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North-South or South-North?
In a complicated year with threats on various fronts, emerging
countries in general – and Latin America in particular—are enjoying
another year of opportunities.
Up until a few years ago, the term North-South was used to describe the political and economic
relationships that governed the world. The North referred to powerful, developed nations, while
the South included poor countries or developing ones, in the best of cases. This bipolar view
of the world has changed radically in recent times. The final blow to this concept was dealt by
the 2008-2009 financial meltdown, when developing nations (many of which have been called
emerging nations for years) – and especially China—became the driving force across the globe.
Contents The 2010 economic recovery has consolidated the new world order. While the United States
and Europe have shown feeble rates of economic growth, countries like China and Peru have
seen growth closer to double digits. Even Brazil, a giant that has traditionally lagged behind the
emerging stars, grew by 7.5%, its highest rate of growth in 25 years.
Oil & Gas 3
This growth, which has been supported by a combination of dynamism in exports and rising
Electric Power 22 domestic consumption in emerging nations, has resulted in tens of millions of people joining
the middle classes. The outcome of this is an increase in consumption and, thus, greater demand
for basic products to produce goods (food, electrical appliances, housing or vehicles), which the
Financial services 37 inhabitants of these countries can now afford to buy.
Infrastructure 48 This has created a sort of virtuous circle for emerging economies that are large producers of raw
materials. But it has also generated conditions for the formation of “bubbles” that could threaten
Information 62 the growth process. A good example of this is the increase in food prices. The January 2011 food
price index calculated by the Food and Agriculture Organization of the United Nations (FAO)
Technology
showed an increase of 3.4% compared with December 2010 and was up by 2.2% in February
against January, the highest month-on-month increases recorded since 1990, both in nominal
Mining 76 and real terms. In the last 12 months up until February 2011, the index climbed by 34%.
97 The same is happening with metal prices, not to mention oil, where prices soared in March
Telecom
caused by the unrest in North Africa and the Persian Gulf.
All of this news is unsettling for the world economy. Nevertheless, and in the short term, Latin
America will sail through the storm. The region is an important exporter of raw materials so
many Latin American nations will be favored by the high prices. However, the most important
thing is that a significant handful of nations in the region have been following prudent political
polices for years, which have made them attractive to investment, so the project portfolio in
some of them – Colombia, Chile, Peru, Brazil, Mexico, Panama – is significant. Billions of
dollars will be invested in infrastructure, mining, energy and telecommunications, among other
sectors, a considerable proportion of which is planned for this year and the next.
The Outlooks provided in the following pages discuss the major trends that will govern the fate
of these sectors in Latin America during 2011, against a backdrop of economic conditions that
are particularly good for the region.
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Oil & Gas sector outlook for 2011

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Energy Series
Oil & Gas Outlook
Introduction
T heattention
energy sector within the Latin American region continues to attract
of investors worldwide. This, despite the familiar issues that
normally accompany certain economies: financial, economic and political
uncertainty, just to mention a few. While the countries at the top of the
investor’s watch list have not changed, what’s at stake has to do with
new discoveries, governmental changes and adjustments to operating
agreements among other issues.
Colombia and Brazil are two countries expected to report increases in

crude oil and natural gas reserves this year and next due to aggressive
exploration activities onshore and offshore. Second tier countries such
Bolivia, Ecuador, Mexico, Peru, and Trinidad and Tobago offer investors
substantial upside potential, however constrained or limited by different
issues, while the future of Venezuela, Latin America´s oil leader, remains an
open question.
Although the combined hydrocarbon resources from Colombia and Brazil do

not come close to those in Venezuela, the former countries offer investors
upside potential as well as legal, financial and political security. Small-
independents and juniors have increased activities in Colombia, due to
favorable operating terms, and continue to announce small but substantial
discoveries. Brazil’s pre-salt discoveries offshore as well as others offshore
and onshore have potential to easily double Brazil’s oil and gas reserves
and support similar production gains.
Ecuador and Bolivia continue to encounter problems attracting investors

due to issues involving changes to contracts and nationalizations,
respectively. Due to constitutional restraints, Mexico remains out of reach
of many investors despite passage of a new energy reform, while Peru and
Trinidad and Tobago offer interesting alternatives for natural gas investors
looking for LNG exporting countries.

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Figure 1
Oil Reserves and Production at end 2009
Country Reserves (Bn Bbls) Production (MMbpd) R/P Ratio
Argentina 2.5 0.676 10.2

Brazil 12.9 2.029 17.4
Colombia 1.4 0.685 5.4
Ecuador 6.5 0.495 36.1
Peru 1.1 0.145 21.1
Trinidad and
0.8 0.151 15.1
Tobago
Venezuela 172.3 2.437 100+
Other S. & Cent.

1.4 0.141 26.8
America
Total S. & Cent.
198.9 6.760 80.6
America
Mexico 11.7 2.979 10.8
Source: BP’s Statistical Review of Energy
Figure 2
Gas Reserves and Production at end 2009
Country Reserves (Tcf) Production (Bcm) R/P Ratio
Argentina 13.2 41.4 9.1
Bolivia 25.1 12.3 57.9
Brazil 12.7 11.9 30.4

Colombia 4.4 10.5 11.8
Peru 11.2 - 91.3
Trinidad and
15.4 40.6 10.7
Tobago
Venezuela 200.1 27.9 100+
Other S. & Cent.
2.5 7.0 19.7
America
Total S. & Cent.
284.6 151.6 53.2
America
Mexico 16.8 58.2 8.2
Source: BP’s Statistical Review of Energy
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Oil & Gas Outlook
Brazil: Taking it to the next level

Until recently, Brazil’s ambitions to achieve self-sufficiency in crude oil
and natural gas may have been hard to imagine, considering the country’s
modest reserve base of just 12.9 billion barrels of crude oil and 12.7 Tcf
of natural gas. However, the country has become self-sufficient in oil and
plans to soon be self-sufficient in natural gas. As such, recent pre-salt
discoveries offshore, among others, have the potential to change the
landscape of Brazil’s hydrocarbon industry. The pre-salt potential alone is
enough to push the country into another league in regards oil reserves and
production. Collectively considering the pre-salt, post-salt, onshore and
offshore oil and gas discoveries, and ethanol, just to mention a few areas;
Brazil has the hydrocarbon resource base needed to become Latin America’s
hydrocarbon powerhouse.
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According to initial estimates, the pre-salt was thought to contain between

50-70 billion barrels of oil equivalent (Bn Boe). However, these estimates
have been raised to 70-100 Bn Boe. This reserve potential has sparked a
drilling frenzy offshore as companies the world over have come to Brazil
participate in the country’s hydrocarbon explosion. Furthermore, Brazil’s
state oil company Petrobras expects capital expenditures (capex) to reach
a whopping US$224 billion during 2010-2014 on an estimated 686 projects
to increase crude oil and natural gas production as well as new projects
for: pre-salt, logistics, increased utilization of domestic oil, expansion of
refining capacity, monetization of natural gas, among other projects.
Figure 3
Proven oil reserves
32
About 30 billion bbl Tupi,

Iracema, Iara, Guará, Parque
28
das Baleias and Franco
24
20
Billion barrels
16
12
0
2002 2003 2004 2005 2006 2007 2008 2009 Future
Source: Statistical Review of Energy, BP
Petrobras announced that capital expenditure on E&P activities will

approximate US$108.2 billion during 2010-2014, of which US$75.2 billion
will be allocated to the post-salt while the remaining US$33.0 billion will
be earmarked for the pre-salt. During the aforementioned timeframe,
annual capital expenditure on exploration and development activities
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will average US$4.5 billion and US$19.5 billion, respectively, while capital
spending on infrastructure will average US$3.1 billion. While Petrobras has
already raised US$70 billion in the largest global stock offering to date, the
company will still need the technical assistance and financial backing of
other companies.
Petrobras’ business plan will focus on domestic reserve and production

growth as well as expansion projects abroad. Production from pre-
salt, natural gas and other oil discoveries is expected to lift Petrobras’
production in Brazil from 1.971 million barrels of oil equivalent per day
(MMboepd) in 2009 to 2.100 MMboepd in 2010, then to 2.980 MMboepd in
2014 and 3.950 MMboe/d in 2020. Between 2002-2009 Petrobras’ equivalent
production in Brazil and abroad increased at an average rate of 4.9% per
year, according to Petrobras. This equivalent production averaged 2.525
MMboepd in 2009 and is expected to average 2.723 MMboepd in 2010.
Over the medium-to-long term, this production is expected to reach 3.907
MMboepd in 2014 and 5.382 MMboepd in 2020.
In 2009, natural gas demand in Brazil was 1,624.4 million cubic feet per
day (MMcfpd); however, this demand is expected to increase to 4,590.9
MMcfpd by 2014, according to Petrobras. Supply problems in Bolivia could
affect Brazil’s imports from that country; as such another reason Petrobras
will focus more capital expenditure on gas exploration activities in Brazil.
Over the near-term, imports of LNG from Trinidad and Tobago or elsewhere
will probably increase in importance should production from Bolivia falter.
Brief Conclusions
Hands down Brazil is the developing country of choice for energy investors
looking at Latin America. Execution of Petrobras’ business plan during
2010-2014 will affect all the sectors directly or indirectly involved with
the energy sector. Furthermore, Brazil’s recent economic successes and
Petrobras’ reputation as a serious oil and gas company make the Brazilian
story that much more attractive. Thus, the Brazilian opportunities are
not just real but the objectives are achievable and with the assistance
of foreign investors. The pre-salt discoveries stand to change the face of
Brazil’s hydrocarbon industry and have again thrust Petrobras into the
spotlight. Proper development of the pre-salt resources will generate
substantial oil income for Brazil, much of which will destined to programs
to eradicate poverty and alleviate socioeconomic disparities. If used
properly, the oil income will forever change the face of Brazil.
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Venezuela: Betting on heavy oil

Within South America, Venezuela reigns as the largest holder of crude
oil and natural gas reserves while, internationally, the country ranks as
the second and eighth largest reserve holder, respectively. Nevertheless,
ongoing nationalizations as well as political and financial uncertainty
continue to hamper the ability of the socialist-leaning administration
led by President Hugo Chávez Frias to attract foreign investors to its
hydrocarbon industry. Under Chavez´s watchful eye, oil production has
followed a slight downward trajectory even though oil reserves located in
Venezuela’s Orinoco Heavy Oil Belt have moved in the opposite direction.
Venezuela’s heavy oil reserves represent the largest accumulation of
unconventional oil in the world. As such, the Orinoco Belt holds the
most promise to increase Venezuela’s heavy oil reserves and eventually
production over the medium-to-long term.
For investors interested in Venezuela, May 1, 2005, marked the beginning

of a nationalization trend that has severely affected the country’s
hydrocarbon sector, among others. Chávez used the nationalization to
regain control of his country’s hydrocarbon sector and others deemed
“strategic” to the development of the country. The nationalization forced
out long-term foreign investors such as ExxonMobil, ConocoPhillips,
PetroCanada, just to name a few, while others have seen their operations
seriously affected by across-the-board changes that have been
implemented as a result.
Still, Venezuela’s state oil company Petróleos de Venezuela (PdVSA) plans

capital outlays of US$252.17 billion during 2009-2015 destined to nearly
double the country’s production of crude oil, increase the country’s refining
capacity and move the country to the top of the list of worldwide rankings
based on reserves, among other goals.
However, a lack of financial and legal security has been reason enough
for foreign investors to reduce their capital spending in Venezuela. Not to
mention political instability. As a result, directly or indirectly, Venezuela’s
production of crude oil has fallen from 3.27 million barrels per day
(MMbpd) in 2005 to 3.01 MMbpd in 2009 according to PdVSA. Considering
foreign investors are in “standby mode,” the decline seems modest.
However, the US-based Energy Information Administration (EIA) pegs
Venezuela’s production at 2.4-2.5 MMbpd, while industry experts across the
board tend to concur with the EIA’s production assumptions.
Enter the Orinoco Belt. With 1,360 billion barrels of original oil in place, of
which PdVSA estimates 20% to be recoverable, the potential for Venezuela
to increase production will depend on its ability to manage its heavy oil
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reserves. As of year end 2009, Venezuela’s total reserves stood at 172.3

billion barrels, although numerous reserves have been added since. Using
PdVSA’s conservative estimates of 18% to 20%, these reserves could
increase by 244.8-272 billion barrels. Or, using estimates released by the
US Geological Survey, these reserves could increase by 512-652 billion
barrels assuming recovery rates of 45% to 70%.
Recently, Venezuela reported that a number of international companies

pledged partnerships and investments with PdVSA to the tune of roughly
$80 billion just on development of the Carabobo and Junín areas of the
Orinoco Belt. Said investments will be destined to increase production of
heavy oil over the medium-to-long term in the Carabobo and Junín areas
by 800 MMbpd and 1,490 MMbpd, respectively. Additionally, production
from other Junín blocks currently without partners could increase output
by another 600 MMbpd. Therefore, taking into account existing production
with potential new production from the Orinoco Belt, it is easy to see that
Venezuela’s future success will tie in with heavy oil.
With natural gas reserves of 200.1 Tcf as of year end 2009, and, according
to PdVDSA, an estimated 193 Tcf of reserves in the process of being
certified, Venezuela’s natural gas industry also holds enormous upside
potential. To date, offshore exploration activities at various discoveries
have confirmed 14 Tcf in the Cardón IV Block, while an agreement was
recently signed unifying the 10 Tcf Loran-Manatee natural gas field located
along Venezuela’s and Trinidad’s maritime border. Both hold potential to
increase Venezuela’s natural gas production in the future. Venezuela also
plans to have CIGMA, its own LNG export facility, up and running soon,
and sourcing recent discoveries, among others. Such an achievement would
allow Venezuela to enter the small ranks of South American countries with
such terminals.
Despite the upside potential, Venezuela has a natural gas deficit in the
western region of the country and is forced to rely on imports from
Colombia. While the flow of natural gas is expected to reverse itself in the
future, Venezuela will first need to develop its natural gas industry and
infrastructure.
While PdVSA has yet to announce plans to create partnerships with

companies active in the natural gas sector that would give the company
a controlling majority interest, not doing so in the future would be a
surprise. Looking at the recent takeover of lubricants company Industrias
Venoco, it appears that no hydrocarbon or related industry in Venezuela
will escape the nationalization bullet.
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Brief Conclusions
Venezuela will continue to garner a lot of investor attention due to the
size of its reserve base and the upside potential associated with PdVSA’s
plans to double production of crude oil and natural gas. Still, plans for
construction of a LNG exporting facility, new refineries and upgraders make
the Venezuelan story hard to pass up even with Chávez lurking close behind.
Colombia: Open arms as investors return

In the early 1990s, in the aftermath of Cusiana, Cupiagua and Cupiagua
South discoveries, Colombia’s hydrocarbon story was definitely making
headline news around the world. However, optimism turned to pessimism
and Colombia was again far from becoming the first or second largest
exporter of crude oil in South America. Colombia’s oil reserves and
production peaked nearly a decade ago and had been on a downward
trend until recently. However, an aggressive campaign spearheaded by
the administration of former President Álvaro Uribe attracted increased
investment to the oil sector by improving hydrocarbon contracts and
security in oil areas once controlled by leftist guerrillas.
Figure 4
Area of exploration in Colombia by operator and total surface area
14,000,000
12,000,000
10,000,000
in acres
8,000,000
6,000,000
4,000,000
2,000,000
0
Ecopetrol Pacific BHP Petrobras Talisman Exxon
Rubiales Billiton Mobil
Source: Statistical Review of Energy, BP
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Colombia shares much of the same geological features as its neighbor

Venezuela. However, vast regions of Colombia remain unexplored, making
its hydrocarbon sector very attractive for exploration activities. Actions
undertaken by the Uribe administration lead to declines in the number
of kidnappings and attacks on oil installations, while new hydrocarbon
contracts lowered taxes; thus, paving the way for new exploration and
development activities.
Colombia’s state oil company Ecopetrol expects capital spending to

reach $80 billion during 2011-2020 on activities to increase production,
modernize refineries and expand the transportation infrastructure at home
while also expanding abroad into Peru, the United States and Brazil. In
2011, Ecopetrol’s capital expenditure is expected to approximate $8.5
billion. This compares to expected capex of US$6.93 billion in 2010 and
just US$922 million in 2005.
In 2000, Colombia’s oil production peaked at 687,000 barrels per day (bpd)
while equivalent production peaked at 783,000 barrels of equivalent oil
per day (Boepd). Unfortunately, oil production bottomed out at 525,000
bpd in 2005, while equivalent production hit bottom at 631,000 Boepd in
2004. However, in 2009, these trends reversed themselves as oil production
averaged 671,000 bpd, while equivalent production averaged 840,000
Boepd. In 2010 oil production could average 780,000-800,000 bpd, while
equivalent production could average 950,000-970,000 Boepd. In the future,
equivalent production is expected to reach 1,000,000 Boepd in 2015 and
1,300,000 Boepd in 2020.
Brief Conclusions
Colombia has done a good job attracting investors by offering attractive
hydrocarbon contracts and a safer operational environment. As a result,
reserves and production are on the rise again. Furthermore, plans to nearly
double production of crude oil represent large opportunities for some
companies, albeit for juniors and other small companies.
Bolivia: Breaking apart at the seams

In the aftermath of a May Day nationalization announced by President
Evo Morales on May 1, 2006, Bolivia’s hydrocarbon sector has never
been the same. Since, the country’s natural gas reserves have yet to be
certified by outside engineering consultants, while foreign investment
and subsequently gas production have declined. The end result of the
nationalization policy gone wrong has Bolivia on the verge of defaulting on
its contractual gas export agreements with Brazil and Argentina.
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Bolivia’s nationalization policy, like that of Venezuela, has created

concern among long time investors while new investors remain hesitant.
While Bolivia’s nationalizations have been toned down a bit compared to
Venezuela, the mere thought of an asset expropriation has spread fear
among even the most seasoned South American investors.
Even though Bolivia’s state oil company Yacimientos Petrolíferos Fiscales

Bolivianos (YPFB) has taken control of the country’s hydrocarbon sector,
the company continues to fall behind the curve in regards to operational
experience, investment capital, and technology. Further, lackluster
investments from YPFB and long term investors such as Petrobras, Repsol,
and Total, just to mention a few, has caused natural gas production
to decline to the point that Argentina and Brazil have begun to look
elsewhere for reliable natural gas imports in the likelihood that Bolivia is
unable to deliver.
YPFB signed an agreement with its Argentine counterpart Energía

Argentina Sociedad Anónima (Enarsa) whereby YPFB would export 271.9
MMcfpd to Argentina from 2007 to 2008; 565 MMcfpd in 2009; and 978.2
MMcfpd from 2010 to 2026. However, in recent years due to issues related
to production and transport capacity, Bolivia has struggled to comply with
this production agreement.
YPFB also signed an agreement with Petrobras whereby YPFB would export
of 1,059.4-1,094.8 MMcfpd to São Paulo and 70.6 MMcfpd to Cuiabá from
2009 to 2019. However, due to issues related to production and seasonality
of demand in Brazil, Bolivia’s contractual volumes continue to fluctuate.
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Figure 5
Bolivia: Natural gas reserves
(in trillions of cubic feet)
80
24.2
24.9 24.1
70 23.2
15.2
60
26.2
Trillions of cubic feet
50 24.2 24.7
17.6 22.0
23.0
40
30
13.9 28.7
27.4 27.6 26.7
23.8
20
18.3
5.5
10
4.1 3.2 3.3
1.9 2.5 5.3
3.8 4.2
0
1997 1998 1999 2000 2001 2002 2003 2004 2005
Proven (P1) Probable (P2) Possible (P3)
1997 1998 1999 2000 2001 2002 2003 2004 2005

Proven (P1) 3.8 4.2 5.3 18.3 23,8 27.4 28.7 27.6 26.7
Probable (P2) 1.9 2.5 3.3 13.9 23,0 24.9 26.2 24.7 22.0
(P1 + P2) 5.7 6.6 8.6 32.2 46,8 52.9 54.9 52.3 48.7
Possible (P3) 4.1 3.2 5.5 17.6 23,2 24.2 24.2 24.1 15.2
Source: YPFB
A recent Ryder Scott report revealed Bolivia’s natural gas reserves

had declined to less than 10 Tcf. This figure is a far cry from the 26.7
Tcf the country was reported to have in 2005 at the time of reserve
engineering firm DeGolyer & MacNaughton’s last audit. Issues related
to the nationalization policy later led to the dismissal of DeGolyer &
MacNaughton. Since, no other independent consulting firm has audited
Bolivia’s reserves. If Bolivia’s reserves are indeed what Ryder Scott claims
they are, doubts arise as to Bolivia’s ability to fulfill its contractual
agreements with Argentina and Brazil as well as internally.
YPFB’s Investment Plan for 2009-2015 calls for total investments of

US$11.29 billion with the potential to increase production to 2,705.1
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MMcfpd by the end of the period from around 1,341-1,412.6 MMcfpd.

