Versailles Breakfast Latin America Presentation Ami 2012 11 02

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John Price, Managing Director of AMI, presents the most relevant business, economic and political trends shaping Latin America over the next four years. The meteoric rise in Chinese influence in the region, the looming threat of falling commodity prices, the shift in North-South energy trade, the pace of reform, improving income disparity and the expansion of the base of the pyramid consumer.

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  • 40% of Americans claim to go to church each week but actual amount is 18%90% of Latin Americans consider themselves Roman Catholics but less than 10% go to church each week.
  • Versailles Breakfast Latin America Presentation Ami 2012 11 02

    1. 1. LatinAmericaThe immediateThe longer termOpportunitiesMiamiNovember, 2012
    2. 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 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. 3. Your Presenter 3
    4. 4. What we do… bespoke that answers strategic in Latin America Market Intelligence questions • Should we enter the market? • How do we compete against Customer the dominate local player? • Market Research • What do local customers expect from their supplier? • In which market will we gain the most growth in 2013?Climate • Should we buy or greenfield?• Economic Competitor • Who is the best local firm with analysis • Competitive whom to partner?• Political risk Intelligence analysis • Do we face regulatory risk? • If the opposition wins, will they support our investment? • What products will our competition launch next year? • What is the optimal product mix to serve our target market? 4
    5. 5. Eight strong industry practices Financial Services Industrial • 160 LatAm projects since 1994 • 105 LatAm projects since 1994 • Consumer & corporate cards, pre-paid • Transportation, manufacturing, cards, insurance, banking, consumer loans, chemicals, metals, plastics, paper, trade finance, more.. packaging, safetyRetail & CPG Natural Resources• 170 LatAm projects since 1992 • 90 LatAm projects since 1992• Food, beverage, snacks, appliances, beauty • Mining – exploration, equipment; products, toys, entertainment Energy – oil & gas, alternatives, petrochemicals; Agriculture – commodities, fertilizers, technology Healthcare Automotive • 80 LatAm projects since 1993 • 110 LatAm projects since 1993 • Pharmaceuticals, supplements, vaccines, • Cars, trucks, buses, OEM parts, medical equipment, devices, hospital aftermarket, service, finance services, health policy, more…Telco, IT, Media Logistics• 70 LatAm projects since 1993 • 75 LatAm projects since 1993• Telco – wireless, ISP, services, equipment; • 3PL, air cargo, FTL, LTL, rail, ocean, IT – computers & accessories, ERP, AMT; warehousing, distribution, equipment, Media – gaming, pictures, print, TV, radio, software signage 5
    6. 6. AMI enjoys a global partnership with the GIA, the world’s largest network of market intelligence companies• GIA Group embodies 24 offices globally, of which AMI operates Mexico and Miami. 6
    7. 7. The Immediate (2013) 7
    8. 8. Exogenous Forces – trending positive Europe + ECB ? Merkel USA China+ manufacturing + Migration+/- Energy sector + New political cycle? Fiscal cliff Syria & Iran ? Economic shift +/- Oil shock - Financial instability 8
    9. 9. Spheres of Economic Influence – China predominates Europe - Caribbean tourism - Caribbean private banking - Caribbean exports - South American commercial and institutional lending China - Food imports from Brazil, Argentina, Paraguay, UruguayUSA - Metals imports from Peru,- Mexican manufacture exports Chile, Bolivia, Brazil- Mexico bound FDI - Energy imports from- Central American, Caribbean Venezuela, Peru, Colombia and Mexican remittances - Mining investment in- Central American manufacture Ecuador, Peru, Bolivia, exports Venezuela- Caribbean tourism - Infrastructure investment in- Caribbean banking Panama, Caribbean,- Andean bound FDI Central America, Peru,- Andean product exports Ecuador, Venezuela, Brazil - Bi-lateral loans in most markets 9
    10. 10. Country Forecasts – a predictable tale of the usual suspectsRegional growth will increase from 3.1% to 4.0%- Commodity prices are rebounding- Credit is loosening Consumption Growth X-change rate (2010 = 2013 (%) 100) versus 2011 2012 2013 2011 2012 2013 2012Brazil 4.8 3.5 5.1 100 83.0 80.5Mexico 4.5 3.8 3.7 100 93.7 96.5Argentina 9.5 4.3 3.5 100 93.2 84.0Colombia 6.6 4.6 5.3 100 102.7 102.3Venezuela 4.0 7.5 1.0 100 100.0 74.1Chile 8.8 5.9 5.9 100 99.0 98.0Peru 6.4 5.9 5.6 100 104.2 106.6Ecuador 5.8 4.4 3.1 100 100.0 100.0 10
    11. 11. US Elections – Latin America still won’t matter come Nov 7thPossible overhaul of immigration including Lessen enforcement of employers, possiblyamnesty to illegals, might expand H1B Immigration expand temporary worker plan, expand H1BRecord levels (due to sharing databases) helpsjustify amnesty Deportation Likely to continue because of lack of amnestyLatecomer to the political benefits of trade. Wants to sign more free trade agreements inWould support symbolic new trade agreements if Trade LatAm, Brazil especiallypolitically convenient.Gun shy on further liberalizing of relations with Wants to reverse Obama’s easing of CubaCuba after Castro snub. Continue non- Sanctions embargo. Strong rhetoric against Chavez –intervention with Venezuela. possible sanctions?Likely shrink as a result of other priorities. Aid Likely shrink as a result of budget cuts. May push for “Plan Mexico”. Strengthen DEACited as a priority but not acted upon as such.Drug trade to US is in decline on its own. Drugs enforcement efforts. Deepen investigation in Venezuela. 11
