Ten years ago, Latin America was touted as the place to invest, as GDP surged ahead with no signs of stopping.
Today, the picture isn’t so rosy.
Brazil’s economy is set to shrink by 3%, and Ecuador’s by 0.6%. The IMF predicts Argentina’s growth will be a meager 0.4% this year, and will actually shrink in 2016. Venezuela’s future is particularly murky, as its economy is also expected to contract this year… by 10%.
Looking at the numbers, the continent is in trouble… with one exception: Peru.
The IMF predicts the country GDP will grow by 2.4% this year. That’s thanks in part to the travel and tourism industry, which has grown 40% since 2011.
Making the most of the boom
Two companies are taking a big bet on Peru’s positive economic outlook: LATAM and Avianca – both airlines.
In the spirit of growth, both airlines are the by-product of recent mergers, and both are expanding in the hopes of attracting not only a regional client base, but an international one.
In 2010, Colombia’s Avianca joined with El Salvador’s Taca to create the second largest airline in the region. Much of the airline’s focus, however, has been on the land of the Incas.
“In the five years (since our merger) we have made huge growth,” says Nani Garrues, the head of Avianca Peru. She not only oversees the airline’s regional operations, but has a hand in dictating the direction of the airline overall.
“I participate actively in those decisions that tell where we’re going to fly,” she says. “But my role is also to keep high standards here in Peru.”
The airline’s next target is international travelers who long to see Peru’s many cultural wonders.
“Our growth in the future is the long-haul, it’s the next stage,” admits Garrues.
The continent’s other major carrier, LATAM – the product of a merger between airlines LAN and TAM – is similarly focused on Peru.
“Peru is absolutely strategic for the group for many reasons,” admits Felix Antelo, CEO of LAN Peru.
“Lima is crucial for our international business because we are in the middle of South America, so we are in a hub. We’re in a position where we take traffic from Argentina, Chile and Uruguay and take it to the Caribbean and North America and the States.”
Worth the risk?
Though LATAM seeks growth and a bigger piece of the market, in the short term, there is a lot of focus on successfully merging two brands into one overarching company.
Merging to form a completely unique brand identity is, admits Antelo, not without risks.
“We are worried,” he acknowledges, “but we think that the advantages we’ll have from being LATAM against being two separate brands are really much more than the risks we are running, because we are associating ourselves with the region, with this region, which we think is a region of the future.”
