december, 2016 - liaa › files › liaa › attachments › lac_region.pdf · q2’s sharp...

December, 2016

ELANbiz is a project financed by the

European Union

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Business opportunities in Latin America

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Why LAC?

• A US$5.3 trillion economy

• Approximately 600 million citizens

• Latin America is a rapidly-growing market • A fast growing middle class

And because diversifying export marets is always a good idea…

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US$ 5.3 trillion economy

Almost x3 in 15 years

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Things are expected to improve

• Most LATAM countries have much lower external debt ratios and greater international reserves than in previous crisis

• This allows for greater flexibility in monetary policy as well as access to capital markets

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Fast growing middle class

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Population disparities

Uneven economic growth across the region

Language

GDP per capita disparity across the region

Income inequalities within countries

World Bank

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LATAM Trade blocs *excl. AP

ANDEAN COMMUNITY

DR-CAFTA

MERCOSUR

NAFTA

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Largest trade blocs

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World Bank ease of doing business index

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LATAM Business environment: UF Index

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Business opportunities

161.000 million US$ will be invested in the next 5 years: • Transportation and logistics 90.417 million US$ • Oil and gas infrastructures 35.500 millions US$ • Energy 26.226 millones: half of the demand in

2030 is expected to be covered with renewable energies

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Fastest growing consumers markets

2010-2015

LATAM aging population +65 years %

Language

WOMEN in LATAM

• 53% of working population

• 33.5% of Directorship positions

EU-LATAM trade

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Argentina

• Population: 43,416 million • GDP: 583.169 billion US$ • GNI per capita: 12.460 US$ World Bank, 2016

• The new administration of President Macri promises to be substantially more business-friendly than the outgoing Peronist government

• The pace of fiscal consolidation, however, remains a key challenge for President Mauricio Macri’s administration.

• Although in October the government reinstated a gas subsidy cut after the original had been temporary annulled by the Supreme Court in August, the slash introduced this time around was smaller and will be implemented more gradually.

• Legislative elections in 2017

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Political situation Argentina

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Economic situation Argentina

• The economy remains in recession as a result of the government’s austerity measures, declining real wages and weak external demand.

• Some positive signals have started to emerge in recent months. The decline in economic activity softened in August and the upward trend and business and consumer confidence continued in October

• In 2017, however, the country will return to growth due to revived public spending in the wake of the 2017 legislative election and to the recovery in Brazil.

• Analysts see the economy rising 3.2% next year.

• Inflation at over 30% remains a serious risk

• Argentina ranks 121st out of 189 countries in ease of doing business by the World Bank.

• In surveys of corruption perceptions it ranks in the third quartile, and dropped in the most recent rankings.

• Agents report fairly little confidence in the rule of law,

• Argentina rose in a recent ranking of economic freedom

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Business situation Argentina

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Argentina trade agreements

• Energy, oil and gas

• Renewable energies

• ICT

• Agriculture (technology)

• Food processing

• Automotive

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Sectors of interest Argentina

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EU-Argentina trade

Product

code Product label

Argentina's imports from European Union (US$)

Value in 2013 Value in 2014 Value in 2015

TOTAL All products 13,532,384 11,292,559 10,038,124

84 Machinery, mechanical appliances, nuclear reactors, boilers; parts 2,863,584 2,637,116 2,395,491

30 Pharmaceutical products 1,234,102 1,191,551 1,223,906

85 Electrical machinery and equipment and parts thereof; sound recorders and

reproducers, television . . . 1,079,095 1,239,365 971,709

87 Vehicles other than railway or tramway rolling stock, and parts and

accessories thereof 1,842,997 966,082 809,286

90 Optical, photographic, cinematographic, measuring, checking, precision,

medical or surgical . . . 498,492 480,288 528,327

29 Organic chemicals 465,269 465,537 485,502

27 Mineral fuels, mineral oils and products of their distillation; bituminous

substances; mineral . . . 1,620,349 914,118 411,094

39 Plastics and articles thereof 421,822 394,893 395,742

38 Miscellaneous chemical products 403,566 376,182 377,267

73 Articles of iron or steel 293,044 300,678 224,341

72 Iron and steel 191,490 167,115 211,956

48 Paper and paperboard; articles of paper pulp, of paper or of paperboard 244,515 200,667 195,594

33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations 157,506 144,423 154,510

40 Rubber and articles thereof 221,015 180,779 151,883

88 Aircraft, spacecraft, and parts thereof 456,763 158,292 128,623

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Brazil

• Population: 207,847 million • GDP: 1,775 trillion US$ • GNI per capita: 9.850 US$ World Bank, 2016

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Political situation Brazil

• The political scene remains complicated but the government is making progress on fiscal reforms.

