Israeli companies are discovering the business potential of Latin America, with a number of major deals signed since the beginning of the year. Delek Group Ltd. (TASE: DLEKG) subsidiary Delek Infrastructures Ltd. has a 35% stake in the construction of a 140-megawatt power station in the Guyana district of Brazil at an investment of $50 million. Housing and Construction Holding Co. Ltd. (Shikun u'Binui) (TASE: HUCN) sub-subsidiary Solel Boneh International Ltd. won a $672 million project to build the 330-kilometer Transversal del Norte in Guatemala, part of the Plan Pueblo Panama, a development corridor running from Puebla, Mexico, to Panama and maintain it for 30 years.
Other Israeli companies active in the region include Kardan NV (TASE: KRNV;AEX:KARD) subsidiary Tahal Group, which develops water infrastructure projects, Ormat Industries Ltd. (TASE: ORMT), which is developing geothermal power stations, Gilat Satellite Networks Ltd. (Nasdaq: GILT; TASE: GILT), and RAD Data Communications Ltd.
Merhav MNF Ltd., owned by Peruvian born Joseph (Yossi) Maiman is considering investing $500 million in ethanol and biodiesel projects in South America. The company has already invested $750 million in the region in recent years.
Hitherto, Israeli companies tended to avoid Latin America. One reason was its distance from Israel, which complicated control and management. The other was chronic political and economic instability in many countries in the area. The Federation of Israeli Chambers of Commerce said bilateral trade now amounts to $2.5 billion, and has growth potential. The Israel Export and International Cooperation Institute says that Latin America is growing at 5-6% a year, and that most countries are able to maintain fiscal discipline and low inflation. Politically stable countries have the greatest potential, such as Brazil, Mexico, Chile and Peru. Countries such as Venezuela under its socialist president Hugo Chavez, Bolivia, and Ecuador, which have all nationalized businesses, should be avoided.
Export Institute director general Yechiel Assia predicts that between now and 2010, the first three-year period of the free-trade agreement with Mercosur (Mercado Comun del Sur, the Common Market of the South) Israeli exports to the member countries of Argentina, Brazil, Paraguay and Uruguay, will grow by 40%.
Solel Boneh International has been active in Latin America since the 1960s. Its CEO, Yehuda Elimelech, says that activity in the region is not suitable for every company, but mainly for infrastructure companies with accumulated experience in the international market.
Investment is easier in countries that have signed treaties with Israel to prevent double taxation. Israel now has such treaties with Mexico and Brazil, and is due to sign treaties with Argentina and Chile shortly.
Published by Globes [online], Israel business news - www.globes.co.il - on May 6, 2007
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