hrough a blend of historical circumstance, natural resources and long-sought leadership, Brazil's economy is riding a wave of corporate investment that is spread across natural resources, services and manufacturing. The big projects coming to this country and others in South America are helping to shrink income gaps dramatically, spawn new cycles of industry and embody the global growth aspirations of many multinationals. And while many point to a diversification into services, a heavy tilt toward heavy industry remains the continent's economic anchor.
      If only the infrastructure could keep up. Among recent government programs in Brazil is a 10-year plan to bring basic sewage service to 75 percent of the population from today's 35 percent. The cost projection is more than US$23 billion, though some officials have said the true need is for five times as much. Peru is receiving its own $80-million injection of water and sanitation funds from a $1.5-billion fund created by the Spanish government in late 2007. Roads, ports and rail? Don't get people started.
      "Brazil, Argentina and Chile are ahead. But they're still way behind what's really needed," says David Berger, managing director for Latin America and Caribbean for NAI Global, who's worked in every Latin American country but Bolivia over his 23 years of experience in corporate real estate advising. "Paraguay is way behind. All the rest are even worse. The infrastructure for industrial is woefully lacking in Latin America."
      The need is driven not just by modern logistics needs, he says, but by the sheer internal growth of the country and the need to serve citizens. His point was backed up by a recent Bloomberg story citing a 37-percent increase in registered vehicles in Sao Paulo since 2003, and a record reached on May 9, when 165 miles (266 km.) of traffic was at a standstill.
      "The countries aren't taking an integrated approach to development," he says. "They're just allowing projects to go up, and not really looking at how all that growth is going to impact the infrastructure. So a situation that's already inadequate for twentieth century logistics needs is going to get worse before it gets better."
      That said, Chile seems to get the picture.
      "Chile may be the best to address it so far, simply because it's always been more structured in the government's approach to growth," says Berger. "It's a smaller market – though Santiago has 9 million people – and they have strong development criteria. They have the best zoning and building regulations and planning perhaps in all of Latin America."       One window through which to view entire South American industrial marketplace is the family of investments being made by Fiat's commercial vehicle subsidiary Iveco. At the opening of its new $17-million product development center in Sete Lagoas, Minas Gerais, Brazil, the company announced three further facility expansions at facilities in Sete Lagoas, Cordoba, Argentina; and La Victoria, Venezuela, that will receive a combined investment of $339 million. The spate of projects follows on Fiat's reopening of its Cordoba plant in 2006, and its $2.9-billion, 5,500-job family of expansion projects in Minas Gerais announced in 2007. That's the same state where Brazilian steel company Cia Siderurgica Nacional in late 2007 pledged a $5.3-billion investment in a new steel mill, an iron ore pellet plant and two cement plants.
      PSA Peugeot Citroën is investing $500 million to boost production and develop products at its operations in Porto Real, Rio de Janeiro, Brazil; and at plants in Palomar, Buenos Aires, and Jeppener, Argentina, in order to serve the Mercosur trading bloc. Palomar and Porto Real will see the addition of third shifts, and thus 700 workers each. The company also is studying the feasibility of a pilot project in Mexico.
      Non-European OEM investments abound too: Within one week in June, General Motors announced a $500-million, 600-employee investment to produce a new car model at its plant in Sao Jose dos Campos, Sao Paulo, Brazil, and Toyota announced it would build its own $1-billion car plant in Sao Paulo, where it already produces the Corolla.
      Undergirding those OEM announcements is an expected rise in supplier and R&D projects. In the first week of July, Germany's MAHLE Group opened a new 180,840-sq.-ft. (16,800-sq.-m.), 260-employee technical center in Jundiai, Brazil, having outgrown its 30-year-old center in Santo Amaro, near Sao Paulo. Five days later, Federal-Mogul opened a new 110,872-sq.-ft. (10,300-sq.-m.) powertrain component production facility in Araras, Brazil, announcing that its first shipments were sent four weeks ahead of schedule. This too was an upgrade from a former facility, also in Araras, and is the company's sixth facility in South America. Goodyear said in June it would invest $200 million in production expansions at Brazilian plants in Sao Paulo and Americana, and would double capacity at a plant in Maipu, Chile, with a $400-million investment.
      According to a Goodyear release, "the investment at the company's Chilean plant is due in part to the political and economic stability of the country. In recent years, Chile has signed commercial and free trade agreements that have helped Goodyear to more efficiently import raw materials into the country, and to export manufactured products to markets inside and outside the region."
      The projects were announced as part of a global growth strategy that involves the closing of an Australian plant and the relocation and expansion of a Chinese plant.       NAI's David Berger says the fastest-growing market "by far" in South America is all around Sao Paulo. While there is considerable supply, it primarily falls into what he characterizes as Class B building stock. More often than not, that stock is developed in a hodge-podge fashion, resulting in pockets of industrial property surrounded by residential, and all the road and adjacency issues that proximity brings.
      Helping solve those issues takes some educating by project developers, he says, because economic development agencies by and large are more reactive than proactive. He points to Hines as one of the few U.S. developers actively developing sites and looking to do more. Berger's strongest recommendation: Find a local partner, but one that's willing to go cold turkey from a habit of cutting corners to a quality-oriented approach.
      One area corporate end users would like to cut corners is the regulatory red tape often associated with South American nations. Again, says Berger, "it seems to me it's not getting better at all," in part because there's no motivation to change laws when the business is coming anyway. In addition, most reform programs are under-funded for staffing, so "even if you make changes in the law, you don't have enough people doing it."
      Reform of a different nature is coming fast and furious in Venezuela, including an early August blitzkrieg of 26 measures by President Hugo Chavez designed to place even more control of the economy in the state's hands. Among them are laws allowing expropriation of company property related to "essential" goods and services and allowing government intervention in supply chain and pricing matters.
      Asked prior to that decree what kind of guidance he's offering companies looking at Venezuela, Berger says it all depends on how much profit a given company stands to make, and the associated risk-benefit analysis. Because the economy is moving very well there today, he says, some companies will not feel threatened by nationalization. And the engine of oil production and profits serves to cushion the risk. But companies must keep a vigil over the increasing tendency to nationalize.
      On the ground, Berger says Venezuela has seen its crime rate nearly triple over the past decade. And the nation has seen very little building development over the last few years despite its profound economic growth, with vacancy rates in all major cities of less than one percent.
      "A lot of companies would like to go into bigger facilities or consolidate, but those are not being built, or they're not available for lease," he says. "Companies have to design-build and own.
      "In the past one or two years, we're starting to see a little development, because demand is so great," he says. "Local people are amassing wealth, and they can't get it out of the country easily anyway, so they say, 'What the hell, I'll risk it.' But it's still not enough to satiate demand. So when companies look at going into Venezuela right now, they have to look at the limitations on real estate options."