However, Bolivia continues to struggle to increase gas production while
shortages of LPG and gasoline continue to emerge from time to time.
Brief Conclusions
Reserve and production declines have affected investors´ idea of land-
locked Bolivia as a reliable supply source. In the absence of foreign
investors, Bolivia’s natural gas production will remain flat or could decline
further. However, Brazil and Argentina have already taken contingencies for
future Bolivian production shortfalls.
Ecuador: Pushing companies to the edge

While the presidents of Venezuela and Bolivia have moved to nationalize
their hydrocarbon industries, President Rafael Correa, who took office in
2007, has stopped just shy of doing the same. In comparison, President
Correa has suggested private oil companies sign new service-based
contracts instead of the current production-sharing contracts.
Under the service contracts, private oil companies would pay a production
fee although the government would continue to hold all the rights to
production. While the jury is still out on the suggested changes, the private
foreign companies have not been in total agreement with the announcement.
Oxy and Perenco were forced to stop operations in Ecuador and have since
taken their complaints to international arbitration. With Venezuelan and
Bolivian nationalizations all too fresh on their minds, investors have pulled
back on spending and production has rightfully fallen off.
Longtime investors in Ecuador’s hydrocarbon industry including but not

limited to Petrobras, Eni, Repsol, have reduced their capital investments
to a minimum and generally are just reinvesting cash flow as opposed to
bringing in new investment capital from abroad. Foreign investment in
Ecuador’s hydrocarbon industry declined from US$772 million in 2006 to
an estimated US$490 million in 2010, and is estimated to decline to less
than US$100 million by 2013. Production on the other hand has fallen from
a peak of 545,000 bpd in 2006 to 495,000 bpd in 2009, according to a BP
study. Ecuador’s crude oil production will most likely continue to decline as
foreign investors limit capital investments.
The highly publicized Chevron trial continues to attract attention to

Ecuador’s hydrocarbon sector. While the government seeks potential
damages of US$27 billion, one of the underlying issues relates to whether
Ecuador’s state oil company PetroEcuador has the ability to lead the
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country’s hydrocarbon sector, if it indeed had signed off on clean up work

performed by Texaco, which was later acquired by Chevron.
Brief Conclusions
Potential changes to contracts could prove detrimental to Ecuador’s
hydrocarbon sector as the risk-reward trade off declines substantially for
foreign investors. Petrobras could be next in line to exit Ecuador due to
disappointment over new contracts. If so, the ripple effect could lead
to more departures or force the government to seek a “win-win” with
foreign investors.
Peru: South America´s first LNG exporter

Even though Peru’s reserves are modest compared to Bolivia and Venezuela,
the country managed what these countries and others in South America
had yet to do thus far: open a LNG export facility. In so doing, Peru has
become the first country in South America to have such a facility, an
accomplishment that promises to bring increased revenues to the country’s
coffers.
Peru LNG -- the consortium in charge of the $3.8 billion LNG project, which
sources natural gas from the Camisea gas field -- inaugurated the project
on June 10, 2010. Peru LNG has a nominal capacity of 4.4 million tons per
year and will process 620 MMcfpd. The project is estimated to contribute
nearly $310 million per year in revenues to Peru’s Treasury.
13 - 14 july, 2011 · JW Marriot Hotel· Bogota · Colombia
Energy, investment, policy

and Project development
in the Andes
In its 5th year, the Andean Energy Summit is Latin America´s

most forward thinking, senior executive energy forum that
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renewable energy operators in the Andes and
Central America.
Held in the energy capital of the Andes (Bogota, Colombia),

the Summit will unite over 40 speakers, 25 keynotes, round
tables, discussion panels and case study presentations
dictated by the energy leaders who develops, regulate and
invest in this region energy industry.
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Figure 6
Peru: Gas reserves (Blocks 88 and 56) and demand for natural gas
Total
16.44 TCF
Total
10.2 TCF
4.2 Export project

(Perú LGN)
TCF
Electric: 1.7
6.0 Local Demand Industry: 2.2

(20 years)
Petrochemical: 1.0
Residential: 0.2
Vehicles: 0.9
Proven and probable Demand

reserves (2009)
Source: Peru LNG
However, despite the positive news, protests continue primarily in the

Cusco region near Camisea over the use of natural gas in the domestic
market to reduce electricity costs. Currently, the foreign companies
partnered in Peru LNG pay royalties of about US$0.16 per million British
thermal units, while domestic customers are said to pay about $1.20 per
million British thermal units. Even though the Peruvian government has
announced a new law aimed at increasing royalties on natural gas exports,
opposition to Peru LNG continues.
Investments in Peru’s hydrocarbon industry are estimated to reach $33 billion

during 2010-2015, and will be allocated to improve infrastructure along the
entire supply chain including natural gas processing, transportation and
distribution as well as improving electricity supply chain.
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Oil & Gas Outlook
Figure 7
Peru: Investment estimates, Downstream and Upstream
5,000
4,000
US$ Millions
3,000
2,000
1,000
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Downstream Upstream Total
Source: Ministry of Energy and Mining
Brief Conclusions
The export of LNG to Mexico will potentially bring in substantial revenues.
The recent awarding of oil and gas concessions in the county also
spotlights growing interest in Peru’s hydrocarbon sector as investors view
the country as a safer investment risk than Venezuela, Bolivia or Ecuador.
Trinidad and Tobago: Looking

to change its fate
The twin-island country of Trinidad and Tobago was one of the first in the
Caribbean region to build LNG export facilities. Over the last 12 years the
islands’ economy became dependent and comfortable with these consistent
LNG export revenues. However, after years of doing virtually nothing in
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Oil & Gas Outlook
regards to new natural gas exploration and development activities, Trinidad

is faced with declining proved natural gas reserves and, consequently, a
declining reserve-to-production life index, both of which represent a major
threat to the future revenue potential, and in essence the entire economy.
The most recent report by petroleum engineering firm Ryder Scott revealed
Trinidad’s natural gas reserves had declined to 14.4 Tcf in 2009 from 15.3
Tcf in 2008, while Trinidad’s reserve-to-production ratio had declined to
around 10 years. Even though declining reserves and a reserve life less than
10 years are not a death sentence, the Ryder Scott report points to the
need for Trinidad to increase its exploration activities. The contrary could
result in any number of doomsday scenarios assuming Trinidad could not
discover new reserves.
Efforts by previous governments to increase revenues resulted in reduced

exports to the US market, for a long time the primary market for Trinidad
and Tobago’s LNG exports, as part of a strategy to place Trinidad’s exports
in markets willing to pay higher prices. To this end, Trinidad and Tobago
shipped LNG to Chile and Brazil. Nevertheless, theses moves could be seen
as short term fixes to long term problems.
However, the new government has identified the energy sector as one
of Trinidad and Tobago’s main revenue sectors. To that end, the new
government has already moved forward to sign agreements with Venezuela
for development of the Lorán-Manatee reserves, which straddle the
maritime borders of both countries, and called for bids for offshore
exploration activities. A number of companies have already expressed
interest in the deep offshore bid rounds and the potential for large
discoveries in the region. However, a much improved fiscal and tax regime
must be assured to encourage deep water exploration.
Brief Conclusions
Even though the new Trinidadian government is still transitioning into power,
the country will have to move quickly to stop the decline in its natural gas
reserve base before it is too late. Increased exploration activity is the short
term fix to the problem, but must be implemented soon.
Mexico: Trying to stop the oil decline

Close proximity to the US has allowed Mexico to remain a top exporter
of crude oil to the US market. However, declining crude oil production,
primarily the result of natural production declines at the country’s largest
offshore field, Cantarell, have raised red flags for officials at Mexico’s
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Oil & Gas Outlook
state oil company Petróleos Mexicanos (PEMEX). Like Trinidad and Tobago,
Mexico’s reserve-to-production ratio has declined to alarmingly low levels
and governmental officials have singled out an urgent need to focus on the
deep offshore region over the short term.
While numerous offshore and onshore projects have also been highlighted
for future development, the Ku-Maloob-Zaap and Chicontepec offshore
projects are the most prospective. Still, the former offshore field has
believed to have already reached its peak production level of between
590,000 and 620,000 bpd and is now in decline. However, the latter project
warrants large capital outlays, better technology, and experience, things
which are not readily at PEMEX’s disposal. While the solution seems simple
in Mexico, again, as in the case of Trinidad and Tobago, foreign companies
will want to see positive changes to contracts in order to divert more
capital investments to the region.
Mexico’s crude oil production peaked at 3.82 MMbpd in 2004, according to

a study by BP. In 2010, PEMEX expects to spend nearly US$20 billion on
exploration and production activities to maintain production at around
2.5-2.6 MMbpd. However, this production figure is expected to decline
to 2.5 MMbpd by 2012. Over the medium term, production is expected to
rise to 2.8 MMbpd by 2013 as additional production is brought online. By
2024, Mexico’s crude oil production is expected to reach 3.3 MMbpd. In
all likelihoods, the capital investments required to increase production
over the medium-to-long term will need to average US$25 to US$30
billion per year.
Unless changes are made to Mexico’s constitution to allow for increased

foreign participation in the country’s hydrocarbon industry, the country
may face problems maintaining its status as one of the top exporters of
crude oil to the US market.
The Mexican government continues to depend on oil export revenues to

fund a third of its federal budget. As such, it appears undue pressure
will continue to be exerted on PEMEX. While reducing the percentage of
taxes that PEMEX pays to the Mexican government is another option to
free up additional cash for the state company, it will probably not happen
asnationalistic pride trumps rescuing PEMEX, at least for now.
Brief Conclusions
Mexico’s oil industry continues in dire straits as nationalistic pride
and governmental control over PEMEX continue to overshadow business
concerns brought up by private oil investors. New production from the deep
offshore regions or others is needed to curve production declines from
mature fields, specifically Cantarell.
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Electric Power
sector outlook for 2011
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Electric Power Outlook
Introduction
A fter suffering the effects of the global financial and economic crisis
in 2009, average growth in Latin America was able to recover slightly
in 2010 to around 5.2% and only two countries - Venezuela and Haiti -
continued to show negative performance. According to the Economic
Commission for Latin America and the Caribbean (ECLAC), this rebound
was led by countries like Brazil, with 7.6%, and the remaining Mercosur
countries which are all expected to close the year with growth of over 6%,
along with Peru. The Chilean economy is also picking up pace more quickly
than had originally been anticipated, with forecasts repeatedly revised
upward throughout the year, but the remaining countries in the region are
expected to show slower growth of 4% or less in 2010.
The economic outlook for 2011 shows the vast majority of the region’s main
economies slowing to moderate rates of growth hovering between 3% and
4.5%, with the notable exception of Chile, which is expected to lead Latin
America next year with 6% growth. Again, though appearing in different
orders, Mercosur with Chile and Peru will lead the pack, with the rest of the
region trailing.
However, growth is still growth, no matter how slow, and that means a
need for increased investment in energy generation capacities to meet
current and future demand. Thus, demand for electricity is expected to
keep pace with GDP and generate the need for significant new capacities to
be installed. The region’s relative stability amid the ongoing international
turmoil, as reflected in the continuing bad news from European and other
developed economies, means that it will continue to be an attractive
investment destination for projects of all types, electricity included. In
fact, this is ratified by the overall positive evolution in most of the region’s
country risk ratings and the generalized appreciation that Latin America’s
main economies offer companies very favorable investment environments.
But, as in other parts of the world, countries are faced with the
multifaceted challenge of increasing generation capacities while
diversifying sources and attempting to reduce greenhouse gas emissions,
not to mention dealing with increasingly organized and sophisticated
opposition to certain types of activities, which some fear might imperil
projects or even block them altogether. The delicacy of some development
plans might delay projected implementation times and companies will
often have to work hard to win support for their projects. Nevertheless, the
overall political and social stability achieved in the majority of countries
over the last few decades and the recognized need for energy are likely to
produce an overall positive scenario.
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Renewable energy sources are also making inroads in some Latin American
countries under different modalities - renewable energy supply auctions,
price guarantees, or quotas - and some of them have set specific or
theoretical targets and timelines for implementation. However, issues like
cost and/or logistical restraints could condition these goals. The debate over
energy security and the need to reduce greenhouse gas emissions has also
reawakened the subject of nuclear power, though only timidly outside those
countries that already have commercially operating nuclear power plants.
This report attempts to further examine these issues while focusing on five
of the region’s most dynamic economies: Brazil, Chile, Colombia, Mexico
and Peru.
New times, new energy?

The countries covered here, with the exception of Colombia, are among
the ones projected to grow the most in the coming years and will therefore
account for that proportion of future growth in energy demand. According
to the Latin American Energy Organization, OLADE, all but Mexico are
heavily dependent on hydroelectric power, with Colombia and Brazil
generating around three-quarters of their electricity in this way.
On the surface at least, this reality has prompted an intense public debate
on energy security, sovereignty and diversity. In addition, it comes in the
context of international efforts to curb greenhouse gas emissions and
to tax countries’ exports based on their carbon footprints, among other
measures. Increased public awareness of environmental issues would also
seem to favor a major shift in energy paradigms.
However, this does not seem to be altogether the case in most countries.
Notwithstanding talk of renewable energy, in South American countries
this has mostly referred to large-scale hydroelectric projects, such as the
massive 11,200 MW Belo Monte dam project in Brazil, Colombia’s proposed
2,400 MW Ituango Dam, the 2,700 MW HidroAysén project in southern Chile,
and Inambari in Peru with a projected capacity of 2,200 MW, to name only
a few. In the case of Mexico, as BNamericas has reported in the past, close
to three-quarters of new power plants will be some form of cogeneration or
thermoelectric plant, closely mirroring the current mix in the energy matrix.
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Figure 1
Non-conventional renewable energy: a growing industry
Expected worldwide growth in renewables - by geography (GW)
North America Total World Europe
550
max 3,020 1,030
243 330 620
max 1,820
max 407 max
1,225
min min min
2009 2020 2009 2020 2009 2020
Latin America Africa Asia
330
110
1,000
200 70
164 600 max
max max
35 376
min min min
2009 2020 2009 2020 2009 2020
Source: Enel estimates based on WEO 2009; GWEC 2008; WEO 2009
reference scenario (2020 min.) and industry reports/McKinsey (2020 max.)
Delays: Conflict or Standard Procedure?

The digital age and increased sophistication might lead one to believe that
NGOs and other groups opposed to major energy projects like large-scale
dams or thermoelectric plants are more empowered to obstruct and delay
them. However, while it is true that many such proposed power plants are
the targets of campaigns and other attempts to block them, it has yet to
be seen how effective they are.
In fact, Monte Belo, a project on Brazil’s Xingú River that has been on the
drawing board since the 1970s, would seem to be making faster progress
than ever and opposition accusations that it is a “project of the military
dictatorship” and the formal complaints presented to the United Nations
have not fazed the left-leaning Brazilian government, which has explicitly
supported it and awarded the concession contract in August 2010.
For its part, while Inambari has also met with opposition, it has mostly
been focused in the local and regional media and has been largely absent
from other outlets. Furthermore, the project is part of a Peru-Brazil energy
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cooperation agreement signed in June 2010 whereby the latter country

would buy the surplus electricity produced by the dam (the first of some
9,000 MW in hydroelectric power planned in Peru for interconnection to
Brazil), thus injecting significant resources into regional governments
and putting another angle on the issue. While the issue of the dam’s
environmental and social effects has received a certain amount of media
coverage, it has been far from the mainstream press.
Along these same lines, it would appear that the main organized opposition
voiced against Colombia’s Ituango Dam project was based on keeping it out
of foreign investors´ hands rather than environmental concerns. In fact,
the local consortium has already launched the construction tender process
and bids will be received through the end of 2010.
Thus it would appear that, in these cases at least, political will combined
with a favorable investment environment are enough to overcome what
might in other contexts be seen as controversial so projects can be
approved. Nor have repeated or prolonged droughts seemed to affect these
projects, though variability in hydro resources will force countries to
implement significant backup capacities.
It is possible that other factors have also reduced the force of

environmental arguments. For example, in Mexico it could be argued that
these concerns have been overshadowed by other current issues such as the
overall debate on how to structurally reform the local electricity market
even further to foster new investment and allow greater participation
by the private sector, especially in distribution, or the wave of violence
sweeping the country. In Colombia, one could make a similar argument,
noting that the public agenda has been particularly focused on the
country’s internal conflict and attempts to pacify society.
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Chile, the black sheep

It would appear that the one big exception to this trend is Chile, a country
whose only readily available, domestic sources of energy are hydropower
and nonconventional renewable energy (NCRE) sources. In addition, its
attempts at energy integration with its neighbors have failed and it has
resorted to LNG imports at far higher prices to satisfy demand.
Consequently, Chile is paying the region’s highest electricity rates, some

50% more than in other South American countries, which puts even greater
pressure on the sector and the economy as a whole. This situation has led
to an explosion in new projects, including the HidroAysén megaproject in
the southern Patagonia region, which includes a 2,000 km transmission
line that would cross through national parks and indigenous areas, among
others. It is not clear whether the government’s recent ongoing public
expressions of support for large-scale energy projects in general and with
explicit mentions of HidroAysén and the 2,300 MW Castilla thermoelectric
plant will have an effect one way or another.
In contrast to the aforementioned projects in other countries, according to

local press reports, the campaign against HidroAysén has received at least
US$ 6.5 million, making it one of the most expensive campaigns against
such a project ever waged, and it has attracted celebrity activists from the
United States and Europe. However, despite this situation, the project has
continued to go through the legal process and, on 24 November 2010, it
received its third set of observations from environmental authorities.
This time, the observations were mostly focused on the company’s

proposed tourism plan, certain geological information, and requesting more
details on the relocation plan for local residents. When compared to the
literally thousands of observations the project received initially, this would
seem to indicate that it has been capable of satisfying the vast number
of concerns it has raised among different government agencies. A final
decision is likely to be made some time in the second half of 2011.
However, while the government has insisted that the country’s energy needs
are guaranteed for the next few years and that there are many generation
projects awaiting approval, there are fears that the environmental approval
process could become bogged down with legal actions or other measures.
In fact, the Supreme Court has had to intervene in some cases to resolve
problems ranging from zoning conflicts (for example, the Campiche
thermoelectric power plant which resumed construction in 2010 after being
halted for over a year) to corporate conflicts, as in the case of the Alto Maipo
hydroelectric project and its spat over water rights with Santiago’s main
drinking water supplier Aguas Andinas.
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Despite the fact that the increased use of legal proceedings

(“judicialization”) during the environmental approval process has raised fears
that future projects might be at risk – for example, the latest Supreme Court
ruling against MPX’s 2.4 GW thermoelectric plant that classifies the project
as “polluting” - some informed public and private sector players believe
that this is a situation companies simply have to get used to, forcing them
to improve their projects. This is essentially the stance taken by HidroAysén
since shaking up its administration and hiring Daniel Fernández, former
executive director of Chile´s state-held TV network (TVN), as vice president.
He has stepped up the project’s presence in the media and consistently
argued for greater community engagement, as well as making significant
changes to the project’s proposed mitigation measures.
However, in August 2010, another event that sounded alarm bells in the
business community was when President Sebastián Piñera personally
intervened in the proposed Barrancones thermoelectric power plant near
the Punta de Choros national park. Since the plant had already received the
approval of regional environmental authorities, the president´s maneuver
provoked widespread criticism from across the political and social
spectrum for its discretionary nature and for having bypassed the regular
institutional framework (which would have ultimately left the decision in
the Executive’s hands anyway).
This in turn has prompted the government to insist that this was an
exceptional case, but environmental and business sectors alike agree that a
precedent has been set for thermoelectric plants, thus jeopardizing scores
of other such projects planned in different parts of the country. On top
of this, new and stricter emissions standards are expected to be issued for
these power plants, raising concerns over the costs of energy in a country
that is desperate to pay less for electricity.
Harnessing
Latin America´s
May 25-26, 2011 · InterContinental Hotel · Sao Paulo · Brazil
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A NEW
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NCREs: Promises, Promises

