LatAm Executive Team Winners Highlight Region’s Growth

This year’s Latin America Executive Team ranking highlights the ambitions of world-leading Latin American companies such as iron-ore and nickel producer Vale, oil major Petrobras (CFO Almir Guilherme Barbassa, pictured), and brewer AmBev.


Almir Guilherme Barbassa, chief financial officer of Petroleo Brasileiro Petrobras, listens during a session on day one of the World Economic Forum in Davos, Switzerland, on Wednesday, Jan. 23, 2008. Recession across the world’s biggest economies is the main concern of chief executive officers gathering today in the Swiss ski resort of Davos for the World Economic Forum. Photographer: Daniel Acker/Bloomberg News


Latin America was afflicted 15 years ago by a miasma of mismanagement that left its economies and companies hopelessly at sea. Today economic and business conditions in the region surpass those in the U.S. and Europe, thanks to new, hard-won discipline among Latin political and corporate leaders.

The result is a level of ambition and confidence heretofore unseen within the upper reaches of the region’s management ranks, one that has them taking rapid advantage of strong domestic demand fueled by a growing middle class as well as opportunities arising far beyond national and continental boundaries. Those aspirations have spawned a new generation of regional and global leaders, as reflected in Institutional Investor’s second annual Latin American Executive Team.

Consider Vale, the Brazilian iron-ore and nickel producer, which has become the world’s second-biggest miner, after BHP Billiton, the Anglo-Australian giant. Consider Petrobras, Brazil’s oil major, which is expected to surpass Exxon Mobil as the world’s biggest oil company in market capitalization by 2020. Or Cía. de Bebidas das Américas, known as AmBev, the Brazilian brewer whose management helped to create Anheuser-Busch InBev, the Belgian-Brazilian behemoth that today supplies Budweiser to the bars of New York as well as Stella Artois to the brasseries of Brussels. Or Itaú Unibanco, Brazil’s biggest retail bank, which is now larger than Citigroup in market value. The CEOs, CFOs and/or IR Professionals at all four companies score at or near the top of II’s rankings this year, and our profiles of such firms clearly reveal the region’s new swagger.

“The world is becoming multipolar,” says Almir Guilherme Barbassa, chief financial officer of Petrobras, who tops the CFO rankings in the Oil, Gas & Petrochemicals sector. “One of those poles is Brazil and the rest of South America.”


This year as last our rankings highlight the region’s best CEOs, CFOs and IR Professionals, as well as the companies with the most-valued investor relations, based on a survey that asked analysts on both the buy and the sell sides to choose the top performers in their domains.

Of course, Latin America’s corporates are by no means free of concerns. Long-term financing is still hard to come by, particularly in Brazil, which inhibits infrastructure development and, with it, companies’ ability to tap growing demand. “This limits growth,” says Marcos Aguiar, Brazil head at the Boston Consulting Group. “Most business people in the country would say that the infrastructural problems create real issues for them,” Aguiar adds, noting that development agencies need to step in to ensure investment takes place in this sector.

Also, global market volatility threatens what access to capital the Latins currently enjoy.

Such constraints obviously would inhibit the Latins’ ability to exploit burgeoning potential outside the region as well as within. And much if not most of that external potential could evaporate if, as feared, renewed recession not only grips the developed world but spreads to emerging Asia. Latin America’s escape from the macroeconomic shadows has largely depended upon China’s own. Should the latter reverse course, cry for Argentina and others as well.

“The slowdown in the U.S. and the euro zone is starting to create some concern,” says Rogério Calderón, director of investor relations and controller of Itaú Unibanco Holding, whose CEO, CFO and investor relations team top the rankings in the Banking & Financial Services category by analysts on either or both the buy and sell sides, and whose management team ties for fifth overall. “As long as things globally start to recover within the next few months, Brazil will be fine,” Calderón adds. “If it takes longer, then it will start to have a greater impact.”

The Chinese central bank has started to rein in growth but by a small margin. And most experts believe that China is unlikely to experience a severe economic slowdown, so the impact on Brazil and the rest of Latin America of a contraction abroad should be limited.

Moreover, some analysts cite the region’s demographic trends as an overriding positive, at least for the long term. “The demographics are in Latin America’s favor — the population is young and the proportion of people in the working-age range as a percentage of the overall population is high,” says Boston Consulting’s Aguiar. “This will create a sweet spot for the next ten years.”

