Source: http://worldcityweb.com/home/MIA/publications/magazine/21/680/

Latin ad boom

by Joachim Bamrud

After a tough few years, Latin America’s advertising sector is rebounding. Among the beneficiaries: Miami-based broadcasters and ad agencies. Among the big spenders: General Motors’ Miramar-based Latin America division.

Rita Ferro, vice president of advertising sales for ESPN International, Disney Channel and Jetix for Latin America, is bullish these days.

Advertising picked up last year in all three channels last year, helped by strong growth in Mexico, Brazil and Argentina and surprisingly Venezuela.

“2004 was a significantly better year for cable ad sales than 2003 and we saw significant sales in the region, ranging from Mexico to Argentina,” she says. “Even markets like Venezuela, which you’d think would be unstable, had significant growth.”

Other pan-regional broadcasters such as Warner and Turner report similar ad growth in the region last year. In fact, ad sales through pay-TV channels in Latin America increased by 18 percent during 2004, according to Miami-based Latin America Multichannel Advertising Council (Lamac), an industry group that includes 20 networks.

Also Miami-based agencies benefited.

Grace Palacios-Will, president of Miami-based ad agency Charney/Palacios & Co, chalked up an increase of eight percent in revenues last year.

“We were pleasantly surprised,” she says of 2004. After the slump in 2001, she and her agency tended to be conservative with their budgets and last year had hoped at best to repeat the 2003 figures and avoid an outright decline.

All in all, total ad spending in Latin America grew by 11.6 percent to $15.9 billion last year, according to London based ad agency Zenith Optimedia. That was better than the U.S. growth rate of 9.8 percent for the same period, according to TNS Media Intelligence.

Five countries alone account for 72.3 percent of total spending in Latin America, and of those, two Mexico and Brazil dominate.

As in the United States, General Motors and Procter & Gamble were major advertisers in Latin America. The U.S. automaker has been especially aggressive in advertising through pay-TV broadcasters like ESPN.

“After seeing the success achieved in 2003 with the launch of our regional advertising initiative, we increased our spending in 2004 and are forecasting another increase in 2005,” saysMaureen Kempston Darkes, vice president for General Motors Miramarbased Latin America, Africa and Middle East division.

MEXICO

Mexico last year came back as Latin America’s top ad market, replacing Brazil, which had held that position in 2003. Total spending on advertising in Mexico grew by 10.7 percent during 2004 to $4.0 billion, according to estimates from ZenithOptimedia.

The Mexican ad market had been seeing flat growth since 2000, but thanks to an improved economy last year, ad spending grew as well. Telecom ads doubled, while other product categories that boosted their advertising included financial services (up 38 percent), food (up 34 percent) and cosmetics (up 29 percent).

Televisa and TV Azteca were the top advertisers once again, but Procter & Gamble boosted its ad spending more than any other of the top ten advertisers. The company’s advertising expanded by 25 percent in local currency terms. TV and magazines were the big winners last year, posting 12.8 percent and 29 percent ad growth, respectively. But newspapers also did well. “Mexico was very important for us,” Palacios says.

ZenithOptimedia expects a 12.0 percent growth in ad spending this year.

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BRAZIL**

Advertising spending in Brazil grew by 5.9 percent to $3.9 billion last year. However, in reality, that growth rate was somewhat misleading. Only public spending saw a significant increase (26 percent), while ads for all product categories (except for department stores) fell and department store promotions grew by only 3 percent. Of Brazil’s top ten advertisers last year, only four boosted spending and two of those were state-owned companies (Banco do Brasil and oil giant Petrobras).

TV ad spending grew by 10.1 percent, while radio and newspapers saw slower growth and magazines and outdoor advertising fell. Pay-TV ads grew by 23 percent last year, according to Lamac.

This year, driven by TV, especially soccer and Formula 1 programs of Globo, the largest TV network, Brazil’s ad spending should grow by 2.5 percent.

VENEZUELA**

Last year also brought some good news for Venezuela’s beleaguered media and advertising industry. Total ad spending grew by 74.2 percent to $1.7 billion. That follows two years of decline including a 25.9 percent fall in 2003.

The strong growth pushed Venezuela to third place in Latin America, after Colombia had held that position in 2003. The increased ad spending in Venezuela benefited TV most (up 85.8 percent), but also all other ad channels. Advertising through Pay-TV channels expanded by 44 percent, according to Lamac.

Charney/Palacios actually noted a decrease in ad spending in Venezuela last year, but interest is picking up this year. “Venezuela is being put back into the picture,” she says. “Despite its negative turmoil in terms of the political situation, it’s still a country with a lot of potential and business, so advertisers realize they have to be there.”

But the continued economic problems have led ZenithOptimedia to forecast declines of 10.0 percent and 11.1 percent, respectively, during 2005 and 2006.

ARGENTINA**

Argentina’s ad sector last year grew for the first time in seven years. Spending on advertisements in Argentina reached $892 million last year, an increase of 8.1 percent compared with 2003. Pay TV ads grew by a whopping 50 percent last year, according to Lamac.

French food producer Danone, Procter & Gamble and Chile-based retailer Cencosud helped drive the growth, as did the Argentine government and local telecom companies. Radio, newspapers and TV were the biggest ad winners, while magazine ads remained flat.

“Argentina had exceptionally strong growth,” says Ferro. “We saw a big, big growth last year over the previous year.” And that growth didn’t come on the heels of a weak 2003, she emphasizes. “We actually didn’t have poor performance in 2003.”

Like Ferro, Palacios was pleased with the developments in the South American country. “We had severe decreases in our budgets going into Argentina and then (ended up with) healthy growth,” she says.

This year, Argentina is expected to again see a decline (of 0.9 percent) before growing again in 2006, ZenithOptimedia forecasts.

OUTLOOK

This year, Latin America is set for another boost in ad spending, albeit at a lower rate than during 2004. ZenithOptimedia forecasts growth of 4.8 percent to $16.7 billion. Thereafter, the region will see growth of 6.2 percent and 7.3 percent during 2006 and 2007, respectively.

“We started with a strong first quarter,” Palacios says. While she doesn’t expect the strong growth seen in the late 1990’s, she anticipates another strong year. Her budget calls for 10 percent growth.

Ferro also notes strong growth during the first months this year. “So far it’s been excellent," she says. “We continue the strong growth we had in 2004."

ESPN is enjoying increased ad spending related to the World Cup in soccer next year, with broadcasts of various qualifying matches. “We saw strong growth last year and expect to be significantly bigger this year,” Ferro says.