SCOTT LATAM GOALs TIMELINE Slides ( NEAR FINAL VERSION )

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Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Scott Barnette Hitachi Hitachi Hitachi Hitachi Hitachi

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Contents Project: Abstract Goal Hypothesis’ Conclusions to Hypothesis’ Recommendations: LatAm Regional Strategy Country Attractiveness Rank by Sector Public Private Partnerships Roadmap for Japan – LatAm Partnership Business: Outlooks ( economic, political, industry sectors ) National Infrastructure Plans List of Major Rail, Water, Electric Projects Special Section: LatAm Risks Special Briefing: Colombia Special Report: LatAm IT Infrastructure BOOM ! Special Section: Public-Private-Partnerships GE, Siemens, ABB in Latin America China Activities & Strategy in Latin America Regional Overview sdbarnetteDecember2011

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LatAm weathered 2009 financial crisis, though regional challenges remain Experts predict LatAm economies will continue on sustainable growth path LatAm countries are focused on their infrastructure demands in order to ensure continuation of their economic growth and prosperity. Between 2010 – 2015, region-wide, a total of $450 billion will be spent on infrastructure (Transport, Water, Electric, ICT), commitments that are well defined and documented in several LatAm National Infrastructure Plans. The Goal of this project is to clarify what areas of potential for Hitachi to significantly expand LatAm business, including what kind of potentiality exists for entering countries beyond the well explored Brazil/Mexico/Argentina ABSTRACT * LatAm…..Latin America sdbarnetteDecember2011 Implications: Opportunities beyond Brazil, Mexico, Argentina? Which sectors, technologies? Entry Pathways?

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H1. A substantial proportion of LatAm infrastructure spending is aimed at infrastructure technologies within Hitachi’s social innovation portfolio ( i.e. Rail, Electric, Water) H2. Chile, Peru and Colombia seem highly promising for Hitachi’s social innovation portfolio ( i.e. Rail, Electric, Water ) H3. LatAm is experienced in the use of Public Private Partnerships (PPP) as a method of financing large public infrastructure investments HYPOTHESIS sdbarnetteDecember2011

Conclusion to Hypothesis #1 : About 20% of LatAm’s $450B 2010-2015 LatAm Infrastructure Investment is relevant to Hitachi’s social innovation portfolio (rail, water, electric, ICT ) : 

sdbarnetteDecember2011 80% is aimed at non-Hitachi relevant infrastructure: roads, aqueducts, ports, bus rapid transit, Oil & Gas Pipelines, hospitals, schools, housing, airports $450B infrastructure investment region-wide over 2010-2015 2% of entire region-wide GDP, and still increasing…. (compared to 6% India, 10% China) Brazil ($230B), Mexico ($70B), Chile ($42B), Colombia ($33B), Peru ($22B) Colombia, Chile, Peru jumped, committing >16%/year of GDP toward Infrastructure investments…Brazil 8%, Argentina trails at only 2%/year Region infrastructure investments heading two paths, growing investments (Brazil, Colombia, Chile, Peru), while (Argentina, others) showing only very low infrastructure investment going forward Annual LatAm Infrastructure Investment (2010-2015) $44B Highways, Railways, Waterways $26B Electricity $18B Water/Wastewater $13B Urban Mass Transit $13B Ports Source: National Infrastructure Plans CG/LA Infrastructure, IMF Conclusion to Hypothesis #1 : About 20% of LatAm’s $450B 2010-2015 LatAm Infrastructure Investment is relevant to Hitachi’s social innovation portfolio (rail, water, electric, ICT )

Conclusion to Hypothesis 2: Colombia, Chile, Peru, regarding Hitachi social innovation business opportunities, are becoming increasingly attractive … : 

sdbarnetteDecember2011 Colombia, Chile, Peru jumped, committing >16%/year of GDP toward Infrastructure In 2010 Colombia implemented a $317B National Infrastructure Plan… … however, most of it is not yet aimed at rail, water, electric Colombia and Japan are in discussion of EPA…likely to be signed late 2012 … Colombia’s economy will get a strong 2013 boost from preferential trade with Japan 2010-2014, Colombia will infrastructure spend: Electric ( $1B/yr), Water ($1B/yr), Rail (300M/yr) Chile has some rail, electric, and water projects that are relevant to Hitachi Of the 3 countries, Colombia is more attractive/relevant, followed by Chile, then Peru Conclusion to Hypothesis 2: Colombia, Chile, Peru, regarding Hitachi social innovation business opportunities, are becoming increasingly attractive …

Deloitte’s 2010 view: Brazil has made progress with the PPP approach, …. especially in railways, roads, and ports….but still room for improvement : 

Deloitte’s 2010 view: Brazil has made progress with the PPP approach, …. especially in railways, roads, and ports….but still room for improvement Brazil is only in Stage 1 …. but remains one of the countries with the most PPP activity sdbarnetteDecember2011 Conclusion to Hypothesis 3: PPP’s are crucial to financing infrastructure projects, and LatAm is not as experienced as other regions with the use of PPP’s …

