The document discusses the economic outlook for South Florida and the implications for local businesses from 2011-2012. It notes that while the US and global economies are expected to see moderate growth, the recovery will be slow and below potential levels. The document identifies several industries and business opportunities in South Florida that may see growth during this "new normal" period of slower economic activity, such as exports, trade financing, and professional services.

1. Growing Florida and Houston Economic Perspectives:
South your South Florida Business in the
“New Normal” for Banking Opportunities
Implications Economy
Dr. J. Antonio Villamil
Dean, School of Business and Research Professor of Economics
St. Thomas University
The Cuban American CPAs Association, Inc
Fall Seminar
November 9, 2011

2. The 2011-2012 Business Environment: Managing your Firm in the
“New Normal” Economy
 A prolonged period of below potential economic growth in US and
industrial countries
 Growing business opportunities in selected emerging markets of
Asia and Latin America – positive for South Florida businesses
 Low ―pricing power‖ for most products and services (e.g., low and
stable inflation), which suggests a prolonged period of relatively low-
real interest rates
 Consumers and businesses ―reliquifying‖ balance sheets
 Emphasis on productivity, smart expense management and credit
quality of receivables to improve profitability of your business

3. South Florida Financial and Economic Drivers Becoming More
Positive Since 2009, but Downside Risks Remain in 2011-2012
South Florida’s Economy Starting to Recover Slowly
from a Deep Recession
Economic Drivers Outlook 2011-2012
Moderate growth in 2011 and into 2012 (below
 US Economy
potential)
Top trade and investment partners of South
Florida expanding, fueling demand for South
 Global Economy Florida’s goods and services (trade
finance, exports, tourism, investments in real
estate)
Credit availability is improving, but still tight
for small businesses and real estate (two key
 Financial Markets
sectors of South Florida) – “Take your banker
to lunch”

5. US Economic Growth Driver of South Florida: Below Potential
Economic Growth Through 2012
Indicator 2009 2010 2011E 2012F
Economic Growth ( % Real GDP) -3.5 3.0 2.0 2.5
Inflation ( % Core CPI/U) 1.7 1.0 1.5 2.0
Personal Income Growth ( %) -4.3 3.7 3.0 3.5
Fed Funds Rate (Average) 0.16 0.18 0.25 0.25
Unemployment Rate (%) 9.3 9.6 9.0 8.0
Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, Federal Reserve and UCF. Estimates (E) and
Forecasts (F) by The Washington Economics Group (WEG).

6. Global Economic Driver of South Florida: Stronger Economic
Growth in Selected Emerging Markets, but Sluggish in Many
Industrial Countries
∆ % from Previous Period
Region/Country
2009 2010E 2011E 2012F
World Output (GDP), of which -0.7 5.1 3.5 3.8
Japan -6.3 4.0 1.0 2.3
United Kingdom -4.9 1.4 1.1 1.6
Canada -2.8 3.2 2.1 2.0 FDI Flows
to Florida
Euro Area, of which -4.3 1.8 Flat 1.5
Germany -5.1 3.6 2.0 1.5
France -2.6 1.4 Flat 1.0
Spain -3.7 -0.1 -1.0 Flat
Italy -5.2 1.3 -1.0 Flat
Developing Asia, of which 7.2 9.5 8.2 8.0
China 9.2 10.3 9.5 9.0
India 6.8 10.1 7.8 7.0
Source: International Monetary Fund, World Economic Outlook, Update September 2011 and The
Washington Economics Group (WEG) for Estimates (E) and Forecasts (F).

7. Global Economic Activity: Latin America Region Expanding at
Moderate Pace – Positive for South Florida Exports, Tourism,
Investment
Region/Country 2009E 2010 2011E 2012F
Latin America & the Caribbean, of which -2.1 5.9 4.7 4.1
Brazil -0.6 7.5 4.0 4.0
Mexico -6.1 5.4 4.0 3.5
Colombia 1.5 4.3 5.3 5.0
Dominican Republic 3.5 7.8 5.0 4.5
Chile -1.7 5.2 6.3 4.5
Peru 0.9 8.8 7.1 4.0
Argentina 0.9 9.2 8.3 4.0
Source: Economic Commission for Latin America and the Caribbean (ECLAC), Economic Survey of Latin
America and the Caribbean 2010 -2011 and The Washington Economics Group (WEG) for Estimates (E) and
Forecasts (F).

