About a year ago, a 1-minute beer commercial stirred up Brazilians and ended up having Paris Hilton declared too hot for that country. Unfortunately, the sultry actress is not the only with image problems there.

Today as U.S. President Obama visits Brazil, the U.S. is no longer the largest trading partner - China is. So it's no surprise then that on this trip Obama brings a commitment for both infrastructure and export financing in the region. His hope is that in return U.S. businesses create jobs at home while providing goods and services to these emerging, emerging market consumers.

What's also clear is that local Latin American industries, like Beverage and Brewing are poised to enjoy some exciting times ahead.

Key factors for the bright outlook include: 1) robust earnings generated by beverage companies; 2) the recent pick-up in the M&A activity in the industry; and 3) improvement in the region’s domestic consumption of the industry’s products.

Brazil-based alcoholic beverage producer, Companhia de Bebidas das Americas (NYSE:ABV) contends with only limited foreign competition in its domestic market (it controlled 66% of the market volume for beer in 2010), with equally generous profitability (gross margins in excess of 66%). The company hopes to benefit from strong domestic consumption, reflected in its plans to invest BRL 2.5 billion ($1.5 billion) in 2011 for setting up new factories and distribution centers in the country.

Recently, Chile’s beverage trade association, ANBER, reported that the consumption of carbonated soft drinks in that nation grew 6.4% to 2.3 million liters in 2010, compared to a year earkuer. I think that Chile’s commodity-driven economy and the high prices for metals of late (Chile is the largest exporter of copper in the world) will be resulting in heavier wallets in consumer pockets and more discretionary spending at retail stores. That’s great news for investors in soft drinks maker, Embotelladora Andina SA (NYSE:AKO.A).

M&A activity involving the region’s beverage firms has picked up recently, with geographic diversification being a major theme. Chile-based wine maker, Vina Concha y Toro SA (NYSE:VCO) last month acquired U.S.-based Fetzer Vineyards from Brown-Forman Corp. (NYSE:BF.B) for $238 million. VCO also underlined its intent to diversify its product portfolio be-yond the wine segment by acquiring a 40% stake in Chilean beer brewer, Cervezas Kross, thereby giving it access to that nation’s premium beer market. Mexico-based Coca-Cola FEMSA SAB de CV (NYSE:KOF) struck a deal with the Dutch beer mak-er Heineken to sell its beer business in exchange for a stake in Heineken.

The Mexican beverage market is slated to generate growth in-line with the overall economy’s expected growth in 2011. The market for alcoholic beverages is expected to expand 4% while soft spending on soft drinks is expected to grow 5%, according to research firm Business Monitor International. The merger between two of the country’s largest bottlers of Coca Cola, Embotelladoras Arca SAB de CV and Grupo Continental (or Contal) underscores a trend for bottlers to achieve higher operat-ing synergies. They also intend to explore expansion opportuni-ties in overseas markets. Embotelladoras Arca SAB de CV has also signed an agreement with Ecuador-based bottling compa-nies of Coca Cola, aimed at gaining access to that market.

Coming back to Brazil, any breakthroughs on key differences over high U.S. tariffs on imports of Brazilian ethanol and on Brazil's reluctance to allow greater access to its own consumer market would be real, positive changes. Realistically, modest progress is likely on a trade and investment framework and a bilateral tax treaty.

So basically, they won't send Obama packing, but they will take his money. That's my take on it.

Happy trading!

Rudy

The stock markets posted a modest recovery this past week, with leading stocks including:

• Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA) +5.0%
• Southern Copper Corporation (NYSE:SCCO) +4.4%
• Fibria (NYSE:FBR) +3.5%
• Banco Santander (NYSE:STD) +3.3%
• Bancolombia S.A. (NYSE:CIB) +3.1%