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Which market, which segment What is the scale of the opportunity Form of investment How to operate in the region (tax, labor) latam recommendation: methodical, fact-driven process for market entry Market assessment Internal capability assessment Assessment of Entry Options sdbarnetteDecember2011

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sdbarnetteDecember2011 Regional Entry Strategy research should pursue many information sources

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latam recommendation : Have detailed Region entry Strategy created by relevant group Companies sdbarnetteDecember2011

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sdbarnetteDecember2011 R1. Group Company: “Regional Strategy & Entry Plan” should be created, identifying specific future infrastructure projects within the National Infrastructure Plans, while also detailing precisely what is needed for the Group Company to build-up the requisite capabilities to win in the region on a sustainable basis. Japan Govt: “A Road Map for New Dimensions to the Strategic Partnership between Japan and LatAm“, should be existing and our Corporate Headquarters should create a Regional Strategic Plan that links the Japan Govt Region Strategy with our respective Group Companies Regional Strategy. R2. SAOHI/BUEHI: “Colombia, Chile, Peru” should continue to be monitored closely as these countries are increasingly becoming business opportunities for Hitachi’s social innovation portfolio ( Rail, Electric, Water, ICT ) . R3. Japan Agencies (JETRO, JBIC, others): Public Private Partnership forums, events, conferences, should be routinely sponsored, expressing Japan’s interest in supporting and participating in LatAm’s PPP’s. latam recommendations: * PPP…..Public Provate Partnerships

latam recommendation : This is a decade that Hitachi should invest in LatAm … (but still with Risk Management) : 

Growing macro stability region-wide Largely untapped by investment professionals Proven capacity to design and implement sound macroeconomic policies Improved banking systems, and financial governance Effective and transparent use of resources / budget support Increasingly higher revenues and GDP’s Growth oriented Govt and Industry planning mindsets Regional economic integration Better economic /financial data latam recommendation : This is a decade that Hitachi should invest in LatAm … (but still with Risk Management) Latin America … increasingly attractive … rapidly rising-up sdbarnetteDecember2011

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latam Recommendation: High Level Latam Region Strategy Use Multi-level Strategy: link Japan Govt “LatAm Strategy”, Hitachi Ltd.’s Region Strategy, Group Company’s Region Strategy, with Latin America’s National Infrastructure Investment Plans Near term, continue chasing Request For Proposal tenders for opportunities across Brazil/Argentina/Mexico, as well as Columbia/Chile/Peru ... Where necessary, invest in LatAm Government Relations to strengthen Hitachi promotions into Federal/State/Local Ministries, Agencies, Regulators … Establish partnerships: Sogo Shosha, PPP’s, EPC’s and Consultancies … Leverage existing relations with significant LatAm operations ( GE, IBM, HP ) … Establish a LatAm risk management framework & system … Build-up a track record of successful projects in the region … Over long term, commensurate with the success of region building, invest in higher levels of capabilities, including local executive leadership, local production, local R&D, local procurement, local contracts & negotiations, local project planning/management etc sdbarnetteDecember2011

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Road Map for New Dimensions to a Strategic Partnership between Japan and LatAm Multi-level Interaction: Gov’t-to-Gov’t Agency-to-Agency Industry-to-Industry University-to-University Regional Japan and LatAm share common interests Strategy Democracy, peace, stability, prosperity, human rights Message: Five Pillars of future architecture of the region A more formal, new dynamism, in a positive direction Affirm willingness to build a strong, enduring partnership Political: Active high level visits between countries Regular exchanges between members of respective cabinets Economic: Expansion of bi-lateral trade Business Leaders Forum LatAm – Japan, Urban Development Working Group LatAm – Japan, ICT Technology Working Group Japan Science & Tech Agency tie-up with LatAm Science & Tech Agencies Innovation Management Programs between universities & corporations Youth Exchange, Academic Exchange, Cultural Exchange, Tourism Promotion Special Economic Large LatAm Regional Infrastructure Projects Partnerships: JETRO/JBIC/JICA Related Activities Recommendation: Put forth a multi-level coordinated effort to pave the wave for Japan Industries into LatAm for the next 20 years … Starting with “ Japan ‘s LatAm Region Strategy “…. …then building downward to a “ Hitachi Ltd. Region Strategy “ ………..then building downward to individual “ Group Company Region Strategy” latam recommendation : sdbarnetteDecember2011

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latam recommendation : Leverage Japan’s New “Aide-for-Trade” Strategy 2009 Japan Foreign Investment Strategy Council Council Head: MOFA and MEITI Member Institutions: JICA, JBIC, Keidanren Japan’s New Comprehensive Official Development Assistance (ODA) Leverage Sogo Shosha LatAm Investments: Natural Resources, Energy, and Infrastructure Building downward to a Hitachi Corporate Region Strategy … - clarifying Japan’s historical and current region accomplishments for potential of partnership arrangements sdbarnetteDecember2011

