1. Latin American Business Outlook Part of the Global Business Outlook A joint survey effort between Duke University, Fundação Getúlio Vargas and CFO magazine Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 1

2. Top Concerns for Latin American CFOs Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 2 1.Government policies 2.Economic Uncertainty 3.Regulatory requirements 4.Weak demand for product/services 5.Rising wages and salaries 6.Currency risk 7.Inflation 8.Cost of benefits 9.Rising input or commodity costs 10.Corporate tax code

3. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 Business Optimism Index Global Trends Country / Region Sept 2014 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 In stark contrast to one year ago, Latin America is now the least optimistic region in the world

4. Expected Increase in Product Prices Notes: Presented data are the mean values for each region or country. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 4 Product Prices Inflationary expectations decreased among Latin American CFOs compared to last quarter, after three quarters of increasing expectations. Global TrendsSept 2014 Outlook Inflation expectations decrease in Latin America  Latin American price expectations are lower this quarter (3.1%), relative to last quarter’s survey  CFOs in Africa also expect inflation to temper, US CFOs expect stable product prices. Inflation expectations lower in Latin America  Of responding countries, Argentina has the highest inflationary expectations, followed by Brazil and Uruguay  Prices are expected to increase slowly in Peru and especially in Chile and Mexico.  European CFOs expect low inflation

5. Expected Growth in Sales Revenue Global TrendsSept 2014 Outlook Revenue Notes: Presented data are the mean value for each region or country. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 5 Sales growth expectations decrease significantly from last quarter, with Latin American CFOs expecting a 5.5% increase in revenues over the next 12 months Latin American revenue growth down  Expectations down from last quarter, when L.A. CFOs expected revenue growth greater than 9%  Latin American revenue growth will be only slightly larger than Europe and be less than other regions. Asia companies expect fastest growth  Asia has the highest sales revenue growth, followed by the US.  Among responding L.A. countries, revenues in Peru will grow the fastest, followed by Brazil, Mexico and Uruguay.

6. Global Trends Capital Spending Sept 2014 Outlook Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 6 Expected Increase in Capital Spending Notes: Presented data are the mean value for each region or country. Latin American capital spending is expected to increase 2.2% over the next 12 months. Capital spending growth rebounds but still low  Latin American spending plans increase significantly to 2.2% but is still below other regions of the world  Capital spending plans are stable in other regions. Business spending weak across Latin America  Capital spending will grow strongly in Peru but will remain flat in Brazil and Chile.  Business spending strong in the US and Asia.

7. Global TrendsSept 2014 Outlook Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 7 Expected Change in Earnings Notes: Presented data are the mean public company value for each region or country. Earnings Earnings expectations continue to decline in Latin America, with no growth for the region overall over the next 12 months, varying widely across countries. Year-long negative earnings trend in Latin America  Latin American earnings growth has fallen from 13.4% in 2014Q1 to flat this quarter  European earnings growth decreases. US, Asia, and Africa expect strong growth in earnings. Weaker earnings in surveyed Latam countries  Brazil and Chile expect earnings to be lower next year, relative to this year.  Within L.A., earnings in Peru and Mexico will be relatively strong over the next year.  US earnings growth will be greater than 10%

8. Global Trends # FT Employees Sept 2014 Outlook Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 8 Moderate Increase in Fulltime Employment Notes: Presented data are the mean value for each region or country #FT=Number of Fulltime Employees Latin American CFOs expect to increase fulltime domestic employment by 3.1% over the next 12 months. Employment growth moderates in Latin America  While Latam CFOs expect modest employment growth in the next year, workforce increases should still outpace Europe, the U.S. and Asia  Europe expects little if any growth; Africa expects strong employment growth Employment growth continues in Brazil  Brazil expects high growth in fulltime employment, Peru is slightly lower.  Employment will grow about 3% in Mexico and Uruguay but barely grow in Argentina

9. Historical Responses Wages & Salaries Sept 2014 Outlook Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 9 Expected Wage and Salary Increase Notes: Presented data are the mean value for each region or country Wages and salaries are projected to increase by 7.1% in Latin America, similar to Africa and Asia. Rapid wage growth in emerging economies  Latin America, Asia, and Africa all expect wages to rise by more than 6%, which is higher than the overall inflationary expectations in LA and Africa  The US and Europe expect wages to grow by less than 3% Wages to soar in Uruguay and Brazil  Companies in Brazil expect to increase wages and salaries by 6.8% over the next year.  In Peru and Chile, wage hikes will be around 4%, while Mexican wage growth will be near zero

10. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 Percentage of Workforce Earning Minimum Wage 10 Approximately what percentage of your primary workforce currently earns minimum wage? Asia has the highest percentage of workers earning minimum wage, followed by Africa.  Asia has more than 37% of the workforce earning minimum wage, followed by Africa’s 15.1%  About 8% of Latin America workers earn minimum wage, similar to the US and Europe.  Brazil has the lowest proportion of workers earning minimum wage.

