Chile firms seek investments abroad

SANTIAGO (Reuters) - Chilean companies are set to continue a long-established trend of investing in other Latin American countries in 2007 as they outgrow their home market, with Colombia the preferred destination and retailers the biggest spenders.

Supermarket chain and diversified retailer Cencosud SA (CEN.SN) and department store owner Falabella SACI (FAL.SN) will try to ride the wave of Colombia's consumer spending boom, while dominant Chilean airline LAN LAN.SN may try to gain a significant foothold in Brazil, the region's biggest aviation market.

Cencosud Chief Executive Laurence Golborne will speak at the Reuters Latin American Investment Summit in Santiago on Friday.

Energy companies Enersis SA (ENE.SN) and Chilectra SACHL.SN, already entrenched in several countries in the region, are also expected to try to consolidate their foreign empires.

"The region's economies continue to perform very well, and Chilean companies are extremely well positioned to take advantage of that, particularly the retailers," said Ben Laidler, an equity strategist at UBS Pactual in Santiago.

Despite having only 3 percent of Latin America's population and accounting for 4 percent of its gross domestic product, Chile has been punching above its weight in terms of corporate foreign investment.

For years, neighboring Argentina was by far the biggest destination for Chilean investment, but in recent years countries including Peru and Colombia have caught up.

Last year was particularly fruitful.

According to the Santiago Chamber of Commerce, Chilean companies spent $2.39 billion abroad in 2006, 59 percent more than in the previous year and the highest level in nine years.

They plowed nearly one-quarter of that investment -- $529 million -- into Colombia, some 17 percent into Argentina, 15 percent into Peru and 11 percent into Brazil.

The retail sector accounted for 30 percent of the total, followed by the energy and mining sectors with 25 percent and 24 percent, respectively.

SAME AGAIN, PLEASE

Chamber of Commerce Director of Research George Lever said he expects the same trends to continue this year.

"Colombia has become really attractive again for foreign investment," he said.

"For Chile it will continue to be so ... although you can't rule out other countries that have traditionally been strong for Chile, like Argentina, Peru and Brazil."

Already this year, Chilean companies have been spending elsewhere in the region.

In January, LAN revealed it had bought an option to take a minority stake in Brazil's Nova Varig, which operates routes previously operated by once-mighty Brazilian airline Varig. (VAGV4.SA)

Last month, Chilean copper cable and tube manufacturer Madeco SA MAD.SN said it had entered the Colombian market by acquiring cable manufacturer Cedsa and vowed to ramp up production to take advantage of Colombia's growing economy.

Also last month, Cencosud announced it had signed a preliminary agreement to buy a stake in Colombia's biggest supermarket chain, Almacenes Exito, IMI.CN although its ambitions could still be thwarted by Exito's shareholders.

"Regardless of what happens with Exito, Cencosud will be putting more money into Colombia," said Laidler of UBS Pactual. "The retail sector's completely unconsolidated there, and if they don't get Exito, they'll simply look for something else."

"As far as LAN's concerned, they've been trying to get into Brazil for a long time," he added.

Despite the optimism over prospects for Chilean companies abroad in 2007, Lever said 2006 looked like a standout year.

"It's not very likely we'll see a repeat of the growth rate we saw last year," he said.