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sdbarnetteAugust2011 BRAZIL COLOMBIA MEXICO ARGENTINA CHILE …. No formal National Infrastructure Plan PERU ….. No formal National Infrastructure Plan latam recommendation : Tightly link our investments to their National Infrastructure Plans sdbarnetteDecember2011

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High Low Country Attractiveness latam recommendation: Prioritize our investments by sector and by probability of return Rail Water Electric** ICT *HSR/MonoRail Brazil Argentina Mexico Chile Colombia Peru Brazil Chile Colombia Market size Market growth Competitive conditions Prohibitive conditions Government regulations Economic & political stability Mexico Solar/Wind Farm Brazil/Mexico Hydro PP Brazil Gas/Oil PP Argentina Nuclear PP Mexico/Argentina Brazil Coal/Oil PP Chile * Note: highlighted specific relevant sub-sector ** Note: Bio-Fuels, Geothermal, gaining in importance, but small Water Brazil Mexico Argentina Colombia Chile Peru *WasterWater Treatment Brazil *SmartGrid Mexico/Brazil High Level Country Attractiveness Rank by Sector ( derived from National Infrastructure Spending & Polices ) sdbarnetteDecember2011

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latam recommendation: Public Private partnerships Japan Govt should continuously encourage Latam PPP formations promote benefits of PPP’s for LatAm financing infrastructure frequently emphasize Japan’’s interest to participate in LatAm PPP’s Messaging of interest to LatAm regarding PPP’s: PPP’s help Govt meet demands of population and social development during early stage when economy may not yet be able to afford expensive infrastructure PPP’s help Govt reduce capital outlays during time of fiscal deficit Investors want to see strong political will and technical expertise from PPP Conflicting regulations across states, preferential treatment for local companies, deter companies and investors Many examples of successful PPP worldwide and across LatAm International Finance Corporation (IFC) can provide much-needed expertise and whose presence will help provide confidence to potential investors sdbarnetteDecember2011

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Commitment, Persistence, Entry Partners Brazil Mexico Agribusiness Construction machinery Mining machinery Smart Grids Mining Waste Water treatment 20 LatAm Recommendation: - tightly align with country-specific sectoral investment commitments/plans Oil & Gas Automotive (historical) Aerospace (entering stage 3) Offshore Oil & Gas equipment Argentina Waste Water treatment Trains & Monorails Smart grid Colombia Peru Chile IT (latest boom) High precision parts Thermal Power Plants Auto Part Mfg Oil & Gas Agribusiness Chemicals Motor vehicles Oil & Gas Mining Farming Mining Farming Mining Farming

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Outlooks: LatAm GDP Growth is projected to sustainably continue sdbarnetteDecember2011

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Outlooks: LatAm Investment rates are expected to grow at LatAm rates …. not Asian Rates sdbarnetteDecember2011

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Outlooks: LatAm Water and Electricity Infrastructure …. relative to other countries sdbarnetteDecember2011

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Outlooks: LatAm Electricity Generation by source Source: - most energy consumption in Brazil, Mexico, Argentina - 1 Hydro, 2 Gas, 3 Oil, 4 Coal - Bio Fuels and Renewables, gaining in importance, but small sdbarnetteDecember2011 25

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Outlooks: LatAm Electricity Demand Forecast (2013 versus 2018) sdbarnetteDecember2011

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OutlookS: LatAm Wind Power, not a large market - 2010, total Wind only 2GW ….. compared to 1000 GW total consumption - Brazil only 1GW installed - Argentina <200MW - Chile only 172MW Why ? - Hydro dominates - Policy changes needed - Regulatory changes needed - Financing/Incentives needed sdbarnetteDecember2011

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Outlooks: LatAm Distribution of Financing for Renewables (2010) - mostly only Brazil driving Renewable Energy (RE) - then followed by Mexico - Argentina high RE potential, but no policy sdbarnetteDecember2011

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Outlooks: Global Water & Waste Water Market 2015 – 2025 Note: Investment Trend for WasteWater Treatment & ReUse sdbarnetteDecember2011

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Risk transfer Budget control On-time delivery Substitute Capex by Opex Consortium Construction Lenders Conceding Authority Special Purpose Company Consortium (Operation& Maintenance) PPP contract O&M contract Engineering, Procurement,and Construction (EPC) contract (turnkey) Loan contract Debt service Capital subsidy Operating subsidies PPP contractual scheme Shareholders Main benefits for the customer Understanding PPP’s and how to participate is key… Typical PPP Structure & Benefits Public Private partnerships

