terry mccoy @ purdue university - february 19, 2014
TRANSCRIPT
February 19, 2014
THE 2014 LATIN AMERICAN BUSINESS THE 2014 LATIN AMERICAN BUSINESS ENVIRONMENTS:ENVIRONMENTS:
BRAZIL AND CHILEBRAZIL AND CHILE
Purdue CIBERPurdue CIBER
Terry L. McCoyTerry L. McCoy
University of FloridaUniversity of [email protected]@latam.ufl.edu
PresentationPresentation
Current Environment for Business and Investment in Latin America•Snapshot of 2013 environment•Outlook for 2014•Differentiating Countries: Brazil and Chile
Evolution of the Latin American Business Environment at Krannert•2009: Coping with the Global Financial Crisis•2010: Robust Recovery•2011: The New Latin America?•2012: Growing Uncertainties•2013: Mild Recovery, Long-term Challenges
2014: Consolidation of Post Recovery Environment•Continuity for most countries•But important outliers
Components of theComponents of theLatin American Business EnvironmentLatin American Business Environment
Economic
-------------
Financial
Social
Political Policy
---------------
Legal
Global
Regional
Domestic Environment
Regional Profile: Moderating GrowthRegional Profile: Moderating Growth
With Moderate InflationWith Moderate Inflation
And Slower Export GrowthAnd Slower Export Growth
In Softer External Environment withIn Softer External Environment withWeaker Commodity PricesWeaker Commodity Prices
And Slowing Capital FlowsAnd Slowing Capital Flows
With Growing External DebtWith Growing External Debt
And Weakening Fiscal AccountsAnd Weakening Fiscal Accounts
Are Rising Standards of Living Theatened?Are Rising Standards of Living Theatened?
Economic Reform
Sustained Growth
Outlook for 2014Outlook for 2014::Cautiously Optimistic but . . Cautiously Optimistic but . . ..
External Environment•Increased global growth (3.2% from 2.4%) led by rich countries•Tailwind: Stronger trade (but subdued commodity prices) •Headwind: Volatile capital flows (“Emerging Markets Rout”)•Shifting regional blocs (Pacific Alliance vs. Mercosur)
Domestic Environment•Economic: Modest uptick in growth and inflation•Social: Increasing mobilization and protests from civil society•Political: Elections unlikely to produce significant re-alignment•Policy: Reducing inflation and growing external and fiscal imbalances while stimulating growth
Significant Country Differences
Attractive Environments (9)Attractive Environments (9)
Defining Features
Sustained growth with moderate inflation
Diversified export base
Growing middle class
Centrist democratic politics with power sharing
Social market policy consensus and continuity
Protection of property rights
Transparency, accountability
Strong credit ratings and FDI
Countries ▼Brazil*
▲Mexico*
=Chile*
=Peru*
=Panama*
?Colombia*
=Uruguay*
?Costa Rica
=Dominican Republic
*Investment grade rating
Problematic Environments (4)Problematic Environments (4)
Defining Features
The Populist ALBA bloc
Power concentrated in re-elected presidents
Interventionist states
Weak legal environment and high rates of corruption
Energy export dependence
Growth with moderate inflation
Significant poverty reduction
High risk countries with growing dependence on China
Countries
▼Venezuela
-------------------------------------
=Ecuador
=Bolivia
----------------------------
=Nicaragua
Mixed Environments (5)Mixed Environments (5)
Defining Features
Slowing growth with high inflation
Rich commodity base
Strong middle class
Increasing state control of economy and serious macroeconomic imbalances
---------------------------------------------
Slow growth
Weak terms of trade
Heavy US dependence
Widespread poverty
Drug-related violence
---------------------------------------------
Poor but growing
Countries
▼Argentina
-------------------------------------
=Guatemala
=El Salvador
=Honduras
-------------------------------------
▲Paraguay
Brazil and Chile:Brazil and Chile:Important Latin American MarketsImportant Latin American Markets
Economic EnvironmentsEconomic Environments
BrazilGDP ($bn/11) 2, 310
GDP Growth (Av.%/04-12) 3.9
GDP Growth (%/13/14) 2.5/2.5
Inflation (%/13) 6.5↑
Exports ($bn/12) 282.4↓
Current Account ($bn/12) -54.2↑
Net FDI ($bn/12) 68.1↑
External Debt ($bn/12) 312.9↑
Debt/GDP (%) 11.8↓
Fiscal Balance (%GDP/12) -2.0↓
FX/US$ (13) -6.9
Stock Market (%/13) -15.9
Chile300
4.6
4.4/4.5
0.9↓
90.9↓
-9.5↑
9.2↑
117.8↑
31.0↓
0.6↓
-5.4
-15.9
Natural Resource EconomiesNatural Resource Economies
Brazilian Soy Beans Chilean Copper
Social EnvironmentsSocial Environments
BrazilPopulation (m) 200.0
Pop. Growth Rate (%) 0.8
Illiteracy (%) 9.7
Per capita GDP ($ppp) 11,909↑
HDI Rank (of 186) 85
Poverty (%/11) 20.9↓
Inequality (Gini) 54.7↓
Unemployment (%/12) 5.5
Homicide Rate (/100,000) 21
Chile17.6
0.8
1.4
22,352↑
40
11.0↓
52.1↓
6.4
3
Modern CitiesModern Cities
SantiagoSao Paulo
Political Environments:Political Environments:Dictatorships to Consolidated DemocraciesDictatorships to Consolidated Democracies
Dilma Rousseff Michele Bachelet
Institutional EnvironmentsInstitutional Environments
Brazil
Rule of Law (%) 51.7
Corruption Rank (of 159) 69
Econ. Freedom Rank (186)100
Property Rights Rank (%) 50
Start a Business (days) 119
Country Risk Rating (13) BBB
Global Competitiveness
Rank (of 142) 56
Chile88.2
20
7
90
8
A
34
Conclusions Conclusions
Brazil and Chile are important markets •Chile is fundamentally stronger (less risk) but Brazil is bigger (greater upside)•Companies need employees who know these counties and know how operate with, and in, them
Acquiring competency to business degree•Become familiar with the country•Learn Spanish and/or Portuguese and the local culture•Do a study abroad or internship in Chile or Brazil•Research firms (profit and non-profit) with business in the country•Build a network of contacts (beginning here at Krannert)
Take the first step – Study Tour Brazil or Chile
And have fun!And have fun!
Ipanema Chilean Vineyard