    12. 12. The Longer Term (Societal Trends) 12
    13. 13. Latin America is entering an optimal demographic phase LatAm’s 40 yearGLOBAL RANK COUNTRY MEDIAN AGE demographic 33 Cuba 38.4 window 48 Uruguay 33.6 56 Chile 32.1 61 Argentina 30.5 71 Brazil 29.3 78 Colombia 28.0 82 Mexico 27.1 85 Peru 26.2 86 Dom Rep 26.1 86 Venezuela 26.1 87 Ecuador 25.7 94 El Salvador 24.3 95 Jamaica 24.2 103 Bolivia 22.5 114 Guatemala 20.0 13 Source – www.investmentu.com
    14. 14. Modernizing LatAm Household structure the age of segmentation has arrived 100% Non Family Nuclear Family Other Family Types 14.5% 61.6% 23.9% Composite Family Unwed, Students Single Parent (Female) 9.9% Couple, no kids (Male) 1.5% Living Alone Single Parent Friends 5.0% Two Parents with Kids 9.5% Extended Family 2.2% 8.1% 42.0% 21.7% Working Mother Single Income Dual IncomeLatin America’s Emigration and divorce Dual Income Single Income have created more 3.4% 4.7% Mother 3.6% 6.3%fastest growing Unemployedsegment is elderly 19.8% 22.2% single mothersliving withoutchildren Often brutal economic reforms in the 1990’s eroded the real incomes of middle and CAGR working class segments, forcing both parents Percentage GrowthSource: ECLAC to work. Modernizing ways encouraged SES A, of market share 1990-2010 B, C+ women to hold onto their careers. 14
    15. 15. USD Billions Credit will continue to expand but at a slower rate 15 Source - EIU
    16. 16. The emergence of a new viable market2015 Analysis using 2005 constant USD prices ABC1 • 34.4 million homes • $1,342 bn total spend ABC1 = HH income of over $20k USD or $15k per year (constant 2005 prices) Top of the Base of the Pyramid • 40.3 million homes • $417 bn total spend Based upon WRI and EIU figures and AMI Analysis 16
    17. 17. Crime & corruption will continue to plague the region The World’s Deadliest Cities City Murders /100,000 1 San Pedro Sula, Honduras 158 2 Ciudad Juarez, Mexico 147 3 Maceio, Brazil 135 4 Acapulco, Mexico 127 5 Tegucigalpa, Honduras 99 6 Caracas, Venezuela 98 7 Torreon, Mexico 87 8 Chihuahua, Mexico 82 9 Durango, Mexico 79 10 Belem, Brazil 78 21 New Orleans 69Sources – TransparencyInternational, World Bank 30 Detroit, USA 48 31 Bagdad, Iraq 48 43 St. Louis, USA 35 44 Cape Town, South Africa 34 17
    18. 18. Latin Americans clamor to connect 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 2013 2014 2015 Source - EIU 18
    19. 19. Latin Americans are the greatest consumers of socialmedia on earth and distrustful of traditional media 250 Facebook subscribers Newspaper Readers 200 millions 150 100 50 0 2010 2011 2012 2013 2014 19
    20. 20. Older & Wiser 20
    21. 21. 1990 versus 2020 • 5.3 pph • 3.3 pph 1990 household 2020 household • Ages 30-40 fastest growing • Age 60+ fastest growing • US$2,720 GDP per capita • US$15,390 GDP per capita • 3% car ownership • 21% car ownership • <3% have credit cards • >25% have credit cards • Shrinking middle class • Expanding middle class • Economic crisis • Social crisis • Conform to tradition • Seek pleasure • Fitting in (collective) • Gaining power (individual) • Undemanding consumers • Very demanding customer • Cost conscious • Value & convenience driven • Traditional • Social media, unpredictable media, Predictable opinions 21
    22. 22. Opportunities - How to win tomorrow’sLatin American customers 22
    23. 23. Utilize Modern Segmentation Techniques Traditional Modern Consumer Segmentation Segmentation Geography Income Income Psychographics Age Lifestyle Gender Values Interests & Hobbies Loyalty Purchase Timing Usage level Geodemographics 23
    24. 24. Build value, service & convenience and they will comeChoice Best value, not lowest priceTime Solve my Demanding problems ConsumerCredit Treat me as an individualEmpowerment Inform me now 24
    25. 25. Introduce a wider spectrum of productsOld thinking: New thinking:Introduce (dump) three Introduce multipleproducts into the LatAm niche productsmarket Luxury 1 3 Mid-price 2 4 6 8 Value 5 7 9 25
    26. 26. Embrace testimonial marketing via social media • Did I tell you I test-drove the new Harley-• Our product is great Davidson?• You’ll love our product or your money back – What did you think of it?• Recall our brand, recall our brand, recall – Loved it. You should try it. …. – 54 of your friends liked it, 6 disliked it• Traditional advertising • Don’t take our word for it, ask your friends• Unsubtle PR techniques (journalists for • Convince credible opinions to try your sale) product• No objective 3rd party opinion in sight• Metrics: Eyeballs, awareness • Metrics: brand• Research methods: surveys emotion, usage, recommendations • Research methods: Observational research 26
    27. 27. Leverage Latin America as a Base of the PyramidLaboratory Why start your global Base of the Pyramid strategy in Latin America? • Middle income • Distribution systems • Communication • Homogeneity • Free trade 27
    28. 28. John Price Market Intelligence jprice@americasmi.com +1.305.773.114128

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