Latin America Forecast - 2014 Se acabó la fiesta – time again to reform October, 2013
May 10, 2015
Latin America Forecast - 2014Se acabó la fiesta – time again to reform
October, 2013
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Table of contents
A. Global
1. Commodities
2. LatAm versus other growth markets
3. FDI
B. LatAm
1. LatAm public spending
2. Reformer list
3. Brazil
4. Mexico
5. Argentina
6. Colombia
7. Venezuela
8. Peru
9. Chile
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Global
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Most commodity prices will continue to soften
70.0
80.0
90.0
100.0
110.0
120.0
130.0
140.0
150.0
2010 2011 2012 2013 2014
Oil (Brent) (price perbarrel)
Gold ($/troy oz)
Copper (cents/lb)
Industrial metals
Coffee arabica(cents/lb)
Agriculturalcombined
Source - EIU
7
56% of LAC exports are commodities, c.70% of South America’s
Source - UNCTAD
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Latin America will underperform vs. other growth markets
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2010 2011 2012 2013 2014 2015
Latin America
China
SE Asia
India
Middle East &North Africa CAGR
Nominal USD Denominated Growth
Source - EIU
9
Latin America remains a priority FDI destination
15%
9%
17%
28%
31%
15%
5%
17%
24%
39%
SE Asia IndiaMiddle East & North Africa
Latin America
China
2010 2015Source - EIU
10
Latin America
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Government spending grew faster than the private sector over a decade of commodity price inflation
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
LatAm public vs private consumption (USD billions)
private consumption government consumption
11.1%
13.7%
CAGR
Source - EIU
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Governments will need to reform going forward
-5 -3 -1 1 3 5 7 9 11 13 15
Venezuela
Brazil
Argentina
Chile
Nicaragua
Uruguay
Mexico
Peru
Guatemala
Colombia
Reform Progress 2005-2013% movement towards best practice benchmark
Proven reformers will have the upper hand in leaner times
Source – World Bank
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Brazil remains a consumption growth story
10,000
15,000
20,000
25,000
30,000
35,000
2010 2011 2012 2013 2014 2015
Number of HH earning morethan $15k
Passenger cars
Broadband subscriber lines
Growth Stories
MiningAgrifood
InfrastructureFinance
Consumer Services
tho
usa
nd
s
Source – EIU
14
Under the PT, debt levels have skyrocketed
Government debt (USD billions)
2004$97.1
2015
$170.5
Private debt (% of GDP)2004
22.69%
2015
46.30%
Source – EIU
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Reforms in Mexico – challenging phase ahead
0 0.1 0.2 0.3 0.4 0.5
Fiscal
Energy
Telecom
Education
Labour Law
Contribution to GDP (% points)+ Employment Contracts and Temporary Employment
− Outsourcing
+ Will professionalize teacher hiring, training,remuneration, incentives and dismissals
− Teachers protest against the education reform
+ Increased competition and investment in the sector
− High barriers to entry and capital costs to invest
+ Open Mexico's energy industry to foreign investment
− Political backlash
+ More stable source of taxes (income andconsumption)
− The working poor will be hardest hit
Source – AMI Analysis
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Mexico FDI – Energy reform could provide a boost
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2010 2011 2012 2013 2014 2015
Inward direct investment (USDbillions) with energy reform
Inward direct investment (USDbillions) with energy reform
Manufacturing FDI (USD billions)
Growth Stories
ManufacturingBusiness services
EnergyMining
Consumer durables
USD
bill
ion
s
Source – AMI analysis
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Argentina – still periled by poor government
Agriculture the strongest sector Strong economic growth A pre-election minimum-wage
rise and tax cuts
• Inflation will accelerate• Depreciation of the currency• The potential for diplomatic and
trade disputes will remain high.
Growth Stories
MiningAgrifood
Retail
18
Colombia’s impressive growth shall continue
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2010 2011 2012 2013 2014 2015
Inward direct investment(USD billions)
Nominal privateconsumption (US$ bn)
FDI
Co
nsu
mp
tio
n
Growth Stories
InfrastructureMining Energy
Real Estate & RetailConsumer durables
Source – EIU
19
Venezuela – the fantasy economy
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
24.0
25.0
26.0
27.0
28.0
29.0
30.0
31.0
32.0
2010 2011 2012 2013 2014 2015
Inflation (%)
Exchange rateOfficial (lBS/US$)
Exchange rateBlack market(BS/US$)
Bla
ck M
arke
t F/
X -
Infl
atio
n %
Off
icia
l F/X
Source – EIU
20
Peru – poised for mass consumption growth
0
20
40
60
80
100
120
140
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2010 2011 2012 2013 2014 2015
Total loans (USDbillions)
Personal computers(stock per 100 people)
Mobile subscribers(stock per 100 people)
Passenger cars (stockper 1000 people)
USD
bill
ion
s
Pen
etra
tio
n le
vels
Source – EIU
Growth Stories
MiningRetail
Consumer durablesFinancial services
Logistics
21
100.0104.4
99.493.8
88.984.3
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
4.3
4.5
2010 2011 2012 2013 2014 2015
Price of cooper per pound(US$/pound)
Chilean purchasing power will weaken gradually
Inflation adjusted F/X index
Growth Stories
MiningRetailLuxury
Consumer services
Source – EIU