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Latin American Business Outlook Part of the Global Business Outlook

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Presentation on theme: "Latin American Business Outlook Part of the Global Business Outlook"— Presentation transcript:

1 Latin American Business Outlook Part of the Global Business Outlook
A joint survey effort between Duke University Fundação Getúlio Vargas CFO magazine El IMEF PyME

2 Top Concerns of Latin American CFOs
1. Economic Uncertainty 2. Government policies 3. Regulatory requirements 4. Currency risk 5. Weak demand for product/services 6. Corporate tax code (domestic) 7. Employee productivity 8. Cost of benefits 9. Cost of borrowing 10. Access to capital Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

3 Business Optimism Index
Latin American CFO optimism rebounds, led by Peru, Argentina, Brazil and Mexico. Global Trends March 2017 Response Country Business Optimism Index Country / Region Own-Firm Business Optimism Index CFOs in Latin America have become less optimistic about financial conditions in their home countries, with the average declining by approximately 10 points on a 100 point scale Latam CFOs no longer most optimistic in world Latam optimism has fallen below that in Asia and now equals US optimism Latam optimism still higher than in Europe and Africa Mexican CFOs are most optimistic Among Latam CFOs, those in Mexico, Peru, and Chile are most optimistic Brazilian optimism has fallen almost as low as in Argentina CFOs are relatively optimistic about the futhre for their own firms in Latin America and elsewhere around the world, with own firm optimism equalling about 65 on a 100 point scale Slide edge in emerging own-firm optimism CFO optimsm about their own firms is highest in Asian, Latin America, and in Africa US and European own-firm optimsm is not far behind Own firm-optimism highest in Mexico, Chile, Peru CFOs in Brazil are fairly optimistic about their own firms CFOs in Argentina, Eduador, and Colombia are less optimistic Own Company Notes: Presented data are the mean value for each region or country, Scale from 0-100 Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

4 Expected Product Price Inflation
Latin American inflationary expectations increase, high in Mexico Global Trends March 2017 Outlook Product Prices Brazil: median=3.3 used, mean=2.8%  Brazil not shown in graph Mexico: median=5.0 used, mean = 5.5% Argentina: median=5.0 used, mean = 11.5 Inflationary expectations high in Africa, increasing in Latin America Latin American CFOs expect moderate price increases. CFOs in Europe and Asia expect low inflation Inflation expectations highest in Mexico Of responding countries, Mexico and Argentina have the highest inflationary expectations Import prices drive some of the Latin American price inflation. Notes: Presented data are the mean or median values for each region or country. Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

5 Expected Growth in Sales Revenue
Latin America sales revenue expectations continue to rise Global Trends March 2017 Outlook Revenue Latin American revenue growth increases Revenue expectations increase from last quarter Latin American revenue growth expectations trail Asia and Europe Brazil and Mexico expect most rapid revenue growth Overall Latin American revenues pulled down by Chile and Ecuador Brazil and Mexico expects rapid sales growth, due in part to relatively high inflation Notes: Presented data are the mean or median values for each region or country. Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

6 Capital Spending Plans
Latin American capital spending will be the weakest among all continents in 2017 Global Trends March 2017 Outlook Capital Spending March 2017: Brazil already using median, mean = -14.8; argentina using median, mean=10.5 Modest capital spending plans Latin American CFOs expect modest business spending growth Business spending is ramping up in the US and Europe, softening in Asia Business spending varies within Latin America Mexico and Colombia anticipate moderate growth in capital expenditures Spending expected to decline in Brazil Notes: Presented data are the mean or median values for each region or country. Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

7 Expected Change in Earnings
Earnings are expected to increase in Latin America after sinking in the last quarter Global Trends March 2017 Outlook Earnings March 2017: Brazil median: 14.7 Peru dropped: mean=27.4, median = 33.2; Argentina too. Latam earnings bounce back Latin American earnings are expected to increase in 2017. US expects the highest earnings growth Positive earnings growth in Latin America Brazil and Mexico have the strongest earnings expectations Earnings are expected to grow moderately in Chile and Colombia Notes: Presented data are the mean public company value for each region or country. Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