Brazil’s central bank has nonetheless reacted quickly to signs of slowing global growth by reducing interest rates. Whether high inflation precludes its monetary authorities from further reductions in the event of a continued slowdown remains an open question.

In any case, Calderón finds a certain irony in the fact that Latin America is currently in better shape than much of the rest of the world. “This is the first time that Brazil and other Latin American countries have not been at the center of the crisis,” he observes.

What exactly has changed in Latin America? During the past ten years, many countries in the region — including Brazil, Colombia, Mexico and Peru — have targeted reasonable levels of inflation, exerted greater control over their fiscal deficits and dramatically improved their balance of payments. Stability has dispelled uncertainty as a result, and corporate executives have responded in kind.

Says Alejandro Valenzuela del Río, chief executive officer at Grupo Financiero Banorte, Mexico’s third-largest retail bank, after BBVA Bancomer and Banco Nacional de México, a subsidiary of Citigroup: “Before, the region was autarkic and its corporations inward-looking. Today they have embraced globalization and become outward-looking. When they see opportunities abroad, Latin American companies seize them.” Banorte’s head of investor relations is the best among IR professionals in the Banking & Financial Services sector, according to sell-side analysts.

This year Brazilian executives dominate the list. They lead corporations that are the strongest and most innovative in Latin America and thus best able to confront the challenges of the global economy. Even as global market volatility has made raising capital harder throughout the world, companies in Brazil have accumulated it by increasing their returns on the strength of gross domestic product growth. Those in the country’s consumer segments are content to stay home for now, thanks to fast-growing domestic markets, while those in commodities use their balance sheet strength to expand overseas.

The company that tops the ranking this year has had no need for markets besides Brazil’s. The only company to have eight first-place finishes, sweeping all the executive categories, Rio de Janeiro–based PDG Realty has become the country’s biggest real estate developer and the largest homebuilder in the world outside China. PDG is also the largest real estate company, by market value, in the Americas, something that would have been unthinkable before the U.S. housing collapse decimated builders in that country.

PDG has ridden the wave of Brazil’s economic growth during the past decade, benefiting from the emergence of a much larger middle class and more affordable mortgage financing. Roughly 39.5 million Brazilians climbed into the middle class between 2003 and May 2011, according to Fundação Getulio Vargas, a Rio-based research institute. The country has a housing deficit of some 5.8 million units, according to the think tank.

PDG expects to sell 35,000 homes and apartments this year and has another 100,000 under construction, compared with the 2,000 to 3,000 it produced in 2003. Net income this year is slated to hit 1 billion reais ($572.5 million), up from 22 million reais in 2006. Since PDG had its IPO, in 2007, the share price has climbed by 105 percent, more than those of all but one other Brazilian company (shopping mall operator BR Malls Participações) that have gone public since then.

CFO Michel Wurman acknowledges the company’s fortuitous timing. “We are very lucky that the market came to us,” says Wurman, who along with chairman Gilberto Sayão da Silva and CEO José Antonio Grabowsky has worked at PDG since it was founded, in 2003, by investment bank Pactual, now part of BTG Pactual. The executives were close to André Esteves, the prominent Brazilian banker who is now the CEO at BTG Pactual. PDG was spun off three years later and went public the following year.

But PDG has capitalized on its good fortune, quickly developing a results-driven culture similar to that of Pactual, with executive pay linked closely to performance.

“We learned very fast that you must treat shareholders with all due respect,” says Grabowsky. “Our culture has a sense of urgency. Our main competitors were family-owned businesses. They did not really know how to deal with shareholders. At Pactual we reported results every semester. Today we report them quarterly.”

PDG also acquired three large development companies, Goldfarb Incorporações e Construções, CHL Desenvolvimento Imobiliário and Agre Empreendimentos Imobiliários, in quick succession.

But financing for customers remains a challenge. Only during the past three years have the country’s banks become accustomed to granting mortgages for a 25-to-30-year period. Currently, mortgage credit amounts to just 5 percent of Brazil’s GDP, far below the levels in most developed countries. Banks would like to see that rise to 15 percent eventually.

Although property prices have been rising fast in Brazil, PDG sees no signs of a U.S.-style bubble, because of the sheer size of the housing deficit and the fact that most people are first-time homeowners.

