2022 LATIN AMERICA FORECAST - A BOLD BUT UNEVEN RECOVERY OCTOBER 21, 2021 - CHINAGOABROAD
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2022 Latin America Forecast
A bold but uneven recovery
October 21, 2021
www.americasmi.com
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MARKET INTELLIGENCE CREDENTIALS
Multiple industry 29 years
advisory groups experience
for companies operating
AMI is the leading
in the region
in Latin America
analytical voice
in Latin America’s most
thriving industries Executed
3500+
Full coverage
of Latin America and the
projects
Caribbean in Latin America since
2003
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Today’s
Panelists
Presenters
John Price Lindsay Lehr Alejandro Álvarez
Managing Director Director, Payments Practice Senior Director
|
Arthur Deakin Guillaume Corpart
Co-Director, Energy Healthcare Practice
Practice Leader
Moderator
Abel Delgado
Digital Marketing Director
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Poll
How do you anticipate your Latin American business to
Question #1 perform in 2022?
Much better than in 2021 10%
Better than in 2021 58%
About the same as in 2021 22%
Worse than in 2021 9%
Much worse than in 2021 1%
0% 10% 20% 30% 40% 50% 60% 70%
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 8
Global drivers of growth & risk
Astounding global
monetary expansion
$17.6 trn USD was added by the top nine central banks in 18 months. LatAm has thus far captured
less than its historic share.
Leading Central Bank M2 Supply (Dec ‘19 - Aug ‘21) USD trillions
$100.0
$90.0
$80.0
$70.0
• Leading market M2 grew by
$60.0
22% over 18 months.
$50.0
• When will LatAm capture its
$40.0
historic share (2.6%) of
$30.0
expanded global capital -
$20.0
US$458bn?
$10.0
$-
December, 2019 September, 2021
China US EU JPN UK KOR AUS CAN CHK
Sources – CEIC data, AMI analysis
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 10Chinese and US historic growth
will generate strong demand for LatAm exports
Latin America’s two largest export customers are the USA and China
Northern LAC 2019 exports (USD billions) Big 7 South America 2019 exports (USD billions)
US, $59
ROW,
180.8
China, $124
ROW, $341
US, 399.1
China, 16.1
©2021. All rights reserved. ǀ Private and Confidential *Big 8 exporters – MX, BR, CH, PE, AR, CO, VE, EC Sources: Tradeeconomics, US trade data, EIU, Forbes www.americasmi.com 11Latin America’s unique basket of exportable products will help
exports grow at 13% p/a through 2023
Strong global demand and natural resource price inflation will pull LAC out of its recession
Big 8* Exporters (USD 2019 2020 2021 2022 2023 13% p/a growth
billions) 945.7 852.7 1,052.2 1,128.1 1,181.5 2020-2023
GDP (USD billions)
2024 20,910 26,066
$11 trn
2023 19,423 25,051 increase
over four
2022 18,013 23,911 years,
roughly 1/3
of global
2021 16,642 22,549
growth.
