Contáctenos

A través de este formulario podrá dejarnos sus comentarios, sugerencias o inquietudes.

Dirigido a:

Todos los campos son obligatorios.
Cancelar

Reportar Comentario

Estas reportando este comentario a la redacción de El Cronista.

Todos los campos son obligatorios.
Cancelar

Recomendar Nota

A través de este formulario podrá recomendar la noticia que esta leyendo.

Todos los campos son obligatorios.
Cancelar
DÓLAR
/
MERVAL

Finance, Communications and Tourism, an unexpected fit

por  Santiago Lilo

(Translation: Adriana Caminiti)

0

Opening our borders and attracting investors has been the No. 1 priority on the economic agenda of the new administration since December 2015, when Mauricio Macri became President. In the face of the dramatic changes in the rules of the game, and after years of lack of competition, it was not too long before the large telcos announced the undoubtedly necessary investments worth several million, thus closing the door to new market entrants. In this regard, Enrique Carrier, Director at Carrier & Asociados, notes that "the telco market has been in a handful of companies for a long time now".

Mid-term prospects look brighter for the banking sector, on the other hand, mainly driven by capital market reforms. The domestic stock market experienced a historical rebound, with record prices above 16,000 BPs, mostly led by the shares in large financial groups such as Macro and Galicia banks. In view of this situation, Gustavo Neffa, partner and director of Research for Traders, argues that “today, we have a banking system that is robust, with good liquidity, low delinquency rates, and more than adequate reserves. Competition has increased, but the market is still small to allow new players in."

Lastly, the Government is taking initial measures to boost investments in the travel sector. With an ambitious plan comprising direct investments of over ARS 4 billion by the Travel Ministry and USD 16 billion in infrastructure (to be allocated to Argentina´s northern region through the Plan Belgrano), this sector is expected to recover, and even drive the revitalization of regional economies.

 

Telcos: long-lasting competition

Just like several countries in the region and throughout the world, the Argentine telco market is concentrated in a handful of carriers. Who is who

Shortly after the recent opening of the Argentine economy the large companies set their ground and announced investments worth several million to deploy their networks and further expand the scope of their services, thus curtailing further opportunities for new market entrants and concentrating the business in fewer hands.

So far, Telecom Argentina and Telefónica have announced investments for this year worth USD 620 million and USD 720 million, respectively. They are followed by Claro, with USD 500 million, and Nextel (owned by the Clarín Group), which intends to spend USD 400 million to supplement its mobile telephony offer as Mobile Virtual Network Operator (MVNO) and thus operate on third-party networks. This quick reaction by large market players has affected companies and cooperatives, such as Catel and Telecentro, which will need to invest in technology if they are to keep pace with their counterparts.

Interesting opportunities await beyond the telecommunications’  core business, however. Enrique Carrier, director of the consulting firm Carrier & Asociados and an expert in telecommunications, asserts that one alternative option is the provision of engineering services for network development and antenna installation. "These companies carry out surveys to identify locations and prepare them, to then rent them out to carriers that need to set up new antennas. Alternatively, they buy the antennas themselves and provide technical support to keep the equipment running," he says.

This option should not be overlooked. The mobile telephony service is faced today with an excess of lines (62 million) vis–à–vis the current population (less than 45 million people). As a result, networks and antennas need to be expanded, and engineering and technical support services offer an exciting opportunity in the short term.

The expert goes on to note that the market lacks clear rules, however: "There are guidelines at a national level on the mechanisms and requirements that should be in place to develop new networks, but they are not standardized." As a result, most municipalities impose stringent regulations that end up deterring these initiatives.

Investing in telco stocks might also be an option in the current scenario. "An investor will probably find it more attractive to buy shares in Telecom or the Clarín Group than making a direct investment in the cable and telephony business," Carrier points out. Along these lines, the price of the Clarín Group stocks rose between 4% and 6% on the Buenos Aires and London stock exchanges. Telecom Argentina has not been outdone - its share price has increased over 10% so far in the last four-month period.

This option is appealing for two reasons, namely the ease of several restrictions on capital flows by the Argentine Central Bank (BCRA, as per its Spanish acronym), and the potential reclassification of the stock market (from frontier to emerging) in the medium term. This last event might, according to some stock market analyst estimates, generate an inflow of USD 2 billion that would be distributed among the main Argentine stocks listed abroad and, therefore result in a considerable appreciation of these securities, with those issued by the Clarín Group to be almost certainly among them.

 

Banking and Insurance: lighter but in the need of IT

The domestic banking market is characterized by simple infrastructure, that it is lagging behind in terms of digitization. The potential buried inside.


The banking and insurance businesses are back on investors' radars following the change of political and economic direction and the abrupt turn in the rules by which they are to abide. The underlying reasons may be summarized in the easing of most of the restrictions formerly enforced on the banking sector, and the latter’s need to keep up with the rest of the world as far as technology breakthroughs are concerned.

