June 1, 2008        www.LatinEPR.com      

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LATIN AMERICA - NEWS BRIEFS

Media and technology

Latin Ads: Brazil Leads Growth

ZenithOptimedia, a London-based ad agency, has forecasted that Latin America's advertising industry will experience the world’s second-highest growth rate, reported the Latin Business Chronicle recently.  According to the forecasts, advertising expenditures in LatAm should grow by 13.3% this year to $29.9 billion.  This is in sharp contrast to other ad markets like the US, which is projected to grow by 3.7% and Western Europe by 3.9%.  Within the LatAm region, Brazil is showing the most dramatic growth, boosted by large US manufacturers of household products.  Mexico, meanwhile, should see numbers rise with the 2008 Beijing Olympics’ ad spending.  Increased investment in 2008 is riding the wave of 2007, which was a record year and total ad spending in Latin America grew by 12.8% to $25.6 billion.

MTV Lands in Latin America

MTV Networks Latin America has announced its intention to invest $76 million over the next five years to build a production hub in the capital of Argentina, according to Variety.  The new 33,000 square-foot complex in Buenos Aires will supply the network’s Latin American operations and create 200 new jobs, a major increase from the 30 staff members in 2006.  MTV Latin America has expressed its desire to tap into Argentina’s large pool of local talent and work with the country’s high concentration of indie-minded filmmakers in developing future programming. 

Telefonica to Launch Mobile Banking Across Latin America

Starting in July 2008, Telefonica will partner with the Inter-American Development Bank to offer Latin American cell phone users mobile banking, reported Cellular News this past month.  The new m-banking initiative will target the 175 million people in Latin America who currently have mobile phones but no banking access.  Says Matthew Key, CEO of Telefonica Europe, the company is “building on a number of other major Telefonica initiatives aimed at reducing social and economic exclusion…the project’s principal aim is to improve financial access in Latin American markets by providing an m-banking solution to some of the most vulnerable in society – those groups that do not currently have access to banks or financial services.”  Key recently joined other industry leaders, politicians, and senior figures from the UN at the UN Millennium Development Goals Business ‘Call to Action’ event in London, and signed the Business Call to Action Declaration, pledging the company’s commitment.  Currently, Telefonica supplies 13 Latin American countries and 86% of the region’s population with mobile communications.  The company has been largely responsible for increasing mobile penetration in the region to 70%, up from 45% only two years ago, by removing entry barriers for lower socio-economic groups and targeting rural communities.

Aerial Roaming Service to Take Flight in Latin America

Mobile phone users on Latin American routes could begin taking advantage of a new aerial roaming service that allows onboard cell phone conversations as soon as next year, Chilean mobile operator Movistar announced to Bnamericas recently.  Movistar is trying to forge partnerships with various Chilean airlines to offer the unique service, developed by Aeromobile and OnAir and being introduced currently to Qantas and Emirates airline customers.  Antonio de Bonis, assistant roaming and convergence manager explains that restrictions for using cell phones onboard stemmed from a misconception that handset frequency interfered with the airplane’s onboard communication system.  More than 10 years of research have shown this to not be the case after all.  The new service would see Movistar working with Aeromobile to install cellular antennas on airplanes and offering in-flight roaming for around US$ 5.00 a minute. 

Cuba: Mobile Phone Ban Lift Sparks 7,400 New Contracts

7,400 new cell phone accounts were opened in Cuba within the first ten days of President Raul Castro lifting the restriction on service, the Associated Press reported at the end of this month.  Prior to the lift on April 14, only top government officials, foreigners, or those working for foreign companies were permitted to have mobile phones.  The rush to open new accounts shows the immense demand, particularly in light of the cost to residents of the island.  A cell phone contract costs about $120 to activate, half a year’s wages on the average state salary, meaning that despite the interest, it will still take some considerable time before most Cubans can begin to benefit from this new law.

TRAVEL

Strong Euro Helps LatAm Emerge as Popular Summer Vacation

With the number of U.S. passport holders increased by almost 20% over last year to 88 million, more and more Americans are looking to travel abroad, but a recent USA Today article points out that the focus of their destination is changing.  Although European vacations remain popular, exchange rates have caused 2008 summer bookings to Euro-based countries such as Spain, France and Italy - the season’s traditionally top contenders - to drop off by as much as 15% in favor of non-Euro countries.  One region to profit especially from the current exchange rates is Latin America and the Caribbean.  According to the article, the Caribbean’s share of summer bookings on Travelocity, for example, has gone up 15%.  South America’s share, particularly for Buenos Aires, has increased by 13%, while Mexico’s share is up an incredible 47%.   The Mexico Tourism Board is wasting no time in taking advantage of the Euro’s strength, and is actively promoting to U.S. tourists with new summer packages and travel deals.  Oscar Fitch, the board’s director, told USA Today that bookings for the first three months of 2008 are already 10% higher than this time last year.  As he explains, Mexico, as well as the region at large, satisfies the international traveler’s need for another culture, artists, food, beaches, and music, but at a budget they can afford.