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Combination of Investments is typically required for Infrastructure Private Corporate Bonds Debt Equity Leasing Export Credit Agencies Public Public Bonds Subordinated Debt Govt Guarantees Risk Capital Subordinated Capital Debt (multilateral, commercial) Pension Funds How Big Infrastructure Projects Get Paid? What is needed? Fund-raising Challenge Public Private partnerships sdbarnetteDecember2011

Deloitte’s 2010 view: Brazil has made progress with the PPP approach, …. especially in railways, roads, and ports….but still room for improvement : 

Deloitte’s 2010 view: Brazil has made progress with the PPP approach, …. especially in railways, roads, and ports….but still room for improvement Brazil is still in Stage 1 …. but remains one of the countries with the most PPP activity Public Private partnerships sdbarnetteDecember2011

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RREEF’s 2008 View: LatAm’s PPP Market Maturity Rating is low RREEF: former Deutche Bank Asset Management firm Public Private partnerships

Summary of Brazil’s infrastructure sectors using PPP’s - also note “main players” and “local partners” are essential to Rail and Energy infrastructure projects : 

Summary of Brazil’s infrastructure sectors using PPP’s - also note “main players” and “local partners” are essential to Rail and Energy infrastructure projects Public Private partnerships sdbarnetteDecember2011

Brazil’s Typical PPP Infrastructure Investment Players : 

Brazil’s Typical PPP Infrastructure Investment Players Public Private partnerships sdbarnetteDecember2011

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Brazil: Special Sector Briefing Electricity opportunities in Brazil Nuclear is only 3% of Brazil generation, but is expected to change as the country builds its 3rd plant (Angra3) and plans the construction of at least least 4 new nuclear power plants over the next 15 years.

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Brazil: Special Sector Briefing - Smart Grid deployment Prospective non-Local Partnerships IBM GE SilverSprings Networks Pilot projects local Brazil Utilities - Cities of the Future (Cemig) - SmartGrid Sao Paulo (AES) - Digital City (COPEL) - MicroGrid (CELESC) Major Challenges - size of Brazil grid - remote areas Amazon, and rural areas - reliability standards - installing 65 million smart meters - Brazil National Energy Plan 2007-2017 Driving Factors - prevent 21% of electricity theft - enable remote meter reading - increase grid system efficiencies - allow integration renewable sources Players: Regulations and Standards - Ministry Mines & Energy (MME) - Energy Research Company (EPE) - Electric Energy Research Center (CEPEL) - Operator National Electric System (ONS) - Brazil Electricity Regulatory (ANEEL)

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Brazil: Special Sector Briefing Water Treatment Opportunities in Brazil and across LatAm PAC aims $10B/year over 10 years Market Size Specific Waste Water Equip’t Opportunities Public Private Partnerships are forming Prospective Local Partnerships Driving Factors FIFA Compliance/Requirements PAC and IDA Funding Requirements

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Market Size & Growth Rate Specific IT Opportunities Brazil: Special Sector Briefing Rapidly Emerging IT Infrastructure Opportunities in Brazil … and also Mexico, Colombia, Chile Source:

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Brazil Major Projects: Brazilian deep water pre-Salt oil field - Hitachi expertise in high pressure, high temperature equipment, systems and remote MRO - Petrobras alone will spend $224 BILLION between 2010 – 2015 - Petroleum Institute estimates $1 TRILLION between 2010 – 2020 - unique business opportunity, Petrobras’ enormous deep water offshore Oil & Gas * New Refineries: Critical Equipment Opportunities [ * Scott Barnette has separate detailed report on deep offshore market opportunity }

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Brazil Major Projects: Rail …. { projects have delays but progress is occurring Flagship HSR Project aka “Bullet Train” (TAV) Call for Bids 1Q2012

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Brazil Major Projects: Electric Power Plants Expanding Nuclear Plant Many More Hydro Plants A few more Coal/Oil and Gas Plants

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Brazil Major Projects: Transmission Grid Projects & Wind/Solar Power Plants A few Wind Farms A few Solar Farms Lots more Trans- mission & Dist- ribution

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Brazil Major Projects: Federal Energy Planning (EFE) Future Energy Mix Plans A lot more Wind In Brazil’s Future Electricity Plans, Diversifying away from Hydro. Solar still considered too expensive. Dec 20, 2011, EFE Auction (“A-5”) NEW 6.3GW of installed capacity NEW 231 Power Plant Projects starting 2016 205 Wind Farms 5 Large Hydro 8 Small Hydro 13 BioMass

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Brazil Major Projects: Potable Water and WasteWater Plants An increasing trend of Water Projects In Brazil and across LatAm

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Argentina Major Projects: NEW Electric Power Plants - Govt Policy is for some Hydro, some Nuclear, some Thermal, some Solar/Wind Argentina’s hydroelectric capacity is far from being reached. Shortages in the future will also be addressed with Nuclear, Gas and Renewables. Argentina Nuclear Fleet - Argentina has had nuclear for 60 years - currently 2 power reactors ( Atucha I and Embalse ) - ~ 7% of total generation - third nuclear reactor, Atucha II, under construction - initial planning for 2 new reactors

