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2017 Latin America Forecast
Struggling to compete in tough global environment
22017 Latin America Forecast
01AMI is Latin America’s leading independent
market intelligence consultancy
02Our founding partners helped pioneer
the field of market intelligence in Latin America
03Our consultants have advised a third of the region’s
100 largest strategic investors over a span of two decades
04AMI consultants have conducted over 2,000 client
engagements in Latin America since 1993
05Our holistic approach to market intelligence is unique. We combine
market research, competitive intelligence, political analysis and economic
forecasting in our studies. Few others do the same in Latin America
John PriceManaging Director
+1 (305) 773-1141
About AMI
32017 Latin America Forecast
Disclaimer
Wherever possible, AMI has verified the accuracy of information provided by third parties, butdoes not under any circumstances accept responsibility for such inaccuracies should theyremain unverified.
It is expected that the reader will use the information provided in this presentation inconjunction with other information and with sound management practices. AMI therefore willnot assume responsibility for commercial loss due to business decisions made based on theuse or non-use of the information provided.
42017 Latin America Forecast
2017 Latin America Regional Forecast
52017 Latin America Forecast
Latin America Will Return to Growth But Will Still Underperform
2017 will end Latin America’s commodity-driven recession, but future growth will not come easily
-0.5%
-1.1%
1.3%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2015 2016 2017
GDP growth
World Industrialized countries Emerging markets LAC
62017 Latin America Forecast
Yellen vs. Trump
The Fed’s anti-inflation mandate may be the greatest threat to Trump’s fiscal & debt stimulated growth strategy
0
1
2
3
4
5
6
2007 - Q3 2008 - Q3 2009 - Q3 2010 - Q3 2011 - Q3 2012 - Q3 2013 - Q3 2014 - Q3 2015 - Q3 2016 - Q3 2017 - Q3
US Fed rate
72017 Latin America Forecast
The Uneven Commodity Bounce
Metals up, energy flat: Winners – Chile, Peru, Brazil; Losers – Venezuela, Ecuador, Colombia, Mexico
0.00
50.00
100.00
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20
03
M1
20
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20
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M7
20
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20
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M1
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M7
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20
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M1
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M4
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M7
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M1
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0
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M1
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M7
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M7
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0
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14
M1
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0
Diverging commodity prices (indexed pricing)
Industrial metals Energy
Driven by a global infrastructure spend boom
Driven US energy output expansion
82017 Latin America Forecast
Throw’em out
Latin America’s embrace of center-right parties is a rejection of incumbents, not an embrace of pragmatism
Argentina President Macri
✔
Chile President Bachelet
✘
Bolivia President Evo Morales
✘
Peru President Kuczynski
✔
Venezuela President Maduro Ecuador President Correa Mexico President Peña Nieto
✘✘✘
92017 Latin America Forecast
The Trump Factor
America’s controversial new President will deliver growth and risk
Positive Changes Threatening Changes
• Lower corporate taxeso Higher investmento Capital repatriation
• Less regulationo Expanded capital investmento Resource industry boost
• Infrastructure programo Much needed productivity boosto Short-mid-term stimulus
• Protectionismo Tax on business and consumerso Risks global trade war
• Building the wall & deportationso Will provoke populist political
backlash in Mexico – end to NAFTA
• Restrict immigration & visaso Deprives US business of talento Raises wage inflation – higher Fed
102017 Latin America Forecast
Brazil and Argentina Will Fuel Regional Growth
In both 2017 and 2018, Brazil and Argentina will combine for 70% of the region’s dollarized GDP growth
-644
23
202289
-153
-157
20
80
62.9
-113.6
117.8
131.3
-86.5
-5.6
40.2
26.4
-1000
-800
-600
-400
-200
0
200
400
600
800
Net change in LatAm GDP (billions of USD)
Brazil Mexico Argentina Colombia
Chile Peru Uruguay Central America
Dom Rep Rest of Caribbean Ecuador
112017 Latin America Forecast
Country Analyses
122017 Latin America Forecast
Brazil
Finding its animal instincts, now that the professionals are in charge – as long as they don’t get prosecuted
• FDI monies kept coming
• Domestic capital strike may soon end if Temer looks to survive Lava Jato
• Pro-reform block controls congress
• Competent managers now run the Central Bank, the Ministry of Finance, BNDES, and Petrobras
• Brazilian corporate and HH sectors more than halfway through debt restructuring process
• Strengthen trade with Mercosur, EU, perhaps Pacific Alliance
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
2014 2015e 2016f 2017f 2018f
FDI flows, USD billions
132017 Latin America Forecast
Argentina
Waiting for investors to act on their promises
• Macri admin has executed text-book neo-liberal reforms. Now they are waiting for the private sector to invest as planned.
• FDI promotion efforts focused on: Agrifood, mining, oil & gas, infrastructure, real-estate
• 2017 must be a growth story to avoid a populist set-back in mid-term elections
• Trump engineered global investment risk could delay Argentina’s growth start
• Macri has not yet tamed inflation0
5
10
15
20
25
2014 2015e 2016f 2017f 2018f
FDI flows, USD billions
142017 Latin America Forecast
Mexico
Tan lejos de Dios, tan cerca de los estados unidos
• Trump’s war of words has paralyzed investment in Mexican export manufacturing. Re-negotiating NAFTA plus a border tax debate will further delay planned investment. FDI will drop 25-30% in 2017
• Capital flight has eroded Peso by 20% since Trump began targeting.