2020 14,722 20,894
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
China USA
©2021. All rights reserved. ǀ Private and Confidential *Big 8 exporters – MX, BR, CH, PE, AR, CO, VE, EC Sources: Tradeeconomics, US trade data, EIU, Forbes www.americasmi.com 12Global trends point to
a new commodity super-cycle
The last supercycle (2003-2013) combined with low interest rates created Latin America’s greatest growth decade in
half a century
S&P GSCI
800
700
• Massive expansion of money supply
600
• Real negative interest rates will sustain precious metal prices
500
• Increased infrastructure spending to drive industrial metal demand
400
• Emerging market growth recovery to raise food & energy demand
300
• Lockdowns stalled investment in new supply of most commodities
200
• Super-cycle to last 4-7 years
100
-
9/26/11 9/26/12 9/26/13 9/26/14 9/26/15 9/26/16 9/26/17 9/26/18 9/26/19 9/26/20
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 13LatAm regional trends
Latin America may be closer to
herd immunity than any region of the world
Previous infection is 6-7 times more effective than the best vaccines at preventing re-infection even with the Delta
variant
3-month death Oct 10 % of pop Oct 10 total
rate change vaccinated deaths/million
Oct 10 COVID deaths/million June 1 COVID deaths per million
Peru -95% 45% 6243
Peru Bolivia -94% 30% 1656
Bolivia Colombia -93% 43% 2551
Colombia
Argentina -93% 60% 2596
Argentina
Chile Chile -89% 87% 2006
Brazil Brazil -76% 60% 2870
Jamaica
Jamaica 72% 16% 690
Guatemala
El Salvador Guatemala 173% 22% 847
Cuba El Salvador 258% 62% 523
Bahamas
Cuba 261% 90% 704
Singapore
Bahamas 1325% 30% 1501
0 2 4 6 8 10 12 14
Singapore 4846% 85% 31
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 15The fiscal costs of fighting COVID are alarming
Dramatic policy adjustments will be required to avoid sovereign debt downgrades (cut spending and/or raise taxes)
Fiscal deficits as a % of GDP
2019 2020 2021 2022
0
-0.1
-2
-1.7 -1.6
-2.4 -2.4
-4 -2.8 -2.8 -2.5 -2.9 -3.2
-3.8 -3.4
-6 -4.8
-5.8 -5.5 -5.7 -5.8 -5.6
-5.9 -6 -5.9
-8
-7.6 -7.3 -7.1
-8.5 -8.4
-10 -8.9
-12
-13.8
-14
Brazil Mexico Colombia Argentina Chile Peru Ecuador
©2021. All rights reserved. ǀ Private and Confidential Source(s): AMI Analysis, EIU, World Bank, IMF, CEPAL, www.americasmi.com 162020 devaluations were influenced by
COVID fiscal & monetary policies
Brazil adopted an unusually dovish central bank approach in 2019 that was then coupled by
record deficit spending in 2020
LCU vs dollar Index (2019=100) Leading currency forecasts
105.0
2019 2020 2021 2022 2023 2024
100.0
Chile
95.0 Mexico Brazil 3.9 5.2 5.3 5.1 5.1 5.0
90.0 Colombia Chile 703 792 727 740 736 722
Peru
85.0
Colombia
80.0 3,281 3,693 3,721 3,633 3,554 3,589
Brazil
75.0 Mexico 19.3 21.5 20.1 19.9 19.6 20.2
2019 2020 2021 2022 2023 2024
Peru 3.3 3.5 4.0 4.1 3.9 3.9
Brazil Chile Colombia Mexico Peru
©2021. All rights reserved. ǀ Private and Confidential Source(s): AMI Analysis, EIU, World Bank, IMF, CEPAL, www.americasmi.com 17A rising tide
in 2021-2023 does not all ships lift
All Latin American economies fell dramatically in 2020. The rebound story is more uneven.
Factor Metric CHI DR PER BRA URU MEX PAN ARG ECU COL VEN
Herd immunization speed Estimated date Sept Feb '22 Dec Dec Sept Mar '22 Dec Dec Dec Apr '22 May '22
Central bank policy 2021 real interest rates -1.9% -3.5% -2.0% -2.0% -2.5% -0.7% -1.2% -9.0% 0.3% -1.3% N/A
Fiscal debt Public debt/GDP 2021 37% 56% 37% 83% 68% 51% 69% 96% 65% 74% 317%
Export growth 2020-23 % growth 61% 17% 27% 30% 9% 21% 10% 26% 20% 7% -30%
Total FDI inflow/GDP
Investor sentiment 9% 10% 8% 14% 11% 6% 19% 4% 6% 9% 4%
(2021-23)
GDP per capita growth USD (2019 – 2023) 15% 11% -1% -5% -3% 10% 1% 7% -3% 11% 4%
Overall score
Excellent Economic rebound prospects Poor
©2021. All rights reserved. ǀ Private and Confidential Source(s): AMI Analysis, EIU, World Bank, IMF, CEPAL, www.americasmi.com 18The fate of industry is shifting
Most traditional industries will rebound impressively but others may never recover
Medical supplies Oil and gas
Software applications & online services Industrial metals
Domestic e-commerce Software applications & online services
Early post-COVID industry performance
Fintech Fintech
Industrial metals Logistics
ICT Domestic e-commerce
