Notas de Prensa: Marzo 2005

BG Consulting

China-Latin America-India Forum Highlights

On March 16, 2005 BG Consulting (www.bg-consulting.com) together with its partners in China and India, ApproaChina and ERG respectively, hosted the first annual "China - Latin America - India Forum" held at the Ritz-Carlton Washington DC. This year the Forum focused on business opportunities and industry trends in the telecommunications and energy sectors in China, India, Latin America and the Caribbean. Considering these sectors' high rate of growth and dynamism in the regions in question, the seminar sought to bring together some of most important players within each industry to discern a picture of the current state of each sector and provide insight into future trends.

The event began with a discussion of industry-wide trends, focusing on recent developments in the telecommunications and energy sectors in some of the world's largest markets. Particular focus was placed on the manner in which industry trends would affect business strategy and the sub-sectoral opportunities the panelists identified as possessing particularly strong growth potential.

Regarding Mexico, Mr. Saul Feder, former Minister of Energy from the Embassy of Mexico in the US, noted that while strong predictions for GDP growth and other solid macroeconomic fundamentals bode well for demand for the Mexican energy, there is forecasted to be a significant shortfall of domestic supply due mainly to a lack of energy infrastructure development. Besides a need for increased investment in infrastructure, strengthening the Mexican regulatory agencies was deemed necessary to ensure the fair treatment of foreign investors and a stable business climate.

The telecommunications situation in Mexico benefits from the same strong macroeconomic indicators as the energy sector and enjoyed 22.6% growth in 2004. Although foreign competition is allowed on a limited basis, the former state owned exclusive-provider, TelMex, still enjoys 70% domestic market share. Mr. Ulises R. Pin, Partner in the Telecommunications, Media and Technology practice group of the Washington, D.C. office of Swidler Berlin LLP, indicated that the pending PSC auction of the 1900 MHz frequency range may present an opportunity for entry, although it was noted that foreign entry on a large scale would likely be difficult.

During the seminar's second segment Colombian Ambassador to the US, Luis Alberto Moreno and Peruvian Ambassador to the US, Eduardo Ferrero Costa spoke on business opportunities and industry trends in their respective countries.

Ambassador Ferrero noted that while teledensity of fixed and mobile lines in Peru has shown steady growth, especially in the case of mobile lines, Peru's teledensity lags behind regional averages. However, it was noted that Pyramid Research forecasts Peruvian growth rates to surpass Latin American averages over the next two years.

With the commencement of the Camisea project, the Peruvian energy sector has begun development of one the region's largest natural gas sites. Block 88 of the project is estimated to yield 8.24 trillion cubic feet of natural gas and 482 million barrels of liquefied natural gas. The investment necessary for creating the upstream, downstream and distribution infrastructure for the Camisea project is estimated at US$ 2.1 Billion.

Ambassador Alberto Moreno noted several opportunities in Colombia, which has attracted increased attention due to solid growth and the government's commitment to fighting crime and improving the legal environment for business. Local energy firm, ECOPETROL is looking for private investment to supply of electric energy, hydrogen, nitrogen, and vapor for the development of the Cartagena refinery. It was also noted that ECOGAS is seeking investors to define and implement their commercial strategy to increase usage, consumption, and penetration of natural gas in across Colombia.

The opportunities in telecommunication in the Chinese market were noted to be relatively small do to the strength and increasing dynamism and competition between the four main incumbent providers. However, it was noted that opportunities in the Chinese energy sector appear more robust. Specifically, it was noted that there were opportunities in developing energy alternatives to coal, which currently provides the vast majority of China's energy consumption. China is thought to have one of the world's largest supplies of coalbed methane (CBM), a resource that is still largely undeveloped in the country. Furthermore, as Chinese regulators intend to increase energy consumption towards natural gas to utilize large untapped domestic sources and decrease dependence on coal, treatment of foreign investors is thought to be favorable in these sectors. Mr. Stoyan Tenev, Lead Economist for the East Asia and Pacific Regional Office of the International Financial Corporation led an insightful presentation on these opportunities.