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Mexico Major Projects: Nuclear …. only two reactors….but $1B market for MRO

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Mexico Major Projects: Solar …. growing but not huge market, many competitors

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Colombia Industrial Equipment Markets growing due to oil & gas industry exports - Market Size: Pumps/Valves/Compressors, Pollution Control Equip’t and Electric Power Systems

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Chile Major Projects: Electric Power Sector Projects Many More Coal Plants More Large Hydro Plants A few small Wind, Solar, Geothermal, Plants Some Transmission & Distribution Projects

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Chile Major Projects: Water & Rail Projects Many DeSal Plants, critical to Chile’s Future WasteWater Treatment Plants Some Transmission & Distribution Projects

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Chile Major Projects: Electric Industry Market Size …. and … Mining Equipment Market Size

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Chile Major Projects: New Electric Power Plants 2010 -2015 … and … Water / WasteWater Crisis Power Plant Prospects Pollution Control Equipment Market Water & WasteWater Market

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Special Sector Briefing: Latam IT Boom New Booming Internet & On-Line Audience in LatAm - driving data center demand for IT Infrastructure

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…allowing for booming LatAm E-Commerce IT Infrastructure Special Sector Briefing: Latam IT Boom

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… which is causing LatAm to now chase software and IT Service markets for jobs growth Kaldorian economies of scale for future professional job growth ICT “spill-over effects” for other domestic sectors Special Sector Briefing: Latam IT Boom

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Example: Territorial Specialization in LatAm Software Industry Special Sector Briefing: Latam IT Boom

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Transnational Software Companies Operating in Latin America Special Sector Briefing: Latam IT Boom

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2010 IBM Establishes Research & Development in Latin America Major IT Players are increasingly moving into LatAm …. Special Sector Briefing: Latam IT Boom

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Latin America: Ranking of Principal Offshore IT Service Providers Special Sector Briefing: Latam IT Boom

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Colombia Government is targeting IT Exports to neighboring countries Special Sector Briefing: Latam IT Boom

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Special Sector Briefing: Latam IT Boom

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2010 Colombia IT related FDI Special Sector Briefing: Latam IT Boom

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sdbarnetteAugust2011 BRAZIL COLOMBIA MEXICO ARGENTINA CHILE …. no formal National Infrastructure Plan PERU ….. no formal National Infrastructure Plan National Infrastructure Plans

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São Paulo Monorail System Project Type Metro line extension Project Cost $1.6bn Route Vila Prudente to Cidade Tiradentes Length 24km Passenger Capacity 40,000 passengers an hour per direction Scheduled Completion Phase 1 by 2014 Owner Companhia do Metropolitano de São Paulo (CMSP / São Paulo Metro) Sample Major Rail Projects in LatAm Sao Paulo Monorail Line 17 Operator Companhia do Metropolitano de São Paulo (CMSP) Turnkey Project Contract A consortium of Monotrilho Integracao Length of the Route 17.7km Number of Stations 18 Project Cost BRZ Real 1.4bn ($862m) Start of Construction 2011 Scheduled Completion 2014 Argentina High Speed Rail Ownership Argentine Government Contract bidders Alstom (France); Siemens (Germany); CAF and Obrascon Huarte Lain (Spain) Line length 710km Project cost (estimated) $4bn Completion date (scheduled) TBA Maximum speed 250–300km/h Gauge 1,435mm Fortaleza Metro Rail Project Operator Metrofor Project Type Modernisation of the existing rail Estimated Investment $592m Project Commenced August 1999 Completion 2014 Passenger Capacity 700,000 a day Rolling Stock Supplier AnsaldoBreda Rio de Janeiro Metro Project Type Metro upgrade Scheduled Completion of Upgrade 2015 Estimated Cost $1.31bn Location Rio de Janeiro Opened 1979 Metro Length 42km Operator Rio Trilhos Chile - High Speed Rail Scheduled Completion 2015 Estimated Cost $650Mn Location: Santiago Operator: Valparaiso Santigo - Metro Line 3 and 6 Scheduled Completion 2017-2018 Estimated Cost $2.8bn Location: Santiago Operator: Valparaiso National Infrastructure Plans

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Sample Water Projects in LatAm National Infrastructure Plans

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ARGENTINA NATIONAL INFRASTRUCTURE PLAN http://institucional.minplan.gov.ar/html/plan_obras/paginas/folleto_1.php BRAZIL NATIONAL INFRASTRUCTURE PLAN http://www.planejamento.gov.br/secretaria.asp?cat=478&sec=61 MEXICO NATIONAL INFRASTRUCTURE PLAN http://www.usmexico.org/nip.htm COLOMBIA NATIONAL INFRASTRUCTURE PLAN http://www.dnp.gov.co/PND/PND20102014.aspx CHILE NATIONAL INFRASTRUCTURE PLAN { no formal infrastructure plan } PERU NATIONAL INFRASTRUCTURE PLAN { no formal infrastructure plan } These government websites have the National Infrastructure Plans National Infrastructure Plans

