South America (Argentina, Chile, Colombia, Peru, and Uruguay)
The results obtained in South America in 2006 reflect
the good economic performance of this region, the
entry into Peru and the continued effort to improve
management processes. Siderperu, which is now
operated by the Gerdau Group, is the largest steel
mill in Peru (see Gerdau arrives in Peru).
Additionally, the consolidation of Diaco (Colombia) and 100% of Sipar (Argentina) at the end of 2005
positively impacted the Group’s performance in 2006.
According to the Economic Commission
for Latin America and the Caribbean (ECLAC), the
GDP in the region grew an average of 5.3% in 2006.
Except for Chile, practically all countries in the
region recorded significant growth in the civil
construction sector.
As a result, the combined Gerdau operations produced
1.2 million metric tons in 2006, an increase of 131.3%
over the 2005 figure.
In Colombia, the Gerdau Group consolidated its
leadership in the market and recorded strong growth.
In Uruguay, where the group is also a market leader,
sales were driven by the installation of international
industrial facilities and by civil construction projects
in the tourist city of Punta del Este.
The Group’s performance in Argentina was less favorable
due to the price control policy imposed by the local
government and the readjustment of electricity tariffs
and labor costs.
In 2006, US$ 52.4 million was invested in the mills
in Argentina, Chile, Colombia, Peru and Uruguay for
technological upgrades and expansion of installed
capacity. Most of this amount went to Diaco in Colombia.
Diaco’s annual production capacity was
increased from 380,000 metric tons to 530,000 metric
tons. In Uruguay, Laisa's capacity was increased
from 70,000 metric tons to 100,000 metric tons
after the installation of a new electric arc furnace.
In South America, Gerdau steel was used for major
construction works, such as the TransMilenio project,
a system of bus corridors built in Bogotá.
Perspectives
Gerdau's growth strategy in Latin America will be
maintained in 2007, either through acquisitions
or investments in the existing industrial plants.
In Colombia and Peru there is potential for growth,
since these markets rely heavily on imports that can
be replaced with local production in the future. Chile's
stable economic situation provides new growth
possibilities. The expansion of Laisa in Uruguay will
guarantee the capacity to meet the country’s demand
over the next 10 years. Despite the difficulties in
Argentina, the Gerdau Group intends to continue
investing in that country, especially because we
believe that this transition period will lead to social
and economic development.
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