Dominican Republic Targets 5 Million Visitors

The Dominican Republic’s Tourism Ministry has set its sights on receiving five million tourists by 2012, with 4.4 million of these being international visitors, Dominican Today reported last week.  Tourism Minister Felix Jimenez explained in a news conference that this goal would generate more than five billion dollars annually and guarantee $8 billion on hotel and real estate investments for his nation.  To achieve this, Jimenez referred to the next four years of the ministry’s 2000 National Integral Tourism Development Plan, which calls not only for advertising abroad but also improved infrastructure at home.  The government plans to invest in highways, sanitary systems, security services and training, among others.  One project currently on the table involves tourist roads that would link the country’s mountain towns, while another would ensure lighting for the capital’s cultural monuments. 

Aruba Airport Gets Facelift

Aruba’s Aeropuerto Internacional Reina Beatrix is undergoing a facelift inside and out that has Peter Steinmetz, the airport’s managing director looking to diversify, according to a recent article in Flight Global.  Named after Queen Beatrix of the Netherlands, the airport has undergone a complete upgrading of its commercial retail space and parking, and runway renovations should be complete by the end of June.  The airport’s new look has turned focus on expanding its arrivals, mainly by targeting untapped markets.  Explains Steinmetz, visitors to the island have been traditionally wealthy timeshare owners from New England, but there seems to be renewed interest from elsewhere, as indicated by the 1.84 million visitors in 2007, a 13% increase over the previous year.  Already in 2008, traffic is up 30%.  Aruba airport officials are targeting the US Midwest, northern Europe, as well as Latin America, where Steinmetz is talking to major airlines in Central America.  Existing routes from Colombia and nearby Venezuela are exhibiting dramatic growth, and Delta has already added additional flights from Atlanta for the summer.  

Mexico Partners with Expedia Travel

This April the Mexican Tourist Board announced it will be teaming up with leading online travel company, Expedia, Inc., to promote in-bound tourism to Mexico, one of the top destination countries booked by Expedia travelers each year.  The partnership, which is one of the most significant to date for Expedia, will aim at developing targeted advertising campaigns on Expedia sites throughout North America and Europe, as well as building on the 2006 partnership that saw Mexico join the World Heritage Alliance, an initiative led by Expedia and the UN Foundation to promote sustainable tourism and preserve cultural landmarks.  Expedia has more than 70 million unique users each month and an audience with one of the highest BPI (Buying Power Index) scores on the web.

2007/08 Argentine Cruise Season Sees 185,000 Passengers

The Argentine cruise industry closed the 2007/08 season with 185,000 visitors, a 35% increase over the previous season, reported a recent Mercopress article.   According to the report, officials are calling the season a success and maintain that visitors spent an estimated US$110 million in Buenos Aires alone.  For the upcoming 2008/09 season, 134 cruise calls have already been booked, contrasted to 54 calls in 2006/07.  Boosting arrivals are the expanded Buenos Aires port facilities, which can now handle up to five cruise vessels at a time.  

Latin American Airlines Growing despite Rising Fuel Costs

The airline industry in Latin American is stable and growing, despite the heavy downturn experienced by airlines in other markets due to rising fuel prices, reported Reuters recently.  According to the news source, Latin American airlines are an anomaly for the industry these days, with Chilean carrier LAN and Copa from Panama making record profits while other airlines in the Northern Hemisphere are recording huge losses.  LAN’s net profit grew 28% last year to $308 million, while Copa Holdings reached a record $160.4 million.  In Mexico, passenger demand is also strong and of the 12 airlines currently operating in the country, half are low-cost airlines that were founded within the last two years.  European carriers are waking up to the region’s profitability as evidenced by the large number of code-share agreements in recent months, such as Lufthansa and Portuguese TAP with leading Brazilian carrier TAM, and Air France and KLM with TAM’s competitor Gol Linhas Aereas.  The report attributes the healthy aviation market to economic gains that have created more buying power, an emphasis on fuel-efficient aircraft, a tourism boom, and a strong cargo business.  Further boosting passenger demand is the influx of low-cost carriers, like Jet Blue, which is introducing a new airline to Brazil in 2009.  The cost effective airlines are beginning to have a significant impact on the way Latin Americans travel, particularly in places like Mexico and Brazil, by providing an affordable, more reliable and often safer alternative to the traditional bus.