Brazil’s Main Infrastructure Projects List : 

Brazil’s Main Infrastructure Projects List National Infrastructure Plans

Brazil’s Main Infrastructure Projects List : 

Brazil’s Main Infrastructure Projects List National Infrastructure Plans

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Brazil’s Annual Investment in Infrastructure continues upward National Infrastructure Plans

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Brazil’s infrastructure investment is heavily is aimed at Energy (Oil&Gas), followed by Transportation (Railway, Highway, Ports) National Infrastructure Plans

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Brazil’s PAC2 is nearly R$1Trillion until 2014 PAC2 focuses six major initiatives….11% at transport, 48% at energy National Infrastructure Plans

Brazil’s Infrastructure Spending, not affected by the crisis : 

Brazil’s Infrastructure Spending, not affected by the crisis National Infrastructure Plans

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Most of Brazil Govt spending is aimed at Industry… …. and most of that Industry funding is aimed at Oil & Gas National Infrastructure Plans

Brazil’s Infrastructure Investment Plan up 37% : 

Brazil’s Infrastructure Investment Plan up 37% National Infrastructure Plans

Brazil’s PAC1 Projects not fully materialized : 

Brazil’s PAC1 Projects not fully materialized National Infrastructure Plans

Brazil’s PAC2 Projects are more diversified, more aggressive : 

Brazil’s PAC2 Projects are more diversified, more aggressive National Infrastructure Plans

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ENERGY Gas Transportation Infrastructure Trunk Pipelines Regional Pipeline Infrastructure for Electric Power Generation Hydroelectric Thermal Power Plants Turbio coal deposits Nuclear energy Alternative Energy Electric Power Transmission Substations Power Lines MINING Regulation, control, and oversight of the mining sector Promotion of Private Investment Public Investment in Mining Footprint COMMUNICATION Regulation, control and communications sector audit Satellite Communications: by state-owned company AR-SAT TRANSPORT Road Works Highway-Highway Repaving the national road network Dirt road paving, gravel Road Safety Works Paving and / or resurfacing of access to premises Improvement of rural roads HOUSING New Homes Improving existing housing Railway Infrastructure Transformation of long distance lines are high performance lines Electrification and improvement of urban lines Improvements in shipping lines Maintenance Works Port Infrastructure: Port Expansion Signs and Improvements Waterway Infrastructure: Investment in Waterway Airport Infrastructure: Private investment in the sector Water and Sanitation Water treatment plants, sewage treatment expansion Water and sewer networks aqueduct Water Resources Irrigation Works Flood Control Works Canalization Defenses in rural and urban areas Storm Drain Urban Infrastructure: Urban Pavement Social and Community Infrastructure Hospitals and Community Integrators Civic and Cultural Buildings Restoration Works Educational Infrastructure: Schools and kindergartens Works in Universities Argentina: diverse categories of Infrastructure Spending... some Hitachi relevant RED: Hitachi Social Innovation portfolio related

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Argentina: 2010-2015 CAGR for Rail, Water, Sewage forecast is lower than 2006-2010 period - despite Argentina’s lower future spend …. ….. still substantial Hitachi relevant opportunities in Electric, Rail, Water/WasteWater Argentina Market Size: 2010-2015 for Rail, Water, Sewage National Infrastructure Plans

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Mexico’s National Infrastructure Program Source: SHCP, Mexico 2010; Banobras/FONADIN 11 National Infrastructure Plans

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Mexico Investments in Infrastructure Source: SHCP, Mexico 2010; Banobras/FONADIN 14 National Infrastructure Plans

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Mexico Investments in Infrastructure is growing Source: SHCP, Mexico 2010; Banobras/FONADIN 12 National Infrastructure Plans

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Though MEXICO is increasing infrastructure investment, much is aimed at Energy Sector infrastructure … some is aimed at Water, Electric and Rail National Infrastructure Plans

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National Infrastructure Plans Peru: 2010-2015 CAGR for Rail, Water, Sewage - the spend is not huge but still substantial Hitachi relevant opportunities in Electric, Rail, Water/WasteWater Peru Market Size: 2010-2015 for Rail, Water, Sewage

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Bogota, November 28, 2011.- The study group formed of Colombia and Japan began today, in an effort to move toward bilateral negotiations for an economic partnership agreement (EPA). Japan Gov’t: Taking the next step with LatAm, another EPA (Colombia) Special Briefing: Colombia

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Special Briefing: Colombia Post-crisis , Colombia‘s GDP bounces right back

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Colombia’s Pillars for the National Development Plan National Infrastructure Plans

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Colombia’s: categories of National Infrastructure Spending Projects with large regional economic impact Special Briefing: Colombia

