The document discusses challenges facing the economies of Argentina and Brazil. In Argentina, the government imposes barriers on business practices like foreign exchange transfers. GDP growth is projected to be low over the next two years and inflation remains high. Brazil is experiencing stagnating growth below 2% annually, returning inflation, and a credit-driven economic model that is nearing its limits. Proposed reforms like fiscal reform, addressing social security debt, improving infrastructure and education, and political reforms are delayed solutions needed to boost competitiveness and investment.

1. May
19th
2014

2. LATIN
AMERICA

3. The
Execu)on
of
Maximiliam
E.
MANET
1867-­‐1868
The
Museum
of
Fine
Arts,
Houston

4. Understanding LATAM

5. How to be a good “Latino”
• Show
tremendous
regret
for
the
various
tragedies
of
our
history
• Embrace
local
culture
as
a
form
of
resistance
• Hate
capitalism
• Blaim
externals
for
everything
• Worship
weird
heroes
Based
on:
“guia
poliLcamente
incorreto
da
América
LaLna”

6. LATIN AMERICA MEMORIAL – SÃO PAULO
Confirming a dangerous common sense?
“Blod
and
poverty
are
engraved
in
the
history
of
La5n
America,
a
land
so
opressed.
Now
is
5me
to
reshape
it
here,
make
it
independent
and
happy”.
Oscar
Niemeyer

7. Woman
holding
a
balance
J.
VERMEER
1664
Na)onal
Gallery
of
Art,
Washington
DC

8. What you see is NOT what you get!
Appearance Language
Food Music
Soccer tricks
Leadership style
Ideals
Concepts of past
and future
Power disputes
Concepts of
beauty
Use of time
Morality
Approaches to
problem solving

9. Whose fault is it?
Internally
controlled
Externally
controlled
Ruled
centered
Individual
reponsibililLy
Risk
friendly
Achieving
driven
RelaLonship
centered
Team
Responsibility
Risk
averse
Ascribing
driven

10. LATAM : Lack of integration

11. What these people have in common?

12. Feeling Lost?

13. A deeper look in 4 different environments

14. GDP Structure
ARGENTINA
BRAZIL
MEXICO
COLOMBIA

15. Trade Structure
ARGENTINA
BRAZIL

16. Trade Structure
COLOMBIA
MEXICO

17. ARG
–
Two
to
Tango

18. Facts
• There
are
no
jokes
about
ArgenLneans
• Messi,
The
Pope,
the
Queen
of
Holland
Business
Environment
• Governmental
imposes
several
barriers
to
normal
business
pracLces.
Simple
forex
transfers
can
not
be
made:
limit
of
$500K
per
day,
$100K
per
transacLon
with
substanLaLng
paperwork;
• Several
products
have
controlled
prices
• Risk
of
higher
inflaLon
(in
Feb
3.4%
in
a
month,
this
is
49%
annualized)
• In
February,
exports
contracted
6.1%
over
the
same
month
last
year.
• GDP
growth
of
0.1%
this
year,
which
is
down
0.5
percentage
points
from
last
month’s
forecast.
For
2015,
parLcipants
expect
GDP
growth
to
accelerate
to
1.2%.
• LCC
again
?
Argentina – Tango on?

19. Outlook and business implications
Outlook
• GDP
growth
will
be
rather
low
in
next
two
years
• Elec=ons
in
Q4
2015
• Infla=on
a
very
difficult
topic,
may
reach
40%
yoy
• Deficit
on
current
account
balance
and
low
level
of
reserves
may
force
addi=onal
devalua=on
of
the
ARS

20. A
stop
in
the
fields
P.
PUYERREDON
1861
Na5onal
Museu
of
Beuax
Arts
,
Buenos
Aires

21. Nov,
2009
Sept,
2013
BRA : Unbearable lightness of Countries…

22. Facts
• We
do
have
some
good
Wines
Where
is
the
growth
?
• GDP
growth
in
the
recent
years
below
2%
• Return
of
inflaLon
• Model
based
on
credit
expansion
close
to
exhausLon
• Reforms
needed
BRA - Business Challenges

23. Roots causes of model deterioration (1 of 2)
StagnaLon
:
GDP
growth
2010
7,5%
;
average
2011-­‐2013
2,0%
-­‐1
0
1
2
3
4
5
6
7
8
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
GDP
Growth
in
%
yoy
GDP
Growth