Economy and Politics

Mexico Given Strategic Partner Status at EU Summit

Mexico was given ‘strategic partner’ status with the European Union at the 5th EU-Latin America and Caribbean Summit in Lima this May, the AFP reported.  The designation means more open political dialogue and the promise of a free trade agreement.  In the days following the summit, the European Commission signed on a civil aviation agreement with Mexico that restores bilateral air service between Mexico and 12 EU member states.  But of all the EU members, the country emerging as Mexico’s strongest ally is Germany.  Bilateral trade between the two countries has almost doubled in the last seven years to reach $15 billion, turning Germany into Mexico’s top EU trading partner.  Relations were further fortified when German Chancellor Angela Merkel, attending the summit, finished her four-nation tour of Latin America with a visit to Mexico.  There she and President Calderon agreed to strengthen their partnership – the first sign of solidarity is Merkel’s pledge to endorse a joint initiative with Mexico to stabilize food prices at the upcoming G8 Summit in Japan.    The rise in food prices is not only of concern in Mexico, where the price of corn is worrying the population, but was also among the topics that dominated the recent Lima summit, along with energy sources, human rights, and climate change.

Record Foreign Direct Investment for Latin America in 2007

Foreign direct investment to Latin America reached a record $106 billion in 2007, overtaking the previous record of $89 billion in 1999, according to Mercopress which references the latest report from the United Nations Latin American Commission (CEPAL).  The CEPAL report asserts that the new record increase differs from that of 1999, in that previous investment was triggered by privatization while last year’s was the result of strong domestic markets and international demand for the region’s natural resources, indicating a more lasting and sound basis.  The US, the Netherlands, and Spain were the top investors, while leading recipients were Brazil with $34.58 billion, followed by Mexico, Chile, and Colombia with $23.2 billion, $14.46, and $9 billion, respectively.  The report points out that the effects of the US economy’s recent slowdown is yet to be measured, as it only became evident in the last quarter of 2007, but another report by the American Enterprise Institute maintains that a US recession could still have a relatively small impact on LatAm countries, because the current US credit crisis is located in an area of the financial market that does not exist in many developing nations, namely securitized mortgage markets.  Global trade and high commodity prices could buoy LatAm economies enough to survive the current climate, (although close US trading partners like Mexico will no doubt be affected), provided the region’s nations aim towards responsible leadership. 

Former Bishop Wins Paraguay Presidential Election

Former bishop Fernando Lugo became the new president of Paraguay on April 20^th, winning on a platform that promised to restore ‘energy sovereignty’, reports Bloomberg.com.  Scheduled to be sworn into office in August, President-elect Lugo is wasting little time in making good on his promises to the Paraguayan people, whose per capita income stands at $4700, according to the U.S. Agency for International Development.  Lugo has already stated that he will seek to revise thirty-year old energy treaties with Brazil and Argentina, which he contends are unjust as they were made under a dictatorship.  As a land-locked country, Paraguay suffers certain economic disadvantages, which revised rates of the hydroelectric energy it exports could go a long way to relieving, although it unlikely this new agenda will well received by Paraguay’s larger neighbors.  Lugo will also soon be testing another economic relationship, namely its ties with Taiwan, as the South American government seeks to partner with powerhouse China, which is targeting Latin America with 25% of its foreign investment, according to the Xinhua News Agency.        

Costa Rica Economy Forecasted to Resist US Slowdown

The Costa Rican government recently declared its confidence that a downturn in the U.S. will have little negative impact on its own economy.  In support of this statement, Davis Stanley Ltd, one of the UK’s leading overseas property investment specialists, has published a report delineating Costa Rica’s talent for adaptation in any climate.  According to the Davis Stanley analysis, Costa Rica’s strength lies in its constant evolution, citing as an example its increasing hi-tech sector, which has attracted companies like Panasonic and Intel, and could see as much as $90 million in investment this year.  This expanding market, along with Costa Rica’s 95% literacy rate and stable government, show how far the country has come from an erstwhile banana republic to develop into one of the best educated and forward-thinking nations in the Southern Hemisphere.  In regards to agriculture, the report demonstrates Costa Rica’s refusal to stagnate with bananas and coffee, by responding instead to a changing global economy and diversifying.  In recent years, the large variety of agricultural exports from Costa Rica have come to include such select items as exotic flowers and luxury organic produce.

Of course, the Davis Stanely report concedes that the U.S. slowdown will inevitably be felt in Costa Rica, as the two nations are partners in the US-Central American Free Trade Agreement.  The report notes that the downturn in the U.S. economy is no doubt partly responsible for a drop in Costa Rica’s own growth in 2008, 3.8% compared to 6.8% in 2007.  But the factors mentioned above, compounded with a healthy and steadily growing tourism industry that draws more than a million holiday seekers from around the world each year, should see Costa Rica remain bouyant on the whole, padded as it is by a $174 million budget surplus, the first such large sum in over 50 years. 

