Latin American Economy & Business - February 2017 (ISSN 1741-7430)

Region: Corporate Radar

United Airlines to buy into Avianca: Avianca Holdings (which operates in Colombia, Peru, Ecuador and the Caribbean) and Avianca Brasil say they are discussing a merger, which would also bring in United Airlines of the US as minority partner. Two brothers, Germán and José Efromovich, hold the controlling stakes respectively in Avianca Holdings and Avianca Brasil. Avianca Holdings carried 29.5m passengers in 2016, reporting US$1.1bn in net revenue and US$102.1m in net profit in Q316. Avianca Brazil is the fourth largest Brazilian carrier, reporting H116 revenue of BRL1.4bn (US$448m) and a loss of BRL142.5m (US$45.6m) in the same half year period. United Airlines said it was talking with both Avianca Holdings and Avianca Brasil to “expand commercial and equity partnerships”.

Chinese mining companies pile into Peru: According to the Peruvian minister of energy and mines, Chinese companies have commitments to invest US$10.2bn in seven mining projects in the country, mainly in copper. China is the single largest investor in planned Peruvian mining operations, with 21.7% of total future projects. The main new Chinese projects are in Pampa del Pongo (Arequipa), Galeno (Cajamarca), Don Javier (Arequipa), Explotación de Relaves (Ica) and Río Blanco (Piura). There are also expansion projects at Toromocho (Junín) and Marcona (Ica). The ministry said the figures excluded the US$10bn Las Bambas project, in which China MinMetals has an equity stake, and which is already in production. Companies from Canada are the second largest investors with US$8.8bn in new projects, followed by those from the US (US$6.1bn) and UK (US$6bn).

Colombian retailers unhappy over VAT: The Federación Nacional de Comerciantes (Fenalco), which represents Colombia’s main retailers, says that January sales have been impacted by an increase in VAT, which has increased = to 19% (from 16%), as part of the government’s fiscal reforms. Fenalco’s president, Guillermo Botero, says that sales have fallen. He also expects inflation to rise, calculating an increase of about 0.9% in January, above the government target of 0.7%. He also cites a 7% increase in fuel prices, which will feed through to the price of consumer goods. Analysts say that consumers are already switching to lower cost items in supermarkets, such as own-brand goods. Retailers targeting this sector of the market, such as D1 and Justo & Bueno, are reported to be gaining market share, especially in food lines like rice, cooking oil, and prepared meats. Increased taxes on alcoholic drinks are also in play, with consumption of imported wines and whiskies expected to fall. Retailers of footwear, clothing, and personal hygiene products are also reporting weakness in sales. Botero says that the VAT increase has taken COP9bn (US$3.6bn) out of the pockets of Colombian consumers.

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