11. Effect of Increasing Minimum Wage Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 11 Increasing the minimum wage would have multiple, offsetting effects  Firms would shift away from labor towards machines and pass the higher wages along to consumers in the form of higher product prices.  Higher wages would also increase worker productivity and employee turnover For your primary workforce, what would be the effect on your firm if the required minimum wage per hour were to increase by 40%? Would your company...

12. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 Labor-Reducing Capital Investments 12 Has your company made or are you planning to make capital investments aimed at reducing the amount of labor needed at your company? Latin America has the highest intention to switch to labor-saving technologies  55% of the Latin CFOs say they have made or plan to make capital investment aimed at reducing the amount of labor needed, in effect shifting from labor towards robots  African CFOs have the least intention to switch to labor-saving technologies, perhaps reflecting low African wages. Protective labor laws reduce labor-saving techniques in Europe.

13. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 Political Contributions 13 Does your company make political contributions? (Reported data are for firms located in countries that allow corporate political contributions) Most firms in emerging economies do not make political contributions  More than 50% of the European firms make political contributions, according to the survey respondents.  Latin American firms has the lowest rate of making political contributions.

14. Reasons for Making Political Contributions Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 14 What are the most important reasons that your company makes political contributions?

15. Managing Corporate Tax Exposure Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 15 Companies overwhelmingly agree that managing corporate tax exposure is important  Taxes affect business strategies and where to locate operations Do you Agree or Disagree the following statements about managing your company's corporate tax exposure.

16. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 Return on Assets (ROA) 16 Strong profit growth expected in parts of Latin America Profit margins are expected to rise in all regions, relative to 2013 profits, buy not in Peru and Chile  ROA expectations have declined in Peru and Chile  CFOs in Latin America generally expect modest ROA improvement

17. Duke/FGV CFO Survey in Latin America Press Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 17 The Latin American Business Outlook is frequently reported in the press

18. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 18 Duke/FGV CFO Survey in Latin America Press The Latin American Business Outlook is frequently reported in the press

19. Latin American Business Outlook Part of the Global Business Outlook A joint survey effort between Duke University, Fundação Getúlio Vargas and CFO magazine Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 19

20. OLD SLIDES 20 Latin American Business Outlook Duke University / FGV / CFO Magazine Sep 2012

21. From June 2014 21 Latin American Business Outlook Duke University / FGV / CFO Magazine Sep 2012

22. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 Intention to Deploy Cash Reserves 22 Is it likely that your firm will begin to deploy its cash reserves during the next 12 months? Most firms in emerging economies expect to use their cash reserves in the coming year  Due to good long-run investment opportunities, 72% of Latin American firms will deploy cash reserves  Only about half of US and European companies will spend out of cash reserves in the coming year

23. If deploying cash reserves, on what? Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 23 72% of Latin American firms plan to spend their cash reserves in the next 12 months. Among these firms …  More than half will use the cash for business spending and investment, one-fourth to make acquisitions  Nearly 40% will use excess cash to pay down debt.  More than one-fourth need cash to cover operating losses or purchase raw materials

24. If not deploying cash, why not? Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 24 28% of Latin American firms are NOT planning to spend cash reserves. Among these firms …  Nearly 30% say they lack excess cash to spend; another 30% say they have alternative sources of funds  Nearly 30% also indicate that they need to hold their cash reserve in case a liquidity need arises

25. Explicit Target for Cash 25 Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 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? About half of LA and Asian firms indicate that they maintain a specific target for how much cash to hold  Though not shown on this graph, if cash drifts below the target, they quickly try to increase cash holdings  If cash accumulates above the cash target, most LA firms move only slowly to decrease cash holdings

26. 26 Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 Russian Business Connections in Latin America Has your company reduced your Russian-related activity? Though not shown on this graph, Latin American businesses are the least exposed to Russia in the world  Left: Among surveyed firms, none indicated they have pulled out of Russia, only a few evaluating  Right: Few Latin American firms indicate that severe sanctions on Russia would harm their prospects What would the impact be on your country's economy if severe financial sanctions were imposed (including restrictions in intra- bank transactions through the SWIFT system) on Russia as a result of activity in Ukraine?