Energy opportunities in India were also presented. Mr Rao, ex-Secretary from the Ministry of Petroleum and Gas of the Government of India noted that as the country's energy growth of 4% above prime compared to 2% above prime in the rest of the world illustrates the county's growth in this area. Opportunities for investment are particularly strong for refining operations, as India tries to comply with Kyoto standards.

Economist Robert Devlin, Deputy Manager at the Integration and Regional Programs Department of the IBD, concluded the morning's activities by presenting research regarding the possibilities and challenges that China's economic emergence presents to Latin American countries. The lunch presentation divided the implications of China's emergence on Latin America and the Caribbean (LAC) into three categories. First, China's economic assent provides a model or a success story for economic development that should be considered in defining future policy. Second, China's burgeoning demand provides LAC with a large market in which to sell, while inexpensive Chinese imports and the country's expanding private sector also provide LAC economies with possibilities for benefiting from China's success. Finally, it is necessary for LAC to interpret China as a competitor. It was noted that Chinese manufactures' significant advantage in labor prices should force manufactures from other regions to identify alternative advantages such as proximity to major consumer markets.

While the first half of the seminar focused on industry trends and country-wide developments, after lunch the event's focus shifted to the particulars of doing business abroad. The panel on international financing moderated by Marc Ricart, of BG Consulting, and composed of private and public sector institutions such as the Private Sector Department of the IDB represented by Ms. Lori Kerr and the IFC represented by Luc Dejonckheere focused on vehicles available for companies to finance their operations in either industry through government and private sector solutions. It is important to note that besides the traditional project financing methods brought about by both institutions, the IFC provides equity financing and even forms of venture capital for companies in the telecom sector in emerging markets.

Following the Financing Vehicle panel, attendees were presented with specific issues related to structuring international operations in the three regions. Maria Gabriela Sosa, Executive Vice President of BG Consulting, spoke about the bilateral tax agreements in the Latin America and Caribbean regions, led by Brazil (6) and Mexico's (5) and Argentina and Venezuela (4), following she also presented issues pertaining to partnerships and due diligence operations in Latin America. Roger Stark, Partner of Kirkpatrick & Lockhart LLP then spoke in more detail about structuring operations in Brazil. Zack Z. Dong, China Expert with in Chicago, spoke about structuring deals in China and its tax and partnership implications, while Eric Van Aalst, Vice President at Citco, spoke about India and structuring tax effective investments through offshore operations in Mauritius and other contiguous countries.

The seminar concluded by breaking attendees into two roundtable groups: one focused on opportunities in energy and one on those in telecoms. During the roundtable forums, participants discussed their own experience in the various markets. The round tables were moderated by Ms. Linda Wellstein, Co-Founder and Resident Partner in Washington, DC of Wellstein Steel & Associates International. LLC and Mr. David Sweet, Executive Director of the International LNG Alliance.

The first annual China - LAC - India Forum was sponsored in part by: World Hispanic Chamber of Commerce, Venoco, Merrill Lynch, "Divenere, Maionica, Rossini, Jelambi, Balestrini & Ribeiro" Law firm out of Venezuela, GeoData Soluciones, China Telecom, GPI Globalization Partners, Telefinance and Cisco. The Forum's media partners were CNN in Spanish, BN Americas, Latin American Monitor, International Investor, ISI Emerging Markets and the China Business Review. The seminar was also supported by numerous organizations and companies such as the Brazilian American Chamber of Commerce, the United States Mexico Chamber of Commerce, Caribbean Central American Action, China Chamber of Commerce in U.S.A, International LNG Alliance, the US Energy Association, US Bolivian Chamber of Commerce, Outsourcing TV and numerous others.

Contact:
Marc Ricart
Private Sector Manager, BG Consulting
(703) 535 7577 x105
marcricart@bg-consulting.com