Latin America holds hospitality investment opportunities.Despite the fall of the Mexican peso and ensuing foreign investor apprehension, the Latin American hospitality industry continues to hold many investment opportunities for the savvy investor, according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the National Real Estate, Hospitality and Consulting Practice of KPMG KPMG Klynveld Peat Marwick Goerdeler (accounting firm)
KPMG Kaiser Permanente Medical Group
KPMG Keiner Prüft Mehr Genau (German)
KPMG Kommen Prüfen Meckern Gehen Peat Marwick LLP LLP - Lower Layer Protocol .
Not surprisingly, foreign investors are cautious of the Latin American markets after the fall of the Mexican peso wiped out over $10 billion in U.S. institutional equity and the equivalent of $14 billion of Mexican treasury reserves in a matter of days.
"Currency devaluation Currency devaluation
A deliberate downward adjustment in the official exchange rates established, or pegged, by a government against a specified standard, such as another currency or gold. and inflation are part of the economic environment of developing nations, despite any assurances governmental agencies may give," said Roger Johnson Roger Johnson can refer to:
According to Johnson, the key ingredients for investment success in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. are to study the fundamentals of a given country, carefully map out a strategy for hedging foreign debt where the income of the venture is based on local currency, and co-venture the project with a trustworthy local partner. Being able to recognize the difference in U.S.-based investment techniques and those used abroad in developing countries is also crucial, he noted.
Jon R. Simon, a national hospitality and real estate partner in the firm's Miami office, believes this is particularly applicable in the hospitality industry. "While Mexico attracted fame and notoriety with regard to NAFTA NAFTA
in full North American Free Trade Agreement
Trade pact signed by Canada, the U.S., and Mexico in 1992, which took effect in 1994. Inspired by the success of the European Community in reducing trade barriers among its members, NAFTA created the world's (the North American Free Trade Agreement North American Free Trade Agreement (NAFTA), accord establishing a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. ) and the peso devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. , other Latin American economies may offer good alternatives for hospitality investment in the next 18 to 36 months," he predicted.
Chile: Latin America's Healthiest Economy
After 11 years of economic expansion, Chile represents the strongest and healthiest economy in Latin America and continues to be a focal point focal point
See focus. for real estate investment. "There are approximately 50 ongoing hotel investments at present," said Simon. "The most popular areas include the government and business center of Santiago, the coastal resort area surrounding Valparaiso, the country's famed wine region of Serena, and the ski areas around Portillo and Valle Nevado Valle Nevado, Ski resort is located 46 kilometers west of Santiago, capital of Chile.
Valle Nevado is one of Chile's most modern Ski Centers. It was created in1988 by french businessmen, taking European Ski Resorts located at the Alps as model to follow. ."
According to the Practice, foreign visitation to Chile grew to more than 1.6 million visitors in 1994, an increase of more than 15 percent over the previous year. Practice research shows that Argentina accounts for more than half of all visitation to Chile.
Peru: World Leading Economic Expansion
"Peru is currently enjoying one of the highest rates of economic expansion in the entire world," said Simon, noting the government's active role in privatizing many services and a number of major hotel chains investing in projects to accommodate a 25 percent increase in foreign visitation.
Colombia: Coffee and Oil Support Growth
Despite a reputation badly tarnished by an illegal drug trade, Colombia has one of the hemisphere's strongest economies, according to the Practice. "Supported by coffee exports and the largest discovery of oil reserves Oil reserves refer to portions of oil in place that are claimed to be recoverable under economic constraints.
Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally in the last 20 years, the economy looks healthy and stable in the foreseeable future," said Simon.
"Columbia's hospitality industry in particular is showing signs of significant growth," he said. "Major cities such as Cali, Cartagena, and Bogata are attracting international hotel chains such as Forte, Holiday Inn, and Intercontinental."
The Practice predicts Columbia's hotel sector will grow eight to ten percent annually for the next decade.
Brazil: Investors Beware
While the Brazilian economy continues to expand at five percent per year, 1,000 to 2,000 percent annual inflation over the last five years should make any foreign investor wary, reports the Practice.
"Recently, Brazil's inflation rate has come way down. However, in many important sections of the country, the so-called 'sleeping giant of Latin America' continues to snore snore (snor)
1. rough, noisy breathing during sleep, due to vibration of the uvula and soft palate.
2. to produce such sounds during sleep.
v. ," said Simon. As crime continues to plague Rio de Janeiro Rio de Janeiro, city, Brazil
Rio de Janeiro (rē`ō də zhänā`rō, Port. rē` thĭ zhənĕē`r , the Practice forecasts other areas such as Forteleza and Bahia will become more attractive to hospitality investors.
"Unfortunately, another devaluation of the Brazilian currency, the Real, should be expected by year-end," he concluded.
Mexico: Opportunities Exist, But Hedge Your Bets
According to the Practice, Mexico still retains a number of strong fundamentals and offers opportunities for prudent investors. "NAFTA, a cheap peso, and proximity to the U.S. are still strong ingredients for longer-term success," said Johnson.
However, while the peso appears to be stabilizing, the country's high inflation - estimated at 42 percent in 1995 (presently among the highest in all of Latin America) - could lead to another round of devaluation, according to some economic forecasts.
"Regardless of the opportunities available, investors should proceed with caution," warned Johnson. "Continued exchange rate fluctuations between the peso and the dollar are possible. And, in the event that dollar-denominated debt is being serviced by a peso revenue stream, debt ratios are subject to a steep increase - unless the investment is properly hedged," he concluded.
Over the next five years, the current window of opportunity in the Latin American region will remain wide open, predicts the Practice. Cyclical and spillover spill·o·ver
1. The act or an instance of spilling over.
2. An amount or quantity spilled over.
3. A side effect arising from or as if from an unpredicted source: economic conditions and events of one country will continue to affect other economies in the hemisphere. However, the strong regional economies, combined with a lodging industry which has been severely neglected over the last 20 years, has created a vacuum in well-placed lodging accommodations.
As international trade continues to join global economies, travelers from abroad will look for hotel accommodations consistent with what is available in the rest of the word. According to KPMG, with the proper planning and insight, this will be very positive for Latin America's lodging industry.