Weekly Report - 23 March 2004

COLOMBIA | Avianca goes Brazilian. Surprise was the dominant reaction in Bogotá when it was announced last week that Colombia's flag air carrier, Avianca - the oldest airline in Latin America - had been taken over by the Brazil-based Sinergy group, founded and headed by Germán Efromovich (Bolivian-born, of Polish extraction, naturalised Brazilian).

That Avianca was up for sale was no secret. It was running heavy losses (US$100m last year), and the main shareholder, the Baviera or Santodomingo group, wanted to unload it in order to concentrate on its core business, beer. Interest had been expressed by such as LAN-Chile, the Central American airline TACA, and the US-Panamanian Copa. Nobody had heard of Efromovich, whose core business is offshore oil drilling but who also owns a fairly small shipping and air transport business, Ocean Air. Efromovich is taking a 75% stake in Avianca. The Federación Nacional de Cafeteros is holding on, for now, to its 25%. The new proprietor plans to inject about US$64m into the airline and restructure it.

ECUADOR | Vital oil sector takes a hit. A mudslide that ruptured Ecuador's main oil pipeline from the Amazonian fields to the Pacific, SOTE, interrupted oil exports for a week. On 18 March the government announced that it had worked out an emergency solution by contracting out the transport to the privately-owned OCP pipeline, originally meant to carry only heavy crudes. Petroecuador reckons that it will have to pump about 1.1m barrels of crude through the OCP before the SOTE duct becomes operational again. This, it says, will enable it to meet current contractual obligations. The state oil company normally exports about 160,000 barrels per day of crude. Oil export earnings are what has been buoying up Ecuador's dollarised economy; they also provide about 40% of the funding for the national budget.