While the region is known to be rich in all sources of non-conventional
renewable energy, actual development of these markets has been uneven,
to say the least. David Appleyard, chief editor of Renewable Energy World
magazine, has noted that wind power development will dominate the NCRE
sector in Latin America for the next 15 years, given the maturity and
relatively lower cost of the technology, and that as such it will show 12.6%
compounded annual growth over that period.
However, upon a closer look, he also anticipates that 69% of the installed
wind power capacity of 46 GW will be in Brazil, with 31.6 GW, followed
far behind by Mexico with 6.6 GW. Chile is also highlighted as among the
most active in this area, with over 1 GW to be installed by 2024 if the 10%
mandatory target for that year is fulfilled. While Mexico and Brazil are
attracting large-scale wind farms due to the size of their markets and the
latter also holds energy auctions for specific types of renewable energy, like
wind, as does Peru, Chile has chosen a gradual mandatory target system.
In the case of Mexico, many of these projects are sponsored by local

industrial groups for their own consumption, such as the 250 MW Eurus
wind farm in Oaxaca State, as the Federal Electricity Commission’s well-
known lack of investment capacity will not allow it to make much of a
direct impact on the sector, even with participation by Independent Power
Producers (IPP). In general, firms like Emerging Energy Research believe
that lower political support in Mexico will ultimately cause the local
renewable energy market to stagnate for the coming years.
Beyond these specific developments, Appleyard notes that regulatory and

legal differences between countries will also have an effect on local NCRE
development, asserting that the Mexican system will generally favor large
players, while Brazil, Peru and Chile “are aiming for greater competition
with a more open development process for large projects.” Nevertheless,
he also notes that, outside Mexico and Brazil with their huge markets,
most renewable energy companies are betting on a one-country or niche
strategy. Norway’s SN Power affirmed as much at BNA’s 7th Southern Cone
Energy Summit in Lima in November 2010, noting the firm’s presence with
run-of-river projects in Peru and Chile, with plans to become a “niche
player in Brazil by 2015.”
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Figure 2
Hydro resources in Latin America:
The region stands out in renewable potential, holding 20% of the
world’s untapped practicable hydro resources
Venezuela
Colombia 46GW
32%
96 GW
9%
7%
Ecuador
31 GW
Peru
6% Brasil
59 GW
28-30% 260 GW
1.1%*
Paraguay
Bolivia 65% 13 GW
10 GW
25%
Argentina
75% 40 GW
Chile 20%
25 GW Uruguay
13 GW
South America
610 GW
21% developed
Source: OLADE 2009, OLADE Prospecting 2018
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% of the technically usable potential
Congo 1
Indonesia 4
Peru 6
Russia 11
China 16
Colombia 18
India 21
BRAZIL 26 30
Canada 37
Italy 45
Sweden 55
USA 60
Norway 61
Japan 64
Germany 83
France 100
0 20 40 60 80 100
Source: OLADE 2009, OLADE Prospecting 2018
Chile once again stands out in NCREs, this time for its attempts to
incorporate the greatest possible breadth, if not scale, of implementation.
In this context, it should be noted that, in addition to the wind farms that
have been built and which will continue to be developed in the country,
progress has also been made in the tendering the construction of its first
solar photovoltaic and solar concentration power plants in the Atacama
Desert. In addition, the country’s geothermal potential has been estimated
at up to 3,300 MW and the Energy Ministry reported in November 2010 that
it had received some 70 bids for 20 geothermal prospecting concessions in
its latest tender process, thus confirming the interest in this area and in
the country with the largest number of active volcanoes in the world.
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However, doubts persist regarding how much of this will actually materialize
as the relatively modest target of 5% for 2010 is met, followed by gradual
annual increments until reaching 10% by 2024. Again, private and public
sector experts believe that this initial target will already be hard to reach,
given the lack of subsidies and the difficulty that smaller projects will have
connecting to the country’s already weak transmission system.
The proliferation of coal-fueled thermoelectric projects over recent

years, in addition to fears that greater NCRE implementation will cause
prices to go up even further, have not helped the renewable sector much
either, regardless of the efforts on the part of the Chilean Association
of Renewable Energy to refute this last point. This scenario makes the
government’s announced intention of implementing a more ambitious
target of 20% NCRE by 2020 (the 20/20 target) sound impossible to reach
without significant new measures like subsidies or other guarantees to
further stimulate the sector. However, this would seem unlikely given the
country’s open market and the generalized unpopularity of such actions.
Thus it would appear that while NCREs will experience significant growth
in Latin America in the near future driven by growth in selected markets,
their impact on the overall energy grid will continue to be marginal in the
years to come.
Nuclear Revival?
Only three countries in Latin America have commercially operating nuclear
power plants - Argentina, Brazil and Mexico - which were designed and
implemented in prolonged processes lasting up to several decades. Now
they have all announced plans to revise their nuclear strategies and, in this
context, the former two nations have already confirmed the construction of
the Atocha 2 and Angra 3 reactors, respectively.
However, there are few signs of actual nuclear plans elsewhere. While
Mexican Energy Secretary Georgina Kessel told Congress in May 2010 that
the country’s intention was to have 35% clean energy generation by 2024,
including nuclear power, she limited herself to stating that this option is
“being studied” and did not reveal any specific plans.
Chile is the country that has been mentioned the most as a potential
newcomer to the club of Latin American nuclear countries, given its rising
per capita emissions, scant energy resources and its declared need to
diversify the energy grid. Along these lines, the country has attracted
significant international attention from countries like the United States,
France and Russia, among others, with offers to cooperate in this field in
the hopes of installing their respective technologies. Furthermore, the
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current administration has continued to commission different technical

and feasibility studies and has announced the restructuring of the Chilean
Nuclear Energy Commission.
Notwithstanding this situation and the actions taken to pave the way for
nuclear power, it should be noted that public opinion polls in Chile show
that an overwhelming majority of the population oppose it. International
experts on the matter have repeatedly stressed that implementing nuclear
power requires a solid support across society and, in this regard, it should
be noted that very little work has been done to win over the public on the
subject, which in turn means that hopes for implementation should remain
moderate and that little real progress can be expected in the short term.
Figure 3
Peru: Investments in Electric Power generation 2011-2012
MW MMPCD
Investments in Natural gas
CS-NG Private Investment 200 51
CC-NG Private Investment 490
NG sub total 690 51
Investments in other thermal
Private Investment-Diesel 2 171
Investments in Hydroelectric
Under 20 MW (Private Investment) 30.6
Over 20 MW (Public Investment) 101
Hydro sub total 131.6
Investments in NCRE
Solar 80
Wind 141
Biomass 4.4
Renewables sub total 226.4
Investment Total 1219 51
Source: OSINERGMIN
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Energy Series
Conclusion
The positive economic outlook for the region in a context of relative
turbulence in international markets will continue to make Latin American
countries attractive destinations for investment in infrastructure
development - including energy generation - projects, though most of this
interest will be focused on Brazil, Chile, Peru and Mexico, which along with
Colombia boast the most positive country risk ratings in Latin America.
In addition, notwithstanding the controversial nature of some of the projects

proposed, It would appear that, in general, the political will to implement
them and the desire to consolidate social development goals, together with
the relatively stable regulatory and legal frameworks in place, will make it
likely for most of them to succeed. Perhaps the one exception in this case
could be Chile, given the controversy surrounding the Barrancones case and
the protracted legal battles that some projects have had to face, but a clear
picture of this situation will only be available in 2011, when emblematic
projects like HidroAysén will face their final legal hurdles.
Despite the region’s thirst for energy and its respective governments’
discourses favoring increased diversity - particularly in the form of
renewable energy - will not have a noticeable impact on their actual energy
mixes in the near future. Thus, progress made with the implementation of
NCREs is likely to be outweighed by new conventional generation capacities
like thermoelectric power and large-scale hydro. Along these same lines,
nuclear power will not have a significant impact on the overall energy mix
in the coming years and countries like Mexico and Chile are still engaged in
very preliminary debates on how to proceed on the matter.
As has been seen, Latin America continues to face significant challenges to

diversifying its energy grid, with South America continuing to rely heavily
on hydropower and Mexico on thermoelectric generation. In addition, most
countries face difficulties getting investments in transmission capacities
to dovetail with those in generation, a subject that is particularly
delicate for NCREs because of their high up-front capital investments and
swift implementation time compared to the transmission systems they
need to accompany them. In addition, progress is still needed in energy
integration, notwithstanding specific plans between individual countries.
Nevertheless, the region would appear to have a clear idea on the need
to significantly expand generation capacities along all fronts. Although
this might not happen with the swiftness that the companies behind
projects might desire, this fact and the ample room for growth that
exists for all technologies continue to make Latin America an attractive
place for electricity sector investments, despite the regular conflicts and
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controversies that have apparently become part of the landscape for major
industrial projects in the region and around the world. Ultimately, it looks
like “business as usual,” with traditional indicators like country risk and
business environment determining investment decisions in a region that
seems to have shaken off the image of instability that had plagued it
for decades. Latin America is now enjoying its newfound popularity as a
relatively risk-free place for international capital as the economies of more
developed regions continue to sway.
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Financial Intelligence
Services Series
Financial Services sector
outlook for 2011
Financial Intelligence Financial Services Outlook
Services Series
Introduction
L atin America ends 2010 consolidating its economic recovery with growth
of 6%, with marked improvements in levels of employment, personal in-
come, consumption and business activity. Thanks to the countercyclical plans
implemented by the majority of Latin American countries to deal with the
international crisis, which led to the region showing an economic decline of
1.8% in 2009, Latin America now appears to be well fortified at a time of great
uncertainty over the recovery of the developed markets and is also attracting
large flows of capital and experiencing appreciation of local currencies.
Recovering the ground lost over the past year, there will be overall growth,
but stronger in some countries than in others. Among the countries that will
grow are Paraguay (9.7%), Uruguay (9%), Peru (8.6%) and Argentina (8.4%).
Meanwhile, the region’s largest economy, Brazil, will grow by 7.7%, while the
Mexican and Chilean economies will both grow 5.3%, according to forecasts
by the Economic Commission for Latin America and the Caribbean (ECLAC).
This has also been a year that has seen significant improvements in the labor
market, where the unemployment rate has fallen to 7.6% from 8.2% in 2009.
In this context, the financial services industry in Latin America has seen some
interesting activity in various sectors such as banking, the stock markets, debt
markets, and even the private equity and venture capital industry, which has
returned to the spotlight with numerous and record transactions.
In the case of the banking industry, there has been a more modest rate of
expansion, certainly less vigorous than in the period prior to the crisis, and as
this has been gaining momentum, expectations of recovery have strengthened.
Most of the banking systems in the largest economies in the region are
expanding their loan portfolios at rates in double digits or high single-digits.
The slowest recovery has been observed in Mexico, which has been the hardest
hit among this group of nations because of its close ties to the US economy.
The average levels of past-due loans in the banking systems have remained at
adequate amounts, benefiting from the positive performance of commercial
loans, which have the highest relative weight in the loan portfolios, while
there are also reasonable levels of defaults on consumer loans, which are a
fairly new product in the region and have a high level of risk. In 2011 the loan
market of the banking sector could benefit from demand from the business
sector, including small and medium-sized enterprises (SMEs) that are taking
advantage of the positive economic spell, as well as individuals, who have
regained their place in the banking business after being relegated to second
place in 2009.
Services Series
Brazil has a banking industry with one of the most positive outlooks in the
region where the industry will see some of the highest growth – at around 20%
- and strong competition in 2011, leaving behind a very good 2010, during
which credit is expected to increase about 22%, supported by economic growth
of slightly over 7%.
In Mexico, the banking industry is expected to consolidate its recovery in 2011,

after the sector suffered the ravages of the country’s worst recession in decades
in 2009 and lost the dynamism that it was showing before the crisis. In 2011
the banking industry could see the rate of credit growth accelerate to levels close
to 15% in nominal terms, after growing by around 10% in 2010.
In the case of the Chilean banking sector, which is the most mature in the
region and has the highest level of financial market penetration at some 75%,
we may see loans grow 15% in 2011, supported by the positive performance of
the economy, which is expected to expand by around 6%, and low inflation at
approximately 3%. The personal banking business, including consumer loans,
will provide a strong boost to the credit business handled by the banks, totaling
about US$160 billion in loans.
In Colombia, bank credit could increase by about 20% in 2011, a year in

which GDP would grow 4%, and there would be a boost in both the corporate
loan business – which accounts for two thirds of all loans – as well as personal
banking business. This rate of expansion would be quite similar to that seen in
2010, when loans are projected to increase by 22%.
Brazil
What lies ahead in the case of Brazil in the coming years is a trend of vigorous,
but not excessive, credit growth, which is a situation that was unthinkable some
time ago in a country previously known for its economic ups and downs. In the
financial industry, we now have a positive situation on the side of both supply
and demand. Banks have an appetite to grant loans, their leverage is very low
and they can make loans without requiring greater capital. On the demand
side, we have companies and individuals that are benefiting from the economic
boom, the upswing in consumption, improvements in income and levels of
employment, which together are driving demand for credit.
It will be the first year of Dilma Rousseff’s government in which fiscal policies
and inflation control will be implemented, so we can expect that the public
banks will show somewhat moderate growth. So the private sector banks
will certainly be in a position to gain more market share. This is precisely the
opposite of what we saw during the international crisis when the banking
industry saw growth, particularly in public banks – led by Banco do Brasil (BB)
and Caixa Econômica Federal (CEF) – at a time when the private banks began
Services Series
applying much more restrictive lending policies. In a scenario of economic

slowdown, the public banks had to balance the supply of credit to avoid a major
problem in the macroeconomic sector.
After closing 2010 with growth of around 22% in loans, the banks will increase
their loan portfolios by around 20% in 2011 and 18% in 2012. These are rates
of growth that do not cause concern to the central bank and are much more
moderate than those seen in years like 2008 when credit increased 31%. If the
expansion rate of loans were to accelerate, we might see the monetary authority
hike interest rates and possibly even raise reserve requirements.
The type of consumer that benefits most from the growth in the banking
industry will vary as time goes by. At present it is individuals and small and
medium-sized enterprises that are taking best advantage of the economic
expansion, the record low levels of unemployment and improvements in
income, and are thus driving the growth in credit. This is reflected in the
30% growth expected in personal loans in 2010 and the 18% increase in loans
to companies.
Of personal loans, mortgage loans play a very important role and have a
particular potential. From a small base, it is growing very strongly at rates of
close to 50%, thanks to the major player in this segment, CEF. At present
there is a great need to increase housing loans as there is an excess of available
resources from savings accounts, given that 65% of all savings deposits have
to be channeled to mortgage credit. It is expected that this type of credit will
substantially increase its relative weight in the loan portfolio from 6% at the
moment to 15% in five years’ time. Another segment that will accompany the
growth in housing loans is car loans, a type of financing with which the banks
feel comfortable as they have the vehicle as collateral.
Late in 2011 and in 2012, the big companies will be using their full production
capacity and begin to take out loans to finance new investments such as
construction of new plants and factories, so we will close 2012 with a great
boost to credit for large firms.
Together with the improving economic scenario, a large number of businesses

in the informal market will grow to a size that will force them into becoming
formal enterprises. This is a segment that is on the banks’ radar.
The quality of assets will tend to stabilize, benefiting from the positive
conditions in the labor market and the economy, the credit mix and the increase
in the volume of loans which reduces the effects of defaults. Profitability –
which is at around 23% ROE in the large banks – will remain high because
possible shrinkage in the margins would be offset by a higher level of leverage.
Services Series
Figure 1
Banks in Brazil: Credit portfolios (2008-2012E)
3,000 35%
in billions of Brazilian reales

2,500 30%
25%
2,000
20%
1,500
15%
1,000
10%
500 5%
0 0%
Dec 08 Dec 09 Dec 10 Dec 11 Dec 12
Credit Stock Annual variation
Source: Bnamericas, based on Banco Central do Brasil and forecasts.
Mexico
Thanks to the improved economic outlook this year after Mexico suffered
its worst recession in decades in 2009, the banking industry has begun to
regain momentum, moving away from a period of marked deterioration in the
quality of its portfolios and a significant drop in lending activity. This recovery
is reflected in the figures in the current direct loan portfolio, which ended
October with a real-term increase of 3.4% compared with the same time last
year, mainly as a result of the 5.1% growth in corporate credit in the period. By
the end of this year, credit is likely to rise by around 6% in real terms, bolstered
by the 6% increase in credit granted to companies. This is the credit market that
has the greatest relative weight in the banks’ portfolio and accounts for close to
half of total loans. Housing loans are expected to climb 5% and there could be a
2% rise in consumer loans.
Things are going to improve over time, so in 2011 we will see the banks being
much more active, with the current direct loan portfolio showing real-term
year-on-year growth of around 10% by the end of the year. Loans to companies
could also increase and consumer and housing loans are expected to grow at a
somewhat lower rate.
In the case of loans to companies, as the recovery in economic activity

consolidates, firms will require more resources for working capital and
investment, and we will see an increase of 10% in this segment in 2011.
Services Series
In terms of personal loans, the economic activity expected for 2011, with
GDP forecast to rise by 3-4%, could continue maintaining both the upward
trend in family income in a context of stable inflation of close to 4%, and the
improvement in employment levels. The stronger labor market – it is estimated
that there will be an increase of around 685,000 jobs in the formal sector by
the end of 2010 and another 530,000 in 2011 – would also favor a recovery in
consumer confidence, leading to a new demand in loans.
These factors are expected to allow growth of 7% in consumer loans and an 8%

increase in mortgage loans in 2011, with this latter segment being one in which
the banking sector has plenty of work to do due to its low level of penetration
and the significant opportunities available.
Even with the limitations that the banking industry faces in order to expand,
which was demonstrated by the significant restrictions that the crisis imposed
on the sector, it continues to offer exciting opportunities given that its current
scale and scope do not reflect the size of the economy or with the financial
service needs of the public. Regarding the latter, an important step was taken
towards the end of 2009 with the launch of the scheme involving banking
agents, which are third parties contracted by lending institutions to provide
financial services to their customers, and this has begun to bear fruit this year.
There are now 12 banks that have established banking agent contracts with
660 businesses, which have a network of 16,179 establishments. Of these
establishments, all of them allow payment of loans, deposits can be made in
15,387, payment of services can be carried out in 3,425, while in some 2,927
balance inquiries and withdrawals can be made, 2,063 are allowed to issue
prepaid bank cards and 644 cash checks.
Figure 2
Banks in Mexico: Direct financing for private sector (2006-2011E)
2,500 35%
in billions of Mexican pesos
30%
2,000 25%
20%
1,500
15%
10%
1,000
5%
500 0%
-5%
0 -10%
Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11
Credit Stock Real annual variation

Source: Bnamericas, based on Banco de México and forecasts.
Services Series
So, a year after authorization was given for the first correspondent agent, the
number of correspondent outlets for basic financial services has now reached
142% of the number of traditional bank branches in Mexico, which shows the
potential of the scheme to allow progress in this area, which is precisely where
the sector needs to improve and continue investing.
Private equity and venture capital

The venture capital and private equity industry is another that has undergone a
strong recovery in Latin America and is likely to continue growing in the future.
This can be seen in the figures for the first half of the year, which show that the
funds raised reached US$ 3.07 billion in the period, compared with US$ 3.6
billion in the whole of 2009, a sign that the these funds may reach or even exceed
the record US$ 6.4 billion recorded in 2008, according to the Latin American
Venture Capital Association (LAVCA). At the same time, new investments totaled
around US$ 3.8 billion in the first half of the year, significantly more than the
US$ 3.3 billion invested during all of 2009. The industry is thus leaving behind
the sharp drop in activity in 2009 resulting from the global financial crisis.
In the words of Cate Ambrose, president and executive director of LAVCA,

Latin America is the flavor of the month. The favorable macroeconomic
conditions in the region, the low penetration of the private equity industry,
transactions at prices that are attractive and also lower than in other emerging
markets such as Asia, and a healthy number of companies in need of capital
make Latin America a most interesting market for investors.
The list of players that are investing and raising capital in Latin America
includes the biggest PE/VC firms, such as The Carlyle Group, The Blackstone
Group, TPG Capital, Apax Partners, Warburg Pincus, Silver Lake and Burrill
Venture Capital. And two other funds raised record amounts in the region;
Advent International and Southern Cross, which carried out transactions
totaling US$ 1.6 billion and US$ 1.7 billion, respectively.
Latin America’s popularity is also reflected in LAVCA’s 2010 survey in which

52% of respondents indicated that they planned to increase their resources
for the region in the next 12 months, in contrast to the responses in 2009,
when only 15% said they planned to do this. However, Latin America is still
a market at an early stage of development. Within the region, the only place
where there is serious competition is Brazil. In fact, the country accounted
for 66% of the new investments in the region in the first half of this year and
some already suggest that firms like Apax, Carlyle, TPG and Silver Lake are
paying a premium to compete for a limited number of large transactions in
the Brazilian market.
Services Series
Nevertheless, in Chile, Argentina, Colombia, Peru and even Mexico, PE and

VC fund managers are very scarce. The economies in these countries quickly
resumed their upward trends and have large amounts of natural resources
that are in great demand by the Asian economies. Therefore, there are great
investment opportunities in sectors such as mining, energy, agro-industry
and in infrastructure-related business. These countries also have expanding
middle class populations, which are fueling strong growth in domestic demand,
creating investment opportunities in education, health, consumer financial
services such as credit cards, and affordable housing.
Figure 3
Banks in Chile: Credit portfolios (2008-2012E)
120,000 16%
in billions of Chilean pesos
14%
100,000 12%
10%
80,000
8%
60,000 6%
4%
40,000
2%
20,000 0%
-2%
0 -4%
Source: Bnamericas, based on SBIF and forecasts.
There are several Latin American countries whose governments have taken up
the issue of promoting the venture capital industry. The most notable case is
Brazil where there has been great interaction between the public and private
sectors for a long time, regardless of who is in power. Another significant
example of progress is Mexico where pension funds – which manage about
US$ 110 billion in funds – have been allowed invest in private equity projects
through instruments called Capital Development Certificates (CKD by their
Spanish acronym).
Although we are finding these incentives in the region, there are also significant
hurdles that the venture capital and private equity industry has to overcome
in order to get on track towards sustained growth. One of the toughest is
the regulatory and tax issue. Chile is a clear example of this type of obstacle.
Although the country s ranked highest of the Latin American economies in the
Annual Scorecard on Private Equity and Venture Capital, 2010, calculated by
LAVCA, in Chile fund managers’ commissions are subject to value added tax,
which reduces their competitiveness.
Services Series
In the region, there is also a general need to expedite the process of opening and
closing a business in order to attact startups. In fact, the bureaucratic red tape
involved in starting up a business is a significant barrier in various countries in
the region. In this section, Chile is ranked 115th in the World Bank’s Doing
Business 2010 ranking, just above Brazil, a country that is legendary for its red
tape and which is ranked 131st.
While information technology (IT) enterprises have been among the

investments that attracted the most venture capital in Latin America in 2009
(US$ 395 million, or 12% of the total, second behind the US$ 489 million
raised by the energy business), the region offers a great deal more. As the 2010
LAVCA Annual Data show, three sectors – including the aforementioned
energy and IT industries, plus the hospitality and travel sectors – captured more
than a third of total venture investments in 2009. The other two thirds were
split between more than a dozen sectors.
Other sectors where there will be a significant amount of activity are education
and health, which has already started to occur in Mexico, Central America and
Brazil. In the IT area, business such as offshoring and outsourcing are attracting
the attention of investors. In Brazil, Paraguay, Uruguay, Argentina and Chile,
agribusiness is an attractive sector, while in Colombia and Peru eyes should be
on anything related to mining, infrastructure and energy. In Brazil there is the
ethanol industry and natural resources in general. And in Central American
countries, despite the size of their economies, businesses related to renewable
energy, logistics and IT are interesting. Also, anything related to biotechnology
may do very well in Chile, Brazil and Argentina.
Figure 4
Banks in Colombia: Credit portfolios (2007-2011E)
250,000 30%
in billions of Colombian pesos
25%
200,000
20%
150,000
15%
100,000
10%
50,000
5%
0 0%
Source: Bnamericas, based on Superfinanciera and forecasts.
Services Series
Outlook 2011
The outlook for Latin America in 2011 is auspicious, albeit with various risks
especially inflation, with growth expected to reach 4.2%, slightly lower than
in 2010. There are different organizations, including ECLAC, who warn of
the need to complement government efforts to regulate short-term capital
inflows with a counter-cyclical strategy that includes the fiscal and financial
areas, in order to reduce pressure on domestic demand and avoid an excessive
increase in credit.
In a high liquidity environment, expect a lot of activity in the debt and IPO
markets in 2011. In Brazil, for instance, the government recently announced
a series of measures to foster long-term financing, particularly, incentives to
encourage infrastructure projects. The measures include tax incentives for long-
term corporate bonds related to this type of projects and the creation of a fund
to stimulate liquidity of those bonds in the secondary market. These measures
will certainly help develop this market, which is still in its early stages, with low
liquidity and limited foreign investors’ participation.
In any case, the positive economic performance of Latin American countries in

