CNBC Business | New World Order

New World Order

The global economy may be inducing panic in some quarters, but for the savvy investor there is still a wealth of opportunity in Latin America. Jude Webber reveals some of the region’s most promising niche investments

SUSTAINABLE TOURISM IN COSTA RICA 

Central America has a lot to offer the tourist trade, with its pristine beaches, diving opportunities, unspoilt jungle and golf courses. Big bucks are still attracted to the construction of waterfront resorts in the region, but it’s sustainable tourism that is proving to be a more interesting bet, especially for smaller investors. And Costa Rica — whose Caribbean coast is particularly popular with Europeans — is one of the best destinations. 

“What we’re seeing with the economic crisis is that a lot of the big projects have stopped,” says Martha Honey, co-director of the Centre on Ecotourism and Sustainable Development in Washington. “People who are interested in ecotourism are generally folks for whom travel is extremely important — it’s part of how they learn about the world. So they tend to keep travelling, even in the tough times.” As a result, the sustainable tourism sector has held up better than the overall market as a whole, and is welcomed by the government since more of the revenue generated stays in the country than in conventional tourist developments. 

Costa Rica boasts some “very good European-run boutique hotels,” says Honey, “but there continue to be good opportunities to invest”. Though many Costa Rican beaches have been grabbed by resorts and available waterfront properties are expensive, there is still room to put small boutique hotels or lodges near some of the country’s parks and protected areas. An estimated 25% of Costa Rica is given over to national parks, nature reserves or wildlife refuges. 

BOUTIQUE HOTELS IN BUENOS AIRES 

Buenos Aires basks in its reputation as Latin America’s hippest capital city. A Mecca for fashion, design, cinema, theatre, tango and steak, it blends ultramodern chic with Spanish colonial charm and neighbourhoods steeped in history. As Argentine wines have taken Europe by storm, more and more holidaymakers are swapping their winters for Argentine summers in order to discover the country for themselves. Even if they decide to head north to the Iguazú Falls on the border with Brazil, or south to the wilds of Patagonia, or west to the winelands, a stop-off in Buenos Aires first is unavoidable. 

Boutique hotels have mushroomed as a result to cater to a well-heeled clientele prepared to pay steep rates, by Argentine standards, for a luxury stay in sophisticated surroundings where design, gastronomy and individual attention are key. Boutique hotels of up to 30 rooms were popping up in Buenos Aires at the rate of about one a month until the global financial and economic crisis began to bite, and there are already 36 on offer, according to Agustina Trucco, director of The Best Boutique Hotels, a club for the sector in Argentina. 

Though there may still be room to grow the market, especially since occupancy rates are best in Buenos Aires, the capital is becoming becomes saturated, leaving the smart money to pursue opportunities in other parts of the country, Trucco says. “We think Bariloche is one place that could be developed,” she adds, referring to the Patagonian lakeside and ski resort in the Andes on the border with Chile. Bariloche is one of Argentina’s top tourist destinations yet has no boutique hotels, unlike nearby San Martín de los Andes and Villa La Angostura, which each boast a couple. El Calafate, home to the Perito Moreno glacier, also has a couple and there are a slew in the northern city of Salta, famed for its Spanish colonial architecture. “But another good place is Iguazú, which only has the big chain hotels,” she says. Other potential areas — less well known to international tourists — include the Esteros del  Iberá wetland reserves in the northern  province of Corrientes, or the cities of Rosario and Córdoba, which are gateways into Argentina’s interior. 

And the cost? On average, setting up a 10–12-room boutique hotel costs around €1.5m, says Trucco, and the owners tend to be well-travelled professionals looking for a new challenge, rather than people with a background in the hotel trade. 

PORTS, AIRPORTS, ROADS IN PERU 

Investors hungry for infrastructure projects need look no further than Peru, where a raft of port, airport, highway and transport ventures are up for grabs. Even with the crisis, the Andean country is still expecting to post an enviable 2009 growth rate of 6%, down from 9.1% in 2008, and Peru achieved coveted investment-grade status last year, providing extra guarantees for investors. Analysts praise the government for implementing some of the best economic management in the region. 

Peru is a vast country, spanning coastal deserts, the imposing Andean mountain range, and lush rainforest, but many roads are poor and rail services are scanty. One route is home to the so-called “macho train”, which locals jest earned its name because it “runs when it wants”. Some provincial airports lack radars and are facilities are basic. Meanwhile, Peru’s Pacific Rim location and export-orientated policies — including a newly minted free-trade agreement with the United States set to come into force on 1 February — make first-class ports essential. 

Peru’s investment promotion agency, Proinversión, has seven provincial ports — not including a planned expansion of the country’s main port in Callao, next to Lima — on its books. The first expected to be tendered is the port of Paita, in northern Peru, which handles agricultural, fisheries, mineral and container cargoes, as well as a subsea pipeline to load and unload oil products. Investment of €96m is sought to modernise the existing structures and run the port for 30 years. Proinversión says bids will be sought in the first half of 2009. 