• Efforts to address Brazil’s recession and fiscal problems will be slowed by Brazil’s political crisis.

• PETROBRAS scandal: over 140 people have been charged with crimes, including politicians and CEOs of some leading firms

• President Dilma Rouseff impeachment • Brazil’s policymakers are now in the position of having to

tighten fiscal policy in a recession. • To stabilize its public debt, the government announced

spending cuts amounting to as much as 1.3% of GDP.

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Economic situation Brazil

• To combat inflation the central bank had to raise interest rates

• The Real has dropped 60% since its peak in April 2011. That depreciation will improve Brazil’s competitiveness and help moderate the contraction of the economy.

• Brazil’s battered economy is slowly heading towards a recovery.

• Industrial production rebounded in September and the current account deficit moderated, but retail sales continued to fall

• Consumer confidence rose in October and the manufacturing PMI recorded the best result since January.

• GDP to drop 3.2% in 2016, and 1% growth expected in 2017

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Business situation Brazil

• Despite the political situation, survey respondents report that perceptions of corruption and the rule of law are improving.

• The ease of doing business in Brazil also has improved, according to the World Bank, though Brazil is still in the bottom half of the rankings.

• That improvement comes despite a deterioration in some subcategories of the rankings, such as the number of tax payments required per year and the corporate tax rate, and in the country’s ranking on economic freedom.

• Reported crime in Brazil, meanwhile, is one of the highest in Latin America.

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Brazil trade agreements

• Infrastructures

• Energy

• Pharmaceuticals

• Medical devices

• Aerospace and aviation


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Sectors of interest Brazil

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EU-Brazil trade Product code Product label

Brazil's imports from European Union (US$)



84 Machinery, mechanical appliances, nuclear reactors, boilers;

parts thereof 11,869,869 10,239,522 7,649,142


87 Vehicles other than railway or tramway rolling stock, and

parts and accessories thereof 5,345,298 4,556,801 2,968,318

85 Electrical machinery and equipment and parts thereof; sound

recorders and reproducers, television . . . 3,964,061 3,523,332 2,943,495

29 Organic chemicals 3,068,814 2,975,515 2,713,004

27 Mineral fuels, mineral oils and products of their distillation;

bituminous substances; mineral . . . 2,636,958 2,806,835 1,981,027

90 Optical, photographic, cinematographic, measuring,

checking, precision, medical or surgical 2,432,911 2,190,453 1,725,865

38 Miscellaneous chemical products 1,752,733 1,991,293 1,646,331

39 Plastics and articles thereof 2,068,743 1,960,725 1,630,249

73 Articles of iron or steel 1,696,170 1,290,826 904,454

31 Fertilisers 1,143,239 857,770 857,897

88 Aircraft, spacecraft, and parts thereof 1,278,765 932,727 726,643

72 Iron and steel 739,867 677,417 560,326


89 Ships, boats and floating structures 181,759 126,316 386,384

48 Paper and paperboard; articles of paper pulp, of paper or of

paperboard 674,290 595,873 367,207

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Chile

• Population: 17,984 million • GDP: 240,21 billion US$ • GNI per capita: 14.060 US$ World Bank, 2016

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Political situation Chile

• President Bachelet’s push for wide-ranging reforms has lost momentum.

• Her proposals include reforms to education, labor relations, tax policy, and the constitution.

• President Bachelet remains committed to reforms that will reduce Chile’s income inequality.

