Last year, during the Belgian economical mission we were present at the launch of Rio Negocios, the Investment Promotion Agency of the city of Rio de Janeiro. Last week, the results of the first year of operations were announced: 186 companies passed through the Investment Promotion Agency, investing a total of 750 million R$.

Tags: investments Rio, Rio negocios

Today was the opening day of the world Economic Forum Latin America 2011, which is taking place in Rio de Janeiro.

I especially enjoyed listening to Sir Martin Sorrell, Chief Executive Officer of WPP, the world leading advertising agency.
You can hear the man’s vision on Latin America in an ever more globalized world form 0:20:50 on.

You can follow the life stream tomorrow here.

Tags: world economic forum latin america

The Wall Street Journal published last Thursday this piece on the ever-increasing currency wars.
Brazilian finance minister Guido Manteiga was extremely direct towards the United States:
“The main culprit is the lagging behind of the recovery by the advanced countries and this prompts them to practice monetary policies that are much too expansive,” Mantega said. “While the advanced countries are not totally recovered from the crisis, we’ll have a dispute for markets, particularly for manufactured goods,” Mantega said. Companies should be able to hedge their currency exposure, but derivatives volumes are well above transaction levels, which “is speculation, it’s not hedging,” Mantega said.

The smart players are using this  moment to import machinery and set up local production in Brazil:
1. Apple and Foxcon announced they are setting up an assembly plant in Sao Paulo for the production of iPhones, iPads and Apple Powerbooks.  Currently an iPhone cost double the price of what it costs in Europe, which didn’t prevent 400.000 Brazilians form buying one in Brazil.  Imagine what the market potential is with local production.  The exact financial taxation of the Apple products assembled in Brazil are still being discussed, at this very moment Dilma is in China and has a visit to Foxcon’s CEO Terry Gou on her agenda.  Assembly in Brazil could start as from November on.

2. BMW announced last week that it is studying an assembly plant in Brazil.  Just a matter of time then before Audi follows-suit.

Tags: apple brasil, BMW no brasil, ipad brazil

Obama left to Brazil, he’ll arrive in Brasilia tomorrow morning.
Initially Obama would speech for tens of thousands of Brazilians, like he did in Germany in 2008, but the plans changed, he’ll now speech in the Teatro Municipal for 2200 persons.  Obama will surely have a hectic week leaving the US for 5 full days, with the crisis in Libia and Japan on his head, he’s already being criticized back home.
But after this  article Obama wrote himself in the USA Today, the press went somewhat milder on him like here on CNN.
CNN also has a feature on the favellas Obama will visit (actually, Cidade de Deus, yes, the one of the movie).

It’s clear that Obama’s visit is not altruistic, the man wants to export to Brazil and latin America, quoting his words:

Nearly 600 million people live in Latin America. The region’s economy grew by about 6% last year. Between 2010 and 2015, it’s expected to grow by one-third. And as these markets are growing, so is their demand for goods and services — goods and services that, as president, I want to see made in the United States of America.
In 1990, Brazil was the 16th largest market for our goods. Last year, it was the eighth largest. In 2010, our exportsto Brazil grew by more than 30% to just over $50 billion, supporting more than 250,000 jobs here at home.

Again Europe is loosing out bigtime !

And also the Brazilians know why Obama is coming to Brazil: petrol and exports.  This poll clearly shows Brazil is not stupid and will dance Samba with Obama:

More on his visit the coming days.
Meanwhile this excellent article in The New York Times is wortwhile reading.

Tags: obama, obama and dilma, obama brasi, obama brazil

I bought Brazilian TAM in May last year at 13,50 USD, the stock trades at 20,96 today (PE 8,15)
Although these are uncertain times to buy shares of air companies, TAM is worth looking into.

Last week the merger between LAN Chile and TAM was formally approved in Brazil, creating LATAM, making it the 11th biggest company in number of passengers, bigger than Qantas, Japan Airlines and China Air:

The merger gives many synergies, not in the least when it comes to cargo.
But let’s not forget what is ahead:

1. LAN has currently 63 planes in the air and 102 planes on order.
2. TAM has currently 144 planes and 124 on order (of which  17 Airbus A350-900 and 10 Airbus A350-800)
3. UK design firm Priestmangood is doing a redesign of aircraft interior on TAM’s entire fleet, including the upcoming Boeing 777s and A350s
4. Last week TAM announced it will buy Brazilian local carrier TRIP.
5. Profits of TAM rose 7,9% compared to last year (dividend yield of 4,1% on the stock)
6. In 2010, the demand for domestic Brazilian flights increased by 23.5%, according to the Brazilian National Civil Aviation Agency (ANAC). TAM estimates that in 2011, demand for commercial flights in the Brazilian market will grow by between 15% and 18%.
7. And most interesting, Portugal will have to sell state-owned TAP in May.  The new LATAM is looking into acquiring 39% of TAP (it’s flights to Brazil, TAP is currently the air company with most passenger movement EU-BR) and eventually increasing its share to 49%.  Lufthanse has also asked for the details of TAP’s privatisation and is interested in buying the remaining 51%.

End of May more news on the TAP deal. Will be determining to TAM remaining a Star Alliance member.  There is a fierce battle going where both Star Alliance (TAM is Star Alliance) and Oneworld (LAN is Oneworld) are both courting LATAM.

I tend to bet that Petrol will fall back to 100 US$ sooner then expected, yet the impact on airline profits is fierce.  Remember:  Brazil does not allow airlines to pass on fuel surcharges to their domestic customers, so companies like TAM, Azul and GOL will simply have to absorb the added cost and watch their margins suffer. To which extent would this already be discounted into the current 21 USD price of TAM?  Currently TAM is still trading at a ~9% discount to the implied stock priced based on the share swap ratio of 1 LFL:0.9 TAM, an opportunity?

Tags: LATAM, TAM shares