Therefore, problems relating to mining such as poor infrastructure and stringent bureaucracy are unlikely to be resolved in the near term. Prospecting To Begin In Kwanza Sul In Q412, Angola-based diamond miner Sociedade Mineira de Catoca (SMC) was awarded the rights to carry out prospecting for diamonds in the province of Kwanza Sul. The announcement followed the completion of surveying work by SMC in the mining zones of Gango and Quitúbia, both of which encompass a concession area of 3,000km sq. The company is due to install equipment for prospecting in the area in Q313 in addition to carrying out demining and geological analysis of the region.

The project will be the first diamond mining enterprise in Kwanza Sul province and is the culmination of ongoing attempts to launch exploration projects at Gango and Quitúbia since 2001. This and other projects will ensure that diamonds dominate Angola's mining sector for the foreseeable future.

Although local PC, TV and mobile phone production in Tierra del Fuego state has expanded rapidly, most of the imports used for assembly are still imported. The tax on 'luxury goods' such as mobile phones and digital cameras has dramatically boosted the sales share of locally produced goods, while sales of imported consumer electronics devices have fallen sharply. Headline Expenditure Projections Computer Hardware Sales: US $2.5bn in 2012 to US $2.5bn in 2013, +2% in US dollar terms. Forecast in US dollar terms unchanged due to macroeconomic factors and analyst modification as domestic PC production continues to increase.

The key trends in Argentina's Infrastructure sector are:

• Leading indicators for building permits show consistent contractions, as the industry runs out of steam under the pressure of heavy inflation, import restrictions, a funding squeeze and a slowing macro picture. The slump is being mainly driven by the impact of policies on the residential construction sector and falling industrial production; however, infrastructure should remain the one area of growth, as a number of projects progress. This will not be enough to reverse the trend of falling industry value however.
• We have for some time anticipated that Argentina's construction sector would experience an abrupt slowdown in 2012, following inflated growth of 9.1% in 2011, as a result of pre-election spending. However, as imbalances in the economy unwind, inflation ticks ever higher, the business environment continues to deteriorate and revenues decline, the slowdown has been far more abrupt than anticipated, based on leading construction sector indicators.

Local consumers have turned away from the larger cars (such as the Falcon) being produced by Ford, in favour of cheaper, more fuel-efficient Japanese imports, such as the Mazda 3. Announcing the closure, Ford Australia's President, Bob Graziano, stated that the company's production costs were twice those of Europe and nearly four times higher than in Asia. In conclusion, Graziano said that 'manufacturing is not viable for Ford in Australia in the long term'.

The main trends and developments we highlight for Australia's oil & gas sector are:

• Our forecast for gas production is 142.5bcm by 2017 from an estimate of 59.7bcm in 2012. This growth will be brought about by the development of gas fields that will come online alongside the completion of LNG projects. We expect about 75% of this gas to be exported as LNG, largely to Asian customers. By 2022, gas production is forecast to hit 179.2bcm, with LNG exports surpassing 100bcm.
• However, further expansion of liquefaction capacity - and consequently exports - could be held back. Spiralling developments costs, owing to a shortage of skilled labour and a strong Australian dollar, together with an expected loosening of the global LNG market as more supplies come online, could worsen the economics of LNG projects in Australia.

Key Data:

• Australian mobile operators saw mixed performances in 2012, ending the year with 30.642mn subscriptions. By Q113, BMI data show this figure reached 30.987mn. Telstra continues to gain significant net additions at the expense of Vodafone Hutchison Australia.
• The auction of 700MHz digital dividend spectrum in May 2013 will encourage the introduction of LTE and value-added services; however, we expect strong competition and a deteriorating economy to apply downward pressure on ARPUs. ■ We forecast Australia's broadband industry to receive a boost in the latter part of our forecast period when the National Broadband Network (NBN) and LTE services are widely available. The coalition's alternative NBN plan announced in April 2013 may bring this boost forward as it aims for a faster rollout.

Growth has since recovered, and from 2013 onwards we expect to see very positive growth year on year of around 10%. This growth could however be limited by the growing strength of the Australian dollar, which is making the country one of the most expensive in the Asia Pacific region, and moving forward could deter tourists who will seek more cost effective destinations.

