Exclusive outtakes from industry leaders
But we still have the bumper cars…
Mexico’s central bank Gov. Guillermo Ortiz thinks the world economic crisis is probably past the worst but warned growth in the third quarter could contract on an annual basis.
Speaking at the Reuters Latin American Investment Summit, Ortiz — who also fronts the Bank for International Settlements — said there is a growing sensation that the crisis may have bottomed. Inflation in Mexico is likely to decline, helped by lower demand and the peso stopping its free fall against the dollar.
Two types of market interventions since October, where the government sold dollars to ease pressure on the exchange rate, have managed to pull back the peso to levels of just above 13 per greenback, a gain of about 19 percent from its March all-time low.
Ortiz also said the central bank is touching base with key market players to evaluate if a second auction of short-term dollar credits, aimed at triggering lending to companies once again, is needed.
At the beginning of 2009, as Mexico felt the pinch of the U.S. meltdown, Finance Minister Agustin Carstens said the country’s economy was much better prepared than before to resist slowing business from its northern neighbor, where it ships about 80 percent of exports.
Asked about the possible effects of the U.S. recession in Mexico, he candidly anticipated in a TV interview in February the economy would only “catch a little cold instead of a pneumonia.”
The phrase has haunted him ever since as mounting bad news — unemployment, inflation, industrial activity — show Mexico is not immune to the U.S. crisis.
With Mexico officially in recession — GDP contracted 1.6 percent in the first quarter versus the same period of 2008 and could fall further in the current quarter — Carstens now thinks the economy may not grow again until the first quarter of 2010.
In an affable chat with Reuters during the Latin American Investment Summit, Carstens also talked about measures taken to keep the peso from weakening further against the dollar but shied away from saying if, or when, daily dollar sales could stop.
Fixed-line phone provider Telefonos de Mexico was an old, rusty government-run mammoth when businessman Carlos Slim bought it two decades ago. In a matter of a few years, and with the help of billions of dollars to deploy a nation-wide, state-of-the-art network, Telmex became Slim’s cash cow.
But times change fast. The expansion of cell phone services across Latin America, led by sister company America Movil, has dented Telmex’s domestic revenue in recent years. The arrival of new technologies, which allow international calls at very low prices, hit Telmex’s long-distance sales too.
And let’s not forget the new players in the market.
The company bets Internet services will help it keep business charging ahead. Chief Financial Officer Adolfo Cerezo told the Reuters Latin American Investment Summit that in five years Telmex could become a mostly-web focused company.
The one thing holding back even faster growth is that only a quarter of Mexican families own a computer.
High unemployment rates, declining remittances from Mexicans living abroad, an economic slowdown and contracting consumption is not boding well for Mexican retailers. This year is no exception as the country’s leading supermarket chains struggle to keep customers happy, offering anything from stamps to buy German cuttlery sets to cooking classes for housewives pulling their hair wondering what to prepare for lunch next.
Monterrey-based Soriana, Mexico’s No. 2 retailer, knows a thing or two about sailing in choppy waters. After an ambitious acquisition of 200 stores from a smaller rival in 2007, which boosted its presence across the country, the company faced tight liquidity to meet debt payments last year.
But Soriana has moved fast to cut costs and lighten the weight to face more hard times in 2009. Chief Financial Officer Aurelio Adan told the Reuters Latin American Investment Summit that Soriana’s same-store sales will be flat this year but it will generate enough cash flow to cut its debt by over 20 percent.
Adan expects to turn the page in 2010 and resume Soriana’s strong growth with the opening of 40 stores.
With presence in all key Latin American markets, a comfortable debt payment schedule for the next 10 years, and an undisputed lead in the region, what’s left for America Movil to do? The Mexican cellphone provider, part of the empire of billionaire and Forbes list fixture Carlos Slim, will focus on growing its 3G services in the 18 countries where it operates.
Chief Financial Officer Carlos Garcia-Moreno spoke with Reuters during the Latin American Investment Summit in Mexico City, where he forecast that data traffic could make 25 percent of the company’s overall revenue within three years.
He bets that the arrival of new, cheaper cellphones with catchy web-surfing features will help the company’s data traffic rise. The company is also planning to sell netbooks across the continent to help lift its 3G income.
Georgetown’s Moran says “the collapse of export markets…and the collapse of commodity prices” have had a devastating effect on Latin America.
Professor Theodore Moran of the School of Foreign Service at Georgetown University says both the “collapse of exports to North America and Europe and the decline in demand for natural resources such as coal and iron ore” have made it an “extremely difficult” time for Latin America.
After years of heady economic growth, Latin America is now facing an abrupt slowdown that could reignite ghosts of the region’s repeated bust-and-boom cycles that many hoped was finally behind them.
When the global recession began in the United States, many Latin American leaders insisted the crisis would only affect developed countries, arguing the region’s recent growth was the result of sound economic policies. But months later they saw their own economies hit by the fallout.
Reuters fifth Latin American Investment Summit will feature more than 50 of the most influential businessmen, politicians and regulators who will give insight on where they think the region is heading. The Summit will take place in 15 cities in Latin America, the United States and Europe and will generate a series of exclusive interviews and articles from our team of expert reporters, as well as regular blog postings and online video, which will be immediately available only to Thomson Reuters’ clients.
Mexican cell phone giant America Movil, which does business in 17 countries across Latin America and the United States, plans to add another 20 million subscribers this year to its client base.
Chief Financial Officer Carlos Garcia-Moreno chat with Reuters during the Latin America Investment Summit about keeping the doors open for more acquisitions outside its core region although he said the company is in no rush to do so.
America Movil is owned by Carlos Slim, one of the richest men in the world.
With Congress and political parties mired in energy reform talks, monopoly Pemex painted a grim outlook for Mexico’s oil industry if foreign partnerships for deep sea production are not allowed.
Pemex Exploration and Production Chief Carlos Morales told the Reuters Latin America Investment Summit that the company’s first six deepwater exploration wells found no oil and how production at more of the country’s Gulf fields will follow Cantarell into decline in the years ahead. He also said that a planned oil sector reform would be crippled if it excludes alliances with experienced foreign partners.
Investors are concerned about inflation and energy shortages in Argentina, where the red-hot economy has grown 8 percent a year for five years straight after a 2001-02 economic crisis.