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Friday, August 1, 2008

Latin America Notebook

Claudio Agostini

Southern Helicopter Land

Southern Cone is the unofficial and curious designation for the southernmost region of Latin America. It includes Argentina, Bolivia, Chile, Uruguay, sometimes Paraguay and finally Brazil.

Given its size (both territorial and economic), Brazil is treated in various ways in relation to this designation. It may be considered to be fully included in the Southern Cone or as part of it but individually treated. It also may be considered part of the Southern Cone through its only southeastern state (São Paulo) and its three southern states (Paraná, Santa Catarina and Rio Grande do Sul).

To beat these systems one must plan backward from the objective to the starting point.

The region is unlike the Southern Common Market (known by the Spanish acronym Mercosur or the Portuguese Mercosul). Founded by the 1991 Treaty of Asunción and amended by 1994’s Treaty of Ouro Preto, Mercosur is an official and structured entity established for economic and social development and includes Argentina, Brazil, Paraguay and Uruguay. But the Southern Cone has no formal establishment or structure. It is often used in a more practical way for many economic, business, sociopolitical and geographic references and evaluations, including those involving the oil and gas sector.

Considering the Southern Cone to consist of the five countries plus Brazil’s four states alone, the region covers roughly 2.3 million sq mi (6.03 million sq km) with a population of 120 million. It had a collective gross domestic product in 2007 of $1.09 trillion (at the official exchange rate). Brazil’s four-state regions made up 58 percent of that, while Argentina contributed 23 percent, Chile 15 percent, Uruguay 2 percent and Bolivia and Paraguay 1 percent each. (That four-state region accounts for about 50 percent of Brazil’s gross domestic product).

In Latin America, only Brazil, Chile and Mexico are rated investment grade. Considered among the major emerging nations along with Russia, India and China, Brazil enjoyed in 2007 the third highest rate of growth for the group considered "high net-worth individuals." It was led only by India and China.

Reflecting the business potential of the Southern Cone, three of the seven Latin American cities that ranked among the top 75 worldwide centers of commerce lie within its boundaries. These are Santiago, Chile (ranked No. 53), São Paulo, Brazil (56) and Buenos Aires, Argentina (63). (The other Latin American cities on the list are Mexico City at 54, Bogota, Colombia at 62, Rio de Janeiro, Brazil at 65 and Caracas, Venezuela at 75.)

Estimates put Latin America’s total civilian helicopter fleet at nearly 2,600. The Southern Cone alone includes 1,037 helicopters or about 40 percent of the total. Argentina has roughly 250, Chile 185, Uruguay 12 and Bolivia and Paraguay roughly 10 each. Brazil’s four-state region alone includes 574 helicopters (about 480 in São Paulo, 35 each in Paraná and Santa Catarina and 24 in Rio Grande do Sul). The majority of these helicopters are from the main Western manufacturers. Of those, generally 65-75 percent of the total market is evenly split between Bell Helicopter and Eurocopter. The remainder of the fleets comes mainly from Robinson Helicopter, Sikorsky Aircraft, AgustaWestland and the other manufacturers.

The Southern Cone includes some of the most extensive aeronautical exhibitions in Latin America: the Feria Internacional del Aire y del Espacio (FIDAE) civilian and military show held in even-numbered years in Chile; the Latin America Aerospace and Defense (LAAD) military show conducted in odd-numbered years in Rio de Janeiro; and the annual Latin American Business Aviation Conference and Exhibition (LABACE) held in São Paulo. As such, Brazil and Chile divide the attention of manufacturers of aircraft and equipment and providers of services and support for neighboring countries. Eurocopter has subsidiaries in Chile and Brazil (where it has an assembly line with short-term expansion plans). Bell also has local customer support services in those nations, as do AW and Sikorsky and the engine makers Rolls-Royce and Turbomeca.

With higher costs for purchasing, operating, and servicing a helicopter and for training pilots (who will earn much less) compared to the United States, the market in the region is not growing at a fast pace. But the trends and the dynamics promise increasing opportunities ahead, mainly for executive/corporate, offshore support and electronic news gathering operations, and for services and parts and components production for local use and export.

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