, Vice President of EDR Group and leader of the firm’s trade economics practice, and Robert McMillan, a former Panama Canal Commission Chairman and author of Global Passage, concur. (See Panama Canal Expansion Exceeds Expectations)
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