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Caterpillar’s Southern Strategy

This morning’s SEC filing was ugly across the board except for one bright spot: Latin American sales. A recent press release from Caterpillar hypes their power-generator sales in Argentina, but all “Cat is Saving the World by Digging Big Holes In It” rhetoric aside, something’s afoot south of the U.S. border.

As Argentina rises as a power player in the global marketplace, the demand for electricity in the country has increased dramatically. According to Argentina’s Ministry of Economy and Production, the gross internal product (GIP) has grown between eight and nine percent annually over the last five years. To help meet the needs of this international economic force, Caterpillar Inc. and Finning South America (FINSA) have supplied more than 270 natural gas and diesel generator sets over the last six months, providing over 200 MW of power to Argentinean businesses.

“Limits on energy supplied through the local grid, combined with the nation’s burgeoning industrial growth, have increased the demand for on-site power generation,” said Octavio Alvarado, Electric Power Group Industry Manager, FINSA. “Finning has invested more than $150 million ARS ($50 million USD) in staff training and inventory to ensure that a large range of equipment and expertise is readily available to meet the power needs of this country. We also will have welcomed nearly 200 new and highly trained electric power engineers and technicians to the FINSA team by the end of 2008.”

It’s not just generators. It’s also iron ore and other mines. One South American miner worth a look is Vale, which trades under the ticker RIO on the NYSE.

Companhia Vale do Rio Doce (Vale) announces that it has entered into a definitive arrangement agreement with African Rainbow Minerals Limited (ARM) and its 65%-owned subsidiary TEAL Exploration & Mining Incorporated (TEAL) for transactions through which Vale will acquire a 50% interest in a joint venture company which will own TEAL’s subsidiaries for CAD$ 81 million, enhancing Vale’s strategic growth options in the copper business in Africa.

Vale’s chart is a trainwreck like everybody else’s this year, but the Motley Fool CAPS system — which allows FOOL readers to rate stocks — gives Vale five stars. (The CAPS system is entirely unproven at this point but the idea of crowd-sourcing their entire readership and championing the most accurate stock pickers is intriguing).

The South American stock exchanges have taken their lumps this year, but the Latin American development story is compelling for Cat watchers.

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Tom Mangan posted at 11:04 am December 18th, 2008 |

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