1. Latin American Business Outlook Part of the Global Business Outlook A joint survey effort between Duke University, Fundação Getúlio Vargas and CFO magazine 1 Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

2. Top Concerns for Latin American CFOs 2 1.Economic Uncertainty 2.Government policy 3.Weak demand for product/services 4.Currency risk 5.Access to capital 6.Regulatory requirements 7.Cost of benefits 8.Corporate tax code 9.Inflation 10.Cost of borrowing Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

3. Business Optimism Index Global Trends Country / Region Jun 2016 Response 3 Notes: Presented data are the mean value for each region or country, Scale from 0-100 Country Business Optimism Index Own-Firm Business Optimism Index Own Company Latin American CFO optimism increases to moderate this quarter, though it varies by country Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

4. Expected Product Price Inflation Notes: Presented data are the mean or median values for each region or country. 4 Product Prices Latin American inflationary expectations increase, though higher in Brazil than elsewhere Global Trends Inflationary expectations high in emerging economies  Latin American CFOs expect moderate price increases, driven by high inflation in Brazil.  CFOs in Europe and the US expect low inflation Inflation expectations highest in Brazil  Of responding countries, Brazil has the highest inflationary expectations  Prices are expected to remain nearly flat in Ecuador and Peru. Jun 2016 Outlook Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

5. Expected Growth in Sales Revenue Global Trends Revenue 5 Overall, CFOs in Latin America expect strong growth in sales revenue. Latin American revenue growth increases  Revenue expectations rise from last quarter’s weak expected revenue growth  Though improving, Latin American revenue growth expectations still trail other emerging economies Brazil and Peru expect most rapid revenue growth  Overall Latin American growth is pulled down by countries (Venezuela, Ecuador, Central America) not shown in chart  Brazil expects high growth in sales revenue, though only about the same as inflation in Brazil Jun 2016 Outlook Notes: Presented data are the mean or median values for each region or country. Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

6. Global Trends Capital Spending 6 Capital Spending Plans Latin American capital spending will be modest, pulled down by Chile Modest capital spending plans  Latin American CFOs expect modest business spending growth  Business spending continues to weaken in the US Business spending varies within Latin America  Brazil, Peru and Mexico anticipate growth in capital expenditures  Spending expected to decline in Chile, in part due to proposed Labor and Constitutional Reforms (see slide 12) Jun 2016 Outlook Notes: Presented data are the mean or median values for each region or country. Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

7. Global Trends 7 Expected Change in Earnings Notes: Presented data are the mean public company value for each region or country. Earnings Averaged over the region, earnings will be flat in Latin America No Latam earnings growth expected over next year  Earnings expectations are variable. Averaged across all countries, Latin American earnings are expected remain constant over the next 12 months.  Asian earnings are expected to recover in this quarter. European earnings continue to grow Overall, weak earnings in Latin America  Earnings expectations recover in Brazil, up from very low levels and beating expected inflation  Mexico and Peru expect earnings to grow  Chile expects earnings to fall Jun 2016 Outlook Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

8. Global Trends # FT Employees 8 Fulltime Employment Outlook Notes: Presented data are the mean value for each region or country #FT=Number of Fulltime Employees Latin American CFOs expect to reduce fulltime domestic employment over the next year Negative employment outlook in Latin America  L.A. CFOs expect negative employment growth in the next year.  Europe expects strong employment growth. US expects moderate increase. Employment growth varies across L.A.  Brazil, Peru, and Ecuador expect reductions in fulltime employment.  Employment in Mexico and Chile is flat Jun 2016 Outlook Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

9. Global Trends Wages & Salaries 9 Expected Wage and Salary Increases Notes: Presented data are the mean value for each region or country Wages and salaries are projected to increase by about 6% in Latin America. Rapid wage growth in emerging economies  Asia expects wages to grow 7.0%, which is higher than its overall inflationary expectations  Europe expects the lowest wage growth  US wages to grow 3.3% No real wage growth in Brazil  Wages will increase robustly in Brazil; however Brazilian wage growth struggles to keep pace with expected inflation Jun 2016 Outlook Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

