You don’t get too many exhibition veterans who started their careers in the chemical industry. Valmir Fernandes made that very transition when he helped launch Cinemark Brazil, growing the business into a market leader as general manager for 10 years. Fernandes was promoted to head Cinemark International in 2006, where he has spearheaded projects such as introducing the private-label premium large-format concept, Cinemark XD, to screens across Latin America. BoxOffice talked to Fernandes and got a closer look at Cinemark’s overseas business.
What were some of the highlights for Cinemark International in 2014?
We definitely started the year worried about the impact of the World Cup. Not only because it was taking place in Brazil, but also because of the strong participation of other Latin American countries in the tournament and the fact that it would be held in the region for the first time in a while, meaning time zones wouldn’t be an issue. The good news is that we finished the year ahead of the previous one. We performed better than the domestic industry; by itself, that was an achievement, because to outperform in a year with such a distraction in the region, and specifically with our strong position in Brazil and Argentina-with Argentina getting to the semifinals-was not an easy time for us. But we managed to offset all that distraction and perform really well. We also initiated operations in Bolivia in early 2014 and continued growing in almost every country in Latin America. I would say even with the difficulties the region is facing, business has been very good for us, and we expect to continue to perform well in Latin America.
What do you think the future holds for a country like Brazil, where exhibition seems prime for expansion but the country’s economy is showing signs of slowing down?
The movie business continues to be very strong. I’m not seeing problems as long as we continue to have a great crowd, and that’s exactly what we are getting. I don’t feel we have the same problems that other sectors are facing, particularly because the unemployment rate continues to be very reasonable. I’m not making any forecasts, but up to now things have been good other than the fact that the whole world has been affected by the devaluation of other currencies against the dollar, but I think currency devaluation is a problem for any global company regardless of the region. Even in Brazil, with the political problems, the corruption, I don’t think there will be an impact on our business in 2015. The only thing that may, and I’ll be very clear, may have an impact is if people start to get worried about future investments. But that would impact three or four years from now, not 2015 or 2016. In fact, I believe we are looking at very good years, and I also expect some solid local product in Brazil to help us.
As an exhibitor that has had an international presence for a long time now, is there any way you can prepare for something like currency devaluation?
As long as you have developed sound projects, they will go through the times of uncertainty or oscillation in the currency. The good thing is that our business, other than imported equipment, is totally conducted based on local currency. We know some things get more expensive, and we know some things get less expensive when you look at things in dollars, but our way to look at this is to manage the business as if we are a local company. We manage the business looking at all the drivers and all the elements in local currency, and then after managing the business in local currency, we translate whatever the results are to dollars. But we try to be very tight to operate everything as a local company that’s not even looking at the dollar, other than the fact that my imports are getting a little bit more expensive. But then I also have some local costs that are going to be cheaper-construction costs and things like that. We know the currencies are going to go up and down, and we’re going to wait for better times because we have gone through it before.
We’ve seen Cinemark expand throughout Latin America over the past couple of years, reaffirming its faith in the region. You mentioned Bolivia as a new market. What goes into finding a new territory?
When we look at new opportunities in the area, we normally link it to either a growth potential or a very, very reasonable and attractive deal that would put us in a different country. We entered Bolivia because we felt it was a very under-screened and underdeveloped market similar to the ones we first found when we entered Latin America. We found a very high-quality project to participate in, and you get into a new country and suddenly began selling an additional 800,000 to million tickets. We continue to look for similar opportunities. We are opening in a few months in Curaçao, and we’re opening in Paraguay at the end of the year or early next year. There are also opportunities in our existing territories, going to cities and areas that remain under-screened or with no theater offerings. I think what we are going to continue to see happening in Latin America is that the market is going to grow, not only because it has the potential to grow in the cities where we are already present but because there are markets that can be untapped, and then suddenly you have another project that is selling a half million tickets in a year. You’ll see this trend popping up in different regions where the movie business is not present.