Latin America’s Top Executives Learn to Cope with a Sluggish Economy
The 2013 Latin America Executive Team looks to consolidation, technology and scale to drive earnings growth despite a weak macro climate.
By Katie Gilbert
From left: Falabella CEO Sandro Solari, Kroton CEO Rodrigo Galindo, Banorte’s Alejandro Valenzuela and Klabin’s Fabio Schvartsman
The days of easy, carefree growth in Brazil came to an abrupt end at the start of this decade. Weaker commodities prices, infrastructure bottlenecks and persistent inflation throttled the economys expansion rate from a peak of 7.5 percent in 2010 to less than 1 percent last year, and economists predict that real gross domestic product will grow by just a modest 2.5 percent this year and next. The sluggish economy, combined with popular frustration over poor public services and corruption, spilled over into massive street demonstrations earlier this year.
Those conditions would hardly seem to represent an ideal investment climate, but dont tell that to Fabio Schvartsman. The chief executive officer of pulp and paper manufacturer Klabin is on an expansion spree. He is investing in five existing pulp-making plants to increase their capacity by a total of 290,000 tons in 2014. The company also plans to spend 7.2 billion reais ($3.3 billion) to build a new 1.5 million-ton pulp plant in the southern state of Paraná, which is due to come on stream by the first quarter of 2016. All told, Klabins production potential is set to more than double over the next two and half years, from 1.7 million to 3.5 million tons.
Schvartsman doesnt hold any particularly rosy views about the broader Brazilian outlook, but he believes the addition of modern capacity combined with the groups sizable timber holdings in the state of Paraná will untether his companys fortunes from that of the economy.....