Proinversión also expects to invite bids for regional airports. A package of six airports in southern Peru, including Juliaca, close to  the Bolivian border, and Puerto Maldonado in the south-eastern jungle, is pencilled in for the third quarter of this year, with investment of €118m sought. 

Other transport concessions include a €274m train service in Lima — a sprawling city with no metro and a chaotic bus system — that the government is hoping to launch in the first quarter, and highway projects in northern Peru, slated for launch in the first half, with investment of €392m. 

WINE TOURISM IN URUGUAY 

Wine tourism is just taking off in Uruguay, whose beef and wines are every bit as enviable but a far better-kept secret than those of its larger neighbour, Argentina. Most wineries and vineyards are traditional, family-run concerns and very small, but some have teamed up with French investors in joint-ventures to export their wines, especially the signature Tannat varietal, which is virtually unknown in Europe. 

Uruguay’s exports of fine wines totalled just €4.9m in 2007 and was expected to have grown 10%–15% last year, illustrating how the industry is beginning to take off. Production is some 15 million bottles a year. 

Wine exporters have launched a wine route but it remains in its infancy: for example, Wines of Uruguay representative Fernanda Nogues says there are no hotels yet and suggests that tying into an estate could be one way of putting the burgeoning businesses on the map. “There’s so much that could be done,” she says.  

Argentina’s premier wine producing province, Mendoza, has seen an influx of tourists looking to buy wineries or vineyards, a trend that is still relatively new in Uruguay. That means working properties ripe for development can be found in peaceful countryside, relatively close to an array of beaches, for cheaper than the cost of buying a house in many EU capital cities.  

Compared with its turbulent neighbour, Uruguay is a more tranquil place to do business with a calmer political climate. Uruguay has enjoyed six years of economic growth and though its economy collapsed in the wake of Argentina’s financial crisis at the start of the decade, it has prefinanced debt and now faces no such risk of contagion even if Argentina struggles to meet its debt servicing obligations in the next couple of years. 

STEVIA IN PARAGUAY 

As enlightened European consumers embrace everything green, a traditional Paraguayan plant that is 300 times sweeter than sugar, has no calories and is totally natural, is poised for stardom. Used for centuries by Guaraní Indians, who call it ka’a he’ê, and very popular in Asia (it is widely grown in China), the plant has only just been granted approval as a food additive by the US Food and Drug Administration. European lobbyists believe that the EU will follow suit within months, making stevia a potentially interesting market for those farsighted investors willing to look ahead of the curve. 

US soft-drinks giants PepsiCo and Coca-Cola Company have already latched onto the potential of stevia, and plan to launch some drinks shortly — including a Sprite brand — that will include the sweetener. The plant can also be used to sweeten desserts and teas or in a host of other applications, and its by-products can be used as an alternative animal feed. Traditional stevia products often had a bitter aftertaste but the drinks giants say they have ironed out this kink and producers are confident they are approaching a natural alternative that can look and taste as good as sugar, with none of the calorie overload, that can be tolerated by diabetics and is even good for your teeth.  

Juan Carlos Fischer, president of the Paraguayan Chamber of Stevia, says current stevia production volumes cannot keep up with projected demand, meaning investors willing to invest in agriculture in Paraguay will be well placed. The country has a strong agricultural tradition — Paraguay is the world’s fourth largest exporter of soya — and the vibrant farm sector helped propel the country to economic growth of 5.8% last year. After 60 years of one-party rule, Paraguay now has a new, clean-hands government and a respected finance minister committed to stamping out corruption. 

José Cruz Cavero of the European Stevia Association says applications for the use of stevia both as a so-called novel food and as a food additive were filed back in 2007. “We hope that in 2009 we’ll get the novel food green light and that we’ll also have approval for it as an additive by the end of 2009 or early 2010 at the latest,” he says. “It’s just a question of time.” 

CALL CENTRES IN ARGENTINA  

Argentina has been beset by inflation in the last couple of years but cheap labour costs and a well-educated, often English-speaking workforce, make it an attractive destination for businesses looking to locate call centres. The relative weakness of the Argentine peso is another boon for European companies. Local players say European pharmaceutical and car companies have branched into the market and that although the economic crisis has cast a shadow over short-term growth, there is still plenty to be done. Rosario and Córdoba, two industrialised cities to the north and west of Buenos Aires respectively, are key locations. Both are also emerging hubs for information technology companies. 

URUGUAY FORESTRY 

Uruguay’s biggest-ever foreign investment, the €900m pulp mill established by Finland’s Botnia in the former home of corned beef, Fray Bentos, has given a boost both to the country’s economy and to its booming forestry sector. European investors are already buying land in this sparsely populated country to set up tree farms, and with more pulp mills in the pipeline, the industry is expected to continue to boom. Developing Uruguay’s ports will become increasingly important to ensure Uruguay’s key soya, beef and cellulose exports get to market.  