10. 10 Political uncertainty How would you rate the degree of political uncertainty or political risk in your country? Africa has the highest degree of political risk, followed by Latin America  93% of African CFOs think their country’s political risk is moderate-to-high, compared to 90% for Latam  Within Latin America, Brazil has the highest political uncertainty, and Peru has the lowest  Due to the upcoming election and Washington gridlock, the US also faces high political risk Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

11. 11 90% of Latin American CFOs rate political risk as moderate-to-high.  The biggest concern is government gridlock and dysfunction. Half of Latin American CFOs indicate that concern about these issues has caused their firms to plan cautiously  Concerns about potential tax reforms and regulations also cause firms to become cautious Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016 Which political uncertainties are the source of business caution?

12. 12 Labor and Constitutional Reforms in Chile Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016 Has the current discussion about proposed Labor and Constitutional Reforms affected your company’s… …degree of optimism about the business environment in Chile? …business spending plans for the next 12 months? …hiring plans for the next 12 months? The proposed Labor and Constitutional Reforms have made businesses much more pessimistic in Chile, leading firms in Chile to reduce hiring and spending plans.

13. 13 Trade alliances How do you think trade alliances between countries affect your country’s economy? Most Latin American CFOs think trade alliances have a positive effect on their countries and their own firms  54% of US CFOs think trade alliances have a positive effect on their country but only 30% think the alliances help their own firms How do you think trade alliances between countries affect your company overall? Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

14. 14 Do trade alliances affect the number of workers employed? Half of Latin American CFOs think trade alliances help increase employment in Latin America  Only about 15% of US CFOs think trade alliances increase employment in the US Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

15. 15 Intention to Deploy Cash Reserves Is it likely that your firm will begin to deploy its cash reserves during the next 12 months? Companies in emerging economies are most likely to tap into their cash reserves in the coming year  Latin American firms are most likely to rely on cash reserves over the next year  53% of US firms will deploy cash reserves in the next year Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

16. If deploying cash reserves, on what? 16 70% of Latin American firms plan to spend their cash reserves in the next 12 months. Among these firms …  About half will use excess cash to pay down debt that has accumulated in recent years  Nearly 40% will use the cash for business spending and investment  More than one-fourth need cash reserves to cover operating losses  Fewer than 20% will use cash reserves to make acquisitions Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

17. If not deploying cash reserves, why not? 17 30% of Latin American firms are NOT planning to spend cash reserves. Among these firms …  More than 40% say they have alternative sources of funds  One-third say they lack excess cash to spend  About 20% plan to retain cash because of a lack of investment opportunities  Nearly 20% need cash for liquidity and hedging purpose Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

18. Explicit Target for Cash 18 As your firm decides how much cash to hold, do you have an explicit "target" or "range" for the amount of cash and marketable securities to hold? Two-thirds of Latin American firms maintain a specific target for how much cash to hold  Though not shown on this graph, if cash drifts below the target, they try to quickly increase cash holdings  If cash accumulates above the cash target, most LA firms gradually reduce cash holdings Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

19. What best describes your cash target? 19 Two-thirds of Latin American firms have a cash target. Among these firms …  The most common target is cash/operating expenses, to make sure expenses can be covered  Similarly, more than 30% target cash/short-term liabilities Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

20. Return on Assets (ROA) 20 Profit growth recovers in Latin America but still weak Profit margins are expected to rise in all regions, relative to 2015 profits  CFOs in Latin America expect low profits as measured by ROA  Despite substantial risk in Africa, CFOs there expect high ROA Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

21. Duke/FGV CFO Survey in Latin America Press 21 The Latin American Business Outlook is frequently reported in the press Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

22. 22 Duke/FGV CFO Survey in Latin America Press The Latin American Business Outlook is frequently reported in the press Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016

23. Latin American Business Outlook Part of the Global Business Outlook A joint survey effort between Duke University, Fundação Getúlio Vargas and CFO magazine 23 Latin American Business Outlook Duke University / FGV / CFO Magazine June 2016