It takes a special kind of researcher to hit the road for long stretches and report consistent, solid intelligence back to base. That’s why I brought Sam Hopkins onto the Wealth Daily team back in 2005. Time and again, he’s trekked all over the globe, riding planes, trains, and automobiles with little more than a backpack, passport, and business suit. For the most part, though, Sam simply keeps his eyes open.
By looking around in places like China, Brazil, Israel, and Peru, he sees the companies gaining a foothold in emerging markets — very often, they’re ones you wouldn’t hear about if you just took CNBC or the Journal‘s word. Today, you’ll learn about the linguistic and cultural connections that are giving Spain’s clean energy companies an advantage in Latin America’s burgeoning wind power market, and why noticing market movement now will lead to hefty returns in the coming years.
An armada of Spanish investors is riding a stiff breeze across the Atlantic to their former Latin American colonies.
Among them, two wind power companies are set to profit big time from a clean energy reconquista.
Let me explain…
Over the course of the past couple of weeks, I’ve been privy to Peru’s national renewable energy auction process, which aims to bring clean power production in this leading Latin American economy up to the needs of GDP growth and a growing population. Last Monday, bids in closed envelopes were delivered to the Ministry of Energy and Mines for the first major round of clean power pricing.
And I have a good handle on who the winners will be…
Just a few days before, I met with Juan Coronado, head of one of the bidders, Energia Eolica (which means "wind energy" in Spanish). Señor Coronado echoed lessons I learned in Brazil in 2009 about the need to alternate between abundant but seasonal hydropower resources and sizable breeze-blown power potential.
It’s a matter of math.
From 2006 to 2008, Peru averaged 8.8% economic growth each year, and similar levels of expansion are going to be needed to give jobs to the 370,000 people who enter the workforce annually.
The stakes are high, as my other local contacts here reinforce with stark statistics. Cesar Peñaranda, Executive Director of Economics at the Lima Chamber of Commerce, told me in our meeting that 85% of Peruvians in areas with little or no infrastructure are poor.
That means that roads, water, and above all, energy, are hard to come by for large sections of this strategically important country between China and Brazil. As a result, the denizens of those underserved slums and shantytowns are scarcely involved in the economy except to sell inflatable toys and bubblegum-flavored Inca Cola to the middle and upper class as they escape to the beach for the weekend.
When the global economy turns down, the lower classes get knocked two steps back for every one step forward they took during boom times.
The lesson is that even if commodity prices of Peru’s natural resources like gold, silver, natural gas, and rice are on the rise, the government needs to initiate and attract a lot more investment in infrastructure to achieve first world status — which President Alan Garcia says Peru can do by 2021.
This is where Peru’s clean energy auction comes in, and where you’ll see why Spain is leading the charge.
Spain’s Clean Power Pole Position in Latin America
Spain has become the top source of foreign direct investment (FDI) in Peru, as major Madrid companies like petroleum giant Repsol YPF (NYSE: REP) seek dynamic new markets.
Historical and cultural ties make Latin America an easy choice for expansion beyond Europe, and in the current clean energy bidding in Peru, Spanish clean energy companies are — as my fellow Green Chip International editor Nick Hodge likes to say — in the catbird seat.
In fact, GCI readers already know about two Spanish companies that are sure to be among the winners when Peru names its clean energy champions on February 12.
Lima is celebrating 475 years as a city this week. Founded by the Spaniards as the City of Kings, Lima is now a capital in its own right.
Spain still has plenty to teach Peru about kick-starting a native clean energy industry. At the end of 2009, Spain reached a record 42% of its electricity capacity from wind power; the problem now is storage. Incidentally, Spanish leaders started chirping this week about a big national electric vehicle push, and we’re hearing more and more from energy aficionados around the world that EV batteries could themselves become a widespread storage mechanism for the smart grid. More on that another time…
In Peru, Spain’s top wind power firms can help ramp up generation right now.
But as forcefully as Spain is moving into this market, that country is not alone…
Why Peru is Our Global Green Stock Bellwether, and How to Benefit
The United Nations Conference on Trade and Development says that Peru was unique among emerging markets in bringing FDI up in 2009. Peru’s foreign investment inflows grew by 28.1%, while mighty Brazil’s gravy train delivered only half of its 2008 load last year.
Not only Spain but neighboring Chile, the United States, and of course China are pouring money into Peru.What this means, quite simply, is that Peru is establishing its own momentum as a target for global companies to establish themselves and tap growth that has already proven to reach China and India levels.
As I said above, Peru can’t just bank on commodities to keep FDI and GDP flowing, so the country is searching for sustainable means of growth.
For our purposes, the best approach is stocking up on shares in the Spanish companies that are already the leading investors in Peru’s highly attractive investment scene.
But not just any Spanish company will do… which is why I’ve traveled both to Spain and to Latin America to investigate precisely which firms have the best approach, and which will pay off biggest in the end.
And I’ve prepared a video report from Lima for Green Chip International subscribers. I’ll be updating them on exactly how our portfolio will be affected when the February 12 announcement of winners in the Peruvian clean energy auction comes around.
These stocks aren’t only attractive as long-term plays on international clean energy advancements — they’re also trading at a discount right now, which means there’s never been a better time to buy. Come what may in the market, Nick and I expect upwards of 60% returns in these two companies over the next several months.
And Peru isn’t the end of the story. Other countries on this continent and elsewhere are engaged in similar auction rounds to draw money and create energy for growth, and the same companies we’re talking about have a truly international edge.
To learn more, check out GCI today and get the global advantage so many investors already enjoy.