28 the economic slowdown in many European end markets. Partially of fsetting these negative impacts were the current year benefits of European tar geted cost reduction ef forts, which include, among other actions, personnel reductions. The increase in operating income for the ROW segment of $ 3.7 million  was primarily attributable to strong spending in V enezuela for government led projects as well as increased demand and operational improvements in Thailand. These increases in operating income are partially of fset by decreased sales in Brazil, principally related to aerial transmission and reserves for disputed customer receivable accounts in Thailand. Other Income (Expense) Other income (expense) primarily includes foreign currency transaction gains or losses, which result from changes in exchange rates between the designated functional currency and the currency in which a transaction is denominated as well as gains and losses on derivative instruments that are not designated as cash flow hedges. During 2012 and 201 1 the Company recorded a $ 2.9 million loss and a $ 31.7 million loss, respectively . For 2012 , other expense was primarily attributable to $ 4.5 million of foreign currency transaction losses which resulted from changes in exchange rates in the various countries in which the Company operates, and $1.6 million of gains on derivative instruments which were not designated as cash flow hedges and inef fectiveness on derivatives designated as cash flow hedges. For 201 1 , other expense was primarily attributable to $ 24.4 million of foreign currency transaction losses which resulted from changes in exchange rates in the various countries in which the Company operates, and $ 6.1 million of losses on derivative instruments which were not designated as cash flow hedges. Inter est Expense Net interest expense increased $18.1 million in 2012 . Interest expense increased primarily due to fees and redemption premiums of $9.3 million associated with the call of the $200 million of the 7.125% Senior Notes. Additionally , interest expense increased due to the addition of the $ 600.0 million senior unsecured notes (the " 5.75 % Senior Notes"), issued on September 25, 2012 . T ax Pr ovision The Company’ s ef fective tax rate for 2012 and 201 1 was 90.2% and 39.9% , respectively . The increase in the Company's 2012 ef fective tax rate reflects the adverse impact of significant valuation allowances recorded against deferred tax assets, as explained further below , and nonrecurring tax char ges incurred in connection with legal entity restructuring to integrate the Alcan acquisition. The Company’ s 201 1 ef fective tax rate reflects the adverse impact of valuation allowances recorded against deferred tax assets in certain foreign jurisdictions, partially of fset by tax benefits recognized for uncertain tax positions due to statute of limitations expirations and tax audit settlements. In the third quarter of 2012 , the Company updated its 2012 forecasts and substantially completed its 2013 global business planning process, which indicated continuing weakness in its Iberian market and business. After weighing all positive and negative evidence, including the three year cumulative loss position, and factoring in prudent and feasible tax  planning strategies, management judged that it was not more likely than not that a future tax benefit for the deferred tax assets of its Spanish and Portuguese business units would be realized. T ax expense of $1 1.5 million was recorded in 2012 to establish a full valuation allowance against Spanish and Portuguese deferred tax assets, of which $1.8 million related to the beginning of the year net deferred tax asset position. In the fourth quarter of 2012 , a valuation allowance was also recorded against deferred tax assets in the Company's German business unit. The German business unit incurred an equipment failure in the fourth quarter that adversely impacted its ability to meet its contractual obligations for its lar ge project work and reduced profit expectations. In addition, the German business is encountering certain other project delay/cancellation and warranty issues. After weighing all positive and negative evidence, including the three year cumulative loss position, and factoring in prudent and feasible tax planning strategies, management judged that it was not more likely than not that a future tax benefit for the deferred tax assets of its German business would be realized. T ax expense of $8.3 million was recorded in 2012 to establish a full valuation allowance against German deferred tax assets, none of which related to a beginning of the year net deferred tax asset position. A full valuation allowance was recorded in the fourth quarter of 2012 for the Company's Colombian distribution business since it was rendered redundant by the fourth quarter acquisition of Procables. The Colombian distribution business will be wound down and is expected to generate losses until the business is terminated. T ax expense of $1.1 million was recorded in 2012 to establish a full valuation allowance against the Colombian deferred tax assets, of which $0.2 million related to the beginning of the year net deferred tax asset position. The Company continuously monitors the deferred tax position of all business units to determine whether a valuation allowance should be recorded. Full valuation allowances are currently recorded against deferred tax assets in ten significant business units. The Company is closely monitoring the deferred tax asset situation in New Zealand. The New Zealand business unit has been operating at mar ginal profitability in recent years due to depressed economic conditions and increased competition in the local market. After weighing all positive and negative evidence and factoring in prudent and feasible tax planning strategies, management T able of Contents