The CPC Group (Chile, Peru, and Colombia), an undisputed leader in attracting foreign investment in South America
The IMF has recently published an updated edition of the world economic outlook assessing the situation in the second quarter of the year, with global recovery weakening further as a result of tensions in Europe. On the other hand, the IMF survey underscores the CPC Group’s potential in attracting investors to South America.
IMF revisions to growth projections indicate that global expansion will be in the order of 3.5% in 2012 and 3.9% in 2013. If we consider that growth forecasts for the Euro Area in 2012 will amount to 2 % and to 1.4% for all advanced economies, and if be leave aside China’s 8% and India’s 6.1% growth, it is clear why Latin America, and the main South American countries in particular, have kindled great expectations.
Certainly, apart from Brazil a regional giant whose economy just as that of the other BRIC nations like China and India has started to slow down, with a growth forecast of 2.5% for 2012 and of 4.6% for 2013; the CPC Group (Chile, Peru, and Colombia) enjoys steady growth, which is surprising considering the current scenario. In the IMF recent revision, the growth forecast for Chile is 5.0% for 2012 and 4.5% for 2013; for Peru, 5.9% and 5.7% respectively; and for Colombia, 4.5% for both years, which evidences that the foreign investors’ preference is in line with what has been occurring in those countries in recent years and especially with the outlook for the years to come.
This club could also be joined by Argentina, where the IMF growth projections are 4.6% for 2012 and 4.2% for 2013. However, the signals Argentina is sending to the international financial community contrast with the principles that have long been espoused by the group. Free trade, free inflow and outflow of foreign currency, no restrictions on profit repatriation, no restrictions on the import of goods and services, and single-digit inflation rates are all conditions that the region’s second largest economy unfortunately cannot show to a business community eager to take advantage of the benefits offered by healthy economies, vis-à-vis the growing instability in most advanced economies of the Northern Hemisphere.
Specifically regarding the hotel business sector, the impact on the region is even greater given that, in general, South American markets boast two reasons to attract investment; on the one hand, the expansion of their economies in the last ten years, and on the other a need to revamp hotels and adapt them to the demands of today’s travelers.
If the proof is in the pudding, just a quick look at occupancy levels and rates in the main cities of the region will indicate that the hotel business is enjoying good health and that demand is far above supply. If wishing to travel to Santiago, Bogota, Lima, Sao Paulo or Rio de Janeiro at a week’s notice, getting a business class airline ticket or good accommodation is not so easy.
As a result of rising occupancy, rates have reached adequate levels that were unthinkable just four or five years ago.
Further signals regarding the growth outlook for regional economies, and particularly for the CPC Group (Chile, Peru, and Colombia), relate to the placement of bonds by Codelco, Chile’s largest mining company. Codelco’s issuance totaling USD 2 billion was oversubscribed in five times, with a bond for USD 1,250 million at a coupon rate of only 3%.
This may not sound remarkable in an advanced economy in the Northern Hemisphere, but it is so in a South American country. Furthermore, Chile has launched a project to expand Santiago’s international airport current capacity by 60%. The facilities will be fully operational in 2017.
In less than two months a new edition of SAHIC will take place. This annual event will be attended by key players in the hotel, tourism and real-estate related projects. The huge number of participants evidences their enormous interest in learning about the opportunities offered in South America.
Everything seems to indicate it is the best time to invest in South America’s hotel industry.Arturo Garcia Rosa July 23, 2012
South America -News – July 2012: www.hvssouthamerica.com/e-sur/editorial_eng/arturosletter-eng.html