-
The World Economic Crisis and its The World Economic Crisis and its
Impact on Latin AmericaImpact on Latin America
Rafael Amiel
Managing Director, Latin America
February 3, 2009
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2
Copyright © 2009 IHS Global Insight. All Rights Reserved.
The Worst Global Recession in Six Decades
• Globalization has increased business-cycle synchronization
• North America, Europe, and Japan are facing severe downturns
• Growth in emerging markets will slow dramatically
• A Great Depression or Japan-style lost decade is unlikely
• Huge fiscal and monetary stimuli will help to spark recovery
• Bottom Line: a deep recession in 2009, modest recovery in 2010, and a stronger rebound in 2011
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3
Copyright © 2009 IHS Global Insight. All Rights Reserved.
(Annual percent change, 2000 dollars) (Percent)
U.S. Expected To Contract by 2.5% in 2009
-6
-4
-2
0
2
4
6
8
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
3
4
5
6
7
8
9
10
Real GDP Growth Unemployment Rate
-
4
Copyright © 2009 IHS Global Insight. All Rights Reserved.
(Index, over 50 indicates expansion)
30
35
40
45
50
55
60
65
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
United States Eurozone China
Purchasing Manager Indexes for Manufacturing Signal a Severe Global Downturn
-
5
Copyright © 2009 IHS Global Insight. All Rights Reserved.
-4
-2
0
2
4
6
8
1980 1984 1988 1992 1996 2000 2004 2008 2012
Real GDP Industrial Production
(Percent change)
The World Economy Faces the Worst Recession of the Postwar Era
-
6
Copyright © 2009 IHS Global Insight. All Rights Reserved.
-2
0
2
4
6
8
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Advanced Countries Emerging Markets Developing Countries
(Real GDP, percent change)
It’s Still a Two-Speed World Economy
-
7
Copyright © 2009 IHS Global Insight. All Rights Reserved.
-4
-2
0
2
4
6
8
10
NAFTA WesternEurope
Japan OtherAmericas
EmergingEurope
Mideast-N. Africa
Sub-Saharan
Africa
OtherAsia-
Pacific
2007 2008 2009 2010
(Real GDP, percent change)
Wide Variations in Regional Economic Growth
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8
Copyright © 2009 IHS Global Insight. All Rights Reserved.
-8
-4
0
4
8
12
NAFTA Western
Europe
Japan Other
Americas
Emerging
Europe
Mideast-
N. Africa
Sub-
Saharan
Africa
Other
Asia-
Pacific
2007 2008 2009 2010
(Percent change)
Industrial Production Is Declining in Many Regions
-
9
Copyright © 2009 IHS Global Insight. All Rights Reserved.
The Financial Crisis: Big, Bad, Broadly Based
• Perhaps the biggest global housing & credit bubble in history
• Credit growth was strong everywhere
• Bank loan/deposit ratios were especially high in Europe
• U.S. subprime mortgage crisis was the first symptom
• Driving forces: loose monetary policies, financial innovation, deregulation, globalization, government policies favoring debt
• No region will be unscathed
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10
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Bubbles Are Bursting Around the World
Commercial Real Estate
HousingHousingCommercial Real Estate
Commercial Real Estate
CommoditiesCommodities
CurrenciesCurrencies
EquitiesEquities
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11
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-75 -50 -25 0 25 50 75 100 125 150
United Kingdom (FTSE 100)
Canada (S&P TSX)
United States (S&P 500)
Japan (Nikkei 225)
World, Developed* (MSCI)
Eurozone (FTSE Euro 100)
Emerging Markets* (MSCI)
China (SSEA)
2006 2007 2008
(Percent change, local currencies)
* In U.S. Dollars
A Global Stock Market Correction in 2008
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12
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Lessons from Past Financial Crises
• Financial crises are “hardy perennials”
• The worst crises have occurred in heavily regulated systems
• Deflation is a bigger threat than inflation
• There are limits to crisis management; system solutions are needed—sooner rather than later
• Key ingredients of a successful fix: ample liquidity, capital infusions, deposit insurance, debt guarantees, fiscal stimulus
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13
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0
1
2
3
4
5
6
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
United States Eurozone Japan United Kingdom
(Percent)
Policy Interest Rates Are Dropping
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14
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Long-Term Government Bond Yields Are Low
0
2
4
6
8
10
12
14
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
United States Germany Japan
(10-year government bond yields, percent)
-
15
Copyright © 2009 IHS Global Insight. All Rights Reserved.