Headline Expenditure Projections

• Pharmaceuticals: BRL52.4bn (US $26.8bn) in 2012 to BRL57.0bn (US $27.5bn) in 2013; +8.7% in local currency terms and 6.3% in US dollars terms. Forecast remains the same as in Q213.
• Healthcare: BRL410.7bn (US $210.2bn) in 2012 to BRL448.9bn (US $224.4bn) in 2013; +9.3% in local currency terms and 6.8% in US dollars. Forecast upwards from Q213 due to more optimistic historical data.

After a February strike created delays at some of Brazil's largest public ports on the back of government plans to modernise the sector, we highlight potential for further industrial action to create massive disruptions at ports over the coming months. Given that President Dilma Rousseff's government has taken a hard line against union demands in recent months and appears to be serious about port modernisation, we expect that several months of intermittent strike action is likely.

Brazil has a high mobile penetration rate, but, with MVNOs set to enter the market in 2013, we expect growth to continue over the medium term. However, it will be at a slower pace compared to 2011 and 2012, as operators push into the last remaining untapped rural areas. Meanwhile, at the other end of the market, operators are targeting wireless data services and VAS such as m-commerce at the existing subscribers to generate additional revenue in urban areas where subscription acquisition strategies have run their course.

Key Data

• Wireless data services have proved popular with consumers, with W-CDMA subscriptions up 41% y-o-y to over 61mn at the end of March 2013. Meanwhile, there were 14,702 LTE subscriptions in Q113, a figure we expect to rise rapidly now that additional operators have launched services.
• Mobile market leader Vivo reported successive net subscription losses in Q412 and Q113, losing a total of 818,000 subscriptions - almost all of which were prepaid - as its market share fell 1.3pps in the six months to the end of March 2013.
• Pay-TV subscriptions continue to expand as América Móvil merged its Embratel and Net Serviços operations with mobile unit Claro. Regulatory data show pay-TV subscriptions increased to 16.189mn in 2012, up from 12.744mn in 2011.

The main trends and developments in Bulgaria's oil and gas sector are:

• On January 18 2012, the Bulgarian Parliament enacted legislation to ban fracture stimulation (fracking), following widespread protests against the controversial extraction procedure. It then suspended a shale gas exploration permit it had earlier granted to Chevron, in spite of the country's speculated 1,000bn cubic metres (bcm) of shale gas potential. In June 2012, the government partly lifted the moratorium, but only for conventional gas exploration.
• Bulgarian energy minister Delyan Dobrev announced in July 2012 that Total has been awarded the highly prospective Khan Asparuh block in the Black Sea. Total will partner Repsol and OMV to explore the block.

Hydropower expansion is already under way, and there is a long queue of potential projects with strong regional backing. Several are set to proceed, with a surge in hydro-based supply due from around 2016. Domestic gas resources could contribute additional capacity, while the utilisation of renewables is set to rise rapidly from a low base. New coal-fired stations are also in the planning stage, with Cambodia open to the long-term possibility of nuclear energy.

However, it also poses significant risks. Home to deep-run corruption, high crime rates and unsophisticated institutions, the generally small industry sizes offer little to make those risks palatable. However, we do see sporadic growth opportunities, and highlight Panama, Costa Rica and Nicaragua as outperformers.

We are currently forecasting average private consumption growth of 4.4% per year over the next five years compared with 8.6% average growth from 2010-2012.

Headline Industry Forecasts (local currency)

• 2013 per capita food consumption growth = +5.2% year-on-year (y-o-y); compound annual growth rate (CAGR) to 2017 = +5.3%.
• 2013 alcoholic drinks value sales = +5.7%; forecast CAGR to 2017 = +5.8%.
• 2013 soft drinks value sales = +7.2%; forecast CAGR to 2017 = +7.4%.
• 2013 mass grocery retail value sales = +5.2%; forecast CAGR to 2017 = +5.4%.

The pipeline of copper projects and the country's global dominance in copper production make this the most likely scenario despite falling ore grades and more modest production growth. The importance of copper mining to Chile's economy cannot be overstated and we believe increasing global supply over coming years, as well as slower Chinese fixed asset investment growth, will weigh on prices. Given our forecast that copper prices will be lower in 2013 and 2014, averaging US $7,300/tonne and US $7,000/tonne, respectively, we believe the Chilean economy will be heavily affected. At present, however, copper prices remain elevated by historical standards, supporting Chile's external accounts and encouraging mine workers to seek higher wages.