2011 will be the basis for the banking industry to continue expanding its lending
business, in many cases at double-digit rates, and competition between the
institutions is increasing. The rates of growth may tend to be more moderate than
those seen in 2010, in line with the expected growth rates of economies in 2011.
The highest growth rates of the largest banking systems in the region will take
place in markets such as Brazil and Colombia, which still have a great deal of
room to increase the customer base and debt levels. Meanwhile, we will see
more moderate expansion in banking systems such as that in Chile, the most
developed in the region, and in Mexico, which is seeing a slow recovery due to
its close economic links with the United States.
With the improvement in labor market conditions and personal income, the
financial services industry, such as banks, other credit institutions and insurers, now
have the opportunity to grow their customer base and even diversify their income by
cross-selling products, which is an area that is not well developed as yet.
Besides these factors, the growth of the banking systems will continue to be
favored by low levels of financial market penetration in Latin America, where
the credit/GDP ratios compare unfavorably with those in developed economies,
with the notable exception of Chile which has a financial penetration rate of
75%. In most countries, in fact, we see ratios of around 20%, as in the case of
Mexico and, even in Brazil, it is around 50%.
This is particularly true, for example, in the case of mortgage loans that are
just beginning to develop in many countries and insurance, another financial
Services Series
product with great potential to increase its market penetration.
As this occurs, we will continue to observe high profit levels, reflecting the fact
that these institutions are operating in markets that allow for high margins (in
contrast to mature markets) due to their low financial penetration.
At the same time, we will continue to see the disintermediation trend that has
been occuring in several countries, the reason for which the debt markets and
public share offerings will continue to be highly active, thus benefiting the
investment banking arms of the financial institutions.
Figure 5
Latin America and the Caribbean: Total GDP (percentages reflect annual
variation rates in millions of US$ at constant prices for 2000)
a b
Country 2009 2010 2011
Argentina 0.9 8.4 4.8
Bolivia 3.4 3.8 4.5
Brazil -0.6 7.7 4.6
Chile -1.5 5.3 6.0
Colombia 0.8 4.0 4.0
Costa Rica -1.1 4.0 3.0
Cuba 1.4 1.9 3.0
Ecuador 0.4 3.5 3.5
El Salvador -3.5 1.0 2.0
Guatemala 0.5 2.5 3.0
Haiti 2.9 -7.0 9.0
Honduras -1.9 2.5 2.0
Mexico -6.1 5.3 3.5
Nicaragua -1.5 3.0 3.0
Panama 3.2 6.3 7.5
Paraguay -3.8 9.7 4.0
Peru 0.9 8.6 6.0
Dominican Republic 3.5 7.0 5.0
Uruguay 2.9 9.0 5.0
Venezuela -3.3 -1.6 2.0
Subtotal South America -1.8 6.0 4.2

Caribbean -2.3 0.5 2.2
South America and the Caribbean -1.9 6.0 4.2
a Source: ECLAC.
: Estimate
b
: Forecast
www.BNamericas.com
Intelligence
Infrastructure Series
Infrastructure sector
outlook for 2011
Intelligence
Infrastructure Outlook
Introduction
T he situation is a familiar one. Latin America is facing an infrastructure

deficit on such a scale that, according to ECLAC data, just to satisfy the
expected growth in demand for physical infrastructure over the next 10 years –
assuming a 3.9% average annual growth in the region’s economy—investments
equaling 4.9% of Latin America’s GDP will have to be made each year. If the
plan is to reach similar levels of infrastructure as those in East Asian countries
during this same period, then the equivalent of 7.9% of the region´s GDP will
have to be invested. The bad news is that the region doesn’t have a very good
track record. In the last 15 years, Latin American countries have barely invested
the equivalent of 2% of their GDP in transport infrastructure. The good news
is that most of the governments in the region are aware of the problem and are
taking steps to correct the deficit. Whether these measures will be enough, or
whether they are the most appropriate, is another matter. But at least there is a
growing awareness that the infrastructure bull needs to be taken by the horns
and there are increasingly more actors interested in playing a role in the film.
In this report, we will point out the issues that will dominate the infrastructure
agenda in Latin America in 2011.
Figure 1
Estimates for the transport infrastructure gap in Latin America (1995 =
100)
Gap
250 Actual
Necessary
200
150
100
50
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: ECLAC 2009
Intelligence
Figure 2
Containers: Demand vs. Supply 2000-2011 (%)
159%
14%
122%
Variation year-on-year
Accumulated variation
10%
85%
6%
48%
2%
11%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010(f) 2011(f)
-2%
-26%
Variation in demand
-6% Variation in supply -63%
Accumulated demand
Accumulated supply
-10% -100%
NOTE: Both accumulated supply and accumulated demand figures are for the year 2000, (f) forecast
Source: Ricardo J. Sánchez and Maricel Ulloa (DRN/ECLAC , UN) based on Clarkson´s “Con-
tainer Intelligence Monthly”.
Exports by containers (2008-2015)

3,000,000
12,000,000
2,500,000
10,000,000
2,000,000
8,000,000
1,500,000
6,000,000
1,000,000 4,000,000
500,000 2,000,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015
Brazil Colombia Bolivia

Central America Ecuador South America
Chile Peru Caribbean
Caribbean Other countries on the east coast Central America
Argentina Venezuela
Source: Ricardo J. Sánchez and Maricel Ulloa (DRN/ECLAC , UN) based on Global Insight
Intelligence
Tango for two (reloaded)

The main paradigm currently impacting the infrastructure business in Latin
America –and in a major part of the world—is that of public-private partner-
ships. Long-gone is the time when public works were synonymous with state in-
vestment. Under different forms and names, private participation in infrastruc-
ture projects became the norm in the nineties. The models through which this
participation took form were mainly based on different versions of long-term
concessions, with varied degrees of success. In Mexico, one of the countries that
most boldly and aggressively concessioned infrastructure projects –mainly high-
ways—in the first half of the 1990s, the adventure ended disastrously when the
Mexican peso fell sharply during the tequila crisis halfway through the decade.
Multimillion-dollar projects financed through loans and bonds in dollars but
with revenue in local currency faced a monumental financial mismatch that
ended in concessionaire bankruptcy and massive state rescue plans. The lesson
from this crisis was clear: for this business to thrive with private participation
and under a market model, it must have stable macroeconomic conditions that
reduce long-term uncertainty.
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On the other extreme is Chile, whose formula is seen as the most successful.
The works carried out under the concessions model over the last 20 years
have radically changed the face of the country. According to an ECLAC
estimate, the gap between supply and demand for transport infrastructure
in Chile is relatively narrow, even becoming negative during the crisis years
of 2008-2009, very different from the situation in countries such as Mexico,
Brazil or Argentina.
But this does not mean that the Chilean model has been problem-free.
Among other things, flow estimates for the long-term use of infrastructure
have turned out to be inaccurate, so the project’s economic and financial
models have not worked as one might expect. As a result, Chile formulated
a new concessions law, enacted in December 2009. The main changes
incorporated into the new regulations involve improving the processes used to
resolve contractual disputes, which will now be done through an independent
and specialized technical panel. The second relevant change involves improved
regulation of changes and contractual compensations. Third, unpaid tolls
are regulated to facilitate the implementation of free-flow toll systems on
interurban highways with the use of electronic devices, known locally as tags.
Under the new law, the municipalities will now help concessionaires collect
unpaid tolls. If all collection efforts fail, the municipality will refuse to issue
the circulation permit for the non-compliant vehicle until the payment is
made. In exchange, the municipality in which the vehicle is registered will be
allowed to keep a percentage of the payment.
Changes such as those in the Chilean law –legislation that is used as a

benchmark by many Latin America countries—are shaping a new generation
of public-private partnerships that will be consolidated over the next few
years. In this context, the state will continue playing a significant role –in the
past two decades, public investment in infrastructure in Latin America has
accounted for about 40% of the total—but private participation will continue
to play a key role.
The combination of legislative developments, growing pressure to improve

infrastructure in the region and the positive economic environment Latin
America is facing means that 2011 is looking like a year in which the number
of projects that are tendered or that enter the construction phase will increase.
In Chile, for example, the public works ministry has a portfolio of projects
estimated at about US$11.7bn for the 2010-2014 period which includes
everything from urban and interurban highways to prisons and hospitals. In
Peru, meanwhile, the portfolio of private investment in transport infrastructure
is at about US$5.6bn, including a package of six regional airports concessioned
in 2H10 as well as 14 highway projects. Meanwhile, Brazil has plans for
transport infrastructure projects for US$57bn for 2011-2014 as part of the
second package of its growth acceleration plan.
Intelligence
Figure 3
Chile: Concession plans
1. Urban highways
Type of Investment in
Project Year for tender
Initiative US$ millions
Américo Vespucio Oriente public 1,172 2011
Costanera Central highway private 1,184 2013
Road connecting Ruta 78
private 35 2013
with Ruta 68
Santiago – Lampa highway private 78 under evaluation
Ruta G21: Access to ski
private 39 under evaluation
resorts
2. Airport concessions
New bidding for La Florida
public 15 2012
airport
New bidding for Santiago´s
Arturo Merino Benítez public 480 2012
international airport
3. Interurban Road Infrastructure
Rutas del Loa private 223 2011
Nahuelbuta highway private 172 2012
Road interconnection for
public 117 2013
Tres Pinos Enlace
4. Carceles
Santiago II prison public 109 2011
Copiapó prison public 44 2012
Prison Construction Type of Investment in
Year for tender
Program II-B Initiative US$ millions
Calama prison public 58 2011 - 2013
Prison in the Bío Bío region public 63 2011 - 2013
Prison in the Valparaíso
public 63 2011 - 2013
region
Temuco prison public 62 2011 - 2013
Source: Chilean Public Infrastructure Works Concessionaires’ Association (COPSA)
Intelligence
Figure 3
Chile: Concession plans (continuación)
5. Hospitales
Hospital Construction Type of Investment in

Year for tender
Program 2011 - 2013 Initiative US$ millions
Antofagasta hospital public 265 2011 - 2013
Curicó hospital public 170 2011 - 2013
Cauquenes hospital public 65 2011 - 2013
Salvador hospital public 326 2011 - 2013
Sótero del Río hospital public 352 2011 - 2013
Félix Bulnes hospital public 160 2011 - 2013
Source: Chilean Public Infrastructure Works Concessionaires’ Association (COPSA)
Figure 4
Peru: Upcoming concessions
Estimated investment
Project Location
(in US$ millions)
HIGHWAYS
1. Autopista del sol Sullana section on Ecuadorian border TBD
2. Panamericana Sur Ica on Chilean border 70
RAILWAY LINES
3. Huancayo-Huancavelica train Junín - Huancalevica 11
4. Cajamarca-Bayóvar train Cajamarca TDB
PORTS
5. Pucallpa port terminal Ucayali 16
6. New Yurimaguas port terminal Loreto 39
7. San Juan de Marcona port terminal Ica 133
8. Navigability of river routes First stage of river routes TDB
TBD: to be defined
Fuente: ProInversion - priority projects for 2010.
Mixing and mingling

Regional integration is another idea that is gathering momentum. With the
exponential increase seen in both intercontinental trade and intra-regional
transport infrastructure, it has gone from a local issue to a multilateral one, so
the difference in infrastructure quality between countries can create bottlenecks
that affect the efficiency of the transport chain.
Intelligence
Such is the case with Paraguay, which has become part of the intra-regional
trade route within Mercosur. The government has plans to invest US$4bn
in infrastructure between 2008-2013, of which US$1.5bn are earmarked for
road infrastructure and US$500mn for projects such as upgrading airports,
developing waterways and upgrading ports and the railway system. According
to the Paraguayan government’s estimates, the country is currently facing
significant extra costs in its exports due to the low quality of its infrastructure.
For example, the average cost of exporting chilled meat is about US$300/ton
whereas, with upgraded infrastructure, that amount can be decreased by almost
a third to US$208.50. Similar differences are seen in the analysis of the cost of
exporting frozen meat, soy, sesame and wood.
Some of the Paraguayan projects are part of IIRSA, an ambitious macro-plan

of initiatives to improve connectivity in South America that is supported by
regional development bank CAF and the Inter-American Development Bank.
The initiative, created in 2004, has 524 projects (including transport, energy
and communications) in its portfolio and US$95bn in investments. At mid-year,
53 of these projects had been completed, 175 were under construction, 158 were
in the pre-construction phase and 138 were in the study stage. More than half
of the IIRSA projects involve transport infrastructure, including highways as
well as waterways and port improvement.
The IIRSA initiatives are going in the right direction, but there is still a lot
to do. In a presentation during BNamericas’ Southern Cone Infrastructure
Summit, which took place in Santiago in October 2010, Gustavo Anschutz, the
executive director of consulting firm AIC Estudios y Proyectos and a consultant
for the IDB, the World Bank and IIRSA on infrastructure, transport and ports,
said that logistical infrastructure must have a multi-modal role and has to make
each component of the logistic transport chain work within its most efficient
distance. Roads, for example, shouldn’t exceed 300km and railways shouldn’t
exceed 1,000km, he said. Cargo should also be concentrated in hubs. Using
a multi-modal system, between US$300-US$500/truck could be saved by
replacing the current system in which trucks travel over 1,000km on average,
according to Anschutz, eliminating extra costs that are veritable barriers to
international trade, particularly for small and medium-sized companies.
Intelligence
Figure 5
Intraregional trade
The rapid growth of intraregional trade requires highly developed transport infrastructure.
1994 2010
Over 20 million per year
US$4 to US$15 million per year
US$500,000 to US$1 million per year

Source: IIRSA
Airport congestion
Just as the regional and multi-modal nature of transport infrastructure in Latin
America is one of the issues that will dominate the development of the sector in
the region over the next few years, the need to increase airport capacity will be
another topic on the agenda in 2011 and beyond.
Santiago’s Arturo Merino Benitez airport is a good example of the current

problems for airports in Latin America. The increase in traffic was greater than
originally anticipated and the terminal is bordering on its maximum capacity.
The concessionaire presented an expansion plan, but the former government
thought it was better to come up with a long-term master plan that will
kick off when the concession is renewed in 2013. In the interim, the current
concessionaire will have to implement palliative measures.
Nevertheless, the new year will begin with a substantial number of initiatives.
For example, Paraguay’s congress is discussing a proposal presented by the
government to concession Asuncion’s Silvio Pettirossi airport and the Guaraní
airport in Ciudad del Este. The estimated investments needed to modernize the
former add up to about US$140mn, while the latter will require US$35mn.
AA2000, the concessionaire for the Ministro Pistarini airport, better known as
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Ezeiza, is engaged in stage II of Buenos Aires’ main air terminal. The company
is investing US$400mn to increase the airport’s capacity to 13mn passengers/y,
among other things. The airport currently has capacity to handle 8mn
passengers/y. Stage II should be completed in 2013.
In Mexico, under the national investment plan, there are two important airport
projects, but which were still vague at the time this report was written. The
first is the airport in Ensenada, Baja California, intended to absorb some of
the cargo from the Los Angeles airport, replace the El Ciprés airport which
can´t be expanded and provide a second airport option for the city of Tijuana.
The airport would have inter-modal connections to seaports and ground
transportation, including railways and roads. The investment is US$150mn, but
so far it has not progressed beyond the conceptual level.
The second airport project is in the south of the country, in Quintana Roo.
The Riviera Maya airport will require a US$250mn initial investment and
will be located 131km southwest of Cancún, on land provided by the federal
government. It is currently in the final bidding stage.
But the most ambitious package of projects is underway in Brazil, where

Infraero - the state agency that manages the country’s airports - has plans to
invest more than US$3.6bn over the next three years to expand and upgrade the
country’s airport infrastructure for the 2014 World Cup and the 2016 Olympics
in Rio de Janeiro. The works, however, have proceeded slowly up to now.
Figure 6
Brazil: Airport capacity vs actual passenger traffic
million of pax/year
Airport Pax Terminal Capacity Pax in 2009
Sao Paulo - Garulhos 16.5 21.7

Sao Paulo - Congonhas 12.0 13.7
Rio - Galeao 15.0 11.8
Brasilia 7.4 12.2
Salvador 6.0 7.1
Porto Alegre 6.1 5.6
Belo Horizonte - Confins 4.0 5.6
Recife 5.0 5.3
Rio - Santos - Dumont 8.0 5.1
Curitiba 3.5 4.9
Fortaleza 3.0 4.2
Campina - Viracopos 2.0 3.4
Natal 1.5 1.9
Source: Aport
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Money talks
Another trend that is gathering momentum is the growing interest among inter-
national investors to take part in infrastructure business in Latin America. The
increase in the amounts of money that institutional investors have available for
investment, especially the pension funds in those countries where there are private
individual capitalization pension systems, has led pension fund managers and
the regulatory authorities to seek schemes that facilitate their participation in the
financial engineering of the infrastructure projects that the region needs.
In the specific case of the pension fund managers in the region, which now
manage assets totaling some US$290 billion, it is estimated that their
managed funds will continue growing as the systems mature until they
reach around 50% of national GDP in some four decades´ time, as is already
happening in Chile.
The opportunity is clearly there. Assets derived from financing of

infrastructure projects have the ideal characteristics for pension funds
because they are long-term investments and provide a good balance between
profitability and risk. However, for the fit to work well, other ingredients are
required that are lacking in certain cases, which is why investments by the
pension funds in this sector are modest.
Nevertheless, as we mentioned above, there is now awareness among the various

players involved – authorities, pension funds, infrastructure operators and
multilateral agencies, among others – about these shortcomings and steps are
now being taken.
In Peru, a country with one of the most ambitious infrastructure investment

agendas in Latin America, the Superintendency of Banking and Insurance
has established solid mechanisms to facilitate the participation of the AFPs
in these projects, while the creation of multifunds has also aided the process.
Contributors to the Peruvian private pension system keep their retirement
savings in three types of funds, one conservative, one with intermediate risk and
a third that is more risky.
In this context, at the beginning of 2010, Peruvian pension fund managers

(AFPs) put together a trust of a minimum US$300 million and a maximum of
US$400 million to invest in infrastructure projects. The idea of the Peruvian
AFPs is to provide additional support in promoting projects, working with
Proinversión (the state agency that promotes private investment) and not expect
investors to come knocking on the door for financing.
At the end of 2009, the Canadian asset manager Brookfield Asset Management
was chosen by the Peruvian government to manage a fund of up to US$500
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million with its local counterpart AC Capitales to invest in infrastructure. The

goal is to attract funds from institutional investors to the sector. The CAF and
IDB also participate in this fund.
In Colombia, the pension fund managers are also very interested in

participating in infrastructure business. In this country, however, the
mechanisms in place for concessions still need to be perfected so that
institutional investors can see their plans effectively materialize. For now, the
bulk of the investments by these institutions in the infrastructure area are
concentrated in the energy subsector, but specialists point out that there are very
favorable scenarios in Colombia for investment by pension funds in transport
infrastructure projects.
In fact, towards the end of 2009, Brookfield also launched a private equity
fund in Colombia alongside local institutional investors to make investments in
infrastructure projects. The fund holds some US$400 million.
Conclusion
It promises to be a busy year in the development of transport infrastructure
projects in Latin America in 2011. The economic expansion, increased trade
and, in the case of Brazil, the works required to hold the FIFA World Cup in
that country in 2014 and the summer Olympics in Rio de Janeiro in 2016, are
very powerful incentives to step up construction of infrastructure in the region.
In 2011 and the years after, this industry will continue developing around the
different models of public-private partnerships that have been tried and tweaked
since the nineties, which should pique the interest of developers and operators in
the business, as well as institutional investors operating in the region. The funds
managed by Brookfield in Peru and Colombia should prove to be pioneering
experiences that break new ground for similar initiatives in the coming months.
Given the particular economic conditions in the region during 2011, the
concept of public-private partnerships will become more widely used in the
countries where this model is already well-established. Noteworthy exceptions
to this rule are Argentina, where the administration of the late President Néstor
Kirchner and his widow and successor Cristina Fernández has pushed for
greater state involvement in the sector, and in Venezuela, where President Hugo
Chávez has clearly set his sights on a statist model.
From the political point of view, the development of infrastructure is also key
in the struggle against poverty, a battle in which Latin America has had some
significant victories in recent years. According to studies cited by the UN’s
Economic Commission for Latin America and the Caribbean (ECLAC), there
is a direct correlation between the quality of infrastructure, real GDP per
capita and inequality in income distribution. Access to infrastructure services,
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according to ECLAC, has a significant positive effect on the income and welfare
of the poorest segments of the population, as well as increasing productivity and
reducing production costs in the economy in general.
In 2011, the conditions are in place for infrastructure to take off in Latin
America. But this will continue to depend on the efficiency of governments in
the region. As we reach the threshold of the new year, the encouraging signs
allow us to be optimistic.
Figure 7
Forecasts for port cargo in South America
Average yearly
growth rate
2008 2009 2010 2011 2012 2013 2014
(2008-20124) for
Latin America
South America
Transfers (MTEUS) 18.4 16.4 16.5 17.4 18.6 19.9 21.6 2.7%
Capacity (K TEUS) 24.5 25.0 25.5 26.2 27.0 27.9 28.7 2.6%
Utilization (%) 75.1% 65.8% 64.9% 66.5% 69.1% 71.4% 75.4%
Plans for expanding capacity
- - 995 1,020 1,495 1,645 2,070
* Unconfirmed (in thousands of TEUS)
Source: Ultramar, based on figures from Drewry Shipping Consultants
www.BNamericas.com
Information Intelligence
Technology Series
Information Technology: Outlook 2011
Technology Series Information Technology Outlook
Introduction
L atin America is finding its rhythm in the world of IT. The economic picture is
very different for the region than it was two years ago. This might not be the
case for the world over, or even every facet of the region’s economy, but when it
comes to technology Latin America looks more and more serious every year.
It might be the quick recovery towards growth trends experienced prior to