• Weak economy and a corruption scandal sent Ms. Bachelet’s approval rating down to 20% in September

• Ms. Bachelet’s low popularity and a severe loss in the local elections in October suggest further progress on the reforms will be slow and uneven

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Economic situation Chile

• Signs of improvement

• Government adopted measures to boost productivity were introduced in 2016 as the “Year of Productivity” in Chile

• In September, industrial manufacturing recorded a second consecutive month of growth

• Challenging conditions in the mining sector.

• Encouraging economic data from China prompted a slight pick-up in copper prices, despite fundamentals remaining largely weak.

• GDP expected to grow 1,7 in 2016 and 2% in 2017

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Business situation Chile

• It remains one of the most business-friendly countries in Latin America, ranked second only to Mexico in the World Bank’s latest ease of doing business ratings.

• Other than the increase in the corporate tax rate, which is being phased in over four years, the past year saw little change in Chile’s business climate.

• In perceptions of corruption, Chile is ranked 21st in the world, just below Hong Kong, Ireland, and the United States in Transparency International’s most recent rankings.

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Chile trade agreements

• Food processing

• Renewable energy

• Mining


• Healthcare

• Environment

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Sectors of interest Chile

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EU-Chile trade

Product code Product label Chile's imports from European Union (US$)



84 Machinery, mechanical appliances, nuclear reactors,

boilers; parts thereof 3,180,812 2,503,413 2,310,694

87 Vehicles other than railway or tramway rolling stock,

and parts and accessories thereof 1,522,398 1,257,286 1,190,879

85 Electrical machinery and equipment and parts thereof;

sound recorders and reproducers, television . . . 1,177,357 994,507 920,491

88 Aircraft, spacecraft, and parts thereof 1,066,489 505,367 533,346

30 Pharmaceutical products 516,203 523,584 504,471



checking, precision, medical or surgical . . . 380,150 365,018 362,479



48 Paper and paperboard; articles of paper pulp, of paper

or of paperboard 269,716 256,095 239,603

33 Essential oils and resinoids; perfumery, cosmetic or

toilet preparations 220,386 202,449 198,111


22 Beverages, spirits and vinegar 125,004 122,058 122,408

72 Iron and steel 197,770 130,373 121,871

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Colombia


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Political situation Colombia

• The administration of President Juan Manuel Santos is focused on the peace process.

• The government presented its ambitious fiscal reform to Congress on 19 October.

• The reform is designed to compensate for the shortfall in oil income and aims to increase government revenues back to pre-oil slump levels by 2022.

• The proposal will likely face strong opposition in Congress after the government-backed peace deal was rejected at the ballot box.

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Economic situation Colombia

• In Q3 economy likely remained on a weak footing, following Q2’s sharp deceleration.

• In September consumer confidence remained negative

• August retail sales contracted for the first time in 5 months

• The ongoing oil slump is weighing heavily on Colombia’s economic outlook.

• Analysts expect the economy to grow 2.1% in 2016 and 2.6% in 2017

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Business situation Colombia

• Colombia is the 4 highest ranked Latin American country in the World Bank’s ease of doing business rankings, and improved in the rankings during 2015.

• Perceptions of both economic freedom and global competitiveness for Colombia also rose.

• Colombia fell in the World Bank’s governance indicators, possibly reflecting a lack of confidence among some survey respondents about the terms of the government’s pending peace agreement with the FARC rebels

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Colombia trade agreements

• Automotive industry

• ICT

• Energy

• Tourism (investment)


• Mining

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Sectors of interest Colombia

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EU-Colombia trade Product code Product label

Colombia's imports from European Union (US$)



88 Aircraft, spacecraft, and parts thereof 973,572 1,593,052 1,448,227

84 Machinery, mechanical appliances, nuclear reactors, boilers;

parts thereof 1,460,974 1,472,950 1,296,813



recorders and reproducers, television . . . 601,828 543,800 510,463

87 Vehicles other than railway or tramway rolling stock, and parts

and accessories thereof 466,603 477,686 437,670

90 Optical, photographic, cinematographic, measuring, checking,

precision, medical or surgical . . . 453,897 514,018 429,509




89 Ships, boats and floating structures 102,970 55,339 210,119

48 Paper and paperboard; articles of paper pulp, of paper or of

paperboard 177,169 191,097 174,274

27 Mineral fuels, mineral oils and products of their distillation;

bituminous substances; mineral . . . 173,068 53,192 137,470


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Costa Rica


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Political situation CR

• The country was formally invited to join the Organization for Economic Cooperation and Development (OECD), a recognition of its economic and fiscal maturity.

