2017 Latin America Forecast

2017 Latin America Forecast

Struggling to compete in tough global environment


01AMI is Latin America’s leading independent

market intelligence consultancy

02Our founding partners helped pioneer

the field of market intelligence in Latin America

03Our consultants have advised a third of the region’s

100 largest strategic investors over a span of two decades

04AMI consultants have conducted over 2,000 client

engagements in Latin America since 1993

05Our holistic approach to market intelligence is unique. We combine

market research, competitive intelligence, political analysis and economic

forecasting in our studies. Few others do the same in Latin America

John PriceManaging Director

[email protected]

+1 (305) 773-1141

About AMI


Disclaimer

Wherever possible, AMI has verified the accuracy of information provided by third parties, butdoes not under any circumstances accept responsibility for such inaccuracies should theyremain unverified.

It is expected that the reader will use the information provided in this presentation inconjunction with other information and with sound management practices. AMI therefore willnot assume responsibility for commercial loss due to business decisions made based on theuse or non-use of the information provided.


2017 Latin America Regional Forecast


Latin America Will Return to Growth But Will Still Underperform

2017 will end Latin America’s commodity-driven recession, but future growth will not come easily

-0.5%

-1.1%

1.3%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2015 2016 2017

GDP growth

World Industrialized countries Emerging markets LAC


Yellen vs. Trump

The Fed’s anti-inflation mandate may be the greatest threat to Trump’s fiscal & debt stimulated growth strategy

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2007 - Q3 2008 - Q3 2009 - Q3 2010 - Q3 2011 - Q3 2012 - Q3 2013 - Q3 2014 - Q3 2015 - Q3 2016 - Q3 2017 - Q3

US Fed rate


The Uneven Commodity Bounce

Metals up, energy flat: Winners – Chile, Peru, Brazil; Losers – Venezuela, Ecuador, Colombia, Mexico

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Diverging commodity prices (indexed pricing)

Industrial metals Energy

Driven by a global infrastructure spend boom

Driven US energy output expansion


Throw’em out

Latin America’s embrace of center-right parties is a rejection of incumbents, not an embrace of pragmatism

Argentina President Macri

✔

Chile President Bachelet

✘

Bolivia President Evo Morales

✘

Peru President Kuczynski

✔

Venezuela President Maduro Ecuador President Correa Mexico President Peña Nieto

✘✘✘


The Trump Factor

America’s controversial new President will deliver growth and risk

Positive Changes Threatening Changes

• Lower corporate taxeso Higher investmento Capital repatriation

• Less regulationo Expanded capital investmento Resource industry boost

• Infrastructure programo Much needed productivity boosto Short-mid-term stimulus

• Protectionismo Tax on business and consumerso Risks global trade war

• Building the wall & deportationso Will provoke populist political

backlash in Mexico – end to NAFTA

• Restrict immigration & visaso Deprives US business of talento Raises wage inflation – higher Fed


Brazil and Argentina Will Fuel Regional Growth

In both 2017 and 2018, Brazil and Argentina will combine for 70% of the region’s dollarized GDP growth

-644

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202289

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62.9

-113.6

117.8

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-86.5

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26.4

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Net change in LatAm GDP (billions of USD)

Brazil Mexico Argentina Colombia

Chile Peru Uruguay Central America

Dom Rep Rest of Caribbean Ecuador


Country Analyses


Brazil

Finding its animal instincts, now that the professionals are in charge – as long as they don’t get prosecuted

• FDI monies kept coming

• Domestic capital strike may soon end if Temer looks to survive Lava Jato

• Pro-reform block controls congress

• Competent managers now run the Central Bank, the Ministry of Finance, BNDES, and Petrobras

• Brazilian corporate and HH sectors more than halfway through debt restructuring process

• Strengthen trade with Mercosur, EU, perhaps Pacific Alliance

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2014 2015e 2016f 2017f 2018f

FDI flows, USD billions


Argentina

Waiting for investors to act on their promises

• Macri admin has executed text-book neo-liberal reforms. Now they are waiting for the private sector to invest as planned.