COVID industry performance
Logistics Cross-border e-commerce
Agriculture Automotive
Non-essential manufacturing Medical equipment
Cross-border e-commerce Non-essential manufacturing
Construction Aerospace
Automotive Domestic travel
Medical equipment Construction
Domestic travel Cross-border travel
Oil and gas Brick & mortar retail
Aerospace Hospitality and off-line entertainment
Hospitality & off-line entertainment ICT
Brick and mortar retail Agriculture
Cross-border travel Medical supplies
©2021. All rights reserved. ǀ Private and Confidential Source(s): AMI Analysis, EIU, World Bank, IMF, CEPAL, www.americasmi.com 19COVID lockdowns sent
40 million into poverty, inviting political populism
2012 2018 2019 2020
90
Latin America’s informal workforce (60% of 88
total) were forced out of work, accelerating a 86 Gini co-efficient
84
trend of worsening income distribution. 82
80
78
26 million formal jobs were lost in LatAm 76
during the pandemic lockdowns. 500M Latin 74
72
Americans are still worse off than 2019. 70
68
Argentina Brazil Chile Colombia Ecuador Mexico Panama Peru Uruguay Latin
America
Peronists will likely lose legislative Ecuadorians voted for change in 2021 with President No major elections until 2024
advantage in 2022 elections Lasso and the Pachakutik party (congress)
Mexicans doubled down on Morena (populist) Peru elected a leftist President in mid-2021
Lula likely to win the Presidency in 2022
party in 2021 mid-terms
Left leaning constitutional assembly in Likely to elect first populist President
04/21. Possible populist Pres in 12/21 in a century (Gustavo Petro) in| 2022 No major elections until 2024
©2021. All rights reserved. ǀ Private and Confidential
Source: Credit Suisse Global Wealth Report Outlook,
www.americasmi.com 20Poll
Question #2 What is the greatest source of risk to your Latin American business in 2022?
[please select the THREE biggest risks]
42%
38%
29% 29%
24% 24% 23%
17%
13% 12%
Local (LatAm) Local (LatAm) The inability to Weak or falling Onerous and/or A new wave of Security LatAm trade Disruptive new Higher corporate
elections currency pass on demand worsening local COVID infections (physical, cyber, protectionism competitors and/or individual
depreciations inflationary costs business and lockdowns intellectual income taxes (to
versus the USD to a cost regulations property) pay for COVID)
sensitive client
base
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 21The explosion in demand for digital commerce
5 e-commerce
Predictions for 2024
Social media and
live commerce will drive 25% of retail sales
Retail e-commerce will Marketplaces will capture
reach 14% of retail E-commerce
48% of retail sales
Up from 10% in 2021, and compared to 18% reaching Up from 34% in 2021
in the US
$611
billion by 2024
Bank transfers will 31% annual growth 55% of sales
represent 9% of spend will be financed
Up from 50% now in 2020, with growth fueled by
Growing 95% annually in Brazil
Buy Now Pay Later – an additional $30 billion
Sources – EIU, E-Bit, WorldPay, AMI research and analysis
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 23EXPANSION OF THE ‘PLATFORM ECONOMY’
Banking-as-a-service Commerce platforms Financial superapps
More and more financial service providers Embedded commerce Commerce, payments and credit
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 24The logistics boom will continue in 2022
Cross-border e-com Ocean Cargo Air cargo Ground cargo
Ocean freight rates will Air cargo rates from Truck driver shortages in
LAC in-bound cross- trend downwards in Q4 South America to Asia MX will push up ground
border e-comm to grow 2021 but will jump again will climb in next two freight rates by 25% in
y/y 33% through 2025 in Q1 2022 quarters 2022
AMI Logistics Outlook 2022
Origin Destination Transport Mode Capacity Rates
Asia LAC Ocean balanced +
LAC Asia Ocean strained ++
LAC Asia Air balanced ++
LAC Domestic Ground strained ++
©2021. All rights reserved. ǀ Private and Confidential Source: DHL Ocean Freight Outlook, CH Robinson, Maersk, AMI Interviews www.americasmi.com 25The 2022 Latin America Forecast Panel Discussion on the explosion in demand for digital commerce
Poll
Question #3
Would you be interested in a 30-minute free consultation with our practice leaders to
discuss your Latin American business strategy?
