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2017 Latin America Forecast

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Americas Market Intelligence—the leading market research and intelligence consultancy for Latin America—offers an analysis of the trends that will affect LatAm in 2017, as well as individual 2017 projections for Argentina, Brazil, Chile, Colombia, México, Peru and Central America.

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2017 Latin America Forecast

  1. 1. 2017 Latin America Forecast Struggling to compete in tough global environment
  2. 2. 22017 Latin America Forecast 01 AMI is Latin America’s leading independent market intelligence consultancy 02 Our founding partners helped pioneer the field of market intelligence in Latin America 03 Our consultants have advised a third of the region’s 100 largest strategic investors over a span of two decades 04 AMI consultants have conducted over 2,000 client engagements in Latin America since 1993 05 Our 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 Price Managing Director jprice@americasmi.com +1 (305) 773-1141 About AMI
  3. 3. 32017 Latin America Forecast Disclaimer 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 presentation 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.
  4. 4. 42017 Latin America Forecast 2017 Latin America Regional Forecast
  5. 5. 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
  6. 6. 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
  7. 7. 72017 Latin America Forecast The Uneven Commodity Bounce Metals up, energy flat: Winners – Chile, Peru, Brazil; Losers – Venezuela, Ecuador, Colombia, Mexico 0.00 50.00 100.00 150.00 200.00 250.00 300.00 2003M1 2003M4 2003M7 2003M10 2004M1 2004M4 2004M7 2004M10 2005M1 2005M4 2005M7 2005M10 2006M1 2006M4 2006M7 2006M10 2007M1 2007M4 2007M7 2007M10 2008M1 2008M4 2008M7 2008M10 2009M1 2009M4 2009M7 2009M10 2010M1 2010M4 2010M7 2010M10 2011M1 2011M4 2011M7 2011M10 2012M1 2012M4 2012M7 2012M10 2013M1 2013M4 2013M7 2013M10 2014M1 2014M4 2014M7 2014M10 2015M1 2015M4 2015M7 2015M10 2016M1 2016M4 2016M7 2016M10 2017M1 2017M4 2017M7 2017M10 Diverging commodity prices (indexed pricing) Industrial metals Energy Driven by a global infrastructure spend boom Driven US energy output expansion
  8. 8. 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 ✘✘✘
  9. 9. 92017 Latin America Forecast The Trump Factor America’s controversial new President will deliver growth and risk Positive Changes Threatening Changes • Lower corporate taxes o Higher investment o Capital repatriation • Less regulation o Expanded capital investment o Resource industry boost • Infrastructure program o Much needed productivity boost o Short-mid-term stimulus • Protectionism o Tax on business and consumers o Risks global trade war • Building the wall & deportations o Will provoke populist political backlash in Mexico – end to NAFTA • Restrict immigration & visas o Deprives US business of talent o Raises wage inflation – higher Fed
  10. 10. 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 23 202 289 -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
  11. 11. 112017 Latin America Forecast Country Analyses
  12. 12. 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
  13. 13. 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 inflation 0 5 10 15 20 25 2014 2015e 2016f 2017f 2018f FDI flows, USD billions
  14. 14. 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
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. 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
  19. 19. 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 • Medical equipment • Luxury goods • Industrial equipment • E-commerce • Consumer goods • Medical equipment • Professional services • Hospitality • Power equipment • Telecom equipment • Luxury goods • Industrial equipment • Hospitality sector • Consumer goods • Industrial equipment • Mining equipment • Construction • Consumer goods • Professional services • Outbound tourism • Hospitality sector • Professional services FDI Imports
  20. 20. 01 AMI is Latin America’s leading independent market intelligence consultancy 02 Our founding partners helped pioneer the field of market intelligence in Latin America 03 Our consultants have advised a third of the region’s 100 largest strategic investors over a span of two decades 04 AMI consultants have conducted over 2,000 client engagements in Latin America since 1993 05 Our 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 Price Managing Director jprice@americasmi.com +1 (305) 773-1141 About AMI
  21. 21. 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 info@americasmi.com to find out more about how we can solve your strategic data challenges NEXT STEPS CONTACT US info@americasmi.com americasmi.com amiperspectiva.americasmi.com

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