24. Roots causes of model deterioration (2 of 2)
SLmuli
:
credit
driven,
lille
impact
on
increasing
producLon
capacity
,
public
deficit
increase
from
64%
to
69%
of
GDP
InflaLon:
resisLng
at
the
ceiling
of
the
target
(around
6,5%
yoy)
Offer
not
following
Demand
:
industrial
producLon
growth
in
last
ten
years
:
30%;
retail/wholesalers
growth:
120%
Brazil
cost”:
fiscal
burden
36%
of
GDP,
lack
of
infrastructure
External
account
balance:
worst
result
since
2001
-­‐3,2%
of
GDP
Public
sector
expenses
at
its
peak
Lack
of
investment
capacity:
only
18%
of
GDP
as
gross
formaLon
of
fix
capital

25. The “delayed solutions”
Fiscal
reform
• End
of
the
so-­‐called
fiscal
war
between
the
27
states
of
the
FederaLon
• Increase
compeLLveness
• “World
Champion”
Social
Security
debt
• Take
advantage
of
the
demographic
window
Infrastructure
• Solve
the
logisLc
bolleneck
EducaLonal
• Increase
average
school
years
• Quality.
PoliLcal
reform
• Mandatory
voLng
• Campaign
financing
• VoLng
system
Selected
Country
Lis=ng
(rank,
country
name,
and
number
of
hours
to
meet
tax
compliance
requirements)
Ranking
Country
Hours
(2013)
1
Brazil
2,600
24
ArgenLna
405
38
Mexico
334
124
United
States
175
150
Canada
131

26. Outlook and business implications
Outlook
• GDP
growth
will
remain
between
2%
and
3%
in
the
next
years
• Retail
sales
at
the
range
of
4%
yoy
• Business
confidence
level
almost
at
lowest
level
(since
jun
2010)
• Infla=on
s=ll
a
menace,
specialli
with
the
BRL
deprecia=ng
• Trade
balance
not
yet
benefi=ng
from
weaker
BRL
• Unemployment
rate
very
low
Implica=ons
for
the
business
• Fight
for
Market
Share
• Produc=vity
and
cost
op=mizing
measures
• Innova=on
as
a
must
• Need
to
reduce
exposure
to
fx
• War
for
Talent

27. Landscape
TARSILA
DO
AMARAL
1948
MAM,
São
Paulo

28. Facts
• Tequila
really
is
“to
kill
you”
Mexico – Return of the Macho

29. Outlook and business implications
Outlook
• Weaker
than
expected
start
in
2014,
but
GDP
growth
can
s=ll
be
>3%
this
year
and
3.9%
in
2015
• Currency
rather
stable
• Consumer
confidence
level
swings
• Reforms
implemented
(tax,
energy
)
“The
comprehensive
reform
agenda
that
was
approved
last
year
should
address
many
of
the
country’s
economic
weaknesses,
including
lack
of
compe55on,
inefficiencies
and
poor
performance
in
the
sectors
that
the
reforms
target.
The
successful
passage
of
the
by-­‐laws,
combined
with
a
gradual
recovery
in
the
U.S.
economy,
should
support
stronger
economic
growth
in
Mexico
in
2014
and
beyond”

30. The
Alarm
Clock
D.
RIVERA
1914
Frida
Kahlo
Museum,
Mexico
City

31. COL
–
gimme
that
Emerald!

32. Facts
:
•
these
guys
know
how
to
dance!
Colombia

33. A
couple
dancing
F.
BOTERO
1987
Botero
Museum,
Bogotá

34. THE PACIFIC ALLIANCE
• “The most exciting thing
going on in Latin today”
• Intra-regional trade is
27% of total in SA&CA
as opposed to 63% in
EU in 52% in Asia
• Mercosur 1991
• 4 out of 5 first ranked
countries out 33 in
LATIN for better
business environment

35. THE PACIFIC ALLIANCE

36. The Years ahead

37. Processes&
Performance
Purpose&
Principles
Strategy
“Lost and Damages”
MoLvaLon
and
commilment
tend
to
diminish
if
there
is
a
percepLon
that
everything
is
too
costly
and
that
the
company
will
loose
its
agility
“Easy Rider”
The
path
to
business
excellence
is
made
of
an
opLmized
equilibrium
between
processes,
purpose
and
a
compeLLve
strategy
“Risky Business”
Lack
of
solid
values
and
care
with
all
stakeholders
might
endanger
business’s
sustainability
“Chicken Run”
Growth
and
high
peformance
are
not
sustainable
if
we
can
not
differenLate
ourselves
constantly
The
path
to
Business
Excellence
is
under
construc=on

38. Final
“Through
the
years,
I
have
no5ced
that
Beauty,
as
well
as
Happiness,
is
a
constant.
There
is
not
a
single
day
in
which,
at
least
for
one
moment,
we
are
not
in
Heaven”
Jorge
Luis
Borges