Key risks and opportunities in Latin America for 2012. This will include an overview of our global and regional views as well as our strategy for Financial Markets in Latin American & the Caribbean.

1. Business Monitor International
…Contrast This With China
Latin America & The Caribbean
Risks & Opportunities In 2012
Cedric Chehab, Head of Americas Research
Richard Hamilton, Head of Latin America CR & FM
Tim Cooper,PBoC
Source: BMI, NBS,
Global Economic Strategist

2. Business Monitor International
Global Outlook
• The global economy slowed significantly in Q4, but it is not in recession.
• The US is not entering recession, but fiscal cutbacks and household deleveraging
will hold back a recovery in growth.
• The European crisis is the biggest risk. We believe the eurozone will hold
together, but a breakup would tip the world economy into recession.
• Our China fears of a ‘hard landing’ are finally starting to be realized, presenting
a major risk to global demand.
• Fiscal and monetary policy options are more limited now than at the onset of
the 2008-09 recession with emerging markets better-positioned for stimulus.
2

3. Business Monitor International
A Slow, But Sustained Global Expansion
BMI Global Forecasts
2011e 2012f 2013f
World Real GDP Growth (%) 3.0 2.7 3.4
World Consumer Inflation (% ave) 4.0 3.4 3.2
Oil Price, Brent Crude (US$/bbl) 106.00 102.00 100.00
ECB Refinancing Rate 1.00 0.50 0.50
US Fed Funds Rate 0.00 0.00 0.00
Bank of Japan Overnight Call Rate 0.10 0.10 0.10
US$/EUR Exchange Rate (average) 1.40 1.29 1.25
• Developed state growth will remain erratic and weak. This leaves the global economy
susceptible to downside shocks.
• The major risk is of a deflationary downturn, with weak global demand and a prolonged
period of deleveraging in the US, eurozone and China.
Source: BMI Estimates

4. Business Monitor International
Developed Vs Emerging Markets
BMI Real GDP Forecasts
2011e 2012f 2013f
World 3.0 2.7 3.4
US 1.8 2.0 2.4
Eurozone 1.6 -0.3 1.4
China 9.2 7.5 7.1
Developed States 1.3 1.1 1.9
Emerging Markets 5.6 5.0 5.3
Emerging Asia 7.3 6.3 6.5
Latin America 4.0 3.7 3.5
Emerging Europe 4.0 2.7 4.2
Sub - Saharan Africa 4.2 6.0 6.0
Middle East & North Africa 3.7 4.4 4.6
Weighted by US$ Nominal GDP. Source: BMI
Emerging markets are growing more strongly than developed states, and have more room to
manoeuvre domestic policy. Developed states are largely running out of ammo.
Source: BMI Estimates

5. Business Monitor International
External Risks: Eurozone
• Eurozone has the resources, but lacks the resolve to overcome the crisis. Mild
recession in 2012 & ‘muddle through’ is the best case scenario.
• Policymakers continue to deploy ‘smoke and
mirror’ tactics rather than serious reforms:
• ECB as lender of last resort
• Credible plan for fiscal union
• Address endemic lack of competitiveness
• Debt restructuring of insolvent states.
• Support economic growth and job creation
• Our core view remains ‘muddle through’.
However, a failure to make tangible headway on
the above reforms within the next 12-18 months
risks a collapse of the currency union
Source: Bloomberg, ECB, BMI

6. Business Monitor International
External Risks: China Hard Landing
• Following an unprecedented credit boom, tighter monetary policy and declines in
residential construction are weighing on Chinese growth...and a hard landing is on
the cards...
Our Hard Landing Definition:
1) Significant Contraction In Manufacturing
2) Contraction In Services
3) Sustained Fall In Imports
4) Double-Digit House Price Declines
5) Banking Sector Bailout
6) Growing Expectations of CNY Weakness
Source: BMI

7. Business Monitor International
Latin America & Caribbean
Given these global headwinds we prefer economies in 2012 that have
policy ammunition to combat slower growth
Based on this metric we divide the regional economies into three categories:
1. Those with the ammunition (if needed) – Chile, Brazil, Peru, Colombia, Mexico
2. Those who are fast running out of options – Argentina, Venezuela, Ecuador
3. Those with no domestic policy options – Most CentAm and Caribbean
economies

8. Business Monitor International
Those With Ammunition
There are several regional economies Bps of
Current
hikes over
with plenty of room to cut rates if growth Policy Rate
last cycle
cools aggressively
Brazil 10.50% 375
Brazil and Chile have already embarked
on rate cutting cycles, and we believe Chile 5.00% 475
Colombia and Mexico are likely to follow at
Colombia 4.75% 175
some point in 2012
Mexico 4.50% 0
Peru 4.25% 300

