Photograph of Christ the Redeemer statue in Rio de Janeiro

The Latin American leasing
market was not left unscathed by the global financial crisis, but
momentum was maintained and the long-term outlook is promising,
Mark Wilding reports.


Latin America was earmarked as one
of the leasing world’s future star performers a log time ago. But
has the economic crisis put a cooler on its prospects?

The region did not escape the
effects of the financial collapse completely, but has managed to
maintain some of its momentum. The continued modernisation drive
being pursued by many of the region’s countries has seen the
economy remain relatively stable.

In the meantime, the leasing market
has continued its steady growth. Research from leasing consultancy
the Alta Group shows that between 2008 and 2009 the leasing
industry grew 25.3%, against a backdrop of a fall of 1.9% in the
region’s GDP.

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The rate of growth is expected to
have fallen when the next figures are published. But as many of the
region’s economies return to growth, the long-term outlook is

Alta Group Latin America chief
executive Rafael Castillo-Triana explains: “Latin America has grown
dramatically in terms of investment in infrastructure in the last
five to ten years.

“Obviously infrastructure drives
the demand for capital goods, especially equipment. That is one of
the main reasons why the market has been growing.”

“There has also been a
transformation of corporate culture. Entrepreneurs, bank investors,
equipment vendors and independent investors have evolved to meet
needs driven by the boom in infrastructure investment.

“That is one of the factors that
has created a response in the leasing community.”

Brazil is by far the most dominant
economy in the region. The most recent figures from the Alta Group
show the country accounts for around two-thirds of all leasing
activity in the region.

With this in mind, the performance
of Brazil’s economy paints a positive picture for the leasing
industry, with economic growth of around 7.5% in 2010. The speed at
which the country has bounced back has widely been attributed to
the actions of the government.

Brazilian leasing association
(ABEL) executive director Carlos Tafla says: “The government has
issued several prudential measures since 2007 to reduce the impact
of the economic crisis in Brazil.

“These include the improvement of
the liquidity of banks through compulsory resources, the use of
Brazilian Development Bank resources with subsidised interest
rates, and government resources at the disposal of banks.”

Despite this, figures from ABEL
indicate a disappointing 12 months for the Brazilian leasing
industry, with a fall in volume of 25% between February 2010 and
2011. Tafla believes ABEL’s figures will show growth of 10% by the
end of the year.

But the situation is likely to be
much better than these figures suggest. The leasing market in
Brazil is changing rapidly, with several new international
companies entering the market in recent years.

SG Equipment Finance made its debut
in the country in 2008.

Brazil managing director Mohcine
Busta says: “We started our activity in Brazil in the midst of the
crisis. 2009 was our first full year in the country, when everyone
else was slowing down, which has to some extent been of benefit to

“The first year was a good start,
in line with expectations. The second year we had consolidated our
presence in the country and nearly doubled production.”


Changing market

Motor vehicles have traditionally
accounted for the vast majority of leasing activity in Brazil.

This situation is changing rapidly.
Figures from ABEL show that in 2010, leasing of vehicles made up
87% of the industry. In 2011, this has fallen to 77%.

In contrast, leasing of machines
and equipment almost doubled in terms of market share from 8.5% to
15.9%, while computers showed a similar increase in market share
from 2.1% to 4.4%.

But the experience of truck and bus
vendors on the ground shows that demand in their industry is far
from falling. MAN Latin America is the largest truck manufacturer
in the region.

The company’s 2011 annual report
showed that 2010 yielded record results in Brazil, and stated that
Brazil will be the growth driver for its truck and bus

MAN Latin America chief executive
Roberto Cortes says: “We have a combination of factors in Brazil
which will boost the truck and bus market.

“One factor is the infrastructure
plans we have in place which are not in other countries, especially
those associated with the World Cup and the Olympics.

“Another point is social inclusion
– people are entering the consumer market who didn’t consume in the
past. This is a phenomenon which we are seeing far more in Brazil
than in other countries.

“In Brazil, 60% of goods are
transported by road. In Brazil many people travel by bus, but
Brazil has a very old, ageing fleet. That indicates good potential
for growth.”

The changing market share of asset
classes is more likely a result of an industry that is growing as a
result of broadening the scope of its operations.