8 Fulltime Employment Outlook
Latin American CFOs expect moderate fulltime employment growth in 2017 Global Trends March 2017 Outlook # FT Employees Dec 2016: Ecuador use median=mean Moderate employment outlook in Latin America L.A. CFOs expect employment growth of 0.9% in 2017. Significant layoffs expected in Africa Employment growth varies across L.A. Expected employment reductions in Brazil and flat growth in Chile and Ecuador pull down the average for all of Latin America Employment in Mexico, Peru, Colombia and especially Argentina is expected to grow Notes: Presented data are the mean value for each region or country #FT=Number of Fulltime Employees Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

9 Notes: Presented data are the mean value for each region or country
Expected Wage and Salary Increases Latin American wages and salaries are projected to increase by 5.1% over the next year Global Trends March 2017 Outlook Wages & Salaries Dec 2016: Dec 2016 Ecuador median=0, mean = -4.8 Rapid wage growth in Africa Africa expects wages to grow nearly 7% in 2017 Europe expects the lowest wage growth US wages to grow 3.9%, the strongest in a decade Latin American wages to grow 5% on average All participating Latam countries expect positive wage growth except Ecuador Wage growth in Brazil keeps up with inflation Notes: Presented data are the mean value for each region or country Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

10 Improving the business climate
 What issues / policies most need to be addressed to improve the business climate in your country? Europe Reduce business regulations 43.2% Reduce political instability 40.0% Improve public education and training 38.9% Improve the judiciary / legal system 31.9% Asia Corporate tax reform 38.6% Reduce business regulations 34.2% Reduce corruption 32.7% Improve the price inflation/deflation situation 29.1% Latin America Reduce corruption 57.8% Improve the judiciary / legal system 40.9% Corporate tax reform Improve infrastructure 34.4% Africa Reduce corruption 66.0% Improve infrastructure 52.8% Reduce political instability 49.1% Reduce business regulations 30.2% Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

11 Improving the business climate
 What issues and policies most need to be addressed to improve the business climate in your country? Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

12 Could Your Company Handle a Surge in Demand?
If orders for your product/service sharply increased over the next few months, would you have enough _____ to meet sharply higher demand? (% Yes shown below) Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

13 Reaction to US trade proposals
In response to recent trade proposals put forth by the US government, should your government… CFOs from Mexico and Argentina are most likely to support resisting or retaliating against US trade proposals Though not shown in the graph, most French CFOs also support resisting or retaliating Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

14 Reaction to US trade proposals
In response to recent trade proposals put forth by the US government, should your company … CFOs from Mexico and Argentina are most likely to support resisting or retaliating against US trade proposals African CFOs also support resisting or retaliating Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

15 Trade alliances How do you think trade alliances between countries affect your country’s economy? How do you think trade alliances between countries affect your company overall? 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 Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

16 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 March 2017

17 Public Trust Recent data from the Edelman Trust Barometer shows public trust continues to decline in business and government leadership. To what degree, if any, has a lack of public trust in business and government affected… your company your business environment Lack of public trust hurts African, Asian, and Latin American business environments the most Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

18 Responses of Latin American Firms to Lack of Public Trust
How much do you agree or disagree with the following statements in relation to public concerns about business trust? Altered business decisions, strengthened governance, and more transparency are common responses to lack of public trust Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

19 Odebrecht corruption scandal
Because of the Odebrecht corruption scandal, has your company changed its investment plans for 2017? Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

20 President Temer and Brazilian Optimism
President Temer has been in office nearly six months. How do you compare your optimism about the Brazilian economy today, relative to your optimism just after the impeachment? Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

21 Return on Assets (ROA) Profit growth in Latin America is moderate compared to US and Africa March 2017: Argentina too high: 21.1 & 23.3 Profit margins are expected to increase in all regions in 2017 CFOs in Latin America expect profits to grow as measured by ROA Despite substantial risk in Africa, CFOs there expect high ROA Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

22 Duke/FGV Latin American Business Outlook in Press
The Latin American Business Outlook is frequently reported in the press Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

23 Duke/FGV Latin American Business Outlook in Press
The Latin American Business Outlook is frequently reported in the press Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

24 Latin American Business Outlook Part of the Global Business Outlook
A joint survey effort between Duke University Fundação Getúlio Vargas CFO magazine El IMEF PyME Latin American Business Outlook Duke University / FGV / CFO Magazine March 2017

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