27. Labor Unrest 27 Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 Do you expect labor unrest (e.g,. strikes, work stoppages) to affect your country's economy over the next 12 months? Three-fourths of Latin American firms expect labor unrest during the next 12 months  LA concerns about labor unrest are by far the highest in the world; few US firms share this concern  Though not shown on this graph, Brazil (85%) has the highest concern about labor unrest of any surveyed country in the world

28. What is the cause of labor unrest? Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 28 General problems associated with slowing economic growth are the biggest cause of labor unrest in LA  Wage pressures, in part due to high inflation, are the second biggest cause of unrest.  Working conditions are not a major concern in LA. Though not on the graph, poor working conditions lead to labor unrest in China. If you expect labor unrest (e.g,. strikes, work stoppages) to affect your country's economy over the next 12 month, the unrest is driven by?

29. From Mar 2014 29 Latin American Business Outlook Duke University / FGV / CFO Magazine Sep 2012

30. Merger and Acquisition Activity Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 30 As a region, Latin American M&A potential activity trails that of the US, Europe & Asia. About 23% of Latam CFOs expect their firms to make an acquisition in the next year World-wide, slightly more than one-fourth of companies expect to acquire assets of another firm  M&A activity is comparatively lower in Latin America, especially in Peru where only 16% of firms expect to acquire. M&A activity will be highest in Europe and lowest in AFrica.  European firms are the most likely to plan an international acquisition. Among surveyed Latam firms, CFOs in Chile are the most likely to make a cross-border acquisition.

31. Where will cross-border acquisitions occur? Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 31 International acquisitions in Latin America will target companies operating in another Latam country, followed by North American targets. Latam acquisitions mostly regional, overlooking Asia:  Latin American CFOS express very little if any interest in acquiring Asian firms, focusing instead on the Americas  The U.S./Canada is the region most likely to plan to acquire a Latin American target.  Most regions focus their international acquisitions on firms in their own continent

32. Effects of Tighter U.S. FED Monetary Policy Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 32 What effect, if any, has the U.S. Federal Reserve Bank's plan to taper its quantitative easing program had on your company's optimism about its business prospects for 2014? Emerging economics are more wary of U.S. monetary tightening than are U.S. companies  Only 1-in-5 U.S. companies expects direct negative effects from the FED tightening monetary policy  More CFOs in emerging regions are wary of FED tightening, probably because higher U.S. interest rates may lead to either higher emerging economy interest rates and/or depreciated emerging country currencies

33. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 Effects of Uncertain Economic Conditions 33 Does Uncertainty about Economic Conditions Affect Your Business Planning? Growing uncertainty about economic conditions slows hiring and spending plans  Because Latin American CFOs have grown more uncertain about economic prospects, many are adopting a “wait and see” attitude in their own business plans  More than half of Latam companies have reduced hiring and spending plans due to economic uncertainty

34. Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 Effects of Uncertainty About Government Policies 34 Does Uncertainty about Government Economic Policies Affect Your Business Planning? Growing uncertainty about government policies reduces hiring and business spending  Because Latin American CFOs have grown more uncertain about future government policies, many are adopting a “wait and see” attitude in their hiring and capital spending plans  Though not shown in this graph, concerns about government policies are acute in Chile and Brazil

35. Corporate Culture Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 35 In both Latin America and in the U.S., customer-orientation and integrity are two primary aspects of corporate culture More similarities than differences in Corporate Culture  Still, Latin American CFOs put somewhat more emphasis on results (near-term and strategic) and somewhat less emphasis on customer orientation and integrity.

36. Planned Changes to Corporate Culture Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 36 Latin American CFOs plan to put more emphasis on strategic (long-term) results  Nearly 30% of Latam companies indicate that they will increase strategic focus, while nearly 25% say more focus on customer orientation  Though not shown in the graph, most Latam CFOs say that it is very important for their employees to understand the corporate culture. What is the primary focus of changes in corporate culture among Latin American firms?

37. Real Estate Bubbles? Latin American Business Outlook Duke University / FGV / CFO Magazine Sept 2014 37 Approximately 50% of Latin American CFOs believe there is a real-estate bubble in the region compared to 70% in Asia, and 90% in China Real Estate Bubbles are significant concerns in Latin America and Asia  More than half of CFOs in Brazil and Peru indicate that they believe there is a real estate bubble in their home countries. A bursting bubble like what occurred in the U.S. in 2008-2010 could slow economic growth  An astounding 90% of Chinese CFOs believe China has a real estate bubble, and (though not shown in the graph) 30% think the Chinese bubble will burst in 2014