2008, or the rising status of its largest country, Brazil. But something is brewing
in Latin America.
There are still a number of hurdles to face. The penetration of internet access,
especially at access speeds that allow the user to experience the web at a click
of the finger, is still far below an acceptable level. Even less can say they
own a computer. There is still a heavy reliance on imported hardware and
only a fraction of software licenses bring earnings back to local companies.
Education still remains a hurdle, as does attaining a higher level of spoken
English for IT professionals.
After the economic collapse of 2008, the dust started to settle in 2009 and the
economy started to show a bit of progress this year. 2011 will continue this trend,
maybe not at the same pace but enough so to give the region a touch of stability.
There is also a picture of two different development paces, as there are several
countries that are no longer struggling with basic communications and
technology infrastructure. Such is the case in places like Brazil and Chile, while
growth in countries like Peru and Colombia hits a new stride as the foundation
for greater technology adoption takes place.
In this report we look at some of the driving factors that will mold and shape the
landscape of the technology industry in Latin America next year. We see several
main trends that will drive change in many areas of the industry (see exhibit 1).
Figure 1
Driving forces for IT in 2011
Mobility: Increased penetration of mobile broadband and smarter mobile devices

extend the reach of the industry past the desktop, office or home.
Cloud Computing: A buzzword and a force changing how the industry is structured
and operates.
Security: More mobile use and handing data over to the cloud require a greater
understanding of the challenges from users and service providers who can educate
their clients
Industry focus: Companies must invest to drive the IT industry. Who will be taking
new steps with technology in 2011?
Service outsourcing and R&D initiatives: Latin America is finding a role as a near
shore outsource center but R&D must become a strategic goal for governments to
grow local economies and harvest local talent
A look back at 2010

Looking back on 2010 we see a changed landscape for the IT industry in Latin
America. If 2009 was a year spent reacting to the financial crisis of 2008, 2010
was the year spent picking up the pieces. But for many in the region, crisis has
also brought opportunities.
There have been positive indicators pushing the regrowth of the industry in 2010.
One indicator that is of utmost importance is the overall number of PC shipments,
which shows the growth of the base of consumers that make up the target market
for software developers, hardware manufacturers and service providers.
Granted the numbers are positive, but they have not reached the pre-crisis
levels seen in early 2008. According to global tech consultancy Gartner, PC
shipments in Latin America in the third quarter of 2010 saw an increase
of only 9.9% compared to the same period last year. Consumers are still
searching for promotional sales that haven’t materialized to the level needed to
boost overall sales.
But when we look at the overall investment in IT, a figure driven by corporate
sector spending, we see a different picture emerging.
According to a study of Latin American IT investment commissioned by Chile’s

IT industry association ACTI and prepared by industry analysis firm IDC, the
overall investment in US dollars in Latin America is expected to grow 21.7%
across the region in 2010. The double digit growth is more a reflection of the
bad times of 2009 when investment dropped 8.5%, but it does show that the
numbers have gone positive once again.
Leading this growth are Chile and Brazil, which are well known as the most
advanced and the largest markets, respectively. Brazil should see an increase of
29.8% year over year, while Chile will grow 27.3%. Also showing impressive
new levels of IT investment is Colombia, where an emerging outsourcing cluster
is growing. In 2010 Colombia is expected to post growth of 25.8%.
IDC is not alone in its analysis. Gartner has also stressed the opportunity for
tech firms in Latin America since spending is on course to reach US$261 billion
this year, with corporate IT budgets in the region increasing at one of the
highest rates in the world: an estimated increase of 4% during 2010, compared
with the global figure of 1.3%.
Always a leader when comparing markets or football, Brazil is seeing important

growth in terms of consumer and corporate spending for technology and
telecoms. In fact Gartner believes that Brazil’s end user spending will reach
US$101 billion in 2010, representing 9.6% of the country’s real GDP.
Last year, total IT end-user spending reached US$88 billion, accounting for
8.6% of Brazil’s GDP. Gartner also forecast that spending will reach US$128
billion in 2013, representing 10.3% of the country’s GDP.
The opportunity to grow through M&A activity actually accelerates in an

economic crisis as stronger players with cash on hand can acquire new business
units or competitors at a lower cost. This fact was not lost on Latin American
IT firms as the industry saw a series of important mergers and acquisitions.
Leading this charge with a string of five purchases is Chile’s Sonda, which spent
US$89 million on growing its business through acquisitions. The company
is now spread through the region and in many ways represents the business
opportunity for a mid to large sized IT corporation.
Brazilian IT firm Stefanini has also made some big moves, the most recent
of which was an agreement to buy US IT outsourcer TechTeam Global for
US$93.4 million through a US subsidiary. What makes Stefanini’s move bold
and noteworthy is that it is reversing a trend of outside firms buying Latin
American assets. The Brazilian company is expected to make more purchases in
the US and Europe.
Another company that has caught the eye of quite a few of the large players in
the region is IT solutions provider Synapsis whose refined IT services expertise
in the Latin American utilities sector, as well as a fortified presence across the
region, should prove attractive to potential buyers. The company is currently
part of Spanish energy giant Endesa, which is looking to sell assets unrelated to
its core energy business.
Latin American economies have long been cursed by the richness of their natural
resources. While exporting raw materials might bring significant returns, these
have not necessarily translated into a deeper level of development of society,
technology and know-how. But this could change now that Latin American
governments have targeted technology services for export, thus creating an
outsourcing, near shore business. In 2010 we saw a continued push to develop this
focus in Colombia, Chile, Costa Rica, Argentina, Brazil and Mexico.
What’s ahead for 2011?

So what’s in store for 2011? At BNamericas we believe that the industry will see
a year of stable, albeit not spectacular growth as more governments, corporations
and consumers prioritize IT spending to a new degree in the region.
The first indicator to watch is the overall growth of Latin American economies,
which according to Business Monitor International, are forecasted to grow GDP
as a region by 4.3%, led by Brazil with 6%. The exception to the growth is
Venezuela, whose special Bolivarian economy is expected to shrink by 3.8%.
When we look at the investments in the IT sector we also should see steady
growth levels for the region at 7%. Brazil should lead this with an increase of
9%, with other countries still investing heavily in large infrastructure and basic
connectivity projects, such as Peru and Colombia, growing at slightly lower
rates, according to IDC. (See Exhibit 2, above)
Leaving the cables behind: Mobility driving

changes in technology use
It gets more difficult to speak of the IT industry as a fixed set of hardware
anywhere in the world and Latin America is no exception. For 2011 we expect
more focus to be placed on expanding the ecosystem and growing the use of IT
services to more mobile devices.
Much of this is due to an improved offer of devices and maybe more

importantly, services that connect the devices. Without a decent broadband
speed or mobile internet service, even the most loaded iPad is rendered useless.
Figure 2
IT investment growth per country 2009-2011
2009 2010 2011

30
25
20
15
10
-5
-10
-15
Country 2009 2010 2011

LATIN AMERICA -8.50% 27.30% 7.00%
ARGENTINA -6.10% 11.40% 4.00%
BRAZIL -10.10% 29.80% 9.20%
CHILE -4.90% 27.30% 5.50%
COLOMBIA -6.50% 24.80% 7.30%
PERU -2.40% 15.70% 8.20%
Source: IDC, ACTI
While mobile broadband for cellular is available in most major Latin American
cities, its pricing and dependability still present a barrier to making it a
widespread, mass-market option.
However when it comes to enterprises adding mobility to business applications

there is accessible growth potential that requires not only an advancement in
applications, but also investment in the surrounding infrastructure in order to
support mobility.
So for every investment a company makes into securing new mobility

applications for its staff, it will also have to keep improving its data storage,
hardware, and broadband pipes in order to manage mobility.
The use of “ultra” mobile devices that bridge the gap between smartphones and
laptops is also growing. These devices offer convenient access to files and data stored
in the cloud, so the user does not need a full-size laptop on the road, a format that is
proving a great favorite for business presentations and sales professionals.
In countries where mobile phone access and broadband connections are

relatively developed, these devices will continue to grow slowly through 2011, as
both laptops and ultra-mobile devices erode the purchases of traditional towers.
In Chile, 2010 purchases of laptops will reach around 919,000 units, desktops
491,000 units and ultra-portable devices 380,000 units, according to numbers
from IDC. In 2011 desktop sales will likely shrink to 438,000 units while
laptops grow past one million and ultra-portable devices hit sales of 418,000
units, only slightly below the traditional desktop PC. This represents a shift in
how consumers view their data. It must be accessible on the go.
Mobile applications are also a flash zone of entrepreneurial growth as developers

can use platforms with a wide level of acceptance, such as Facebook, or an
operating system on a widely accepted device, such as the iPhone. These allow
local developers to bring their ideas to an already established user base.
There must be a focus from government and industry on encouraging these

entrepreneurs to demand more from social media and mobility, and match
that with seed capital. There is potential to develop applications that are
region- or language-specific, and in turn generate the property rights that go
with the applications.
Cloud Computing
Now both a buzzword and growing reality for the IT industry, Cloud
Computing means a lot of different things but in a nutshell is computing with
the bulk of the actual information stored “in the cloud” or in a centralized
server, not on the actual device.
Cloud Computing itself is the compilation of some of the factors mentioned

above – mobility, storage facilities, faster internet speeds, a deeper penetration
of business intelligence and automation - it requires a set of conditions that only
recently have been seen in Latin America.
On a consumer level Cloud Computing is more of a fancy term applied to

everyday applications, such as using Google Docs or Gmail instead of a
pendrive or Microsoft Outlook.
For the concept to really take hold and create its own niche among the IT
industry there has to be a solid group of corporate clients that are also as
optimistic about Cloud Computing. There are signs of this happening.
In the case of Microsoft Chile roughly 20% of its large corporate clients - which
number about 450 - are expected to be using cloud computing by June 2011.
The company already has the state owned copper miner Codelco among the
ranks of its Cloud Computing clients.
Microsoft has been an outspoken fan of Cloud Computing and its potential to
change the market. Earlier this year Microsoft’s Latin America president Hernan
Rincon told industry insiders and journalists that Latin American businesses are
generating a potential US$57 billion in Cloud Computing business.
While the number is still a bit pie in the sky for practical purposes, the message
is clear, that Cloud Computing is where the large solutions providers are going
to focus their message in 2011.
But exactly how deep the Cloud Computing model can penetrate is yet to be
seen. An industry that has led IT uptake has traditionally been the financial
sector. But entrusting core data of a large financial institution is a step that most
banks are hesitant to make.
BNamericas’ Technology IS report “Cloud Computing: The Next Frontier

for Financial Services” found that the widest interest is in using the cloud for
peripheral services related to HR or to perform day to day emails. Storing
sensitive data that could affect the core business is still a ways away, and should
stay that way through 2011.
From a cost perspective, the ability to use software on a “pay as you go”
basis - the SaaS model - is attractive for Latin America, where companies and
consumers are far more cost sensitive than in North America. Service providers
can target small and mid-sized companies with business intelligence and
management tools that the client pays for as they use them, thus saving the
costly licensing fees beforehand.
There are some examples of service providers that have capitalized on this
model, Salesforce.com is one highly quoted company doing just that. But there
is still a lack of local, Spanish language-focused companies making an offer for
regional companies.
Security
She increase in mobility, and the growing number of devices that are internet-
connected or hold sensitive data, means the need for complex security solutions
is also growing as the needs of the users become more and more complex.
The shift is already clear for platform suppliers, such as Cisco, which are
retooling their security offerings to reflect the needs of Cloud Computing.
Within its IT security branch, Cisco’s traditional bread and butter has consisted
of embedding solutions into clients’ infrastructure, such as routers, switches and
access points. Other focus areas include security for collaboration tools, as well
as hosted and hybrid IT security solutions.
These core offerings will no doubt continue to represent a solid revenue stream
for security providers, but the challenge is to position the company in 2011 as
the source for security solutions in a new and developing area.
Not only is there a need to rework security solutions, but also to identify who
in the value chain is responsible for security breaches, which at some point
will require lawmakers and regulators to get involved. For example who is
responsible if a customer’s data is lifted? The provider of the Cloud solution?
What if the lapse originated in a centralized third party data storage facility?
These are the sort of regulatory questions that will have to be addressed as the
physical presence of data becomes less important and ubiquitous access to data
is the reality.
There is room for security providers to focus their message and help prepare
companies for attacks. Databases and web applications were the targets of 94%
of fraud attacks made last year against Latin American companies, according to
US data security specialist Imperva.
Despite those trends, regional firms channeled 90% of their IT security budget
to areas other than those two technological areas.
Aside from errant security expenditures, lax password protection is also leaving
companies exposed. According to a recent study carried out by Imperva, the
majority of passwords used in Latin America are based on easy-to-crack words
such as the user’s name, a series of letters or numbers and favorite things.
Imperva’s observations and findings on the region’s level of preparation for

security threats is just one example of a wide group of security providers
chanting a similar message: Latin America faces the same risks as the rest of the
world but has not made the right investments to better protect itself.
This scenario is even more complicated when taking into consideration the
surge in mobile use, another front where companies are exposing themselves to
data loss, theft or adulteration. Twitter accounts are great for retail but can be
hacked, and so the list continues. In 2011 companies must become more aware
of the threats faced and be willing to take a preventative approach, rather than
just putting out fires.
An industry focus
The largest movers of IT in terms of investment are industry players. In Latin
America look for core industries, such as mining firms to play a key role in
growing the investment in IT for the region.
An example of what is in store is Los Pelambres, a copper mine located in

northern Chile, which says it will implement a full CRM solution in 2011
not to better its relationship with contractors or clients abroad, but rather
with NGOs and community members that have taken issue with some of the
mine’s operations. The company wants to apply retail philosophies of customer
management to improve its image. The CRM is one destination of its US$5
million IT investment budget for 2011.
According to a study by IDC, more companies in Latin America planned to

up their IT investment in 2010. The regional breakdown was 49% intending to
spend more, 19% the same, and 32% intending to spend less than 2009.
Brazilian companies gave the most optimistic response with 65%, followed
by Peru with 54%. Colombia was at the bottom of the pile with only 30% of
enterprises to invest more in IT this year than last. All in all, more than half of
the largest companies in the region were intent on increasing their IT spending,
particularly in the financial sector.
Corporations in Brazil are also trending towards a smaller number of IT service

providers. The shift comes as a result of large enterprises’ greater emphasis on
IT governance, which will gain steam in 2011. Companies are aware that many
of their technology purchases in the past have been relatively unorganized, and
they are now trying to straighten things out.
This makes a tougher sell for smaller vendors or service providers, but if they
can get their foot in the door with a large enterprise client they can expect a
steady source of projects going forward.
Outsourcing: Putting Latin America

on the IT Map
For Latin America as a region there has always been a challenge to identify
its role on the global scene. The region’s weight in the sales of large IT
hardware and service providers is fractional at best. Look at the case of the IT
infrastructure market. The global IT infrastructure market is forecasted to
generate revenues of US$773 billion this year, up 2.7%. But Brazil represents
only around 1.8% of that global market, and it is by far the largest market in
Latin America.
Nor is the region known for its manufacturing might. Only Brazil and
Mexico boast a real manufacturing industry. The rest of the region relies on
imports of hardware.
The lucrative industry of software licensing, technology patents and research

& development in general are also something left to greater global forces. But
Latin America has found one niche that can spike its importance, especially
towards the US market: service outsourcing.
There is interest in the region as an outsourcing market, and this is mainly

because of low-cost, skilled labor, according to a study by French technology
services consultancy Capgemini.
The cost of labor was given as the top reason for outsourcing to Latin America
by 69% of the executives surveyed, while other reasons included technology and
infrastructure capabilities at 49%, skilled labor 48%, and economic stability 44%.
The study found that the region is the world’s third most popular outsourcing
destination, attracting roughly a quarter of the global market, behind China.
But India still leads the pack, attracting the lion’s share of outsourcing business.
Latin America is an emerging market which will become increasingly important
to US businesses, according to 89% of executives surveyed.
But while the low cost in dollars might be an attractive selling point, there is
still work to be done to fully grasp the outsourcing opportunity. For example
the demand for qualified Latin American professionals is an area that requires
more action from industry players. Demand for highly skilled professionals in
the field of advanced technology exceeds supply by more than 34%, according
to Linux Latin America, using figures from a Cisco study. That percentage
would translate into 90,000 jobs in advanced technologies, which includes IP
telephony, network security and wireless solutions.
The study found that the Latin American country with the highest divide
between supply and demand of these professionals is Colombia, with a 44% gap,
followed by Costa Rica with 39%, Chile 36%, Mexico 27% and Brazil 21%.
One of the biggest factors that will weigh in for the offshore industry, like any
other export business, is the strength of the dollar. The dollar during the fourth
quarter of 2010 has been especially weak.
This brings some advantages to the IT industry in general. It means a drop in

the price of imported hardware and possibly in the transportation fees to get
it there. So for upgrading servers and PCs in Latin America, a region almost
completely dependent on outside manufacturing, it brings lower costs.
For example in Chile IDC cites the low dollar as the leading factor in increased
hardware purchases, so much so that the company has upgraded its forecasts for
the country.
But selling services abroad means a higher cost in dollars for the potential
clients or lower returns for the service provider.
Looking at the region country by country there are several hot spots for the
export of services or for outsourcing development. (See exhibit 3).
The leader in the region not only as an internal market but also as a provider of
services abroad is Brazil. The country’s association of IT and communications
companies, Brasscom, estimates that the country will export US$5 billion
worth of software and IT services in 2011.
To do this the industry is focusing on investments in the areas of education,

marketing, regulatory framework and information technology infrastructure.
Brazil is also attractive since it has a large internal market to sell to so there is a
much larger mass of possible customers to address.
Hand in hand with growing the amount of services exported offshore,

entrepreneurs in the region are looking to opportunities to develop new
technologies and solutions locally.
This is a policy that has caught the attention of policy makers and the economic
development sector in general since it does more than just offer a new solutions
for the market, it develops local talent and adds to the strength of the local
economy as well.
In Chile there has also been a focus on developing local R&D projects for
industry customers. One area that the country’s IT association ACTI is
particularly interested in is mining. Local service provider Coasin has targeted
the mining sector through a spin off called C2 Mining. The company is an
example of a general IT service provider focusing on a local industry as the
impetus for developing new solutions and technologies.
Argentina has also made advances in targeting this market. In fact this year the
Inter-American Development Bank approved a US$200 million loan in order
to fund research and scientific projects. The country also has a large array of
professionals working throughout the region, but has only just begun to tap the
vast potential that is there.
Mexico is also a country that use its proximity to the US and existing status as an
outsourced manufacturing destination as a stepping stone to an IT service industry.
Beyond the effects of a tanking dollar, the fact that the clients for these
outsourced services are mainly in the US and to some degree Europe, there is a
risk generated from exposure to continued economic turmoil in these markets.
Conclusions
As a whole, 2011 will play out as a year of hard work. Growth won’t come hand
over fist as we have seen in the past, but there is a sense of economic reactivation
that brings a host of opportunities for the innovative industry players to take
advantage of.
There is still a need for the IT industry in Latin America to better sell itself to
policy makers as a centerpiece of economic development. The focus on creating
outsourcing clusters is a start but it must go further to also focus on the local
economy more directly.
There is also a need throughout the region to develop more local talent, to tailor
more of the trends to the reality faced in Latin America.
Mobility is a huge opportunity because it is one of very few services whose level
of penetration across the masses in Latin America matches that of the basic
utilities, like running water and electricity. Thus it has more of an opportunity
than almost any other medium to tailor services to a greater audience.
Companies in the region must look at security threats with a proactive mindset,
waiting to react could prove too costly. And geographically speaking Brazil is
the country to watch as it positions itself not only as a powerhouse in Latin
America, but an economic power alongside China, India and Russia.
Figure 3
IT Outsourcing Hotspots
Costa Rica A US friendly,

more stable tech center,
Costa Rica has targeted its
potential for several years
Panama Also trying go

Mexico: proximity and role as a get the door as a financial
manufacturing outsourcer make it services center and tax
an obvious choice. Violence and haven which could lead to
political disorganization palying IT services
against it.
Brasil: An up and coming
global player, Brazil has the
economy and know how
to be a leadeer not just for
outsourcing, but as a global
Colombia: The newcomer. IT service provider and
Close proximity to the US, an research hub
underdeveloped IT market
have made it a new favorite for
global firms
Chile: Some of the most

influencial IT players
are based here. A more
mature IT industry and Argentina: A country
solid infrastructure make with huge potential,
it an older favorite. if only it could get its
economy together.
Abundance of
professionals and ITC
infrastructure. Could
this be its year?
www.BNamericas.com
Intelligence
Mining Series
Mining sector outlook for 2011