The volatility in global financial markets is not having an impact on the group itself, as PDG retains a large cash cushion. Although in September the Brazilian central bank lowered its forecast for economic growth this year to 3.5 percent from 4 percent, PDG is confident that its business won’t be affected, because of strong pent-up demand. With 1.9 million new families forming in the country last year alone, that demand should amount to 1.5 million units a year for the foreseeable future, according to the Brazilian Institute of Geography and Statistics.

Perhaps no company embodies Latin America’s success and promise more clearly than Petrobras (Petróleo Brasileiro, as it is formally known), the Brazilian oil and gas behemoth that is 64 percent owned by the state and based in Rio de Janeiro. Petrobras’s CEO, José Sergio Gabrielli de Azevedo, tops the buy side’s sector ranking, and its management team ties for fifth overall. Globalized and outward-looking today’s Latin corporate leaders may be, but purely capitalist? Not yet. Government-controlled Petrobras is the continent’s biggest company by market capitalization and revenue, at $175 billion and 213.3 billion reais, respectively, for 2010, and the largest by market value headquartered in the Southern Hemisphere.

Founded in 1953, today it produces 2.6 million to 2.7 million barrels of oil a day. In November 2007 the company announced that it had discovered reserves in the Tupi oil field that could produce between 5 billion and 8 billion barrels of recoverable light oil. The country’s then-president, Luiz Inácio Lula da Silva, exclaimed, “This discovery proves that God is Brazilian.”

By 2015, Petrobras expects to produce 4 million barrels of oil a day and, by 2020, 6.4 million barrels. By 2020, management believes, it will be bigger than Exxon Mobil Corp., which routinely ranks as the world’s biggest or second-biggest company by market capitalization.

Its success has not come easily. At the time Petrobras was founded, Brazil had no oil reserves or refining capacity, so the company had to find the first and develop the second. It started by drilling onshore, then went offshore and then went deep offshore. Barbassa — who has been CFO and IR chief since 2005 and has worked for Petrobras for 37 years, and whose first job involved evaluating new projects — says the company’s drilling capacity developed along the way. “We had to learn it,” he says. “We have been going deeper and deeper for 40 years.”

In September last year the company raised $70 billion in the world’s biggest equity offering ever, and it’s pouring the money into capital expenditure, chiefly to develop the Tupi oil field. Petrobras plans to spend $225 billion over the next five years, or $200 million a day.

Barbassa says that under current market conditions such a transaction probably would not be possible. There was a window for the share offering throughout much of last year. The deal involved listings on two exchanges, in São Paulo and New York, and the shares also trade on two other exchanges, in Buenos Aires and Madrid.

Petrobras says that most of its financing comes from operational cash flow, though the capital and loans markets are also important. It also receives help from export credit agencies and the state-backed Brazilian development bank known as BNDES. The group has also agreed to supply China Petroleum & Chemical Corp., or Sinopec, with oil for ten years in exchange for a $10 billion loan from the China Development Bank.

Though there are concerns that the real is overvalued, most experts do not see devaluation as a near-term risk. And it is not one for Petrobras itself, as oil is priced in dollars in global markets. Some 70 percent of Petrobras’s debt is dollar denominated.

Itaú Unibanco is another Latin American corporate that has benefited from Brazil’s macroeconomic success during the past decade. In March 2009, Banco Itaú Holding Financeira, which had been Brazil’s second-biggest bank, acquired União de Bancos Brasileiros, then the third-biggest bank, to create the largest financial institution in the country. Today, São Paulo–headquartered Itaú Unibanco is the world’s eighth-largest in terms of market value, behind the Chinese Big Four, HSBC Holdings, Wells Fargo & Co. and JPMorgan Chase & Co., according to Bloomberg.

“The bank’s success has a lot to do with the momentum the Brazilian economy has shown during the past decade,” says IR chief Calderón. “Credit has started to catch up.”

The bank’s strategy relies upon its extensive distribution network throughout Brazil and a huge number of intermediaries. A universal bank, Itaú serves individuals and businesses of all sizes in all four corners of the country.

Calderón says credit delinquency is low (although it crept up slightly in the third quarter), thanks to the strong economy. He also cites the country’s high level of international reserves ($350 billion at end of September) and many avenues that exist to stimulate growth, including BNDES, as cause for continued optimism despite trouble elsewhere.

