Latin America as the new Emerging Economic Powerhouse

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Growth is focused now in the Pacific area, led by Asia but with a significant
contribution of Latin America
• Latin America presents today lower vulnerabilities due to reforms
implemented after severe crises
• Reforms are now paying off in terms of sustained high growth and increasing
purchasing power of the population
• Despite a global aging process, demographics are still favourable for Latin
American countries
• In addition to a predominant urban condition, consumers in Latin America are
today wealthier and therefore pushing for changes in expenditure patterns
• However, there is no room for complacency and success brings challenges
that policies should tackle on time

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Latin America as the new Emerging Economic Powerhouse

  1. 1. Latin America as thenew EmergingEconomic PowerhouseDavid Martínez-TuréganoMarch 19th, 2013Santiago, Chile
  2. 2. Latin America as the new Emerging Economic Powerhouse / March 2013Latin America in thenew global orderImplications for the Latin Americanconsumer Page 2
  3. 3. Latin America as the new Emerging Economic Powerhouse / March 2013Global growth led by the Pacific Expected contribution to global growth between 2012 and 2022 (%) Eastern Europe Western North America Europe 6.8 10.9 6.4 56.4 Japan 4.5 Emerging 1.7 Asia Africa Middle East Pacific Region 4.9 77.5 Latin America 7.5 1.0 Oceania Page 3
  4. 4. Latin America as the new Emerging Economic Powerhouse / March 2013Very relevant players in Latin America Current size and expected contribution to world growth in 2012-2022 4000 3500 3000 2500 2000 1500 1000 500 2012-2022 change 0 2012 GDP Brazil G6 avg. Mexico Spain Argentina Colombia Peru Chile Page 4
  5. 5. Latin America as the new Emerging Economic Powerhouse / March 2013The increasing roleof Asia has been a supportive factor Rapid Asia demand of High Agricultural, mining and fuels imports by chinagrowth commodities commodity 2000 4% of total world importsin Asia prices 2011 11% of total world imports Increasing commodity Agricultural, mining and fuels latam exports revenues in LatAm 2000 34% of total LatAm exports 2011 54% of total LatAm exports Private and public Latam - Asia trade flows demand for final 2000 4% of total LatAm trade flows goods in LatAm 2011 16% of total LatAm trade flows Page 5
  6. 6. Latin America as the new Emerging Economic Powerhouse / March 2013The key factor: learning from crises Public and private debt-to-GDP ratios (2012) Source: BBVA Research 180 160 140 120 100 80 60 40 20 G7 0 LatAm-6 Public debt Private debt: Private bebt: External debt Households Non-final corporations Page 6
  7. 7. Latin America as the new Emerging Economic Powerhouse / March 2013Further reformsto extend growth momentum The Global Competitiveness Index 2012-2013 (score 1-7) Source: WEF 12 Nordic 11 PPP-adjusted GDP per capita 5.28 10 Em. Europe G7 4.32 9 5.23 Latam 6 8LATAM-6 4.29 N. Africa East AsiaChile 4.65 3.82 4.69 7Brazil 4.40 6Mexico 4.36 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0Peru 4.28 S. Africa Global Competitivenes Index (1-7)Colombia 4.18 3.48Argentina 3.87 Need to close competitiveness gap in infrastructures, innovation, business climate, regulation, education quality Page 7
  8. 8. Latin America as the new Emerging Economic Powerhouse / March 2013Implications for theLatin AmericanconsumerLatin America in the new global order Page 8
  9. 9. Latin America as the new Emerging Economic Powerhouse / March 2013New environment has broughtdramatic changes for consumptionLatin America Developed economies +deleveraging +uncertaintyStill favorable Purchasing Population Mature marketsdemographics power gains growth  0 with high incomeHigher volume Changes in Higher volume Changes inof consumption consumption of consumption consumption patterns patternsReduction of household size Aging increases consumption ratessoftens lower population growth and generates new needsDevelopment of distributionchannels, product differentiation,demand for luxury products… Page 9
  10. 10. Latin America as the new Emerging Economic Powerhouse / March 2013Favorable demographics,but with regional differences Population pyramids (2010) Source: BBVA Research and UN Argentina, Brazil Colombia, Mexico G7 and Chile (avg.) and Peru (avg.) Female Male Female Male Female Male 100+ 100+ 100+ 90-94 90-94 90-94 80-84 80-84 80-84 70-74 70-74 70-74 60-64 60-64 60-64 50-54 50-54 50-54 40-44 40-44 40-44 30-34 30-34 30-34 20-24 20-24 20-24 10-14 10-14 10-14 0-4 0-4 0-4 6 5 4 3 2 1 0 1 2 34 5 6 6 5 4 3 2 1 0 1 2 34 5 6 6 5 4 3 2 1 0 1 2 34 5 6 Page 10
  11. 11. Latin America as the new Emerging Economic Powerhouse / March 2013Middle class boom in Latin AmericaPopulation in Latin America by income rangeSource: BBVA Research Population (mn) Population share (%)600 100% GDP per capita in 2012 90% PPP-adjusted USD:500 80% 70% Affluent>40,000 USD400 Middle class: High (25,000-40,000 USD) 60% Medium (15,000-25,000 USD)300 50% Low (5,000-15,000 USD) 40%200 Low income 1,000-5,000 30% Poor <1,000 USD100 20% 10% 0 0% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 1994 2000 2006 2012 1980 1982 1984 1986 1988 1990 1992 1996 1998 2002 2004 2008 2010 2014 2016 2018 2020 Affluent High Middle Class Medium Middle Class Affluent High Middle Class Medium Middle Class Low Middle Class Low Income Poor Low Middle Class Low Income Poor Page 11
  12. 12. Latin America as the new Emerging Economic Powerhouse / March 2013Urban agglomerationsto increase economic roleUrbanization levels in 2025Source: UN Mexico 25 mn Bogota 11 mn Lima 12 mn Rio 14 mn Santiago S. Paolo 7 mn 23 mn 7 cities will acount B. Aires for 110mn people 16 mn Percentage Urban City population 0-25% 1-5 million in 2025, a fifth of 25-50% 5-10 million total population in 50-75% 10 million or more LatAm-6 75-100% Challenges: infrastructures, basic services,Percentage Urban housing, public City populatio transport, traffic congestion, pollution 0-25% 1-5 million 25-50% 5-10 million 50-75% 10 Page 12 o million 75-100%
  13. 13. Latin America as the new Emerging Economic Powerhouse / March 2013Changes in consumption patterns Transition Transition Group (examples) Low income Middle income High income Food and non-alc. beveragesNecessities Clothing and footwear Alcohol and tobacco Housing (rent, utilities)Semi- Equipment (‘white goods’)necessities Health (drugs) Transport (autos, fuel, public transport) Communications (phone) Recreation, culture (‘brown goods’)Discretionary Education Restaurants and hotels Miscellaneous (personal care, insurance) Peru Brazil Argentina Colombia Mexico Chile Page 13
  14. 14. Latin America as the new Emerging Economic Powerhouse / March 2013Key messages• Growth is focused now in the Pacific area, led by Asia but with a significant contribution of Latin America• Latin America presents today lower vulnerabilities due to reforms implemented after severe crises• Reforms are now paying off in terms of sustained high growth and increasing purchasing power of the population• Despite a global aging process, demographics are still favourable for Latin American countries• In addition to a predominant urban condition, consumers in Latin America are today wealthier and therefore pushing for changes in expenditure patterns• However, there is no room for complacency and success brings challenges that policies should tackle on time Page 14

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