Modernisation drives in verticals such as education, healthcare and manufacturing will maintain enterprise spending growth over the medium term, while in the retail market the meta-trend of urbanisation and infrastructure investments by the government will continue to drive demand for hardware. In fact, regional development of the Western areas of China should compensate for a slowdown in sales in the coastal areas where economic growth is slowing and penetration of products and services is already relatively high. Headline Expenditure Projections Computer Hardware Sales: CNY511bn in 2012 to CNY547.4bn in 2013, +9.4% in local currency terms. Minor downward revision to our Q3 2013 forecast on the back of reports of slower than expected retail hardware sales in the first three months of 2013.

Looking forward, it is clear that the development of health insurance will be a key driver of growth. In the life segment, gross written premiums contracted during calendar 2011. As of mid-2013, it is clear that they have (just) returned to growth in calendar 2012. Challenges include the economic environment, the widely publicised restrictions on bancassurance sales that were imposed by the China Banking Regulatory Commission (CBRC) and competition from wealth management products, which are also distributed by banks. Nevertheless, the latest reports from the leading Chinese life insurance companies in relation to their operations in 2012 suggest that they are lifting new business sales and/or profitability. As is the case in the non-life segment, the life companies are introducing new products, developing new distribution channels and doing what they can to boost sales through existing channels. Several companies have indicated that they have been able to achieve meaningful growth (by some metrics and across at least some of their businesses) by developing the agency channel at a time of (sharply) reduced sales through the bancassurance channel. Meanwhile, most of the foreign companies that are active in China's life segment are growing sales and/or profitability - in many cases because they are focusing on geographic or product niches.

The main trends and developments in Croatia's Oil and Gas sector are:

• Gas from the Adriatic and onshore fields should deliver useful domestic volumes over the next few years. We believe output will peak at around 3.0bn cubic metres (bcm) in 2013/14. Consumption is forecast to rise from an estimated 3.0bcm in 2012 to 4.0bcm by 2017, then to 5.1bcm by 2022, requiring end-period annual net imports of up to 3.1bcm - possibly met by liquefied natural gas (LNG) imports.
• OMV has signed an agreement to sell its subsidiary OMV Hrvatska to Croatian company Crodux Plin - in line with its strategy of pursuing retail and commercial business only in markets where it has integrated supplies. OMV Hrvatska is a 100%-owned subsidiary and employs 63 staff members at its head office in Zagreb. It has 62 filling stations and a market share of around 13% in Croatia.

Exposure to the eurozone sovereign debt crisis is impacting export demand and will also manifest itself as falling, ever-important tourist figures going into 2013.Severe austerity measures will squeeze consumer and government spending alike. Foreign direct investment will slow and credit streams tighten as domestic banks feel the knock-on effects of EU banking regulations.

Key Data

• The mobile market lost approximately 38,000 subscribers in Q113 as we believed in our previous report. The 90-day active subscriber counting initiative means that thousands of SIMs bought by foreign holidaymakers in the summer need to be deactivated in the winter and therefore we expect subscriber additions in Q213. Underlying mobile growth is being driven by customer migration to postpaid plans, despite the cooling economic growth outlook weighing on discretionary spending. Usage of smartphones and tablet computers is rising, pushing up revenues from non-voice services at mobile operators.
• The fixed and mobile broadband market grew faster than expected in Q312 (latest data), up by 6.2% y-oy as a result of a resurgence of interest in mobile broadband services. However, this came back down in Q412. We have adjusted our forecasts for the broadband and fixed-line market, and lowered our forecasts for the broader mobile market, particularly for 2013.
• The fixed-line market contracted by 9.4% y-o-y in Q412, reversing the positive growth of H112. We continue to forecast a decline in fixed lines through to 2017.

The main trends and developments we highlight for the Czech Republic's oil and gas sector are:

• Plans to freeze shale gas exploration for two years to allow the government to draft and implement new legislation have found plenty of support, meaning that drilling activity is unlikely until beyond 2014. The ministry aims to establish a clear legal and technical framework so that any disputes that arise during shale gas exploration can be resolved under sound arbitration procedures, according to Environment Minister Tomáš Chalupa. Several domestic and foreign companies had earlier applied for shale gas exploration permits, including the UK's Cuadrilla Resources and Basgas Energia Czech, a unit of Australia-based Basgas. Domestic upstream company MND has also applied for an exploration permit.