The Brazilian banking industry is highly competitive, but Calderón welcomes the challenge because it keeps Itaú Unibanco on its toes. He adds that the institution has kept its investment banking division separate from the rest of the bank, so that it can compete effectively with agile rivals, such as BTG Pactual. This has helped Itaú outpace all other banks in M&A deal making in the developing world this year, according to data provider Dealogic.

“Itaú Unibanco will support Brazilian groups if they decide to go international,” says Calderón. “But there is no need to speed up the process. Currently, Brazil has the best opportunities, and it’s not hard to deploy capital in the country.”

One of the biggest challenges in Brazil is the lack of long-term capital, especially for companies embarking upon major infrastructure projects. Calderón says his bank can help to some extent, but the sums involved are so vast that ultimately only the development agencies can provide the necessary capital.

Cosan, the São Paulo–based conglomerate producer of bioethanol, sugar and energy, is an example of a Latin American company that wants to be a global player, in its case in some of the most important emerging energies of the future. Its two main businesses are sugar production and ethanol production and distribution. Sugar remains the most profitable part of the business, but ethanol is becoming more significant, and Cosan believes it will become the dominant part of the company over time.

On June 2, Cosan and Royal Dutch Shell, the Anglo-Dutch oil and gas giant, announced the formal creation of their Brazilian ethanol joint venture, Raízen, which will be the world’s largest sugar-and-ethanol producer. The deal enables Raízen to go head-to-head with the two top players in the market, Petrobras and Empresas Petróleo Ipiranga, a unit of Ultrapar Participações, the Brazilian chemicals and fuel-distribution conglomerate.

The 50-50 joint venture will push the group’s sugarcane-crushing capacity to 100 million metric tons a year from the current 60 million tons. Its ethanol production is forecast to more than double over the next five years, to 5 billion liters a year from the current 2.2 billion liters.

“Ethanol will become a global commodity over time,” says Marcelo Eduardo Martins, Cosan’s CFO, whom both buy- and sell-side analysts deem the top Agribusiness CFO.

Raízen markets 25 percent of the ethanol sold in Brazil either directly through its service stations or by supplying other companies’ stations. It has 22 mills in São Paulo state and two in other states. Martins says the JV will help improve the company’s supply chain and make the group less vulnerable to volatile weather. “It helps us improve logistics,” he says.

Yet another Brazilian company scoring high in our rankings, Anhanguera Educacional Participações, headquartered in Valinhos in São Paulo state, is the biggest private, for-profit professional educational company in Latin America by market value and number of students; its director of investor relations, Vitor Pini, is ranked first in the Capital Goods & Industrials sector by buy-side analysts. Anhanguera is the second-biggest company in the world in this segment, after Apollo Group in the U.S. In 2007 it became the first company in the education sector in Latin America to go public. Its IPO and subsequent share offerings raised more than 860 million reais, which the company has used to expand from 11 campuses to 73, along with 500 smaller learning centers. It caters to students from middle- and low-income backgrounds, where there is huge pent-up demand for postsecondary education. Most of its 400,000 students are young and have jobs.

“Brazil has a very tight labor market,” says José Augusto Teixeira, chief planning and investor relations officer at Anhanguera. With the country’s middle class quickly increasing in size, he adds, “there is a growing appetite for further education.”

OdontoPrev, headquartered in Barueri in the state of São Paulo, is the largest dental benefits company in Brazil, with more than 5.2 million members, and ties for third overall in the number of first-place rankings it garners from analysts: Its CEO is top-rated by the sell side in Health Care, its CFO is No. 1 according to the buy side, and its director of investor relations and overall IR effort win highest honors from both. Founded in 1987, OdontoPrev went public in December 2006, raising 171.4 million reais. Some three years later the company got another 330 million reais in return for a 43.5 percent equity stake from Bradesco Dental, a wholly owned subsidiary of Bradesco Saúde, part of Banco Bradesco, one of Brazil’s biggest retail banks.

OdontoPrev specializes in prepaid dental plans, which cover members’ dental care costs. Like PDG, OdontoPrev has grown with Brazil’s middle class, but it has also taken share from smaller competitors, thanks in part to proprietary technology that allows it to reduce costs by helping to monitor risk, oversee quality of service and prevent fraud. As the number of Brazilians with dental plans has grown by about 18 percent a year for the past decade or so, OdontoPrev’s membership has climbed at a rate close to 30 percent.