Along these lines, Gabriela Saavedra, Partner and Financial Services Leader at KPMG Argentina, asserts that the domestic banking industry has a simple infrastructure, and that it is lagging behind in terms of digitization. "This opens up a window of opportunity for the development of products that will speed up transaction processing, and especially facilitate the relationship with customers," she says.

Gustavo Neffa, Partner and Director of Research for Traders, agrees with this statement: "The rate of use of banking services in the domestic financial market is extremely low today when compared to that in neighboring countries." And he goes on to add: "This year's drop in consumption forced banks to rely more heavily on their financial operations, which offer excellent returns in comparison to other financial systems, more dependent on the traditional lending and borrowing business."

As experts noted, the measures implemented by the BCRA (free-of-charge savings accounts, immediate and cost-free transactions, among others), encourage a heavier use of banking services. This, coupled with the ease of restrictions on capital flows, gives the green light for investments in financial technologies. Saavedra notes, however, that " it is important that both the Financial Intelligence Unit (FIU) and the BCRA know how to adapt the new regulatory system for the banking sector to breakthroughs in the area of digitization."

The potential development of the insurance sector, says Saavedra, goes hand in hand with the development of the financial market. "Once the conditions to do business have stabilized and the recession has come to an end, the loans for production-oriented investment projects are expected to increase and, with that, the industry-linked premium volume." Among the different products, policies affording cover for SMEs have good growth prospects.

In turn, Santiago Seigneur, Finance and Lending Director, is of the opinion that surety bonds remain a profitable option. "We have been in this business for several years now, and surety bonds have always offered good returns, irrespective of political and economic ups and downs that may affect this sector," he argues.

He admits, however, that a recent resolution issued by the enforcement agency [the Argentine Insurance Department], whereby it increases minimum capital requirements, constitutes an obstacle for new market entrants. He goes on to confess that "the legal uncertainty prevailing in the recent past discouraged investments in the insurance sector."

 

Tourism: a never ending story

With one of the world´s most diverse geographies and seven different climate zones, Argentina´s travel industry is one of the best kept secrets of the economy. The hotel business, the most attractive option.

From Patagonia in the south to Cafayate in the north, past the picturesque Valle de la Luna (Moon Valley) in the Province of San Juan, and the Cerro de los Siete Colores (Hill of Seven Colors) in Jujuy, travel and tourism is a good option for those willing to set foot onto the local economy. Official figures confirm this statement: This industry accounted for 6.5% of GDP during the first half of the year.

The arrival of almost six million international travelers during 2015 translated into an inflow of USD 4.4 billion, as estimated by Indec (Argentina National Institute of Statistics and Censuses). This figure accounts for 32% and 8% of service and goods exports, respectively. Thus, Argentina now ranks No. 50 as measured by international travel revenues, and future prospects entice investors.

As for long-term investment opportunities, consultants point to the hotel business as the most attractive option. Accommodation was provided to over one million non-resident travelers arriving in Ezeiza and Jorge Newbery Airports during the first semester alone, wich translated into an occupancy of approximately 16 million room nights (a 0.1% y-o-y increase compared to 2015).

Camilo Makón, Director at Singerman & Makon, points out that “the global trend today is towards mixed-use developments”. These projects seek to provide not only accommodation, but other services as well, such as casinos, event halls or golf courses. "This is a business that is growing globally, but still incipient in Argentina, where it has become a need," he adds. According to this expert, the investment required to start this type of hotel is of at least USD 50 million.

A second option that is gaining momentum is the so-called "MICE (Meetings, Incentives, Conference & Exhibitions) sector", targeted at travelers who attend events, conferences or exhibitions. The business opportunity lies precisely in investing in the development of convention centers, generally located in large cities (Cordoba, Buenos Aires and Rosario, among others), as these travelers need the certainty that different services, such as transfers and connectivity, are already in place. Moreover, there is the need for high-end hotels and an agenda of social and cultural activities, two services that are usually found in large cities.

In Makón's opinion, and depending on the size of the venue, the required investment may range between USD 8 million and USD 60 million, with some disbursements exceeding USD 100 million in the case of larger centers. This is a long-term investment, with an estimated recovery period in the range of 20 to 30 years.

The business travel industry in Argentina is, according to some experts, uniquely attractive, thus offering a clear opportunity and a huge potential. This is so not only on account of the scarce supply, but also of the fact that, because of its target audience and the way it is structured, this business is not season-dependent. "The MICE segment, linked to the business world, is ideal for guaranteeing a constant flow of travelers during off-peak periods", concludes Makón.

Más notas de tu interés

Comentarios0
No hay comentarios. Se el primero en comentar