The world's core countries are experiencing many challenges while many parts of Latin America are plowing ahead. Solar continues to come down in cost and the growth of unsubsidized solar in Europe appears to be right around the corner. Latin America does not get a great amount of attention due to its relatively small market and lack of purchasing power. Regardless, Central and South America should be ignored. Chile has over 6000 MW in their pipeline while Brazil is second with a little more than 2000 MW. In 2011 the CIA estimated that Brazil had a GDP of $2.3 trillion and Mexico had a GDP of $1.7 trillion. These nations have large and growing economies which need dependable energy sources. Developing countries are forced to carefully watch their balance of trade and the ability to substitute solar for expensive LNG or coal imports is a convincing sales pitch.
One of the main impediments for the development of solar in Latin America is the constrained capital markets. The banking system is highly oligopolized and borrowers are forced to pay very high interest rates. A complete solar system is a significant capital investment. If a Brazilian borrows 50% of the system's cost at an interest rate of 44% then it will be difficult to get an attractive ROI. The chart below says that Chile's and Mexico's lending rates are much lower than Brazil's but these numbers are severely underestimated. Santander Chile offers personal loans with interest rates from 12% to 30% and Santander Mexico offers similar loans from 20% to 39%. These interest rates show just how precious capital is for Latin American consumers.
First Solar, Inc. (NASDAQ:FSLR) is active in Chile with their 2011 partnership to help develop facilities to serve Chile's mining interests. They recently bought Solar Chile which has a 1.5 gigawatt pipeline. These mines are close to deserts which receive little cloud cover and a large amount of sunshine. The nation needs more power and imports large amounts of LNG which is very expensive. The country's electricity grid is privatized and fragmented which makes locally generated solar more attractive. First Solar has a very low total debt to equity ratio of .15 and a healthy gross margin of 32.8%. Insiders own 26.9 million shares which is 30.9% of shares outstanding. This is a positive aspect of the firm and helps to signal that investors' interests will not be forgotten. First Solar is expected to be profitable in 2013 with estimated EPS earnings around $4.02. This company is a good way to play the growth of solar energy in Latin America.