Mining Outlook
Introduction
A s 2010 comes to a close, a certain level of volatility continues to rule the

financial markets and, in turn, metals prices despite what most believe to
be strong underlying fundamentals, a situation characteristic of 2010 in general.
Cautious optimism continues to describe market sentiment.
Concerns that China could take tightening measures to curb inflation are
weighing on base metal prices, a turnaround from just weeks ago when copper
hit its highest LME spot closing price of the year at US$4.048/lb. The Asian
country is also experiencing a stock sell-off - particularly in lead, aluminum and
zinc - that could simply be a response to reduced internal production reaching
the spot market due to energy rationing at smelters and eventually will lead to a
need to restock. China’s latest trade data show that copper imports in October
sank 30% month-on-month to their lowest level in a year, yet output of semi-
manufactured products in China continues to grow with an 8% year-on-year
rise in October.
Meanwhile, Chilean state copper corporation Codelco recently secured a 31%

increase to US$98/t for premiums on physical copper sold to South Korea
and Japan in 2011, and a 35% increase to US$115/t on shipments to China,
reflecting an expectation of continued tightness in the copper market. The
higher Chinese premium also suggests that the weak Chinese import figures are
only temporary and that strong demand is on the horizon, according to Barclays
Capital. The red metal’s LME closing cash price has averaged US$3.35/lb so far
this year (to November 23), compared to US$2.25/lb YTD on the same date in
2009 and US$2.34/lb for full-year 2009.
Ireland’s debt predicament seems to be a repeat of the crisis that hit Euro-
Mediterranean economies like Spain, Portugal and Greece in the first half of the
year and made base metals prices skittish, and has got people worrying again
about the long-term stability of those countries’ financial systems. The swiftness
with which Ireland’s European neighbors have reacted to its incipient crisis with
a bailout package perhaps indicates that lessons have been learned, though some
fears of contagion persist. Continued debt concerns in Europe could lead to a
strengthening of the US dollar, which would put downward pressure on metal
prices, though the latest economic data out of the US was perhaps better than
expected regarding unemployment, personal income and consumer spending.
But, despite the volatility, forecasts regarding the global physical refined copper
market couldn’t paint a clearer picture: Merrill Lynch projects a 450,000t
deficit for 2011 while the International Copper Study Group (ICSG) projects
a deficit of 435,000tm. The latest ICSG 2010 copper market numbers show a
seasonally adjusted deficit of 121,000t for January-August, apparently indicating
a major shift from the group’s October forecast of a 200,000t deficit in 2010. In
Mining Outlook
Figure 1
2011 Project milestones
Argentina
INVESTMENT
PROJECT OPERATOR PRODUCT CAPACITY 2011 MILESTONE
US$
Andean Resources
285,000oz/y gold during
Cerro Negro (undergoing acquisition by Gold-silver 384mn Construction
first 5 years
Goldcorp)
Gualcamayo Expand total production
QDD Lower West Yamana Gold Gold to 190,000oz/y (add 85mn Construction
expansion 90,000oz/y)
19.8Moz/y Ag during first Updated resource/Full
Navidad Pan American Silver Silver-lead 760mn
5 years feasibility study (2Q11)
148,000oz/y Au,
Feasibility study update,
Agua Rica Yamana Gold Copper-gold 370Mlb/y Cu during first 2.1bn
Production decision
10 years
Ag resources: 8.99Moz
100mn Feasibility study
El Quevar Golden Minerals Silver indicated, 51.5Moz
(approximate) completion
inferred
Feasibility study
Don Nicolás Minera IRL Gold 60,000-70,000oz/y N/A
completion
40,000t/y Cu EIS approval,
San Jorge Coro Mining Copper-gold 227mn
40,000oz/y Au Feasibility study
Resources: 10.3Blb in- Prefeasibility study
Los Azules Minera Andes Copper 2.46bn
ferred, 2.2Blb indicated completion
76,400oz/y Au, 3.4Moz/y EIA approval based on
Cerro Moro Extorre Gold Mines Gold-silver 131mn
Ag during first 5 years PEA (1Q11)
Bolivia
INVESTMENT
US$
Amayapampa Republic Gold Gold 93,700oz/y 136mn Start of operations
Mining Outlook
Brazil
INVESTMENT
US$
Ernesto/Pau-a- 120,000oz/y during first Ramp up following

Yamana Gold Gold 116mn
Pique 2 years 4Q10 production start
58,000t/y Ni in Ramp up following

Onça Puma Vale Nickel 2.84bn
ferronickel 4Q10 production start
40,000t/y during first 5
Barro Alto Anglo American Nickel 1.5bn Start of operations (1Q11)
years
100,000t/y Cu in concen- Start of operations
Salobo (Phase I) Vale Copper 1.81bn
trate, 130,000oz/y Au (2H11)
Carajás Construction process
Vale Iron ore 30Mt/y 2.48bn
expansion (2012 startup)
Salobo (Phase 100,000t/y Cu in con-
Vale Copper 1.03bn Construction process
II) centrate
Start of construction
Pedra de Ferro Bahia Mineraçao Iron ore 19.5Mt/y 1.8bn
(1H11)
95,000t/y Cu in concen- 267mn (in Production decision,
Cristalino Vale Copper
trate 2011) start of construction
Obtain final operating
Minas Rio Anglo American Iron ore 26.5Mt/y 3.8bn
permits
Tucano Feasibility study comple-
Gold-Iron
(formerly Beadell Resources Resources: 4.29Moz N/A tion (early 2011), Produc-
Ore
Amapari) tion decision
M&I resources: 2.07Moz
Feasibility study comple-
Tocantinzinho Eldorado Gold Gold gold (12,000t/d through- N/A
tion, production decision
put)
Mining Outlook
Chile
INVESTMENT
US$
Ramp up following
Tres Valles Vale Copper 18,000t/y cathode 140mn
4Q10 production start
191,000t/y Cu,
215,000oz/y Au,
Ramp up following
Esperanza Antofagasta Minerals Copper 1.56Moz/y Ag in 2.3bn
4Q10 production start
concentrates during first
10 years
Los Bronces
Anglo American Copper 370,000t/y 2.5bn Start of operations (4Q11)
expansion
136,000t/y (Sulfide pro-
El Abra Sulfolix Start of operations
Freeport McMoRan Copper cessing to extend mine 725mn
expansion (1Q11)
life by 10 years)
Los Pumas Southern Hemisphere Manganese 7,200t/d throughput 50mn Start of operations
Collahuasi Increase throughput 20%
Anglo American-Xstrata Copper 750mn Construction underway
expansion to 170,000t/d
El Teniente
new mine level Codelco Copper 20Mt Cu over 62 years 3.28bn Start of construction
expansion
Copper- 138,000t/y Cu, 16Mlb/y
Sierra Gorda Quadra FNX Mining 2.5-2.75bn Start of construction
molybdenum Mo, 36,000oz/y Au
Feasibility study comple-
Antucoya Antofagasta Minerals Copper 80,000t/y (cathode) 950mn tion, Start of construction
(3Q11)
Maintain current
Lomas Bayas II
Xstrata Copper Copper 75,000t/y additional 8 293mn Construction underway
expansion
years
Increase output by
Gaby Phase II Codelco Copper 190mn Construction underway
20,000t/y to 170,000t/y
350,000-400,000oz/y Feasibility study comple-
Lobo-Marte Kinross Gold Gold 575-650mn
during first 5 years tion (1Q11)
Quebrada
170,000t/y in concen-
Blanca Teck Copper 600mn Feasibility study underway
trates
expansion
Escondida
Greater than 110,000t/d
Phase V BHP Billiton Copper 2.5bn Entering feasibility stage
concentrator
expansion
EIS approval, Start of
Mina Invierno Minera Isla Riesco Coal 6Mt/y 180mn
construction
Prefeasibility study
Relincho Teck Copper 120,000t/d concentrator 2.5-3.0bn
completion (mid-2011)
M&I resources: 21.3Moz
Gold-silver- Prefeasibility studies
Caspiche Exeter Resource Au, 48.4Moz Ag, 2.40Mt N/A
copper (2Q11 and 3Q11)
Cu
Mining Outlook
Colombia
INVESTMENT
US$
511,000oz/y gold; Evaluation of project
Angostura Greystar Resources Gold-silver 1.0bn
2.3Moz/y silver area, EIS
102mn (Vale
Ramping up to reach
El Hatillo Colombia Coal 4.5Mt/y 2011 capex in
full capacity in 2012
country)
Dominican Republic
INVESTMENT
US$
Start of operations
Gold-silver- 1Moz/y Au during first 5 (4Q11 - Delay to 1Q12
Pueblo Viejo Barrick Gold 3.0bn
copper years possible due to power
supply approvals)
Ecuador
INVESTMENT
US$
Ecuacorriente (JV China Start of construction,
62,000t/y Cu, 34,000oz/y
Railway Construction Copper-gold- pending contract rene-
Mirador Au, 394,000oz/y Ag dur- 399mn
Corporation-Tongling silver gotiation with Ecuador-
ing first 10 years
Nonferrous Metals) ian government
Guyana
INVESTMENT
US$
Feasiblity study comple-
Aurora Guyana Goldfields Gold 250,000oz/y 262mn
tion (4Q11)
Mexico
INVESTMENT
US$
Cerro Jumil Esperanza Resources Gold-silver 52,000oz/y Au 72.2mn Start of operations
Start of operations
San José Fortuna Silver Mines Gold-silver 5Moz/y Ag equivalent 56mn
(3Q11)
Molybdenum Feasibility study
El Crestón Creston Moly 40,000t/y Mo 576mn
copper completion (2Q11)
Mining Outlook
Peru
INVESTMENT
US$
Start of operations
Pucamarca Minsur Gold 70,000oz/y 90mn
(1H11)
Tajo Norte Zinc-lead- Increase throughput from Completion of expan-

Minera El Brocal 160mn
expansion silver 5,000t/d to 18,000t/d sion
Southern Copper- 90,000oz/y Au,
Tantahuatay Gold-silver 56mn Start of operations
Buenaventura 426,000oz/y Ag
Final permitting (1H11),
400,000t/y Cu in con-
Las Bambas Xstrata Copper 4.2bn Start of construction
centrate
(3Q11)
Tintaya-
Xstrata Copper 160,000t/y 1.47bn Construction underway
Antapaccay
Start of construction,
Tía María Southern Copper Copper 120,000t/y in cathode 934mn
pending EIS review
Feasibility study,
Quellaveco Anglo American Copper 225,000t/y first 10 years 2.5-3.0bn possible construction
decision
Cerro Verde
Freeport McMoRan Copper Increase throughput by Feasibility study
second Copper 2.5bn
& Gold 100,000t/d to 220,000t/d completion (1H11)
expansion
117,000oz/y Au, 4Moz/y Feasibility study
Inmaculada Hochschild Mining Gold-Silver 168mn
Ag completion (End-2011)
105,000oz/y gold equiva- Feasibility study comple-
Shahuindo Sulliden Gold Gold 89.4mn
lent tion (April 2011)
Copper-Mo- Feasibility study comple-
Los Chancas Southern Copper 80,000t/y Cu 1.2bn
lybdenum tion (Early 2011)
4.6Moz/y Ag during first ESIA approval expected
Santa Ana Bear Creek Mining Silver 68.8mn
6 years (3Q11)
650,000-750,000oz/y
Permitting, Production
Minas Conga Newmont Mining Gold-copper Au, 160M-210Mlb/y Cu 3.0bn
decision (mid-2011)
during first 5 years
Gold-silver- Inferred resources: Prefeasibility study
Chucapaca Gold Fields N/A
copper 5.6Moz Au equivalent completion (3Q11)
Prefeasibility study
Ollachea Minera IRL Gold 117,000oz/y 156mn
completion
Uruguay
INVESTMENT
US$
Feasibility study
Minera Aratiri Zamin Ferrous Iron ore 18Mt/y 2.0bn
completion (June 2011)
Source: BNamericas, Companies
Mining Outlook
BNamericas’ Mining Survey, conducted in November, preliminary results show

88% of respondents believe copper will reach new highs in 2011. Respondents
include mining companies of all sizes as well as consulting firms, government
agencies, equipment providers and other entities involved in the mining industry.
Looking only at respondents who said they are directly employed by a mining
company (junior explorer, small producer, midsize producer or major producer),
optimism is even higher: 95% said they believe copper will hit fresh peaks.
Analysts at Merrill Lynch even forecast that spot copper will average US$5.10/
lb next year, up from a previous forecast of US$3.63/lb, based on the expected
deficit and the upcoming launch of new copper ETFs. Experts polled by
Chilean copper commission Cochilco in October were less enthusiastic, their
forecasts for 2011 spot copper averaging US$3.37/lb, and Chilean national
mining association Sonami predicts US$3.50-3.60/lb. Perhaps Merrill Lynch is
in the realm of exuberant rather than cautious optimism.
Prices for lead and zinc perhaps will not see the kind of growth predicted for
copper as both markets are on track to be in surplus next year - lead at 90,000t
and zinc at 233,000t, according to the International Lead Zinc Study Group
- due to new capacity and reactivation of operations that had been shut down
during 2009.
As for gold, spot prices in London have not been below US$1,000/oz all year.
With an average to date on November 22 of US$1,206.68/oz and a closing high
spot price of US$1,421.00/oz on November 9, the popular consensus is that the
yellow metal will reach new highs next year.
There is some risk of a gold bubble, though, as shifts in what historically has
been the normal supply-demand composition have put the price where it is
today, according to GFMS chairman Philip Klapwijk. Scrap supply is higher
than is historically normal, jewelry demand has fallen and investment demand
has greatly expanded. However, the changes and their effect on price are
“happening for good reasons,” says Klapwijk, such as investor motivation to
buy gold due to historically low interest rates, quantitative easing and its future
inflation threat, weakening of the US dollar and the sovereign debt crisis. In
addition, “the bubble, given a continuation of these economic and financial
conditions, and the huge potential for further investor inflows into gold, may
get a lot bigger before it bursts,” he says, adding that for the so-called bubble to
pop, major changes in fiscal and monetary policy would be necessary and there
have been no signs of that yet, particularly in the US.
Among the most positive developments for mining in 2010 has been the steady
recovery of investor appetite for mining stocks and projects, which took off
particularly in the second half and has put the mining sector in a good position
to launch financing and boost activity in 2011. As metal prices consolidated
Mining Outlook
their gains, a major pickup in the equity capital markets has allowed juniors to
turn their focus back to obtaining financing. Furthermore, the vast majority
of projects that were put on hold during the crisis are back in action, though
sentiment still must improve to match its 2008 highs.
According to preliminary estimates by Canadian consultancy Metals

Economics Group (MEG), global non-ferrous exploration budgets in 2010
jumped 44% from 2009 to US$12.1bn as commodity prices and capital
markets rebounded. MEG underlines that the largest share of the overall
increase this year is attributable to juniors.
A year ago, gold projects were getting almost all the investor attention, mainly
from institutional or experienced investors that saw gold as a safe haven and
a market that would sustain high prices, though today interest in gold has
trickled down to the retail investor. But interest in copper and base metals
projects has improved significantly and it is likely that strong prices will
continue to support them in 2011.
Analyst Stefan Ioannou of Haywood Capital in Toronto notes that market

sentiment is at a point where even small juniors with early-stage projects are
accessing financing again and that miners issuing shares are able to insist
on bought deal financing with brokers, signaling a paradigm shift in who is
dictating the terms of equity financing. Even in the event of a modest economic
dip, availability of funds for quality projects will persist. “Barring a huge
global change overnight, for the next 6-12 months, most companies will be
in a position where they have the opportunity to raise money if they so want.
Beyond that, we’ll have to see whether that window is still open, whether it’s
getting bigger or closing,” says Ioannou.
Credit markets for mining development projects are also back on track, even for
junior or TSX-V-listed companies, though partnering with a major will remain
a necessity for juniors with very capital-intensive projects. The restored investor
appetite is generally expected to boost exploration spending next year compared
to 2010, both in Latin America and elsewhere.
Indeed, 69% of respondents of the BNamericas Mining Survey believe that

availability of financing for exploration and mine projects will improve in 2011,
while 28% think it will stay the same and just 3% think it will decline. Of the
entire pool of respondents, 52% said their company plans to raise capital in 2011.
Sixty-four percent of those who do plan to raise capital say the amount will be
larger than last year’s, while 26% say their company did not raise capital in 2010.
Looking exclusively at the mining company employees, the numbers are a bit
higher: 69% say their company will raise capital in 2011 and 71% say it will
be more than last year’s capital raised, while 17% say their company did not
Mining Outlook
carry out financing in 2010. Of the mining companies, 76% said they plan to
increase spending next year and 11% said spending would remain flat.
According to forecasts from independent Chilean copper studies center Cesco,

capital investment in mine project development and expansions in Latin
America will reach US$200bn in 2011. Strong metal prices, particularly for
gold, silver and copper, will likely be a helpful factor in revenue and profit
growth for mining companies in 2011, though this could be somewhat
tempered compared to 2010, as this year already saw important gains over 2009.
The pipeline of mining projects in Latin America is quite impressive, with capital-
intensive endeavors like Vale’s Onça Puma nickel mine and Salobo copper mine,
Barrick Gold/Goldcorp’s Pueblo Viejo gold mine and Anglo American’s Barro
Alto nickel mine due to enter operations during 2011. A good number of large
projects will also be paying for construction throughout 2011 in an effort to start
up in the following years, such as Xstrata’s Antapaccay, Southern Copper’s Tía
María, Minera Escondida’s Phase V expansion, Vale’s Potasio Río Colorado, Luna
Copper’s Caserones, Baja Mining’s El Boleo, Minera Antamina’s expansion and
Barrick Gold’s Pascua Lama, to name just a few.
And on the mergers and acquisitions scene, the majority of those surveyed by
BNamericas believes activity will intensify next year. BHP Billiton’s recent
US$40bn bid to acquire Canada’s Potash Corporation of Saskatchewan, as well
as its plan with Rio Tinto for a US$116bn JV of their iron ore operations in
Australia’s Pilbara region, though both fell through, indicate that the world’s
mining majors are hot to play the M&A game again. More proof comes in the
form of Goldcorp acquiring Andean Resources for Cdn$3.6bn (US$3.51bn),
and Brazilian conglomerate EBX’s offer to buy up Canadian Ventana Gold,
which has the La Bodega gold deposit in Colombia, for some Cdn$1.5bn.
Meanwhile, activity among smaller companies has picked up, too. Recent
deals include Argonaut Gold acquiring Pediment Gold (Cdn$137mn), Nyrstar
acquiring Farallon Mining (Cdn$405mn), First Quantum acquiring Antares
Minerals (Cdn$460mn), Gammon Gold acquiring Capital Gold (approximately
US$288mn) and Endeavour Silver bidding for Cream Minerals (Cdn$10.6mn),
as well as many others.
But with boom comes challenge. High prices often mean communities and
workers demand a larger share of profits. The industry starts getting greater
attention from governments that might see mining as contributing too little to
state coffers, and scrutiny of environmental and safety practices increases. Talk
of royalties and windfall taxes comes into play, as we are already seeing in Chile,
Peru and Brazil.
Mining Outlook
Figure 2
Estimated Global Nonferrous Exploration Budgets and Indexed
Metals Price*, 1996-2010**
Nonferrous Exploration Total MEG Annual Indexed Metals Price*
$15 3.5
Relative Change in MEG Annual Indexed Metals Price (1996=1)

Nonferrous Exploration Budgets (US$ billion)
3.0
$12
2.5
$9
2.0
$6 1.5
1.0
$3
0.5
$0 0
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
* The indexed metals price represents a blend of the relative changes in a basket of metals prices weighted by
the percentage of exploration expenditures dedicated to each metal by the industry as reported in MEG’s CES
studies. This weighting acts as a proxy for the relative importance of each metal within the mining and exploration
industry at a given time.
**Relative prices for 2010 are based on the average through September.
Source: Metals Economics Group
Heightened activity also means greater competition within the mining sector for
equipment, inputs and personnel, possibly leading to cost increases and project
delays. For example, miners are already starting to report difficulty in obtaining
steel tubing in some areas and, in Chile, the sulfuric acid shortage could
intensify as new leach operations come on stream.
Mining support projects related to water supply will also be an important issue
in 2011, with desalinization becoming more common. In fact, the use of raw
seawater at the Esperanza copper project in Chile - now entering its operations
phase – is expected to set important technical precedents for the industry.
Also in Chile, Spanish firm Aguas Barcelona is awaiting EIA approval for a
desalination plant to serve miners in the Copiapó region and has said it would
like to build two more. Meanwhile, major copper miners Minera Escondida
Mining Outlook
(BHP Billiton), Anglo American and Freeport McMoRan as well as steel

company CAP all have desal projects in the works and targeted for launch
starting in 2012. Southern Copper’s Tía María project in Peru’s Arequipa
department will also be working on a desalination system after it was decided in
2010 that desal was the only way to wrangle community approval.
The use of water resources by mining companies and communities’ fear of

contamination and/or depletion pose a critical challenge for miners in most
Latin American countries. And it could become increasingly tougher in the
near future as countries grant extended consultation and opinion rights to
indigenous peoples and become ever more conscious of the need to take care of
their hydro resources.
Scarcity of electric power, particularly in northern Chile and southern Peru,

will continue to be a problem next year. In Chile, copper commission Cochilco
estimates that electric power consumption by the mining industry will grow
some 4.5% in 2011 to 20.97TWh after expanding 9.3% to 20.06TWh in 2010.
The mining sector already suffers from a power supply deficit of 850MW despite
the launch of two LNG regasification facilities in 2009 and 2010, and coal-
fired generation initiatives face major environmental hurdles. Lumina Copper
Chile CEO Nelson Pizarro recently classified the situation as “catastrophic” for
the future of the mining industry. The growing need for an alternative water
supply - that is, pumping seawater to high altitudes, desalinated or not - will
exponentially increase energy demand, and the convergence of energy and
water needs threatens to create a serious bottleneck that could hamper mining
development in the short to medium term.
Chile
Perception of Chile as a good place to do mining business - it ranked number
six in the Fraser Institute’s 2009-10 Survey of Mining Companies - could dip
next year due to the application of a new royalty scheme in January and the
controversy surrounding it, but the brunt of the debate has probably already
occurred and, in general, investment is not likely to falter.
President Sebastián Piñera signed the new royalty plan into law on October 15,
but it has been a controversial issue since its proposal in early 2010 as a means
to collect funds for reconstruction after the February 27th earthquake that hit
south-central Chile. The mining council (Consejo Minero), which represents
the biggest private sector mining companies operating in the country, said the
royalty will have little impact on investment, particularly because the scheme is
voluntary and miners are unlikely to choose to adopt it.
The voluntary royalty increase sets a 4-9% variable tax rate depending on
operating margins for mining companies that hold tax stability contracts and a
5-9% sliding rate for new projects from 2010-12, compared to the current 4-5%
Mining Outlook
Figure 3
Opinion survey: Investment climate by country
The climate is right for mining investment in the country in 2011
100%
90%
80%
70%
60%
50% Strongly disagree