General Interest

Shakira Stages Latin American Version of Live 8

This past month, Colombian singer Shakira’s ALAS Foundation (Latin America in Solidarity Action) brought together an impressive lineup of Latin megastars for an anti—poverty event intended to raise awareness for the needs of the region’s poor children.  Referred to by many as Latin America’s version of Live 8, the event consisted of two simultaneous concerts in Buenos Aires and Mexico, and drew more than 380,000 people to the capitals.  In addition to Shakira, performers included Ricky Martin, Paulina Rubio, Alejandro Sanz, Miguel Bose, Mana, Fito Paez, Jorge Drexler (Academy Award winning songwriter), Gustavo Cerati of Soda Stereo, and many others.  Outspoken Colombian rock star Juanes was unable to attend due to problems with his plane.  An impressive result of the event were the $200 million donations made towards the ALAS cause by Mexican magnate Carlos Slim and Howard Buffet, son of billionaire Warren Buffet.  According to Reuters, both men were on hand earlier in May for the event’s announcements, though Buffet in particular does not usually publicize his philanthropy.  But said the billionaire, “When Shakira calls, you show up…” 

South American Volcanoes Could Impact Climate

In the midst of reports that climate change will adversely affect Latin America and specifically the region’s poor, a new scientific study is pointing to the effects recent volcanic activity in Latin America might have on the world.  According to findings published in the weekly newspaper of the American Geophysical Union, the eruption of Huaynaputina in southern Peru some four hundred years ago was responsible for sending the world into a temporary deep freeze.  Sulfur released into the atmosphere from this eruption, the largest in South America in the past 500 years, caused a global reduction of sunlight that cooled the earth for a year and sparked agricultural upheaval across Europe and Asia.  Similarly, the lesser eruption of Mount Pinatubo in the Philippines in 1991 caused global temperatures to drop by 1 degree Fahrenheit for 1992.  The study, which searched historical documents to trace the social impact of such eruptions, is a timely one as Latin America again experiences a high level of volcanic activity.  This May, the Chaiten volcano in southern Chile, inactive for the past 9000 years, blasted ash and fire some 20 miles into the air.  Peru’s Ubinas volcano also erupted early this month, and just this past week Tungurahua Volcano of Ecuador had 125 explosions.  In addition to ash and fire, these eruptions also sent tremors across the surrounding areas.  Scientists are closely monitoring this activity, especially in Chile, unable to determine the extent of the impact another eruption of Huaynaputina’s intensity would have on the environment.  Of course, Latin America, despite leading the world in volcano population with over 200, is not the only volcanic hotbed at the moment.  Java’s tallest volcano has recently seen activity, as has Italy’s famed Mt. Etna, Europe’s biggest active spouter.

LatAm Leaders Sign $105 Million Food Crisis Deal

The leaders of Venezuela, Bolivia, Cuba, and Nicaragua have signed a $105 million deal at a meeting in Caracas meant to combat the current food crisis, reported ABC News.   A general food crisis is occurring on a global scale, in part due to rising fuel costs.  The United Nations have called the lack of food a “silent tsunami” and have pointed out poor countries like Bolivia, where the energy crisis is equally acute, as being particularly affected.  The new agreement between the four Latin American nations will strive to grow more food, especially staples like rice, bean, and corn.  According to the Associated Press, Venezuela imports most of its food, despite several agrarian reforms under Chavez.  Cuba does the same, and in 2008 expects to spend close to $2 billion on food imports, most of which will stem from the U.S.  Apart from becoming less dependent on imports by growing its own food, each of the four countries will also have to resolve the current struggle between failing business owners and government price controls. 

Brazil Finds Answer to Safe Sex in the Amazon

The Brazilian government reached new heights of ingenuity recently as it invented a new way to combat the country’s AIDS epidemic while at the same time saving the rainforest: produce condoms from rubber harvested in the Amazon.  According to a Telegraph article, Brazil is the world’s largest single buyer of condoms, with the government purchasing over a billion of the contraceptives in recent years as part of an AIDS prevention program.  The dependence on foreign imports, however, has gotten the government to think outside the box and come up with this new plan to start a state-run factory in the Amazon rainforest that could produce more than 100 million condoms each year.  Rubber harvesting should also help discourage destruction of the rainforest, as the latex from the trees is readily available and offers workers a non-destructive source of income.  As it stands, the new venture promises some 150 jobs that will benefit 500 families in the remote town of Xapuri.