The company attributes its success to deep knowledge of the industry. Four of its seven top executives are former dentists. Says José Roberto Borges Pacheco, OdontoPrev’s director of investor relations: “This has enabled us to develop a unique business model, which could be applied to almost any country in the world.”

OdontoPrev is about to make its first foray outside Brazil, via a joint venture with Iké Grupo Empresarial, a Mexico City–based company which provides medical and travel assistance and telemarketing services.

Ultrapar, another leading conglomerate headquartered in São Paulo state, has the best IR Professional in the Oil, Gas & Petrochemicals sector, according to sell-side analysts. It operates in the fuel-distribution business through its chief brands, Ipiranga and Ultragaz Participações, in the chemicals industry through Oxiteno and in the storage for liquid bulk segment through Ultracargo. With about 9,000 staff, Ultrapar has operations throughout Brazil, industrial units in Mexico and Venezuela and commercial offices in Argentina, Belgium and the U.S. through Oxiteno.

“Ultrapar is leveraged to Brazilian economic growth, but it is resilient to moments of instability,” says André Covre, the CFO.

Ipiranga, one of the main businesses, distributes diesel fuel, gasoline and ethanol. It has 50 percent of the diesel market in the country (only trucks and railroads use diesel in Brazil). Diesel consumption growth tends to follow GDP growth closely and normally is about 1 percentage point higher than the expansion in GDP. Meanwhile, gasoline and ethanol consumption tends to grow in line with the growth of the light vehicle fleet in Brazil, which has been running at 8 percent a year. Ultrapar executives say the ongoing shift to lighter vehicles from heavier ones would provide a significant cushion in the event of an economic slowdown.

Since its IPO in 1999, the group has seen its net earnings and earnings before interest, taxes, depreciation and amortization grow by an average of 27 percent and 20 percent a year, respectively. Yet the country has comparatively low vehicle penetration: 15 percent of total population, compared with 20 percent in Argentina, 25 percent in Mexico, 35 percent in South Korea and 50 percent in Poland.

Brazil isn’t the only source of top Latin American executives. But Banorte, Mexico’s third-largest retail bank, is one of only two non-Brazilian companies to win a top spot in the executive rankings, and its performance mirrors that of a Mexico recovering its position as one of the main manufacturing centers for exports to the U.S.

During the past decade the country has lost ground to some of its peers in the emerging markets, because China’s entry into the World Trade Organization overturned the country’s commercial relationship with the U.S. and Canada, despite Mexico’s participation in Nafta. And there were, and remain, security concerns about the country.

But more and more multinationals have concluded that Mexico respects intellectual property rights better than China, and the latter’s labor cost advantage has dwindled as salaries have climbed. U.S. companies with just-in-time supply chains are increasingly coming to value Mexico’s proximity, as sending in container loads of goods to the U.S. from China is neither cheap nor fast. No wonder Mexico’s exports to the U.S. are expected to exceed China’s this year.

And while European and Asian banks are deleveraging, their Mexican counterparts do not have to do that. “Mexico is better able to fulfill the Maastricht criteria than some European countries,” says Banorte CEO Valenzuela, referring to the debt and inflation limits that came out of the 1992 Maastricht treaty. “Mexico for once is on the right side of the balance sheet.”

Although Morgan Stanley expects the country to grow at the same rate as Brazil, 3.7 percent, Mexican inflation is running at only 3.5 percent, almost 3 percentage points less than the South American giant’s 6.3 percent.

Banorte is at the center of all that. Founded in 1899 as Banco Mercantil de Monterrey, the bank is headquartered in the city of Monterrey and has grown through a series of acquisitions. Its recently approved 16.2 billion peso ($1.3 billion) acquisition of smaller competitor Ixe Grupo Financiero gave the bank access to Ixe’s portfolio of wealthy clients, mostly in the Mexico City metropolitan area.

While most large Mexican banking groups have been acquired by foreign financial institutions, Banorte has managed to avoid this fate by minimizing its exposure to risky markets, such as mortgages.

Banorte and Mexico’s success leaves Valenzuela confident that they are close on the heels of their Brazilian counterparts. “Brazilians did a fantastic job. They have organized their economy so well,” he says. “I think Mexicans will replicate it during the next decade.” • •