Versailles Breakfast Club Presents "Se acabó la fiesta" Hosted by John Price, Managing Director of AMI

1. Latin America Forecast - 2014
Se acabó la fiesta – time again to reform
October, 2013

2. Legal notice
Wherever possible, AMI has verified the accuracy of information provided by third parties, but
does not under any circumstances accept responsibility for such inaccuracies should they
remain unverified.
It is expected that the Client and/or reader will use the information provided in this report in
conjunction with other information and with sound management practices. AMI therefore will
not assume responsibility for commercial loss due to business decisions made based on the
use or non-use of the information provided.
2

3. Americas Market Intelligence in a nutshell
• Americas Market Intelligence (AMI) is Latin America's leading Market
Intelligence and Advisory group.
• AMI’s founding partners are pioneers in the field of Market Intelligence in
Latin America, with over 20 years experience.
• AMI has experience in every market in Latin America and the Caribbean.
• AMI is a member of SCIP – Strategic and Competitive Intelligence
Professionals.
• AMI is a member of the Global Intelligence Alliance (GIA), the world’s
leading independent Market Intelligence provider.
Products & Services
Analytical insight and advisory, enabling you to compete
more effectively and grow into new opportunities
Customized market monitoring solution that provides
durable insights for decision makers
On demand, tailor made, consumer research
State-of-the-art Market Intelligence software enabling full
control of the intelligence process
Consulting services, events and online resources for
developing intelligence programs
3

4. Table of contents
A. Global
1. Commodities
2. LatAm versus other growth markets
3. FDI
B. LatAm
1.
2.
3.
4.
5.
6.
7.
8.
9.
LatAm public spending
Reformer list
Brazil
Mexico
Argentina
Colombia
Venezuela
Peru
Chile
4

5. Global
5

6. Most commodity prices will continue to soften
150.0
140.0
Oil (Brent) (price per
barrel)
130.0
Gold ($/troy oz)
120.0
Copper (cents/lb)
110.0
Industrial metals
100.0
Coffee arabica
(cents/lb)
90.0
Agricultural
combined
80.0
70.0
2010
2011
2012
2013
6
2014
Source - EIU

7. 56% of LAC exports are commodities, c.70% of South America’s
7
Source - UNCTAD

8. Latin America will underperform vs. other growth markets
Latin America
25.0%
Nominal USD Denominated Growth
China
20.0%
SE Asia
India
15.0%
Middle East &
North Africa
CAGR
10.0%
5.0%
0.0%
2010
2011
2012
2013
2014
8
2015
Source - EIU

9. Latin America remains a priority FDI destination
SE Asia
India
Middle East &
North Africa
Latin
America
15%
15%
31%
5%
39%
China
9%
17%
17%
28%
24%
2010
2015
9
Source - EIU

10. Latin America
10

11. Government spending grew faster than the private sector over
a decade of commodity price inflation
LatAm public vs private consumption (USD billions)
$6,000
CAGR
$5,000
13.7%
$4,000
$3,000
11.1%
$2,000
$1,000
$2004
2005
2006
2007
private consumption
2008
2009
2010
2011
2012
2013
government consumption
11
Source - EIU

12. Governments will need to reform going forward
Reform Progress 2005-2013
% movement towards best practice benchmark
Proven
reformers
will have
the upper
hand in
leaner
times
Colombia
Guatemala
Peru
Mexico
Uruguay
Nicaragua
Chile
Argentina
Brazil
Venezuela
-5
-3
-1
1
3
5
7
12
9
11
13
15
Source – World Bank

13. Brazil remains a consumption growth story
35,000
Number of HH earning more
than $15k
Passenger cars
30,000
thousands
Broadband subscriber lines
25,000
20,000
Growth Stories
15,000
Mining
Agrifood
Infrastructure
Finance
Consumer Services
10,000
2010
2011
2012
2013
2014
13
2015
Source – EIU

14. Under the PT, debt levels have skyrocketed
2004
$97.1
2015
2015
Private debt
(% of GDP)
$170.5
2004
22.69%
Government
debt (USD
billions)
46.30%
14
Source – EIU

15. Reforms in Mexico – challenging phase ahead
Contribution to GDP (% points)
+ Employment Contracts and Temporary Employment
Labour Law
− Outsourcing
+ Will professionalize teacher hiring,
remuneration, incentives and dismissals
Education
training,
− Teachers protest against the education reform
+ Increased competition and investment in the sector
Telecom
− High barriers to entry and capital costs to invest
+ Open Mexico's energy industry to foreign investment
Energy
− Political backlash
+ More stable
consumption)
Fiscal
source
of
taxes
(income
and
− The working poor will be hardest hit
0
0.1
0.2
0.3
0.4
15
0.5
Source – AMI Analysis

16. Mexico FDI – Energy reform could provide a boost
40.0
35.0
Inward direct investment (USD
billions) with energy reform
Inward direct investment (USD
billions) with energy reform
USD billions
30.0
Manufacturing FDI (USD billions)
25.0
20.0
15.0
Growth Stories
10.0
5.0
-
2010
2011
2012
2013
2014
16
2015
Manufacturing
Business services
Energy
Mining
Consumer durables
Source – AMI analysis

17. Argentina – still periled by poor government



•
•
•
Agriculture the strongest sector
Strong economic growth
A pre-election minimum-wage
rise and tax cuts
Inflation will accelerate
Depreciation of the currency
The potential for diplomatic and
trade disputes will remain high.
Growth Stories
17
Mining
Agrifood
Retail

18. Colombia’s impressive growth shall continue
16.00
350.0
300.0
14.00
Inward direct investment
(USD billions)
Nominal private
consumption (US$ bn)
12.00
FDI
10.00
200.0
8.00
150.0
Consumption
250.0
6.00
100.0
4.00
Growth Stories
50.0
2.00
-
0.0
2010
2011
2012
2013
2014
18
2015
Infrastructure
Mining
Energy
Real Estate & Retail
Consumer durables
Source – EIU

19. Venezuela – the fantasy economy
18.0
31.0
16.0
14.0
30.0
12.0
29.0
10.0
28.0
8.0
Official F/X
Black Market F/X - Inflation %
32.0
Inflation (%)
Exchange rate
Official (lBS/US$)
Exchange rate
Black market
(BS/US$)
27.0
6.0
26.0
4.0
25.0
2.0
24.0
0.0
2010
2011
2012
2013
2014
19
2015
Source – EIU

20. Peru – poised for mass consumption growth
140
70.0
120
60.0
100
50.0
80
Penetration levels
USD billions
80.0
Total loans (USD
billions)
Personal computers
(stock per 100 people)
Mobile subscribers
(stock per 100 people)
Passenger cars (stock
per 1000 people)
40.0
60
30.0
40
20.0
20
10.0
0.0
0
2010
2011
2012
2013
2014
20
Growth Stories
Mining
Retail
Consumer durables
Financial services
Logistics
2015
Source – EIU

21. Chilean purchasing power will weaken gradually
4.5
4.3
Price of cooper per pound
(US$/pound)
4.1
Inflation adjusted F/X index
3.9
3.7
100.0
104.4
99.4
93.8
88.9
3.5
84.3
3.3
3.1
Growth Stories
2.9
2.7
2.5
2010
2011
2012
2013
2014
21
2015
Mining
Retail
Luxury
Consumer services
Source – EIU

22. Market Intelligence:
Latin America
22
John Price
+1 (305) 773-1141
jprice@americasmi.com