Castillo-Triana says: “The main
reason there are so many large portfolios of motor vehicles is
driven by tax reasons. They don’t necessarily reflect annual
investment. Most people lease cars because it is more efficient
from a tax standpoint.

“The good news is that leasing
companies have realised they have a large concentration of motor
vehicles and are looking to diversify.”

Construction equipment is likely to
be a continued growth area. Brazil’s booming oil industry is a
large factor.

Oil firm Petrobras is Latin
America’s largest company, according to the Latin Business
Chronicle. The company is majority owned by the Brazilian
government and has recently discovered vast oil reserves off the
Brazilian coast.

These activities not only increase
demand for mining and construction equipment, but provide a source
of income which will finance development activity elsewhere in the

Heidelberg Financial Services has
worked in Brazil for several years. Head of division Stephan
Knuppertz is positive about its future.

“Just think about the football
World Cup in 2014, the Olympics coming up in 2016 and the way the
country moved itself through the global financial crisis pretty
well,” Knuppertz says.

“The Brazilian economy has created
a lot of new jobs, hence more and more people are able to spend
money today. Brazil is an exciting mix of great opportunities which
may offer the country a final walk away from the various crises we
have seen since we started to work in the market.”


Mixed prospects

Prospects for leasing are not
universally positive across the region, with several countries
suffering from poor economic performance.

Venezuela has performed
particularly badly in recent years, and the leasing market has
under performed even its own ailing economy.

Between 2008 and 2009 the leasing
market contracted by 14% compared to a 3.3% contraction in the
economy as a whole.

But Venezuela is an example of a
country facing political problems. Other countries in similar
circumstances include Ecuador and Puerto Rico.

Many other more stable Latin
American leasing markets are demonstrating growth in similar terms
to Brazil and are in intense competition to prove themselves the
next big investment market. According to data from the Alta Group’s
2010 report, Chile saw impressive growth of 18% in its leasing
industry, compared to a fall of 1.5% in GDP. Next year GDP is
expected to perform much better.

CSI Leasing Chile sales manager
Javier Pacheco said: “Chile is an investment grade country, and in
2020 is expected to become a developed country.

“We are performing very well. GDP
is expected to show 6-7% growth, and the leasing market is growing
at over 25% a year.”

Meanwhile, Columbia showed growth
of 17%, Peru showed 11% while Bolivia was a surprise performer with
growth of 6%, despite a volatile political situation.

These growth figures were produced
against a backdrop of almost non-existent economic growth in
Columbia and Peru, whilst Bolivia enjoyed a 3.3% increase in GDP.
Poor leasing prospects are far outweighed by positive in the

Much of the activity is being
driven by infrastructure investment.

Leasing markets that have
traditionally been dominated by vehicles are slowly approaching a
more balanced spread of investment across asset classes, as global
players increasingly move towards the market. IT is proving a major
area of growth, as industries such as financial services grow.

Test equipment lessor Microlease is
one of many companies to set its sights on the Latin American
market recently.

Head of business development George
Acris said: “Our main sectors are telecoms, aerospace and defence.
There has been a lot of investment in telecoms taking place in this

“In some countries they are jumping
straight into the latest technology and have got more
infrastructure investment going on to bring things up to speed.
That means there is a high level of growth in many of these

“The investment in infrastructure
has been very large, and it is happening across the board.”

For the time being, Brazil’s
position as the leader of the region looks safe. The economy has
rebounded well from the financial crisis and its state-backed oil
industry will be a huge asset in coming years.

Events including the World Cup and
the Olympics will also draw major investment. The country’s onward
march towards widespread modernisation will continue to require the
services of the leasing industry, in the construction and IT
sectors in particular.

But as companies looking for
opportunities in the region have found, Brazil is far from the only
market showing impressive growth prospects.

Brazil has made significant
progress, but the same process is likely to be repeated in several
other countries.

Just as diversification of assets will be a key aspect of
success in Brazil, widening the geographical spread of investment
will be the next step in the Latin American growth strategy.


Click on the table below to view a large PDF:

Table showing the size and growth of the Latin American leasing industry by country


See also:

Vendor finance
in Latin America a major part of the market