8. External Drivers Impacts on South Florida: Moderate Recovery
with Real Estate Markets Improving, Growing Global Business,
Visitors
Indicators 2009 2010 2011E 2012F
Real Gross Domestic Product (Δ%) -3.1 2.0 2.5 3.0
Personal Income (Δ%) -3.3 2.0 3.5 4.0
Population (Δ%) 2.0 2.1 1.5 1.0
Total Non-Ag Employment (Δ%) -6.2 -1.0 1.5 2.0
Exports Growth (Δ%) -9.1 18.0 19.0 15.0
Up
Single-Family Home Median Price (Δ%) -24.0 -4.1 Stable
Slightly
Sources: Bureau of Economic Analysis, Florida Agency for Workforce Innovation, Enterprise Florida, Inc. Florida
Association of Realtors, UCF and The Washington Economics Group (WEG) for Estimates (E) and Forecasts
(F).

9. Where are the Business Opportunities in South Florida under the
“New Normal”? (2011-2012)
 Mergers and acquisitions (M&A activity)
 Exports to selected emerging markets
 Trade-related finance
 ―Knowledge‖ services (accounting, legal, health)
 Foreign companies investing in South Florida
 Selective income producing properties (rentals, warehouses)
 Wealth management (―boomers‖ and ―high net worth‖ foreign
individuals
 Mortgage refinancing products

10. Sectors/Industries with Growing Employment Levels in South
Florida
 Professional and business services
(accounting, legal, IT, management, engineering and others)
 Health-related manufacturing and services
 Private education providers
 International trade-related companies
 Tourism and hospitality-related industries and companies
 Wholesale Trade

11. Concluding Perspectives
 A much-changed economic environment for business through
2012
 A ―New Normal‖: Slower economic growth than in prior cycles with
ample financial liquidity
 Consumers, corporations and businesses repairing balance sheets
 Risk shifting from private to public sector (public finance a key issue)
 Low and stable real short-term interest rates through 2012
continued

12. Concluding Perspectives (continuation)
 2010 was a transition year to a moderate acceleration in the economic recovery of
South Florida in 2011-2012
 There is significant statistical dispersion around average levels of industry
performance in Florida
 Large and diversified Florida counties and regions will outperform real estate and
population-driven ones
Where in Florida?
Stronger Economic Outlook Weaker Economic Outlook
• Miami-Dade, Broward, Palm Beach • Southwest Florida (Collier to Sarasota
Counties)
• I-4 Technology Corridor (Orlando
Region to Tampa Bay) • Brevard County (Space Coast)
• Jacksonville (Duval County) • Leon County (State Gov.)
• Alachua County (Gainesville) • Rural, agricultural-dependent counties

13. To Finalize: Four Macroeconomic Indicators to Track in the “New
Normal” Economy
1 US HOUSEHOLD NET WORTH
2 FLOW OF FUNDS
3 MONETARY BASE
4 INTEREST RATES

14. US Household Net Worth: Consumers Paying Down Debt,
Spending Cautiously and in a “Bad Mood”
Household Net Worth
$70
$64
$58 $59
$60 $57
$54 $55 $55
$54
$52
$50
$40
$ Trillion
$30
$20
$10
$0
2007 2008 2009 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2
Source: Federal Reserve Bank of St. Louis, Economic Research - Flow of Funds, 2Q-2011, September
16, 2011

15. Flow of Funds
US Non-Financial Debt: Consumers and Businesses “Deleveraging,”
Federal Debt Growing Rapidly, End of “Stimulus” for State & Local Governments
(∆%; Quarterly Data are Seasonally Adjusted at Annual Rates)
State & Local
Years Households Business Federal
Governments
Financing and Housing “Bubbles”
2005 11.1% 8.6% 10.2% 7.0%
2006 10.0% 10.6% 8.3% 3.9%
2007 6.7% 13.1% 9.5% 4.9%
The “Great Recession” and the Aftermath
2008 0.2% 5.8% 2.3% 24.2%
2009 -1.7% -2.7 % 4.8% 22.7%
2010 -2.0% 0.4% 4.5% 20.2%
2010-Q1 -3.1% 0.5 % 4.5% 20.6 %
2010-Q2 -2.2% -1.3% -1.4% 24.4%
2010-Q3 -2.0% 1.1% 5.4% 16.0%
2010-Q4 -0.6% 1.9% 7.9% 14.6%
2011-Q1 -2.0% 2.8% -4.2% 7.9%
2011-Q2 -0.6% 4.0% -3.2% 8.6%
Source: Federal Reserve, Flow of Funds, Q2-2011, September 16, 2011.

16. “Helicopter Ben!”: Monetary Base at Record Levels
Monetary Base
(Excess Reserves of Banking System)
$2,800
$2.7 Trillion
$2,400
$2,000
US$ Billions
$1,600
$1,200
$800
$400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Federal Reserve Bank of St. Louis Economic Research. January 2000-October 2011. Shaded
areas indicate U.S. Recessions.
16

17. How Low Can Short-Term Rates Go : Likely to Remain Close to
Zero Through 2012
Federal Funds Rate
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Federal Reserve Bank of St. Louis, Economic Research. Latest observations based from
January 2000—October 2011. Shaded areas indicate US recessions.