40% Disagree
30% Neither
20% Agree
10% Strongly agree
0%
Argentina
Bolivia
Brazil
Central America
Chile
Colombia
Ecuador
Mexico
Paraguay
Peru
Uruguay
Venezuela
Source: BNamericas Mining Survey
Figure 4
Copper price forecast - yearly average (2010-2011)
4.0
Banco Central de Chile
3.8
The Standard
Chartered Bank
3.6 MF Global
Barclays
2010
US$/lb 3.4 Bank´s Australia
BNamericas
Scotiabank
3.2 BMO
3.0 Deutsche Bank
2.8
5
5
3.
4.
2.
3.
2.
3.
2.
3.
3.
4.
4.
2011
US$/lb
Source: BNamericas Mining Stats through 3rd Quarter 2010
Mining Outlook
scale. Then, from 2013-17, miners with tax stability contracts that adopt the
new royalty would pay a 4% fixed rate while those currently in the project phase
would pay 5%.
But the trouble with the royalty debate lies only partly in the idea of a royalty
increase. “The real issue is that mining taxation remains an open topic for
society and many political sectors. I value the royalty agreement, but it is still a
precarious agreement. It is necessary to move toward greater legitimacy for the
industry so that it is not so vulnerable to questions that end up putting it in a
defensive position,” says Juan Carlos Guajardo, executive director of Cesco.
Maybe so, but the preliminary results of BNamericas’ Mining Survey show
that 74% of respondents agree that political uncertainty will not deter mining
investment in Chile in 2011 and 88% say the climate is right for mining
investment. Also, 39% of respondents chose Chile as the country with the best
investment climate of all the Latin American countries.
Meanwhile, 2011 will also bring a focus on safety and environment in Chile,
particularly after the widely covered accident at the San José mine in Copiapó
region in which 33 miners were trapped underground for weeks and successfully
rescued with state funding and significant financial and technical help from
some of the major mining and engineering companies operating in Chile.
Shortly after the rescue operation, President Piñera publicly promised to ratify
the ILO’s Convention 176, which regulates mining health and safety standards
by placing requirements on government, the mining sector and workers.
Separately, Piñera announced a full review of safety standards in mining

and other industries around the country, which includes restructuring the
national geological and mining service Sernageomin as well as establishing a
regulator specifically for mining. Pressure will be on miners to examine and
improve health and safety practices, which Cesco’s Guajardo believes will spark
changes in attitude and focus within the companies. The expert calls for greater
interaction between large and small operations on safety issues.
The San José accident certainly put the public spotlight on mining and, perhaps
as a result, congress has also reopened debate on tailings and mine closure,
which lack comprehensive regulation in Chile.
Meanwhile, changes in strategy implemented within Codelco since the new

government took office in March 2010 will gain momentum next year and
start to sketch an outline of the state copper giant for the midterm future. A
focus on urgent issues like organic growth and labor is likely, followed by a shift
of attention to what are today less burning issues. Executive president Diego
Hernández (formerly president of BHP Billiton´s base metals division) has said
that a move toward a more international strategy is also on the company’s 2011
Mining Outlook
agenda. In November, Codelco approved the development of its 160,000t/y

Alejandro Hales mine with an investment of US$2.2bn, the largest in the
company’s history, with prestripping due to start during 2011.
Overall, the Chilean mining sector is forecast to grow 6% in 2011 with copper
production totaling 5.90Mt and exports worth US$45bn, according to national
mining association Sonami. Not bad considering the sector’s 2010 growth is
estimated at just 1%.
Peru
The Peruvian mining scene looks as promising as ever for 2011 with a number
of mines due to start up after a rather stagnant 2010 in terms of new capacity.
The preliminary results of the BNamericas’ Mining Survey show respondents

expect Peru to lead Latin America in exploration spending next year, both in
terms of overall budgets and percentage growth. Peru also received the most
ticks on the question, “Which country is most likely to improve its mining
investment climate in 2011?” while 87% of respondents said the climate is right
for mining investment in 2011 in the country. Still, more than half (58%) said
they believe social conflicts are likely to intensify in Peru next year, confirming
that the biggest challenge for miners working in the country will continue to be
social license.
The laws guiding the process could also become more rigorous in the short term,
as congress is working on modifications to a bill that would grant indigenous
peoples the right to prior consultation as per the International Labor Organization’s
Convention 169. Congress approved a version of the bill in May 2010, but
President Alan García sent it back for changes. The most critical point in the debate
apparently centers on whether communities would have the power to veto a project,
which is not inherent to the convention guidelines.
Nonetheless, a number of major projects that have faced setbacks related to

community opposition - usually over water and environment - will be aiming to
wrap up consultation processes and obtain permits next year and could well be
successful, such as Tía María (Southern Copper) and Quellaveco (Anglo American).
Miners in Peru can expect some noise surrounding a possible windfall tax next
year. In November, congress reopened discussion of bill 4143, which proposes
a 50% tax on “unexpected earnings” by mining companies that would fund
social programs and development projects. The bill, originally presented in June
2010 by congresswoman Gloria Ramos who represents the Pasco region, says
unexpected earnings are those generated by exceptional metals prices rather
than the merits of management, technology or capacity expansion. While
Mining Outlook
methods for measuring this would have to be better defined, the core of the
debate will be whether it is acceptable to put a new tax into effect at all.
Peru’s pro-market forces oppose the bill on the grounds that changing the
rules on investors just because business is good will not help to attract more
investment in the country, and that greater tax revenue does not guarantee
greater development for Peru’s poor.
Reopening the discussion is perhaps a natural development considering Peru is

scheduled for presidential elections in April and mining is a hot button issue.
But analyst Luis Alonso Ubillas of BCP in Lima believes the general election
this time around will not cause as great a stir as the 2006 elections, when
uncertainty about political stability affected exchange rates and activity on the
Lima bourse for some months as populist candidate Ollanta Humala ran a tight
race against Alan García and his neoliberal platform.
“I believe that, for this election, there is not that perception of such a risk level
and, as such, the market has not responded in that way. Perhaps there could be a
bit of noise regarding certain issues but it would be very short-term and will not
be significant. The possibility now of an extreme candidate entering the political
scene does not look very likely,” says Ubillas.
Mexico
Mining production in Mexico is set to increase next year, thanks mostly to a
number of projects that entered production in 2010 being ramped up and a
push to maximize output inspired by good metal prices. Mines due to boost
Mexico’s output next year include Goldcorp’s Peñasquito and midsize gold
mines Soledad-Dipolos (Fresnillo-Newmont), El Castillo (Argonaut Gold) and
El Aguila (Gold Resources).
In addition, Grupo México’s Cananea copper mine that was halted by labor
conflicts for three years is scheduled to come back online next year at a rate of
180,000t/y after the company’s arduous legal process to regain control of the
facilities. G-Mex is also launching a five-year, US$3.8bn investment plan to
increase annual copper output to 450,000t/y.
Mexican mining chamber Camimex forecasts capital project expenditure of

US$4.17bn in 2011, a slight fall from US$4.43bn in 2010 but up significantly
from the US$2.86bn reported in 2009. Exploration activity is also likely to
rise on the wave of high metal prices, as in much of the region. According to
Mining Outlook
the preliminary results of BNamericas’ Mining Survey, 78% of respondents

believe exploration activity will grow in Mexico next year. Mexico is home to
738 exploration projects, with some 75% of exploration spending attributable to
Canadian companies.
However, 43% of respondents said social conflicts are likely to intensify in 2011,
though 60% agreed that improvements are likely in the regulatory agenda and
69% said the climate is right for mining investment.
Meanwhile, a debate over changes to the mining concession payment scheme

persists in Mexico, as the current setup requires mining companies to pay
according to how much land they have under concession and its status, but does
not include the payment of royalties. Analyst Rodrigo Heredia at brokerage Ixe
Casa de Bolsa in Mexico City thinks 2011 will be relatively quiet on this front
and that serious debate of such royalty proposals is not likely.
The analyst adds that anticipation and speculation in Mexico are high regarding
the possible entry of local billionaire Carlos Slim as a major player in the mining
industry. The board of Slim’s conglomerate, Grupo Carso, in early November
agreed to spin off its mining and construction branches. The newly independent
Minera Frisco will hold five mines with combined processing capacity of
93,000t/d, plus a number of projects. Carso’s mining arm has been active in
making acquisitions, snapping up the El Porvenir gold project in Aguascalientes
state from Canada’s Goldgroup Mining for US$25mn in July 2010.
“Although [Frisco] has few mines and its weight relative to other mining groups
- Grupo México, Peñoles - is still moderate, the possibility of it continuing
to acquire projects, or companies in or on the road to operation, mustn’t be
ruled out. Obviously having such ample financial backing generates a lot of
expectation,” says Heredia.
Slim was recently quoted as saying that the company’s focus would remain
in Mexico, but that it could look at investments elsewhere in Latin America
considering the strength of metals prices.
Brazil
Brazilian mining institute Ibram’s latest forecast for mining investment in
the country predicts capital spending of US$62bn in 2010-14 - an impressive
figure, but one that almost seems conservative. Local mining powerhouse Vale
alone plans to spend US$15.32bn within Brazil just in 2011, covering nearly a
quarter of the five-year forecast without even counting the myriad other projects
underway in the country.
Mining Outlook
Indeed, Brazil’s mining industry is blazing ahead in production of many

different metals, thanks to relatively mining-friendly policy and legal stability,
and is seemingly unfazed by initiatives such as a mining plan that wants to
ensure greater distribution of wealth and talk of greater royalties on iron ore.
The ministry of mines and energy’s National Mining Plan 2030 outlines goals
for expanding geological mapping of the Brazilian territory, internal demand
and production figures and also points out the need for exploration of strategic
minerals like lithium and rare earths. It also sets goals for state investment
in exploration projects for metals and non-metallic minerals, particularly
those used in fertilizers, as well as management of hydro resources. The
plan expresses Brazil’s desire to maintain sovereignty over its resources and
development of technology to ensure future sources of raw materials for its
own development within the context of growing global demand for minerals.
Brazil is a growing consumer of materials and, in the coming years, is expected
to expand significantly. The national mining plan entered a month-long public
consultation phase on November 10.
The government also aims to set up an agency to regulate mining, redefine rules
governing exploration concessions and rethink mining taxation and royalties
as part of a new regulatory framework for the sector, three issues that will be
high on the agenda and likely defined during 2011, but “without trauma to
the industry,” says analyst Pedro Galdi with brokerage SLW in São Paulo. The
only ones who will be against the changes are those who hold concessions
speculatively and do not plan to actually develop them, he adds.
Brazilian mining association Ibram sees the creation of the regulatory agency as
a positive step, as it does the anticipated creation of a national council of mining
policies, on whose board private sector companies will apparently be allowed to
sit. However, Ibram has voiced concerns about uncertainty and called on the
government to be clear in its intentions for the new regulatory framework.
Meanwhile, the transition is expected to be smooth after President-elect Dilma

Rousseff takes office on January 1st, as she is expected to continue along the
same lines as her predecessor Luiz Inácio Lula da Silva and Fernando Henrique
Cardozo before him.
Strong iron ore prices - which are estimated at US$154/t for end-2010 and
forecast to trend slightly downward to US$144/t by the end of 2011 - will keep
the cash flow coming next year for miners like Vale and MMX. Vale plans
to finance its entire 2011 capital expenditure plan (US$24bn) with cash flow,
which analyst Galdi believes is totally plausible. The Brazilian-owned major
is also seen as likely to continue making acquisitions at home and abroad in
parallel with its organic growth plans, and has multiple mines scheduled to start
operations in 2011. Vale predicts its iron ore output will reach 311Mt next year.
Mining Outlook
Colombia, Argentina, Ecuador
Colombia
In 2010, President Juan Manuel Santos took office and pledged to follow the
path of his predecessor, Alvaro Uribe, who was instrumental in transforming
Colombia from a country plagued by personal safety risks to a leading destination
for private investment. The pro-mining nation is also adamant about protecting
its biodiversity and, today, is in the midst of defining just how to do that.
Unfortunately, this is creating uncertainty for mining investors that is likely to set
the tone for 2011 and could perhaps temper enthusiasm in the short term.
The case to watch is Greystar Mining’s US$1bn Angostura gold-silver project

in Santander department, where the environment, housing and territorial
development ministry (MAVDT) in April 2010 requested a new EIA to comply
with Colombia’s new mining code, which came into effect in February 2010,
and bans mining activity in the country’s high-altitude, neotropical ecosystems
called páramos. Greystar initially won an appeal to avoid having the new
regulations retroactively applied to its project, which the company said could
render Angostura economically unviable. But, in October 2010, MAVDT said
it would carry out a detailed technical study of the project area and confirmed
that activity would not be allowed in any páramo area.
MAVDT has repeatedly declared support for environmentally responsible

mining in Colombia and is firm on the establishment of protected areas as
outlined in the new mining code, an initiative that has gained significant
popular support. Debate over the definition of these areas is likely to come into
play in 2011.
Argentina
Despite being a pro-mining country teeming with exploration activity, Argentina
is home to some provinces where bans on certain mining practices all but prohibit
the activity. In Mendoza, for example, a ban on chemicals including sulfuric acid
established in 2007 put the brakes on most projects. But Vancouver-based Coro
Mining determined that its San Jorge copper project is still viable as a flotation
operation - leaving the leachable oxides unprocessed - and the project EIS is
currently under evaluation by authorities. Approval is expected in 2011 and would
be an important step forward for mining in the province.
Meanwhile, questions remain at Pan American Silver’s Navidad silver-lead

deposit in the Patagonian province of Chubut, where the company has said it
could work around the cyanide ban in place in the province, but not the open-
pit mining ban. But Pan American CEO Geoff Burns recently said he remains
Mining Outlook
confident that Chubut will modify its legislation in 2011 to allow the project
to go ahead, likely after things settle down following the late-March provincial
elections. The company announced the completion of a preliminary economic
assessment outlining preproduction capital costs of US$760mn for average
annual output of some 16.2Moz of silver over a 17-year life, with 19.8Moz/y in
the first five years. An updated resource estimate and full feasibility study are
due for completion in 2011.
Argentine President Cristina Fernández recently signed a controversial and

long-debated bill into law to protect the country’s glaciers, which specifically
prohibits mining, exploration and other industrial activities on or around them.
The governments of Jujuy, La Rioja and San Juan - home of Barrick Gold’s
Pascua Lama - have reacted against the new law, and it will be up to Argentina´s
supreme court to decide whether the law is constitutional. Barrick said the
law will not affect its mega gold-silver project, but uncertainty regarding
the interpretation of the areas covered by the law could impact millions in
investment, particularly in exploration.
Ecuador
In November, Ecuador’s ministry of non-renewable natural resources
announced that development contract negotiations with mining companies
would begin in December, based on a model document that includes 5-10%
in royalties and a windfall tax. The initiative targets five companies with large-
scale projects that obtained their concessions before the January 2009 mining
law came into effect.
The mining contract renegotiations follow a similar process in Ecuador’s oil

sector, in which five foreign firms signed contracts in November under which
they will receive a production fee and reimbursement for production costs rather
than receiving a percentage of output. However, the other five oil majors in
Ecuador rejected the deal and their assets will be reverted to the state.
In the mining sector, the process will put miners that accept the renegotiated
contract in a position to advance development of their projects after the last
few years of political and legal uncertainty. Success in the renegotiation process
will also help improve the mining investment climate and stimulate exploration
activity. This process is targeted to wrap up by early 2011.
Mining Outlook
Conclusion
With the equity and credit markets back on track, the early-stage activity so
essential to the long term development of the mining industry is taking off
again, setting the stage for new discoveries, studies and, ultimately, mines.
The fact that developers are regaining access to financing also bodes well for
the shorter-term supply side - a welcome change after a 2010 weak in new
capacity additions.
On the demand side, macroeconomic conditions, including growth in China

and other large, developing economies, are projected to keep the need for iron
ore, copper and other base metals growing despite worries about economic
downturn in developed economies such as the Euro zone. Those same concerns
could help keep gold prices strong, as well.
In 2011, Latin America will continue to be a top destination for mining

investment by both foreign and locally-owned firms. While challenges certainly
exist in all countries - from social license to uncertain regulation, environmental
questions to energy - the region’s quality deposits combined with an increasingly
aggressive investor appetite will keep the sector moving forward.
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Telecom Series
Telecoms sector outlook for 2011
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Telecom Outlook
Introduction
W hile some years in the last decade stand out because of sweeping
consolidation moves or technology launches, the noteworthy events of
2010 were more localized, but deeply significant at the level involved.
Chief among these events were Telefónica finally reaching an agreement to

buy Portugal Telecom’s share of Vivo; market liberalization becoming reality
in Costa Rica; Mexico finally auctioning spectrum (which inspired Televisa to
partner with Nextel, and then surprise us all by undoing the partnership once
the spectrum was won); the Slim family reorganizing its main telecoms units
under the umbrella of América Móvil; and the Bolivian government securing an
amicable agreement to take full possession of Entel at an affordable price.
There was also a surprising turnaround by the Argentine government, which overturned
its August 2009 ruling that Telecom Italia must sell its stake in Telecom Argentina (TEO),
allowing TI to exercise an agreement to buyout TEO’s local shareholder Grupo Werthein.
And Russian group Yota dropped a bombshell that cast a shadow of doubt
over its Latin American WiMax operations by declaring that, in the rest of the
world, it would now focus on LTE. As mobile broadband over HSPA continues
to grow vigorously, WiMax still idles in the balance in Latin America.
Some of these events herald major changes of gear in specific telecoms markets
that are bound to leave their mark on 2011, but at the same time there are some
progressive and inevitable changes due to global technological factors that are
poised to determine the character of 2011.
In this 2011 Outlook, we pick the key factors that will color the coming year,
the reasoning behind them and the impact they are likely to have.
Mobile broadband
Statistics from consultancies like Frost & Sullivan and IDC suggest mobile
broadband already accounted for 30% of broadband connections in Latin
America at the end of 2009, with some 15 million mobile broadband
connections and 34 million fixed broadband connections.
4G Americas has said the number of HSPA connections was 31 million by

September this year, which suggests 39.4 million by year-end if the same
quarterly growth rate is maintained (27% per quarter). The region ended 2009
with 900,000 WiMax subscriptions, growing that year at 20% per quarter. If
that growth rate is maintained, there will be 1.8 million WiMax accounts at
end-2010, bringing total mobile broadband accounts to at least 41 million.
Telecom Outlook
So how does that compare to fixed broadband? Our 2Q10 statistics suggest that
fixed broadband grew by a 29% year on year average across the region. Applying
that to the last reported fixed broadband figure, of 34 million, we could see
43.8 million fixed connections at year-end. Therefore, mobile broadband is now
at the point of overtaking fixed line broadband regionwide, and is certain to
prove dominant during 2011. In August, Argentine consultancy NexTV was
forecasting 53.4 million “mobile and portable” broadband connections by end-
2010, which suggests we are going into 2011 with wireless already dominant.
Brazil in fact serves as a model of a market that saw mobile broadband exceed
fixed broadband far ahead of most other countries in the region. HSPA
connections came to outnumber fixed broadband connections in 1Q10, and it is
possible that mobile broadband exceeded fixed broadband even earlier since Vivo
ended 2009 with some 28 million subscribers on its CDMA2000 and EVDO
networks (and 146 million on its GSM network). However, the operator retired its
EVDO network in July 2010 and never published the peak number of users.
With broadband of both kinds amounting to less than 10% penetration across
the region, there is ample room for continued growth and it is highly possible
that the 2010 growth rates will be repeated, if not bettered. NexTV has
estimated that mobile broadband will grow to 90 million subscriptions in Latin
America by end-2011, and reapplying the 29% growth rate for fixed broadband
in 2010 would give us 57 million fixed connections by December next year.
In August, consultancy Analysys Mason went as far as projecting a CAGR of

86% for wireless network traffic in Latin America from 2010-15, equivalent to
an increase of 16 petabytes per month.
The massive lead expected for mobile broadband makes sense considering
the upcoming spectrum auctions in several countries and the feeling that
many of the region’s qualified MVNOs will adopt a mobile data focus. There
are spectrum auctions underway now or scheduled for 2011 in Brazil (3G),
Colombia (3G/4G), Chile (4G), Mexico (3G) and Peru (3G), with Brazilian 4G
spectrum auctions likely in 2012.
Chile’s Entel PCS has forecast that mobile broadband will overtake the national
fixed broadband market next year, but at the same time there are some high-
profile doubters, such as Movistar Chile, which does not expect mobile to
exceed fixed in its home territory until late 2012 at the earliest.
Note that with 4G licenses going on sale in 2011, and only in a couple of
countries, there is little need to mention LTE as a topic for 2011, especially
as most mobile operators are expected to prefer to make good use of their 3G
investments before moving on.
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Telecom Outlook
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Telecom Outlook
Ultra broadband
Fixed broadband may not be growing as fast as mobile, but it still enjoys a
reputation as the more reliable and traffic-intensive option. 2010 was a year in
which technology vendors stepped up their promotion of cloud-based corporate
services and teleconferencing, while the idea of the connected home - including
online music, gaming and IPTV - has gained traction in the area of residential
services. Even before these services come online, networks are already under
pressure from regular internet surfing, video viewing and peer to peer transfers,
so many operators are keen to prepare by installing VDSL, ADSL2+ and FTTx,
while cable TV companies are looking at Docsis 3.0.
Some analysts predicted 9 months ago that adoption of ultra-broadband would

be a major tendency in 2010, but this has occurred only in isolated cases: For
example, Brazil’s GVT believes that 60% of its broadband clients are signed
up for services of 10Mbps or above, and has confirmed that it will be pushing
15Mbps service during 2011.
In Mexico, Telmex is now testing systems for 10-20Mbps in certain cities

and expects to push these options in 2011, as well as doubling the connection
speed of all existing subscribers. And its Brazilian sister company Net Serviços
deployed Docsis 3.0 technology during 2010, leaving it well-prepared to attract
high-speed clients in 2011.
In September, Telefónica began deploying a US$2.5 billion fiber optic network

in Chile, and expects to launch IPTV in 1Q11.
Figure 1
The mobile segment is also verging on inclusion in this category, since the latest
Evolution of broadband penetration in main countries, 2006-2010
12%
10%
Chile
8% Argentina
Brazil
6%
Mexico
Colombia
4%
Peru
2% Uruguay
0
1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 1H10
Source: BNamericas
Telecom Outlook
3G upgrades, HSPA+, enable downlink speeds of around 20Mbps, and carriers

such as Movistar and Entel PCS in Chile, plus Iusacell in Mexico, are now
upgrading their networks to enable these speeds.
Localized capacity crunches

