03 October 2011
Industrial equipment giant Caterpillar is in the midst of starting a subsidiary in Peru to support its in-country dealer and take some of the work off its Latin America headquarters in Miami.
Peru has “been strong in the mining business and we feel the need to place people there to support the dealer,” said Jurg Zundel, general counsel for Caterpillar Latin America.
The dealers operate somewhat independently of Caterpillar corporate, like car dealerships, but due to growth throughout the region the company is “going to put 10 people down there [who] are industry experts,” Zundel added. For example “some of the may be experts in mining… those people will provide marketing and support services to us in Miami, but those services will be for benefit of the dealers.” The company is to be called Caterpillar Latin America Servicios de Chile Ltda., Sucursal de Peru.
Caterpillar wouldn’t reveal its in-country sales but 2010 sales, which include machinery, engines and financial products, in Latin America sales came in at about $6.15 billion, according to its year-end filing with the Securities and Exchange Commission. That was 58 percent higher than its 2009 business, good enough to make it the fastest growing region. By comparison the next fastest growing was North America which rose 30 percent to $16.09 billion. The region is the smallest contributor to the bottom line, but Caterpillar is one of countless companies staking growth on Latin America. The region becomes even more attractive to companies, involved in the natural resources sectors as countries, particularly China, reach across the globe in search of basic commodities.
The bulk of the Caterpillar’s sales throughout the region are in machinery, which generated $4.29 billion in 2010, 68 percent more than the previous year.
Though setting up companies abroad can be time consuming, “it’s not only setting them up, but you have to maintain them, you have to file taxes, you have to have payroll, you have to have human resources,” Zundel said. But with Latin America growing the fastest of all Caterpillar’s regions the question is does it let the company capture more sales.
“Miami is our headquarters for Latin America but we cannot provide all the marketing and support services out of Miami,” Zundel said. “It’s always the question of to what extent you can provide services cross border.
It also has companies in Chile, Mexico and Panama.
“Chile has been important from a mining perspective, Brazil is a very important economy and Panama we have chosen for certain shared services,” he added.
Peru’s 2010 GDP was $154.48 billion, according to the World Bank. That’s expected to grow by 6.4 percent, according to a report from ScotiaBank, the country’s third largest bank, from the Wall Street Journal.
In 2006 mining accounted for about one percent of Peru’s GDP, and the sector and employed about 83,000 people, according to a report from the United States Geological Services.
Peru is the world's largest producer of silver and a major producer of gold, copper, zinc, tin and other minerals.