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BA Real Estate Activity: Something to Build On

On January 27, 2010, In foreign investment, real estate, by InvestBA
2009 finished on a positive note in Buenos Aires. The trend should continue for the first half of 2010.

Despite a sluggish start and less new construction, 2009 finished on a positive note in Buenos Aires.

Argentina’s Reporte Inmobiliario just released the 2009 summary for real estate transactions in the City of Buenos Aires and—despite the fact that activity is at the lowest level in a decade—the overall trend for 2009 is positive. According to RI, “Compared to 2008, the total number of real estate transactions in the City of Buenos Aires (75,950) fell 21.84%, while the total area of housing units under construction declined almost 35%. In the Province of Buenos Aires, the decrease in the number of transactions (105,638) was 25%.” As the adjacent bar graph indicates, BA home buyers really pumped the brakes during the first half of 2009 with monthly sales figures falling on average 30% compared to 2008. If that trend had continued, 2009 real estate transactions in the City would have fallen to around 60,000 compared to the actual figure of 75,950. After eight long months, renewed optimism and market activity finally kicked in around September, and the year ended with the first monthly gain in real estate activity vs. 2008. In terms of units under construction, MercoPress reports “New projects totaled 1.7 million square meters (18.3MM sq. ft.), which means a 34.7% fall compared to 2008. Similarly three neighborhoods concentrate the majority of new projects, with one of them (Palermo) absorbing 11% of the total which is 200,918 square meters (2.16MM sq. ft.).” InvestBA believes the upward trajectory of sales activity will continue in the first-half of 2010 given a favorable supply/demand imbalance, the lingering mistrust of local banks and lack of sound investment alternatives. The second-half of 2010 should be less robust given the shifting landscape and growing uncertainty building up to the pivotal 2011 elections. (Full story)

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Beer Wars Heating Up In BA, Latin America

On January 22, 2010, In competitiveness, creative class, foreign investment, by InvestBA
Just like the Super Bowl Catfight, the Latin Beer Wars will explode during the 2010 World Cup.

Just like the Super Bowl Catfight, the Latin Beer Wars will explode during the 2010 World Cup.

When temperatures began to rise in BA last November, one local brewer, Isenbeck, covered the City with billboards promising the ultimate fantasy for beer lovers seeking respite from the calor bonaerense: A chance to swim in beer. Ultimately, according to Advertising Age, the marketing event was canned by government officials who feared “the Pileta de Cerveza ad campaign and the plunge into a pool brimming with brew would encourage irresponsible drinking.” The government may have thrown cold water on the Beer Pool, but the competition is just now heating up among brewers in BA and the region in general. First, Heineken outbids SABMiller for FEMSA’s beer business to gain much-needed Latin American exposure, then Chile’s Kunstmann (part owned by CCU, the second-largest player in Argentina) announces a regional expansion, and finally speculation surfaces that Anheuser-Busch InBev may increase its ownership stake of Grupo Modelo. After so many M&A’s, the Latin Business Chronicle says “Scarce Targets” remain in the region: “To acquire volumes in Latin America potential acquirers would now have to look at smaller players that only have operations in one country.” Several of these cervejas artesanais are located in neighboring Brazil where A-B InBev rules, but Schincariol is gaining market share both at home and in  Argentina. Now with the World Cup only six months away, the Latin beer battle moves from the boardroom to the TV with every major brewer vying for top-of-mind association with each country’s national team. (A-B InBev’s Quilmes set the bar extremely high with this 2006 epic.) Winning that battle to reach 26.29 billion viewers in 214 countries would be something unforgettable…kind of like swimming in beer.

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Kraft/Cadbury Makes Sense in Argentina

On January 21, 2010, In foreign investment, us companies, by InvestBA
It may not be the perfect deal worldwide, but Kraft/Cadbury has them smiling in Argentina.

It may not be the perfect deal worldwide, but Kraft/Cadbury has them smiling in Argentina.

Judging by today’s headlines, Kraft’s $19.44 billion purchase of U.K.-based Cadbury Plc. is not going down well with most market insiders: Warren Buffett went on CNBC and said he “felt poorer” (after Kraft upped the ante by almost $3 billion) and MarketWatch’s Simon Constable warns, “Kraft is going to get indigestion from gobbling Cadbury.” While the deal may present major challenges in terms of leverage and global integration, at least it makes sense in one of the 155 countries where Kraft Foods operates: Argentina. Martín Bidegaray at Clarín offers a good analysis and ranking of both Kraft and Cadbury’s offerings in the local market and finds two very complementary brand portfolios. Kraft has candies, chocolates and crackers like Terrabusi, Pepitos, Milka, Variedad, Melba and Tita, while Cadbury is Argentina’s King of Chicles with brands like Bubbaloo and Beldent. And just as the acquistion will put Kraft/Cadbury that much closer to global market leader Nestle, so too in Argentina will the new duo be better positioned to take on local market leader, Arcor, which dominates several of the local candy/cookie/cracker segments and generates annual revenues in excess of $2.2 billion.

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BA Grocery Sector Attracts Foreign Investment

On January 20, 2010, In foreign investment, franchises, us companies, by InvestBA
Eki, which operates 150 stores in Buenos Aires and Santa Fe, is buying local competitor Leader Price. Eki, which operates 150 stores in Buenos Aires and Santa Fe, is buying local competitor Leader Price.  

Business headlines this week in the Latin American supermarket space present a sharp contrast in the stability and predictability of investing in certain countries. France’s Groupe Casino operates supermarket chains in both Argentina and Venezuela under the banners Leader Price, Libertad, HiperCasa (in Argentina), Cada and Exito (in Venezuela). When Hugo Chavez devalued Venezuela’’s bolivar 50% last week, he vowed stiff penalties for any retailers suspected of raising prices. Unfortunately for Groupe Casino, “El Loco” made good on his threats yesterday by taking control of the Exito chain which can only be viewed as the first step toward nationalization. Reuters reports the stores will now operate under the banner Comerso. Meanwhile in Argentina, local supermarket chain Eki—which is 90% controlled by U.S. investment firm Nexus Partners—announced it will purchase Groupe Casino’s chain of 26 Leader Price grocery stores in Buenos Aires. The move by Nexus Partners is solid for two reasons: 1.) It’s a unique opportunity to grow market share when a large competitor is dealing with serious problems in Caracas, and 2.) Supermarkets in Argentina have weathered the financial crisis beautifully. Sales in the “supers” increased every month in 2009 (vs. 2008), according to Clarin, and prices stayed virtually unchanged. INDEC, The National Institute of Statistics and Census provides a detailed analysis of the continued growth and stability in this important sector of Argentina’s economy.

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