• New president Guillermo Solís faced political turmoil, losing his culture minister to a scandal over a failed international culture festival, and his minister of science, technology and telecommunications over a proposed media law

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Economic situation CR

• Weak growth 2015, activity is set to accelerate in 2016-17.

• Domestic demand is projected to be the main driver, but exports will also recover as world markets regain momentum.

• The unemployment rate is likely to remain above 9%.

• The government has proposed a tax reform bill which would replace the country’s 13% sales tax with a value added tax, at an initial rate of 14%, rising to 15% in the second year.

• The tax proposal also includes significant increases to personal income tax rates

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Business situation CR

• The business environment continues to be favorable. • Costa Rica is ranked 58th in the World Bank’s 2016 ease of-

doing-business report, rising a remarkable 21 places since the 2015 report.

• It showed large improvements in access to credit and its tax situation.

• Costa Rica is ranked 47th in the world in Transparency International’s 2014 perceptions of corruption rankings.

• Costa Rica is ranked 51st in the latest Economic Freedom Index.

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CR trade agreements

• Services sector (Call Center, digital technologies, shared services and back office)

• Life sciences (biotechnology, medical devices, clinical trials)

• Green technology (wind and solar)

• Advanced Manufacturing (aerospace and electronics)

• Infrastructure (roads, ports and airports)

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Sectors of interest CR

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EU-Costa Rica trade Product code Product label

Costa Rica's imports from European Union (US$)




84 Machinery, mechanical appliances, nuclear reactors, boilers; 215,504 243,301 190,652

87 Vehicles other than railway or tramway rolling stock, parts and

accessories 117,313 123,699 185,618


recorders and reproducers, television . . . 103,721 138,728 122,751

90 Optical, photographic, cinematographic, measuring, checking,

precision, medical or surgical . . . 71,185 73,555 72,749




21 Miscellaneous edible preparations 20,089 24,041 32,438


86 Railway or tramway locomotives, rolling stock and parts thereof;

railway or tramway track fixtures . . . 84,686 20,998 27,429


48 Paper and paperboard; articles of paper pulp, paperboard 25,868 22,393 25,025

33 Essential oils and resinoids; perfumery, cosmetic or toilet

preparations 28,310 30,128 24,387

31 Fertilisers 26,571 16,296 16,625

69 Ceramic products 13,421 11,259 15,660

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Mexico

• Population: 127,017 million • GDP: 1,144 trillion US$ • GNI per capita: 9.710 US$ World Bank, 2016

• During 2016, President Enrique Peña Nieto has implemented an ambitious reform agenda.

• The President was successful in passing legislation in 2014 to open the energy sector to private participation, increase competition in the broadcasting and telecommunications industries, and reform the banking system.

• Mr. Peña Nieto will struggle to rebuild credibility that has been damaged by a succession of corruption scandals and growing frustration about drug-related crime and violence.

• Impact of US elections

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Political situation Mexico

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Economic situation in Mexico

• Economic activity continues supported by agricultural /service sectors

• Poor performance from the industrial sector

• Currency suffered strong volatility as a consequence of US elections

• Economic growth is losing dynamism due to a variety of factors:

– The government has cut spending

– Manufacturing production remains weak

– Political uncertainty and insecurity affecting consumer confidence

• GDP outlook for this year is at 2.1% and 2.3% in 2017

• At 38th place, Mexico is the highest ranked Latin American country in the World Bank’s ease of doing business rankings, and rose four spots in the rankings in the past year.

• That places Mexico comfortably in the highest quartile in the rankings worldwide.

• In two areas, ease of getting credit and resolving insolvencies, Mexico ranks even higher than its overall ranking.

• Despite the corruption scandals that made headlines in 2015, survey-based perceptions of corruption actually improved this year.