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Colombia … - recently jumped to invest 16%/year of GDP on infrastructure - but much of the new investment is aimed at Roads, Schools, Hospitals, etc - still a good portion is aimed at Rail, Water, Electric …. Colombia Market Size: 2010-2015 for Rail, Water, Sewage Special Briefing: Colombia

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Colombia is positioning to be an export platform: - 11 free trade agreements (FTA) with 48 countries allowing preferential access to over 1500 million consumers Source: Colombia Govt Website Special Briefing: Colombia

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In 2011, Colombia has been negotiating 18 international investment agreements Source: Colombia Govt Website Special Briefing: Colombia

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In 2011, Colombia has been negotiating 16 double taxation agreements (DTA) Special Briefing: Colombia

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Colombia’s High level Strategy for IT Service Outsourcing Special Briefing: Colombia

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Though Colombia is increasingly attractive in overall sense, currently not much investment is aimed at rail, water, electric infrastructure Special Briefing: Colombia

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2009-2010 While other countries were worried about the Debt Crisis and bringing funds home……Panama, Anguilla, Canada more than doubled their FDI into Colombia Special Briefing: Colombia

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Colombia ranks high in qualified labor and education quality Special Briefing: Colombia

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- Compared to Chile, Peru…Colombia has high density urban educated - Chile’s urban educated population cluster very small (only 6.2M) - Chile (tot. pop.17M), Peru (tot. pop.29M), Colombia (tot. pop.45M) Special Briefing: Colombia

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GE Brazil…..  Brazil CEO/Jose G. Ferreira 2010 ~$3B rev.,  several local factories, committed 2012 new $100m multi-disciplinary R&D ctr Rio d. J.,  $500m CAPEX commitment 2010-2015,   long in-country history,  using “company-to-country” approach, Current sector push focus:  Offshore O&G,  BioEnergy,  Wind&Solar   Siemens Brazil….. Fmr Brazil CEO/Adilson A. Primo 2010 ~$3B rev.,  13 factories, 6 R&D ctrs,  committed 200 headcount new $50M  Oil & Gas R&D ctr Rio d. J., 105 yr in-country history,   using  “Siemens One” and “Siemens Sustainable Cities” promotion approach,  Current sector push:   chasing massive Economic Growth Acceleration Program (aka PAC1/PAC2) spending  as well as  World Cup and Olympic infrastructure spending (airport-rail-highway, telecom, IT, water,  building systems, system security,  electric power, intelligent vehicle traffic & people traffic management systems              ABB  Brazil……. South America CEO/Sergio Gomes 2010 ~$1.4B rev.,   3 factories, 4 service ctrs,  2011 no new large investment/expansion commitments announced, long in-country history since 1950’s, relying on strengthening Sales Strategy approach (dedicated account teams,  sector prioritized, cross-selling, strategic accounts, and global account management practices). Holding to ABB’s traditional sector focus:  Power Products,  Power Systems,  Process Automation. Industrial Competitors’ Progress in Brazil sdbarnetteDecember2011

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Commitment, Persistence, Entry Partners Brazil Mexico Agribusiness Construction machinery Mining machinery Smart Grids Mining Waste Water treatment 105 Industrial Competitors: High Level Region Strategy - they tightly align with country-specific sectoral investment commitments/plans Oil & Gas Automotive (historical) Aerospace (entering stage 3) Offshore Oil & Gas equipment Argentina Waste Water treatment Trains & Monorails Smart grid Colombia Peru Chile IT (latest boom) High precision parts Thermal Power Plants Auto Part Mfg Oil & Gas Agribusiness Chemicals Motor vehicles Oil & Gas Mining Farming Mining Farming Mining Farming

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Siemens To Invest Up To $600 Million In Brazil By 2016, CEO Says Thursday, July 07, 2011 Siemens announces new global R&D Center in Rio de Janeiro August 7, 2011 GE TO INVEST $500 MILLION IN BRAZIL FOR ACCELERATED GROWTH  New Brazil Global Research Center to be located in Rio de Janeiro 10 November 2010

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GE CEO Latin America * “Reinaldo A. Garcia” GE CEO Brazil * “Jose G. Ferreira”

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…… this is likely how GE has been approaching BRAZIL GE’s “Company-to-Country” Strategy, example CHINA …… concept is simple…..bring unmatched BREADTH, SCALE, and COMMITMENT …… from GE finance to GE technology to GE local investments ……local factories, local purchasing, local R&D centers, local marketing partners, local Govt Relations etc

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2001–2010 GE increasingly focused BRAZIL as next FDI location 2010 $118m GE Brazil CAPEX $50m NEW GE Medical local production $35m Airplane engine repair facility $21m Deep Sea Oil Equipment factory $12m Locomotive factory NEW GE BRAZIL R&D Center * $100m…2012 completion * Rio de Janeiro * 200 researchers & engineers * Multi disciplinary

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In Brazil, GE INFRASTRUCTURE is mainly focused on 3 sectors:

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2010 In Brazil, Siemens (~$3B) revenue compares to GE (~$3B) Siemens CEO Latin America, Siemens CEO Brazil, Adilson Primo 8 local factories established, 2005 – 2010 3 NEW factories (motors for O&G, mining, ethanol industries) 2012 NEW R&D site, 200 headcount, $50m, Oil&Gas Rio de Janerio by 2012 2011 commitment to spend $600m CAPEX, 2010 - 2016

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Siemens in Brazil for 105 years !!!