Yes
No thanks
Not at the moment, but contact me in Q1 2022 to discuss
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 27The start of a new commodity super-cycle
How is mining investment risk trending in LAC
Resource nationalism is on the rise but community opposition remains the largest risk to mining investors
Political interference Community opposition
• High metals prices and legacy of poor community relations have inspired • Still the largest source of Project risk in LAC
political candidacies built on an anti-mining platform (Peru, Chile) 1 2 • COVID lockdowns stifled many opposition movements but political
• Growing public support for higher taxes and stronger regulations change in some capitals is impacting community support (e.g. Peru)
• Political opportunism behind ‘tax grabs’ - e.g. Mexico
Economic Reputation
• Large fiscal deficits and high metals prices put pressure on
• Int’l mining companies generally did an excellent job of keeping
•
governments to further tax mining
Fiscally strapped local governments and stakeholders leads to 7 3 workers and communities safe during COVID, gaining
Project extortion efforts. reputational standing
Operational Legal & regulatory
• COVID lockdowns and added safety measures added costs 6 4 • Growing calls for sovereign control (versus concession
• High metals prices drive upward pressure on wages control) of water (Chile, Argentina)
• Higher input costs increase supplier costs
• Emerging mining districts often over regulate mining
• Higher fuel costs lower margins 5 (Colombia) Worsening
Security Static
• Security threats declined during COVID
Improving
but may grow again if community
opposition proliferates
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 29Energy transition
investments resemble the industrial revolution
Annual investments amount to 5% of global GDP and roughly $4.4 trillion per year
Total investments needed for 1.5 Celsius Average yearly investment, by financing type, PES1 vs 1.5
objective, 2021-2050 Scenario, 2021-2050 1.5 Celsius
US$ 131 trillion US$ 4.4 trillion
US$99 trillion announced
PES
US$ 33 trillion gap 3% 4%
Equity (public)
11%
US$ 3.3 trillion
Innovation 12% Lending (Development
29%
Others* 34% finance) 28%
Fossil fuel & nuclear Equity (private) US$2.1 trillion
Eletrification 19% 23%
22% Capital markets 34%
Renewables
37%
Energy effiency Lending (private) 13%
26% 20% 31%
21% 19%
2019 2021-2050 2021-2050
Sources: IRENA World Energy Transition Outlook;
*Carbon removals and circular economy Debt into Growth: How Sovereign Debt Accelerated the First Industrial Revolution
1Planned Energy Scenario (PES) includes current government commitments
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 30Latin America’s energy frameworks
will attract private capital 31
Latin America’s liberalized markets will continue to attract private capital despite political volatility
Current versus future average annual investments in clean Main challenges of financing the transition in Latin America
power, grids and energy end-user
US$180 billion ✓ Lack of public financing
Latin America SE Asia MENA
✓ Political and regulatory volatility
India ✓ Fossil fuel dependence
US$121 billion
US$113 billion US$110 billion ✓ “Greenwashing”
+132% +365%
+303% +329% Main predictions
US$52 billion
✓ Growing private sector funds
✓ Strict global regulatory crackdown
✓ Growth in PPPs & third-party independent contracts
2016-2020 SDS 2026- 2016-2020 SDS 2026- 2016-2020 SDS 2026- 2016-2020 SDS 2026-
2030 2030 2030 2030 ✓ Strategic acquisitions and privatizations
Clean power Electricity Networks End Use Source: IEA Financing clean energy transitions in emerging and developing economies
* The IEA SDS is based on the UN’s SDGs: 1) achieving universal access to energy,
2) reducing the serve health impacts of air pollution and 3) tackling climate change
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com2022 Forecast Webinar Panel Discussion on the start of a new commodities super-cycle
2022 Forecast Webinar Rebooting Latin America's healthcare system
The structure of hospitals
Limits leveraging capabilities
LatAm hospital infrastructure totals
• Hospitals are struggling financially.