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Business situation in Mexico

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Mexico trade agreements

• Automotive industry

• Food and beverage

• ICT

• Engineering

• Infrastructures

• Energy

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Sectors of interest Mexico

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EU-Mexico trade

Product

code Product label

Mexico's imports from European Union (US$)



84 Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof 9,862,184 10,045,581 10,578,745

85 Electrical machinery and equipment and parts thereof; sound recorders and

reproducers, television . . . 5,410,216 6,001,287 6,037,441

87 Vehicles other than railway or tramway rolling stock, parts and accessories 4,168,880 4,445,127 4,569,754


27 Mineral fuels, mineral oils and products of their distillation; bituminous

substances; mineral . . . 3,978,296 3,339,723 2,345,234

39 Plastics and articles thereof 1,551,584 1,722,608 1,752,235

90 Optical, photographic, cinematographic, measuring, checking, precision,

medical or surgical . . . 1,636,821 1,754,767 1,727,909

33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations 938,088 1,373,896 1,454,195

99 Commodities not elsewhere specified 920,815 1,073,866 1,236,466

29 Organic chemicals 1,214,252 1,278,290 1,160,744

73 Articles of iron or steel 1,122,100 1,049,565 1,021,682

72 Iron and steel 1,322,625 1,126,054 877,539


48 Paper and paperboard; articles of paper pulp, of paper or of paperboard 655,032 663,665 659,636


94 Furniture; bedding, mattresses, mattress supports, cushions and similar

stuffed furnishings; . . . 390,285 454,517 478,270


82 Tools, implements, cutlery, spoons and forks, of base metal; parts 437,587 428,252 421,409

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Peru


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Political situation Peru

• President Pedro Pablo Kuczynski first 100 days in office have seen various successes.

• The President avoided a political vacuum and embarked on several of the reform programs and projects on its ambitious list of pledges, including: tax reforms Changes to the National System of Public Investment

(SNIP) efforts to improve security.

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Economic situation Peru

• The economy’s overall stable and strong performance has allowed the government to balance the budget.

• The new government intends to increase public investment in infrastructure

• Economic activity grew strongly in August and exports surged in September.

• Business confidence inched down in October but it is still well above the 50-point threshold that separates optimistic from pessimistic

• GDP growth forecast is at around 1.5% for 2016 and above 2% for 2017

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Business situation Peru

• Peru is ranked number 50 out of 189 countries, in the World Bank’s latest Doing Business report, and moved up in the rankings.

• It is the third highest ranked country in Latin America — just below Chile but above Colombia.

• Peru ranked even higher in the getting credit and registering property rankings,

• Peru lost ground in corruption perceptions and in global competitiveness

• More Peruvians report that they or someone in their families have been a victim of a crime than in neighboring countries.

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Peru trade agreements

• Infrastructures

• Fisheries

• Food processing

• Solar energy

• Mining

• Constructions materials

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Sectors of interest Peru

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EU-Peru trade

Product code Product label Peru's imports from European Union (US$)



84 Machinery, mechanical appliances, nuclear reactors,

boilers; parts thereof 1,617,195 1,556,130 1,242,066

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Electrical machinery and equipment and parts

thereof; sound recorders and reproducers, television

. . .

490,878 559,993 560,590

87 Vehicles other than railway or tramway rolling stock,

and parts and accessories thereof 493,801 409,907 352,517



checking, precision, medical or surgical . . . 204,061 198,549 178,587



48 Paper and paperboard; articles of paper pulp, of

paper or of paperboard 120,976 127,812 135,646




72 Iron and steel 103,364 97,857 76,291

• Adopt a regional strategy

• Do not understimate entry costs

• Review market access conditions and barriers

• Consider to work with local partners

• Follow-up with EU FTA strategy: – New FTA with Mexico

– New round of negotiations with MERCOSUR

– Tariff liberalization schedule in FTAs in force

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LATAM market access strategies

Thank you

for your attention!

Javier Sanchez, LAC Expert

[email protected]

Coordination office in Lima:

Katelyne Ghémar, ELANbiz Coordinator

[email protected]

ELANbiz is a project financed by the

European Union

mailto:[email protected]

mailto:[email protected]

december, 2016 - liaa › files › liaa › attachments › lac_region.pdf · q2’s sharp...

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