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China Gov’t policy on State-owned companies since 2000 Non-state-owned companies seeking global Brands, key technologies, access to natural resources Export to LATAM, import natural resources and commodities from LATAM, while out-competing LATAM for US, Europe, and other global export destinations Establish manufacturing export platforms out-side China to circumvent risk of future host country protectionist policies Next stage in LATAM, chase infrastructure projects with the financial backing of the China Gov’t Why ? China’s Latin America Activities and Strategy - since 2010 , China’s FDI heavily aimed at Argentina and Brazil - in 2011, CHina Aimied large FDI at peru ‘s resources sdbarnetteDecember2011

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General LatAm Overview Diverse set of countries – from large rapidly growing middle income countries to small, fragile and vulnerable ones Common challenges: high inequality and large number of poor, in spite of progress Continuous need to strengthen institutions Historic infrastructure gap Need to invest in human capital to sustain growth, achieve mid-term competitiveness Increasing global role and connectivity ~90% of GDP and ~90% of population are in wealthier commodity export countries sdbarnetteDecember2011 Regional Overview :

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After decades of volatility, why is LatAm growing so nicely? Since 2002, a region-wide shift to Democracies, to “good” fiscal policies, and also large export trade to China …. all combining to propel growth for LatAm Regional Overview : Strong Y-to-Y trade growth 2003 – 2010 (except crisis yr 2009) … the predominant industries are as follows: sdbarnetteDecember2011

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Not just Exports to China, India, US, EMEA driving LATAM Infrastructure demand… … but also rapidly growing interregional trade driving infrastructure demand sdbarnetteDecember2011 Regional Overview :

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Favorable political tailwinds … past decade of democratization and pro-cyclical fiscal policies have taken root Dilma Rouseff Ollanta Humala sdbarnetteDecember2011 Regional Overview :

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Example of LatAm’s new pro-cyclical fiscal policy. As soon as 2007 crisis hits, Brazil started rapidly building-up its international reserves, strengthening domestic consumption policies, thus creating buffer against risk of future external global shock(s) Regional Overview : sdbarnetteDecember2011

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Which LatAm countries have improving risk/reward profiles ? no clear risk/reward out-performer in LatAm region Chile tops list for attractive risk/reward profile Chile’s weak points: industry scale & small population Mexico has a gradually improving risk/reward profile Colombia has favorable risk/reward trend occurring Brazil/Argentina slipped slightly in risk/reward profile Venezuela/Ecuador most risk of South America countries Central America still underperforms South America “Business Market Intelligence Index” - new up-and-comers Chile, Colombia and Peru sdbarnetteDecember2011 Regional Overview :

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“World Economic Forum Competitive Index” - new up-and-comers Chile, Colombia and Peru sdbarnetteDecember2011 Regional Overview :

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Top 14 Cities in Latin America sdbarnetteDecember2011 Regional Overview :

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Post—2009 Crisis , LatAm Macroeconomics …. quite favorable still sdbarnetteDecember2011

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“Hot in the South …. slightly less hot in the North” sdbarnetteDecember2011 Regional Overview :

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Largest LatAm Companies sdbarnetteDecember2011

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M&A Entry Method 2010 Active LatAm M&A { note Japan M&A } sdbarnetteDecember2011

As an emerging market, still LatAm Long Term Challenges : 

As an emerging market, still LatAm Long Term Challenges affirm long-term infrastructure policies ( energy, logistics, environment, IT infrastructure… ) promote domestic savings to provide long-term funds for infrastructure ( banks and capital markets ) job expansion, improvement in education …. broaden income distribution develop capacity for innovation and competitiveness of domestic industries sdbarnetteDecember2011 Regional Overview :

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Contents Project: Abstract Goal Hypothesis’ Conclusions to Hypothesis’ Recommendations: LatAm Regional Strategy Country Attractiveness Rank by Sector Public Private Partnerships Roadmap for Japan – LatAm Partnership Business: Outlooks ( economic, political, industry sectors ) National Infrastructure Plans List of Major Rail, Water, Electric Projects Special Section: LatAm Risks Special Briefing: Colombia Special Report: LatAm IT Infrastructure BOOM ! Special Section: Public-Private-Partnerships GE, Siemens, ABB in Latin America China Activities & Strategy in Latin America Regional Overview sdbarnetteDecember2011

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