9. Business Monitor International
Those With Ammunition
Public Sector External Debt, % GDP Although there has been significant
fiscal stimulus since 2009, public
Brazil
40.0
Chile
sector leverage is still very low by
35.0 Colombia DM standards
Mexico
30.0
Peru
25.0
With sovereign debt yields trading
20.0
close to record lows, and CDS
15.0
spreads well contained, these
10.0
governments have access to debt
5.0 markets if required
.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: BMI, Respective Central Banks

10. Business Monitor International
Those Who Are Fast Running Out Of Options
We have long been concerned about economic trajectory for
Venezuela, Argentina, and Ecuador
We believe 2012 could prove a pivotal year for Venezuela
and Argentina, with the potential to derail investors’
perceptions of the Latin American region as a whole

11. Business Monitor International
Venezuela
We believe the current fiscal and exchange rate regime can last until the
election, thanks to massive debt issuance in 2011 and high oil prices, but
few domestic policy options to significantly boost growth
M1 Money Supply Growth, % chg y-o-y
Core scenario: President Hugo 160
Chávez to remain in power 140
120
100
 Implies continuation of 80
high inflation, with strong 60
possibility of another 40
20
destabilising devaluation
0
following the election -20
Oct-97
Oct-03
Oct-09
Oct-00
Oct-06
Apr-11
Apr-99
Apr-02
Apr-05
Apr-08
Jan-00
Jan-06
Jan-97
Jan-03
Jan-09
Jul-07
Jul-98
Jul-01
Jul-04
Jul-10
Source: BCV, BMI

12. Business Monitor International
Argentina
Fears of a devaluation prompted massive capital flight in the run up to last year’s election
Government has had some success in restricting capital outflows, but dealing with symptoms
rather than cause
BADLAR Rate, %
As yet no signs of attempts to address
causes of rampant inflation and overvalued
exchange rate
Not conducive to attracting FDI, and
without access to international capital
markets government can only resort to
printing money to stimulate growth
Source: Bloomberg

13. Business Monitor International
3. Those With No Real Policy Tools
There are many smaller economies in the region which have
very little in the way of domestic economic buffers to deal
with the external headwinds, which will exacerbate
domestic problems
Problems include some of the highest crime rates globally,
weak fiscal frameworks, and in several cases cripplingly
high debt burdens

14. Business Monitor International
Central America
Honduras, Guatemala & El Salvador: All suffering from severe fiscal
weakness and militarisation of the drug war
Nicaragua is currently attracting significant fixed investment, but
fiscal consolidation unlikely following the re-election of Daniel Ortega
Costa Rica - Fiscal Deficit, % of GDP
Costa Rica’s fiscal decline
continues, following
government concessions to
opposition demands for the
2012 budget
Source: BMI, BCCR, f = BMI forecasts

15. Business Monitor International
Caribbean
Many Caribbean states are even more powerless than their CentAm
counterparts because of:
 Very High Debt Burden
 Weak Growth Dynamics
Sovereign Risk Rankings For BMI And S&P (November 2011 )
Our Core View is increasingly
accepted by consensus:
December 2011 S&P downgraded
Bahamas and Jamaica, with warning
for Barbados
Source: BMI, S&P

16. Business Monitor International
Real GDP Growth Rates, %
2010 2011e 2012f 2013f
Barbados -.5 .9 1.3 2.0
Jamaica -1.2 1.5 1.4 1.4
El Salvador 1.4 1.4 1.7 2.2
Venezuela -1.4 3.2 2.3 2.3
Guatemala 2.8 2.4 2.7 3.2
Nicaragua 4.5 3.3 3.3 2.8
Honduras 2.8 4.8 3.4 4.0
Mexico 5.4 4.2 3.4 2.7
Costa Rica 4.2 3.6 3.6 3.5
Brazil 7.5 3.0 3.9 3.7
Argentina 9.2 7.0 4.1 4.2
Colombia 4.3 5.7 4.7 4.4
Chile 5.2 5.9 4.8 3.3
Peru 8.8 6.7 5.8 4.8
Panama 7.5 8.3 6.9 5.5
e/f = BMI estimated/forecasted, Source: Respective central banks and/or statistics agencies

17. Business Monitor International
Q&A
• If you would like to arrange an initial trial or a trial of additional
content, please contact:
• Contact: Erika Lockhart
• Email: elockhart@businessmonitor.com
• Phone: 646.368.1475
• Content: Country Risk, Financial Markets, and Industry Analysis
(22 sectors)
• Deliverables: Daily Analysis, Quarterly Reports, and Proprietary
Databases
17