MercoPress. South Atlantic News Agency

Chilean investments abroad rise sharply in first quarter of the year

Arauco forestry and pull mills expanded into Brazil and Uruguay

In the first quarter of 2010 Chilean businesses invested 1.7 billion US dollars abroad, seven times more than in the same period in 2009, according to the Santiago Chamber of Commerce (CCS).

In recent months at least 10 top Chilean companies have made new international investments, buying assets or developing new projects. Copec, Gasco, Lan and Falabella (owned by holding company Bethia), and Celfin and Linzor Capital have all invested in Colombia, while Sonda, Paz Corp and Cencosud have entered into the Brazilian market. Parque Arauco has invested in Peru, Southern Cross in Mexico, and Casa and Ideas in the U.S.

The largest international investment occurred eight months ago, when CMPC entered the Brazilian forestry market with a 1.5 billion USD investment. Arauco, part of the Angelini group, also expanded to Uruguay one year ago.

These recent developments show a renewed interest by local firms in the international market, a process that began in the 90s, but stalled during the 2008 financial crisis, according to the Chamber’s managing director George Lever. “It's the logical continuation of a process, which has been developing for years and tends to encounter slight disruptions in periods of crisis,” he said.

According to Lever, Chilean companies are in a strong financial position to take advantage of business opportunities abroad. “The high liquidity also affects Chile, as the relative abundance of investment resources is a strength that has resulted in local projects and projects overseas,” he said.

Lever said a second element contributing to Chilean companies’ international success was the depreciation of assets. Fernando Zavala, managing director of corporate & investment banking for Santander, said it was not about buying bargains, but about buying at the right time.

“The central theme is not about the price, but to find an interesting opportunity where Chilean companies have competitive advantages. There are certain industries such as forestry, airlines and fuel where there are advantages,“ Zavala said.

Zavala said Chilean companies in general have done well, with wealth accumulating and stable income. This means these companies are able to spend money and take chances in new markets.

”Chilean firms also have access to local and international funding, which is very advantageous,“ he said.

Some experts say the interest in new markets outside of Chile is due to the limited size of the local market. ”Chile is a small country and successful companies go to invest outside this country. Our market is limited. How much can companies like CMPC, Arauco or Falabella grow in Chile?” asked Jorge Errazuriz, partner and vice president of Celfin.

By Laura Burgoine – Santiago Times