The traffic growth alluded to in the previous section implies vastly increasing
demand for international content, which could put pressure on international
transport networks such as undersea cables and satellite fleets. However, it’s part
of the nature of the business of the international capacity providers to keep track
of traffic volumes and prepare for expansion in advance.
The real bottleneck is in sub-regions or outlying areas of certain countries,

where backhaul is either insufficient or lacking altogether. For example, GVT
explained recently that a lack of inter-urban backhaul was the main factor
preventing it from launching ultra-broadband in several of the cities that it
already serves with standard broadband; and the first step of the government’s
national broadband plan is to piece together an alternative backbone that would
not only bring the service to unserved areas, but also force the established data
transport providers to lower their prices.
Not only are operators and governments engaged in bringing broadband

to unserved areas but, as mentioned in the first section, mobile broadband
infrastructure is in place and the network owners are now focused on selling the
service. Brazil’s Vivo recently said it will triple 3G coverage between November
2010 and end-2011, which mostly refers to small towns, but it still means the
service will theoretically be available to 171 million people, compared to 132
million today.
It is no surprise then that Chinese equipment supplier ZTE recently

announced a plan to build a US$100 million network infrastructure factory
in Brazil next year.
The need for national backhaul has in fact been a concern for the last few years
and prompted Vivo to secure satellite backhaul capacity with Hughes Network
Services early 2009. Eighteen months later, Vivo turned to HNS to expand on
this capacity.
Satellite service providers Intelsat and iDirect said in 1H10 they were preparing
to receive requests for proposals from mobile operators in this region, but there
haven’t been any announcements since then, which suggests that the 3G traffic
boom that was expected in 2010 did not really occur - and puts the focus more
on 2011 instead.
Telecom Outlook
Among the few fixed line operators that appear to be tackling this problem
is Telmex Chile, which announced in November that it is upgrading its fiber
infrastructure with Tellabs’ Optical Transport System.
This could trigger similar action by other Telmex units and other telco groups,
while mobile operators should heed the news from October’s Broadband World
Forum, where European operators raised fears that the transfer of data traffic to
LTE networks will not necessarily solve capacity issues in that region because
there is not enough spectrum available.
The final pointer to 2011 being big on backhaul is ABI Research’s recent report
pinpointing Latin America as the leading backhaul investment zone for the
next five years. And 2011 is the year that stands out, according to ABI, with
backhaul investment peaking at US$266 million compared to US$247 million
in 2010, then gradually declining through to 2015.
Broadband plans
Another factor that may contribute to the capacity crunch is the move by several
governments across the region to step up state-run initiatives to increase the
availability of basic broadband connections.
Chief among these is Brazil’s PNBL plan which saw the reactivation of former
national monopoly Telebras. This shell company has no concrete assets, but
will serve as a vehicle for administrating a national backbone comprised of idle
fiber owned by other public institutions, such as oil giant Petrobras. In early
November, Telebras awarded the first fiber activation contract under the plan.
Telebras set itself the ambitious goal of connecting 100 cities to this backbone
by year-end but, with the first tender only just awarded, most of the activations
are likely to fall in 2011.
During 2010 there have been several meetings between ICT chambers,
government officials and consultants to draft a digital agenda for Mexico,
but the idea remains very much in the “initial discussions” phase. In the
meantime, the country has several ongoing initiatives that are independent but
effectively amount to a fairly loose ICT plan - such as migration to digital TV,
spectrum auctions, number portability and the launch of new national satellites.
The highlight for 2011 will be activation of dark fiber leased by national
grid operator CFE to a consortium consisting of Telefónica, Televisa and
Megacable. This is expected to force Telmex’s broadband backhaul prices down,
encouraging service adoption and expansion.
The alternative backbone idea crops up yet again in Argentina and Colombia,
the former announcing its US$2 billion “Argentina Conectada” plan in
October, and the central element of that being a backbone to be built by
Telecom Outlook
state-run satellite operator Arsat. In Colombia, the government announced a

four-year ICT plan that will kick off with a 3G spectrum auction by year-end,
followed by a US$200 million tender in early 2011 for backbone infrastructure
needed to reach outlying towns.
2010 was also the year in which Chile transitioned from one five-year ICT
plan to another but, whereas 2011 looks to mark a sea-change in the four other
countries, Chile’s plan is more a natural progression of the steady advances
that have already been made, with the broadband penetration goal basically
doubling from today’s 10% to 22% at end-2014.
Smartphones
In much of the region, the penetration of smartphones in the corporate
segment has already been deep, with research firm Nielsen finding that 60%
of people in Brazil’s top socioeconomic class, for example, already use these
devices.
However, increasing uptake of smartphones by the middle class consumer

segment has been confirmed by studies in Brazil and Argentina, and can
only increase further since handset manufacturers are generally prioritizing
smartphone production. Also, the arrival of new players, like Microsoft, Lenovo
and Google - as well as new categories, like tablets - is helping to increase the
variety of options and force prices down.
Analysts have estimated 60% growth of smartphone sales in Argentina and

30% in Peru for 2010 compared to 2009, while IDC estimates 43% sales
growth for the region as a whole. IDC sees sales of traditional handsets growing
24% this year across the region. Smartphone growth was fastest in 1H10,
reaching even 70% in 1Q10 vs 1Q09, indicating that much of the 2010 demand
Figure 2
Evolution of mobile ARPU, Brazil (2009 - 2010)
Intense competition represents downward pressure on ARPU for most
(Oi postpaid growing faster than prepaid)
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Vivo -8,5% -8.7% -10.2% -10.3% -9.2% -7.4% -7.4%

Oi Mobile N/A -15% -10.5% -3.8% 3.3% 6.7% 3.2%
TIM -12% -11% -12% -9.7% -8.6% -10% -10%
Claro -14.3% -11% -10.1% -8.7% -10.9% -9.8% -11.3%
Source: BNamericas
Telecom Outlook
Figure 3
Evolution of mobile ARPU, Chile (2009-2010)
All operators now in positive trend, thanks to data and VAS
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Claro -15.2% -17.9% -18.4% -4.3% 2.8% 1.7%

Entel PCS -6 -9% -15% -7% 4% 2%
Movistar -11% -10.3% -13.8% -4.9% 1.5% flat
Source: BNamericas
Figure 4
Evolution of ARPU, Argentina (2009-2010)
Highest mobile penetration in South America, earlier start with data/VAS than
neighboring countries. ARPU growth also artificially stimulated by inflation.
2Q09 3Q09 4Q09 1Q10 2Q10 3Q10
Claro 6.0 8.4% 11.6% 12.8% 10.4% 8.8%

TEO fixed line N/A N/A 1.0% 4% 4% 5%
Personal flat flat flat 3% 5% 7%
Movistar 10.1% 7.9% 9.8% 5% 4.7% 8.7%
Source: BNamericas
was satiated early on, and slowed down as the year progressed to give IDC’s
43% overall growth estimate. This implies a smartphone boom in late 2009/
early 2010 that, by all accounts, was driven by the corporate segment and could
now be repeated in the consumer segment. However, since consumers lack the
work efficiency aspect that leads corporate users to upgrade, we feel it is unlikely
that this segment will replicate in 2011 the 43% smartphone growth that has
been estimated for 2010.
Convergence
Argentina and Brazil have become notorious in Latin America’s telecoms sector
as the two major markets that have yet to allow telcos to offer TV services
directly, meaning operators are unable to offer triple play packages without
sharing the revenue with a partner that provides the TV component. However,
in June 2010, Brazil’s lower house finally approved Bill PL116, which modifies
broadcasting laws to allow the entry of telcos and had been under discussion
for some four years. The bill now depends on approval by the senate, and its
supporters are optimistic that it will be passed quickly - perhaps even before
year-end 2010.
Telecom Outlook
Brazil’s government has been open to granting DTH licenses to telcos

since 2007, but only for certain localities. However, in May this year, the
government overturned the rule that limits the number of localities served.
Central and southern Brazilian operator GVT will soon be joining Oi,
Embratel and Telefónica as a licensed DTH provider, but wants to wait until
satellite service providers can offer it exclusive capacity. GVT does not see this
happening until mid-2011, by which time PL116 will most likely have been
passed, but Oi has been taking advantage of the May ruling and expects to
achieve national DTH coverage mid-2011. Either way, 2011 stands to be a
boom year for pay-TV in Brazil.
Argentina actually took a step backwards in this respect last May, ordering
incumbent telcos Telefónica and Telecom to annul their marketing partnerships
with DirecTV, which had amounted to pseudo-triple play offerings. Meanwhile,
cable TV operators are free to incorporate internet and voice, but are taking
their time to do so, partly because of the cost of adapting their networks, but
also because telephony rates have been frozen since the economic crisis of 2001.
Mexico has had triple play offerings since 2007, following the convergence
agreement passed in late 2006, but cable TV companies still account for only
a fraction of the country’s telephone lines. Telmex thought it had met all
the obligations that would enable it to participate in that agreement but new
interconnection rules, decided in 2009, mean the firm is still sitting on the
sidelines. The regulator Cofetel is now headed by a team that is sympathetic to
national President Felipe Calderon, who is known to be antagonistic towards
Telmex, suggesting the impasse over Telmex’s right to offer TV directly could
go on indefinitely.
Despite these three instances of large triple play opportunities being held back,
Telefónica and Telmex/América Móvil - and several other operators - have been
actively angling to position themselves for quadruple play, but have been slow to
launch such packages.
For example, América Móvil has a healthy roster of mobile and TV assets across
the region, but consultancy Signals Telecom Consulting recently predicted that
the group will sit on the quadruple play option for the time being, so as not to
dilute its mobile revenues until absolutely necessary.
However, prior to taking full control of its Brazilian mobile unit Vivo in
August, Telefónica had suggested that its Sao Paulo unit Telesp - already a
multiservice provider - would explore the MVNO option for offering quadruple
play. This implies that Telesp at least is keen to launch quad-play, and can now
do so with Vivo as a true sister company.
Telecom Outlook
As the big groups dilly dally, the door has been left wide open for independent
or state-run operators, such as ICE in Costa Rica, Copaco in Paraguay and
Cantv in Venezuela. Cantv expects to have IPTV functioning early 2011,
having signed supplier China Digital TV in May; ICE already has a supplier
of STBs on board and is also likely to launch early 2011; while Copaco entered
the mobile market in July, with the purchase of Hola, and now plans to invest
US$20mn to launch triple play in the capital Asunción by mid-2011.
In fact, the largest single launch of quadruple play could end up being
Caribbean group LIME, which announced in November that it would be
launching IPTV in 2H11, as will its Panamanian sister company C&WP.
The region’s first triple play provider, VTR in Chile, won a mobile license in
September 2009, immediately generating talk of a quadruple play offering,
but also appears to have kept its options open at first. Things now appear to be
moving, with infrastructure provider American Tower Corporation confirming
in November that it has come to an agreement to host VTR’s base stations on
its Chilean tower network, as well as taking control of towers that VTR has
already installed.
Mexico was believed to have come a step closer to quadruple play with Nextel
and Televisa’s joint bid for spectrum in August, but the partnership fell apart
in October. Nextel and Televisa never explained exactly what differences of
opinion they harbored with respect to the quadruple play plan, but perhaps
this is another reflection of doubt about the wisdom of allowing quadruple play
to dilute the mobile revenue stream. Before the two carriers announced their
partnership, some were expecting Nextel to partner with Axtel as the basis for
quad-play, and maybe there are lessons from the Televisa agreement that could
be applied to this option. There is certainly a window of opportunity while
Telmex’s hands are tied.
Support Systems
One of the problems that arises from convergence is that the operator has to
cater to different client groups, such as double-play and triple-play, and those
groups can be further broken down into different client types - youth segment,
corporate, top-end residential, low-end residential etc - that might each respond
to a different tailor-made product. Support system vendors have focused on
solutions that make sense out of the confusing array of possibilities and the
multiple sets of information that each service generates, potentially taking a
huge load off the telcos’ management teams, not to mention the promise of
significant cost reduction and efficiency gains.
Telecom Outlook
Figure 5
Acceleration of B/OSS contract awards in 2010
Service provider Country Supplier When ready? Extent of contract
Amnet Central America Sigma Systems awarded Nov 2010 device provisioning management
Digicel Jamaica Textserv awarded Nov 2010 customer engagement platform
Yota Nicaragua Bridgewater awarded Oct 2010 subscriber management
Vivo Brazil Intec awarded Oct 2010 BSS - improve capex and opex
Net Servicos Brazil Sigma Systems 1Q11 OSS
Columbus Caribbean Sigma Systems year-end OSS
Telefónica Regional Ericsson, Indra Oct-10 Prepaid billing
Entel PCS Chile Intec 3Q 2010 Interconnect
Columbus Caribbean Cerillion 3Q 2010 CRM, billing, interconnect, mediation
GTD Manquehue Chile Verimatrix 2Q 2010 Content management, IPTV
Movistar Venezuela Volubill 2Q 2010 Policy management, charging
Voilà Haiti Comverse 2Q 2010 mobile billing, SMS
TSTT Trinidad Telcordia awarded Jun 2010 Next gen OSS
Telefónica Wholesale Regional Convergys awarded Jun 2010 BSS
(Not disclosed) (Not disclosed) Tecnotree 2Q 2010 Convergent charging, content delivery
(Not disclosed) (Not disclosed) Telarix awarded Jan 2010 BSS

Movistar Colombia Subex July 2010 Interconnect, fraud
Digicel Jamaica Alepo July 2010 OSS, BSS for WiMax
UTS Curaçao Comverse 4Q 2009 BSS
Convergent charging, messaging,
(Not disclosed) x3 Regional Tecnotree 3Q 2009
capacity expansion
Telesur Suriname Comptel 3Q 2009 Automated service delivery
Open Mobile Puerto Rico Open Intl 2Q 2009 OSS, BSS
(Not disclosed) Mexico Telarix 1Q 2009 Interconnect
Source: BNamericas
Vendors announced many more contracts in 2010 than they did in 2009 but,
in several cases, the contracts referred only to country-specific units of the large
groups. There appears to be good scope for the likes of Telefónica and América
Móvil to upgrade the systems that the rest of their units are using. Triple
play coming on the horizon in Brazil and Mexico, and the seemingly infinite
potential for value added services over smartphones, add considerable weight to
the need to upgrade support systems next year.
Telecom Outlook
Outsourcing
As broadband becomes more popular, operators are increasingly more exposed
to over-the-top (OTT) services from third parties. Even the telcos’ supply
partners recognize the opportunity for OTT services, IP solutions provider
Avaya recently partnering with Skype to offer a corporate VoIP option to
companies in the US, and Cisco admitting that it is on the lookout for a similar
kind of deal.
So operators are increasingly tempted to provide those services themselves. To

do this, they need to be able to leave aside network management tasks, partly
by automating with good OSS and BSS solutions, but also by having a specialist
handle the more time- or resource-consuming aspects.
In 2010, we saw Telefónica award a seven-year contract to Ericsson and Indra

to manage its prepaid billing system across most of its operations around the
world, as well as turning to messaging platform vendor Syniverse to take charge
of its roaming negotiations in Latin America.
Nokia Siemens Networks - which in January 2010 took over regionwide

network operations for trunking group NII Holdings - clearly believes there are
plenty more opportunities like this, and in October announced plans to open a
US$20 million global NOC in São Paulo by January 2011.
Major market changes

Costa Rica promises to be one of the most dynamic markets in 2011, with some
60 new carriers licensed during 2010 and three mobile licenses scheduled to be
auctioned by year-end. In the case of Telefónica, América Móvil and Millicom,
entry into Costa Rica would give near-complete coverage of Central America,
meaning there could be beneficial pricing effects for their users across the whole
sub-region.
As mentioned earlier, Telefónica is now in a position to expand triple and

quadruple play offerings across Brazil and, at the same time, the country’s
largest telco Oi will be adjusting to the presence of Portugal Telecom on its
board. In the past, Oi has suffered from political influence and friction among
its shareholders, so now there is an opportunity for PT to instill a new and more
efficient corporate governance regime.
In Mexico, one of the main outstanding issues from 2010 was the discussion
of a bill to allow foreign telecoms groups to own more than 49% of a carrier.
Many experts believe this limit on foreign investment has slowed down the
Telecom Outlook
development of infrastructure and services, with little incentive for Telmex to

take up the slack. Given President Calderon’s traditional anti-Telmex stance,
there has been speculation that this bill could become a priority next year.
One sign that the government is leaning more towards foreign operators is the
decision earlier this month to grant Telefónica a license to offer satellite services,
including broadband and DTH TV.
As mentioned in the introduction, Telecom Italia got rid of two headaches

almost simultaneously. It no longer has to worry about the low returns that
the Bolivian market generates, and the US$100 million reimbursement it has
secured for Entel Bolivia, though disappointingly low, can go towards covering
the cost of taking full control of Telecom Argentina.
All of these changes add weight to the above sections about upgrading
support systems or seeking outsourcing partners during 2011, not to mention
competition effects on other players in these markets.
Also worth mentioning:
Number Portability
Argentina, El Salvador, Colombia and Chile are scheduled to launch their
number portability systems in 2011, bringing the number of countries with
active systems in this region to at least nine. NP advocates have in the past
described the concept as “contagious”, and the sheer variety of countries that
have it in place - from island nations like Puerto Rico and struggling economies
like Ecuador to powerhouses like Brazil and Mexico - does seem to back up the
case that all other countries will vote it in sooner or later.
Digital terrestrial TV
There are now 14 Latin American countries that have decided on a national
DTT standard. Furthermore, LCD or LED televisions have been accessible to
middle class consumers in many of these countries for over a year, and some
manufacturers have already started shipping devices with the appropriate tuner
pre-installed. The governments in Costa Rica, Chile and Mexico have recently
suggested accelerating the roll out of DTT, which implies that there will be
increased general awareness of the DTT option in 2011, as well as meaning that
the eventual deadline for abandoning analog broadcasting could be brought
forward. Some countries are talking about making the move as soon as 2015.
Telecom Outlook
Conclusion
It’s all about broadband. Almost all of the above section headings refer directly
to broadband or are a result of the potential that the service offers, helped along
by migration to IP systems and next generation networks.
It’s no accident that mobile broadband is top of our list. Our table of ARPU
trends shows that several operators now have the holy grail of increased ARPU
within reach, and others are starting to put the brakes on ARPU shrinkage,
mainly thanks to mobile broadband.
But it’s not just the ARPU effect that makes mobile broadband so important.
The whole issue of broadband proliferation, national broadband plans and each
country’s ability to secure a place in the “knowledge society” is helped along
greatly by mobile; and even as they were deploying their HSPA networks in
2006/7, the mobile operators were convinced that mobile broadband would
soon overtake fixed broadband, as we are seeing now.
For those operators that have already registered ARPU growth for the last two
quarters or more - most notably those in Argentina and Venezuela - the figures
suggest that this is in an acceleration phase, which is very encouraging.
On the downside, despite the emphasis by most governments on promoting

competition, the dominant groups - América Móvil and Telefónica - have
strengthened their hands even further by bringing operations under a single
umbrella. They can now enjoy more operational synergies, as well as readying
quad-play offerings. In this respect, the increasing presence of cable TV
providers in the voice and internet space is justified and necessary.
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Intelligence Series Outlook 2011

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Oil & Gas sector outlook for 2011

Colombia and Brazil are two countries expected to report increases in

Although the combined hydrocarbon resources from Colombia and Brazil do

Ecuador and Bolivia continue to encounter problems attracting investors

Country Reserves (Bn Bbls) Production (MMbpd) R/P Ratio

Argentina 2.5 0.676 10.2

Venezuela 172.3 2.437 100+

Other S. & Cent.

Source: BP’s Statistical Review of Energy

Country Reserves (Tcf) Production (Bcm) R/P Ratio

Argentina 13.2 41.4 9.1

Bolivia 25.1 12.3 57.9

Brazil 12.7 11.9 30.4

Source: BP’s Statistical Review of Energy

Brazil: Taking it to the next level

List your company with BNamericas

To list your company with BNamericas Companies today, visit

According to initial estimates, the pre-salt was thought to contain between

About 30 billion bbl Tupi,

Source: Statistical Review of Energy, BP

Petrobras announced that capital expenditure on E&P activities will

Petrobras’ business plan will focus on domestic reserve and production

Venezuela: Betting on heavy oil

For investors interested in Venezuela, May 1, 2005, marked the beginning

Still, Venezuela’s state oil company Petróleos de Venezuela (PdVSA) plans

reserves. As of year end 2009, Venezuela’s total reserves stood at 172.3

Recently, Venezuela reported that a number of international companies

While PdVSA has yet to announce plans to create partnerships with

Colombia: Open arms as investors return

Source: Statistical Review of Energy, BP

Colombia shares much of the same geological features as its neighbor

Colombia’s state oil company Ecopetrol expects capital spending to

Bolivia: Breaking apart at the seams

Bolivia’s nationalization policy, like that of Venezuela, has created

Even though Bolivia’s state oil company Yacimientos Petrolíferos Fiscales

YPFB signed an agreement with its Argentine counterpart Energía

Proven (P1) Probable (P2) Possible (P3)

1997 1998 1999 2000 2001 2002 2003 2004 2005

A recent Ryder Scott report revealed Bolivia’s natural gas reserves

YPFB’s Investment Plan for 2009-2015 calls for total investments of

MMcfpd by the end of the period from around 1,341-1,412.6 MMcfpd.

Ecuador: Pushing companies to the edge

Longtime investors in Ecuador’s hydrocarbon industry including but not

The highly publicized Chevron trial continues to attract attention to

country’s hydrocarbon sector, if it indeed had signed off on clean up work

Peru: South America´s first LNG exporter

Energy, investment, policy

In its 5th year, the Andean Energy Summit is Latin America´s

Held in the energy capital of the Andes (Bogota, Colombia),

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4.2 Export project

6.0 Local Demand Industry: 2.2

Proven and probable Demand

However, despite the positive news, protests continue primarily in the

Investments in Peru’s hydrocarbon industry are estimated to reach $33 billion

Downstream Upstream Total

Source: Ministry of Energy and Mining