• FDI promotion efforts focused on: Agrifood, mining, oil & gas, infrastructure, real-estate

• 2017 must be a growth story to avoid a populist set-back in mid-term elections

• Trump engineered global investment risk could delay Argentina’s growth start

• Macri has not yet tamed inflation0

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2014 2015e 2016f 2017f 2018f



Mexico

Tan lejos de Dios, tan cerca de los estados unidos

• Trump’s war of words has paralyzed investment in Mexican export manufacturing. Re-negotiating NAFTA plus a border tax debate will further delay planned investment. FDI will drop 25-30% in 2017

• Capital flight has eroded Peso by 20% since Trump began targeting.

• Mexican voters may elect a populist on an anti-American, anti-NAFTA platform in 2018

• Mexico will try to re-align as best it can with European, Asian and hemispheric trade partners

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Colombia

Resolving post-conflict challenges in Colombia may prove more difficult than negotiating with the FARC

• Fulfilling the peace requires fiscal measures that Colombia cannot afford

• A re-emerging US energy superpower directly threatens Colombia’s terms of trade and currency strength

• Two years with a weak Peso has helped re-industrialize portions of Colombia’s economy

• Fulfilling FDI potential requires continued streamlining of bureaucracy and the tax code -

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Colombian foreign exchange rate, USD to Peso


Chile

Chile’s middle class has become the most demanding electorate in Latin America

• Copper looks to extend recovery in 2017 thanks to global infrastructure expansion (US, India, South-east Asia) –US and Asian construction to grow at 7+% in 2017 & 2018

• Mining investment will dominate FDI plans in 2017 versus other sectors that are more fickle in an election year.

• Chilean voter angst is unique from much of Latin America. 2017 will likely be a contentious election, again dividing the electorate (old versus young, right vs left)

• Alejandro Guillier may defeat Piñera, adding some investor risk

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Copper price, USD/lb


Peru

If Kuczynski can learn to share the spoils with Keiko, Peru can fulfill its growth potential

• PPK’s rocky starts reveals both his naivety and the bitter electoral resentment of Keiko Fujimori

• The “Kambio” party will have to share power with congress or face more confrontations

• Infrastructure boom should boost base metal prices and mining investment

• Bold infrastructure plans will attract new FDI growth

• Chinese investment will lead new FDI monies

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Central America

The sub-region will for the fourth year running lead Latin American growth

• Cheap energy prices provide a huge TT boost

• American protectionist angst has thus far evaded Central America

• Remittance strength remains strong

• Internal migration from countryside to city is driving a demographic growth spurt

• Near-shoring of Asian dominated light assembly favors Central America

• Growth dynamism attracting FDI from Mexico, Colombia, and other parts of LAC

• Social instability remains a long term weakness 0.0%

0.5%

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2014 2015e 2016f 2017f 2018f

GDP growth


Growth opportunities

Most markets are in early cycle stages, favoring investment over export strategies for foreign businesses

• Infrastructure & real-estate

• Industrial sector

• Consumer services

• Mining, agrifood

• Natural gas• Infrastructure• Real-estate• Finance

• Energy sectors• Tourism• Domestic e-

commerce

• Infrastructure• Manufacturing• Consumer

services• Tourism

• Infrastructure• Agrifood• Logistics• E-commerce• Mining

• Consumer services

• Financial services

• Logistics

• Tourism• Real-estate

• Medicalequipment

• Luxury goods• Industrial

equipment• E-commerce

• Consumer goods

• Medical equipment

• Professional services

• Hospitality• Power

equipment• Telecom

equipment

• Luxury goods• Industrial

equipment• Hospitality

sector

• Consumergoods

• Industrial equipment

• Mining equipment

• Construction

• Consumer goods

• Professionalservices

• Outbound tourism

• Hospitalitysector

• Professional services

FDI

Imports

01AMI is Latin America’s leading independent

market intelligence consultancy

02Our founding partners helped pioneer

the field of market intelligence in Latin America

03Our consultants have advised a third of the region’s

100 largest strategic investors over a span of two decades

04AMI consultants have conducted over 2,000 client

engagements in Latin America since 1993

05Our holistic approach to market intelligence is unique. We combine

market research, competitive intelligence, political analysis and economic

forecasting in our studies. Few others do the same in Latin America

John PriceManaging Director

[email protected]

+1 (305) 773-1141

About AMI

21

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Contact us at [email protected] to find out more about how we can solve your strategic data challenges

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2017 Latin America Forecast

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