• Mexican voters may elect a populist on an anti-American, anti-NAFTA platform in 2018
• Mexico will try to re-align as best it can with European, Asian and hemispheric trade partners
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2014 2015e 2016f 2017f 2018f
FDI flows, USD billions
152017 Latin America Forecast
Colombia
Resolving post-conflict challenges in Colombia may prove more difficult than negotiating with the FARC
• Fulfilling the peace requires fiscal measures that Colombia cannot afford
• A re-emerging US energy superpower directly threatens Colombia’s terms of trade and currency strength
• Two years with a weak Peso has helped re-industrialize portions of Colombia’s economy
• Fulfilling FDI potential requires continued streamlining of bureaucracy and the tax code -
500
1,000
1,500
2,000
2,500
3,000
3,500
2011 2012 2013 2014 2015 2016 2017
Colombian foreign exchange rate, USD to Peso
162017 Latin America Forecast
Chile
Chile’s middle class has become the most demanding electorate in Latin America
• Copper looks to extend recovery in 2017 thanks to global infrastructure expansion (US, India, South-east Asia) –US and Asian construction to grow at 7+% in 2017 & 2018
• Mining investment will dominate FDI plans in 2017 versus other sectors that are more fickle in an election year.
• Chilean voter angst is unique from much of Latin America. 2017 will likely be a contentious election, again dividing the electorate (old versus young, right vs left)
• Alejandro Guillier may defeat Piñera, adding some investor risk
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2012 2013 2014 2015 2016 2017f
Copper price, USD/lb
172017 Latin America Forecast
Peru
If Kuczynski can learn to share the spoils with Keiko, Peru can fulfill its growth potential
• PPK’s rocky starts reveals both his naivety and the bitter electoral resentment of Keiko Fujimori
• The “Kambio” party will have to share power with congress or face more confrontations
• Infrastructure boom should boost base metal prices and mining investment
• Bold infrastructure plans will attract new FDI growth
• Chinese investment will lead new FDI monies
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2014 2015e 2016f 2017f 2018f
FDI flows, USD billions
182017 Latin America Forecast
Central America
The sub-region will for the fourth year running lead Latin American growth
• Cheap energy prices provide a huge TT boost
• American protectionist angst has thus far evaded Central America
• Remittance strength remains strong
• Internal migration from countryside to city is driving a demographic growth spurt
• Near-shoring of Asian dominated light assembly favors Central America
• Growth dynamism attracting FDI from Mexico, Colombia, and other parts of LAC
• Social instability remains a long term weakness 0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
2014 2015e 2016f 2017f 2018f
GDP growth
192017 Latin America Forecast
Growth opportunities
Most markets are in early cycle stages, favoring investment over export strategies for foreign businesses
• Infrastructure & real-estate
• Industrial sector
• Consumer services
• Mining, agrifood
• Natural gas• Infrastructure• Real-estate• Finance
• Energy sectors• Tourism• Domestic e-
commerce
• Infrastructure• Manufacturing• Consumer
services• Tourism
• Infrastructure• Agrifood• Logistics• E-commerce• Mining
• Consumer services
• Financial services
• Logistics
• Tourism• Real-estate
• Medicalequipment
• Luxury goods• Industrial
equipment• E-commerce
• Consumer goods
• Medical equipment
• Professional services
• Hospitality• Power
equipment• Telecom
equipment
• Luxury goods• Industrial
equipment• Hospitality
sector
• Consumergoods
• Industrial equipment
• Mining equipment
• Construction
• Consumer goods
• Professionalservices
• Outbound tourism
• Hospitalitysector
• Professional services
FDI
Imports
01AMI is Latin America’s leading independent
market intelligence consultancy
02Our founding partners helped pioneer
the field of market intelligence in Latin America
03Our consultants have advised a third of the region’s
100 largest strategic investors over a span of two decades
04AMI consultants have conducted over 2,000 client
engagements in Latin America since 1993
05Our holistic approach to market intelligence is unique. We combine
market research, competitive intelligence, political analysis and economic
forecasting in our studies. Few others do the same in Latin America
John PriceManaging Director
+1 (305) 773-1141
About AMI
21
We completed more than 2,000 client engagements throughout Latin America for market research, competitive Intelligence, opportunity benchmarking and more in a wide range of sectors, including:
• Payments (credit/debit cards, virtual wallets, e-commerce, m-commerce etc.)• Logistics (freight forwarding, pricing studies, market forecasts, etc.)• Healthcare (market sizing, competitive analysis, health trends, etc.)• Mining (risk analysis and assessment, competitive intelligence, forecasts, etc.)• Industrial (market sizing, intelligence for investors, brand awareness, etc.)• Consumer (shopping tendencies, demand, market analysis)• Auto (market intelligence, brand awareness, competitive analyses)
Contact us at [email protected] to find out more about how we can solve your strategic data challenges
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