• Economic contraction of 2020 left public sector low on funds.
• Layoffs resulted in drop private healthcare insurance.
• 40%-70% drop in procedure volumes. 20,541 1,153,950 51,517 19,882 1,347,677
hospital operating delivery
hospitals doctors
• LatAm has major infrastructure that needs to be leveraged in order to beds rooms rooms
improve coverage and quality.
• 85% of the opportunity is concentrated in 4 countries. Average number of beds per hospital
• LatAm is home to 20% of the world’s hospitals yet 5% of hospital beds. 160
140
134
• Small private hospitals make for an inefficient system. 120
100
71
80
51 55
60 46 44
• COVID is closing out, but the impact will linger. 40
32
41
• Hospitals will recover only a fraction of the procedures lost. 20
0
• Procedure volumes are increasing again. Argentina Brazil Central
America
Chile Colombia Mexico Peru ROLA
(Rest of
Latin
America)
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 34Healthcare trends in Latin America
Key drivers for the years ahead
• We are in the “new normal” and it requires hospitals to constantly adapt to work through it.
• Elective and Non-Elective procedures will continue to rise and reach pre-pandemic levels in
2022Q1.
• COVID inflicts additional strain to the current burden of care. Impact of COVID on Hospitals
• Long-term health concerns (Ageing population and the Obesity epidemic) will remain Marco 85% 4%
drivers for healthcare and will be further emphasized by mental health issues.
3%
80% 2%
• Cost cutting will remain on the forefront of the agenda until YE 2022 at least.
weekly growth
• Downward pressure on First-tier products; Shifting to Value solutions. 1%
Occupancy
• Opportunities for innovative care models will stem from the private sector. 75% 0%
• Remote care solutions will grow at different speed and for different motives. -1%
70% -2%
• Demand for capital equipment will continue to see fluctuations through 2024. -3%
• Inflows need to stabilize for investments to be budgeted again.
65% -4%
• Scale is a critical factor for long-term population health.
• Healthcare continues to be managed as a reaction to the needs rather than in anticipation
Occupancy Procedures
thereof.
• Investments should be made end-to-end and scalable over time (i.e. sustain high patient growth).
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 352022 Forecast Webinar Panel Discussion on rebooting Latin America’s healthcare industry
2022 Forecast Webinar Final thoughts
Latin America
2022 SWOT analysis
STRENGTHS WEAKNESSES
• Commodity super-cycle • Worsened distribution of income
• Negative interest rates • Ascending populist politics
• LatAm is region closest to herd immunity • Weak positioning of multi-Latinas
• Massive online migration • Fiscal crisis looming
SWOT
OPPORTUNITIES
THREATS • Sell to export industries
• Consumer price-sensitivity • Digital commerce boom
• Isolated and frightened affluent • Privatizations and de-regulations
• Higher taxes on successful sectors • Acquisitions (distressed & divestment)
• Rising security risks
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 38Poll
Question #4
Would you be interested in a fee-based, personalized economic, political and industry
specific forecast to be presented to your company leaders?
Yes
No thanks
Not at the moment but contact me in Q1 2022 to discuss
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 39Tracking LatAm’s COVID Recovery Audience Q&A
Let’s Continue
The Conversation
John Price Lindsay Lehr
Managing Director Director, Payments Practice
jprice@americasmi.com llehr@americasmi.com
Guillaume Corpart Alejandro Álvarez
Healthcare Practice Leader Arthur Deakin
Co-Director, Energy Practice Senior Director
gc@globalhealthintelligence.com
adeakin@americasmi.com aalvarez@americasmi.com
©2021. All rights reserved. ǀ Private and Confidential www.americasmi.com 41You can also read
