latin america as the new emerging economic powerhouse
DESCRIPTION
Growth is focused now in the Pacific area, led by Asia but with a significant contribution of Latin America • Latin America presents today lower vulnerabilities due to reforms implemented after severe crises • Reforms are now paying off in terms of sustained high growth and increasing purchasing power of the population • Despite a global aging process, demographics are still favourable for Latin American countries • In addition to a predominant urban condition, consumers in Latin America are today wealthier and therefore pushing for changes in expenditure patterns • However, there is no room for complacency and success brings challenges that policies should tackle on timeTRANSCRIPT
David Martínez-Turégano
March 19th, 2013 Santiago, Chile
Latin America as the new Emerging Economic Powerhouse
Latin America as the new Emerging Economic Powerhouse / March 2013
Latin America in the new global order Implications for the Latin American consumer
Page 2
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 3
Global growth led by the Pacific
Africa
Oceania
Emerging Asia
Japan
6.8
4.9
Eastern Europe
56.4 1.7
1.0
6.4
Middle East
4.5
Western Europe
10.9
Latin America
North America
7.5
Pacific Region 77.5
Expected contribution to global growth between 2012 and 2022 (%)
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 4
Very relevant players in Latin America
Current size and expected contribution to world growth in 2012-2022
0
500
1000
1500
2000
2500
3000
3500
4000
Brazil G6 avg. Mexico Spain Argentina Colombia Peru Chile
2012-2022 change
2012 GDP
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 5
The increasing role of Asia has been a supportive factor
Rapid growth in Asia
Asia demand of commodities
High commodity
prices
Private and public demand for final goods in LatAm
Increasing commodity revenues in LatAm
Agricultural, mining and fuels imports by china
2000 4% of total world imports 2011 11% of total world imports
Agricultural, mining and fuels latam exports
2000 34% of total LatAm exports 2011 54% of total LatAm exports
Latam - Asia trade flows
2000 4% of total LatAm trade flows 2011 16% of total LatAm trade flows
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 6
The key factor: learning from crises
Public and private debt-to-GDP ratios (2012) Source: BBVA Research
0
20
40
60
80
100
120
140
160
180
Public debt Private debt:Households
Private bebt:Non-final corporations
External debt
G7
LatAm-6
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 7
Further reforms to extend growth momentum
The Global Competitiveness Index 2012-2013 (score 1-7) Source: WEF
Need to close competitiveness gap in infrastructures, innovation, business climate, regulation, education quality
Nordic 5.28
G7 5.23
N. Africa 3.82
S. Africa 3.48
East Asia 4.69
Em. Europe 4.32
LATAM-6 4.29 Chile 4.65 Brazil 4.40 Mexico 4.36 Peru 4.28 Colombia 4.18 Argentina 3.87
2.5
PPP-a
dju
sted
GD
Pper
capita
3.0 3.5 4.0 4.5 5.0 5.5Global Competitivenes Index (1-7)
Latam 6
6.06
7
8
9
10
11
12
Latin America as the new Emerging Economic Powerhouse / March 2013
Implications for the Latin American consumer Latin America in the new global order
Page 8
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 9
New environment has brought dramatic changes for consumption
Latin America Developed economies
Still favorable demographics
Purchasing power gains
Higher volume of consumption
Changes in consumption patterns
Reduction of household size softens lower population growth
Development of distribution channels, product differentiation, demand for luxury products…
+deleveraging +uncertainty
Population growth 0
Mature markets with high income
Higher volume of consumption
Changes in consumption patterns
Aging increases consumption rates and generates new needs
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 10
Favorable demographics, but with regional differences
Population pyramids (2010) Source: BBVA Research and UN
6 65 54 43 32 21 10
0-4
10-14
20-24
30-34
100+
90-94
80-84
70-74
60-64
50-54
40-44
0-4
10-14
20-24
30-34
100+
90-94
80-84
70-74
60-64
50-54
40-44
0-4
10-14
20-24
30-34
100+
90-94
80-84
70-74
60-64
50-54
40-44
Female Male Female Male Female Male
6 65 54 43 32 21 10 6 65 54 43 32 21 10
G7 Argentina, Brazil and Chile (avg.)
Colombia, Mexico and Peru (avg.)
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 11
Middle class boom in Latin America Population in Latin America by income range Source: BBVA Research
GDP per capita in 2012 PPP-adjusted USD:
Affluent>40,000 USD
Middle class: High (25,000-40,000 USD)
Medium (15,000-25,000 USD)
Low (5,000-15,000 USD)
Low income 1,000-5,000
Poor <1,000 USD
Population (mn) Population share (%)
0
100
200
300
400
500
600
19
80
19
82
1984
19
86
19
88
199
019
92
19
94
199
619
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
Affluent High Middle Class Medium Middle Class
Low Middle Class Low Income Poor
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1980
19
82
19
84
1986
19
88
19
90
19
92
19
94
19
96
199
82000
20
02
20
04
2006
20
08
20
10
20
12
20
14
20
16
20
18
20
20
Affluent High Middle Class Medium Middle Class
Low Middle Class Low Income Poor
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 12
Urban agglomerations to increase economic role Urbanization levels in 2025 Source: UN
Challenges: infrastructures, basic services, housing, public transport, traffic congestion, pollution
Percentage Urban0-25% 1-5 million
5-10 million10 million or more
25-50%50-75%75-100%
City population
Percentage Urban0-25% 1-5 million
5-10 million10 million or more
25-50%50-75%75-100%
City population
Mexico 25 mn
Bogota 11 mn
Lima 12 mn
Santiago 7 mn
B. Aires 16 mn
S. Paolo 23 mn
Rio 14 mn
7 cities will acount for 110mn people in 2025, a fifth of total population in LatAm-6
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 13
Changes in consumption patterns
Necessities
Semi-necessities
Discretionary
Food and non-alc. beverages
Clothing and footwear
Alcohol and tobacco
Housing (rent, utilities)
Equipment (‘white goods’)
Communications (phone)
Health (drugs)
Transport (autos, fuel, public transport)
Recreation, culture (‘brown goods’)
Restaurants and hotels
Education
Miscellaneous (personal care, insurance)
Group (examples) Low income Middle income High income Transition Transition
Peru Brazil Argentina Colombia Mexico Chile
Latin America as the new Emerging Economic Powerhouse / March 2013
Page 14
Key messages
• Growth is focused now in the Pacific area, led by Asia but with a significant contribution of Latin America
• Latin America presents today lower vulnerabilities due to reforms implemented after severe crises
• Reforms are now paying off in terms of sustained high growth and increasing purchasing power of the population
• Despite a global aging process, demographics are still favourable for Latin American countries
• In addition to a predominant urban condition, consumers in Latin America are today wealthier and therefore pushing for changes in expenditure patterns
• However, there is no room for complacency and success brings challenges that policies should tackle on time