Latin Finance - September/October 2010 - 24

stanley motta

corresponding lines, but that only lasted for a while,” says Motta, who conservatively expects Panama’s GDP to expand by 5% in 2010. “The banking system is not holding back the economy,” he concludes.

M&A Potential

Panama’s government is boosting Copa’s footing in the region by expanding Tocumen airport. And legislation passed in June allows Copa greater flexibility in hiring foreign pilots. “We’ve had full cooperation from the government,” says Motta, whose family leads a group that has a 25% stake in Copa Holdings. “We’ve gone out and explained to them what our plan is and what we need in order to pull it off. If we don’t have more gates at Tocumen, it’s kind of hard to bring in more planes. And if you don’t have to the ability to bring in more pilots while you’re training the local pilots, I can’t bring the planes either.” Copa’s business model is largely based on serving low volume routes from its Panama City hub. It plans to grow organically by adding new routes and frequencies. Motta, however, does not rule out further mergers and acquisitions for his family’s business interests. “We don’t have our door closed,” says Motta, whose family has financed its businesses mainly through Citi for 50 years. “We have a reputation of being good partners. Opportunities will present themselves, we’ll take some of them and other ones might not be the right moment. All these M&A things require the right time, the right moment, the right partners.”

year’s merger between Colombia’s Avianca and the Central America’s Grupo TACA could pressure margins. But Motta is sanguine on the prospects. “Obviously, Avianca-TACA will be a major competitor and we think they’ll take part of the business and we think we’ll take a better part of the business,” says Motta. “We’re both responsible airlines trying to grow in the region, and both of us will put out a good product. I think Copa has set a very high bar and the other guys are trying to get there. That’s fine. We have to raise the bar a little higher.”

No Bubble

Motta says he is optimistic a slow-moving agenda of Central American integration

of companies in Central America that are operating in more than two or three countries. The private sector is out in front in doing it, it’s the public sector that now has to put the rules together that make this more efficient.” At home, Panama City’s skyline is dotted with half-empty high rises and some two dozen cranes erecting more, prompting fears of a real estate bubble on the verge of popping. However, Motta does not anticipate a major correction. “There is no major problem with what’s being built,” says Motta, who predicts excess inventory will be picked up, partly as multinationals continue expanding to Panama. “It’s not that all the apartments are going to be sold tomorrow, it’s that the projects are well capitalized. So they don’t need to sell off 100% of the building in order to pay the loan.”

Gates and Pilots

Copa Holdings, with a market capitalization of around $2 billion expects profit margins between 20% and 22% for 2010. Industry analysts point to the carrier’s Panama hub – which is a fuel saver for its sea level takeoffs and strategically located on the isthmus joining North to South America – and limited competition for its success. The group incorporates Copa and Colombia’s Aero República, which was acquired in 2005. Heightened competition from last

Motta sees few constraints to Panama’s growth. They include the government’s ability to execute an ambitious infrastructure agenda, a shortage of skilled labor and supply of private education for an influx of foreigners fuelled by laws designed to attract multinationals. Critics say conservative president Ricardo Martinelli has incurred risk by concentrating power and rushing controversial legislation that weakens environmental laws and labor unions, while also increasing the use of force by will see significant advances over the next few years. Integration is expected to police. A small backlash has resulted in strikes and street-blocking protests that be boosted by a long-awaited electrical left at least two men dead in July clashes interconnection grid (SIEPAC), with the first substations in Costa Rica and Panama with riot police. Motta says he is not concerned about to begin functioning by August, according to the IDB, which is financing the project. political risk interrupting Panama’s bullish “We have done things that have moved economic run. “Is there a political risk of some local confrontation? There always is. us forward but we have stayed short of a But there’s no changing of the direction of major integration,” says Motta. He adds the river,” says Motta. that policymakers are lagging as the Motta is guarded when speaking of private sector has become more regional. where he’d like to invest further. But he While regional trade has increased says tourism is ripe for expansion. steadily and customs guidelines are “The tourist industry is a big industry almost completely streamlined, border that [in] Panama is very unknown, let’s crossing is cumbersome and inefficient, say compared to Costa Rica,” says Motta. he adds. “I would say that’s an industry that I think “I think just like the European Union, people should look at. We’re not that far to a certain extent businesses are always from the major markets both in the south ahead of the political realities,” says and the north,” he concludes. LF Motta. “I think today you can find a lot

“We’re both responsible airlines trying to grow the region . . . We have to raise the bar a little higher,” says Motta

No Reversal

24 LatinFinance

September/October 2010

Latin Finance - September/October 2010

Table of Contents for the Digital Edition of Latin Finance - September/October 2010