-9
-6
-3
0
3
6
9
NAFTA WesternEurope
Japan OtherAmericas
EmergingEurope
Mideast-N. Africa
Sub-Saharan
Africa
OtherAsia-
Pacific
2007 2008 2009 2010
(Federal budget balance, % of GDP)
Fiscal Balances Will Deteriorate Across Regions
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16
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Forces That Drove Up Commodity Prices
• Strong economic growth in emerging markets
• Stimulative monetary policies
• Lagging supply responses to higher prices
• Government subsidies—being removed slowly
• Export restrictions
• U.S. dollar depreciation
• Speculation
-
17
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0
20
40
60
80
100
120
140
1998 2000 2002 2004 2006 2008 2010 2012
(West Texas Intermediate price, dollars per barrel)
A Sharp Retreat in Crude Oil Prices
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18
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Oil Prices Are Still a Risk
• Additions to supply continue to disappoint
• Lower prices are discouraging development
• Periodic supply disruptions, geopolitical events, and speculation contribute to price volatility
• Long-term growth in emerging markets will be strong
• The world has abundant energy resources, but they are concentrated in high-risk countries
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19
Copyright © 2009 IHS Global Insight. All Rights Reserved.
0
1
2
3
4
5
6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
All Materials Chemicals Nonferrous Metals
(IHS Global Insight Indexes, 2002:1=1.0)
And A Swift Correction in Industrial Materials Prices
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20
Copyright © 2009 IHS Global Insight. All Rights Reserved.
6.2-9.6-3.12.2Imports
-0.9-7.06.48.4Exports
2.90.41.22.3State & Local Govt.
1.51.42.82.1Federal Government
-0.3-15.11.94.9Bus. Fixed Investment
15.2-20.8-21.0-17.9Residential Investment
2.3-0.90.32.8Consumption
2.2-2.51.22.0Real GDP
2010200920082007
(Percent change)
U.S. Economic Growth by Sector
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21
Copyright © 2009 IHS Global Insight. All Rights Reserved.
-9
-6
-3
0
3
6
9
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Real GDP Industrial Production
(Percent change)
U.S. Real GDP and Industrial Production Growth
-
22
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Global Economic Crisis: Contagion in LATAM
• The combination of a deep U.S. recession and the global financial crisis will impose severe damage to the Latin American economies.
• U.S. and global recession affect Latin America and Caribbean:
• Trade: lower demand for LATAM exports, lower employment in manufacturing sector
• Capital: credit tightening, higher interest rates, lower foreign direct investment, capital outflows, flight to quality
• Lower remittances
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23
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Global Economic Crisis: Contagion in LATAM
• Lower oil prices is good news for the large majority of countries in the region, but not all. It will help external and fiscal accounts and price stability.
• Inflation: external pressures vanish with lower commodity prices. This will give some relief to fiscal accounts, as subsidies may be ended.
• Exchange rate corrections may continue as external deficits widen.
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24
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Latin America
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2004 2006 2008 2010 2012 2014
-20.0
-10.0
0.0
10.0
20.0
30.0
2004 2006 2008 2010 2012 2014
-4.0
-2.0
0.0
2.0
4.0
2004 2006 2008 2010 2012 2014
GDP GrowthGDP GrowthExports Exports
Current Account BalanceCurrent Account Balance InflationInflation
(y/y in percent)(growth nominal terms y/y in percent)
(percent of GDP) (y/y in percent)
0.0
2.0
4.0
6.0
8.0
10.0
2004 2008 2012
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25
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Latin America: A Temporary Setback
• Exports are falling in response to global slowdown
• Lower commodity prices will hurt several countries
• Currencies are under pressure as investors avoid risk
• But compared with the late 1990s, the region is better shielded from the global financial crisis
• Long-term prospects are bright for countries attracting foreign investment, including Brazil, Chile, Peru, Panama and Colombia
• Policy mismanagement and resource nationalism will take a toll on Argentina, Venezuela, Bolivia, and Ecuador
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Copyright © 2009 IHS Global Insight. All Rights Reserved.
Devaluations Bring Down Nominal US$ GDP
0
1000
2000
3000
4000
5000
6000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0
1500
3000
4500
6000
7500
9000
Nominal GDP (US$, billions) GDP Per Capita (US$, right axis)
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27
Copyright © 2009 IHS Global Insight. All Rights Reserved.
-3
0
3
6
9
12
15
18
GDP Private
Consumption
Government
Consumption
Fixed
Investment
Exports
2003 2004 2005 2006 2007
(Percent change, 2000 dollars)
In the last tranche of the cycle, investment was the major driver of growth
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28
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Higher perception of risk and cost of funding: Argentina and Venezuela push up the average
Interest Rates, percent
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Sep-99 Jul-00 May-01 Mar-02 Jan-03 Dec-03 Oct-04 Aug-05 Jun-06 May-07 Mar-08 Jan-09
Embi+ Embi+ Latin America US 10- year Treasury Bonds Embi+ México
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29
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Improved Fiscal Accounts
2.3-0.3-2.3-3.2Peru
-0.0-0.1-1.0-1.0Mexico
0.8-1.6-2.7-2.7Panama
-0.80.0-3.6-5.5Colombia
6.35.2-0.9-1.3Chile
3.80.6-1.20.7Venezuela
1.81.8-1.4-1.6Argentina
-1.5-3.0-4.1-5.3Brazil
2008200520021999(Percent of GDP)
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30
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The Inflation threat has Vanished, but not for all
3.65.81.82.0Peru
3.85.14.03.6Mexico
6.79.04.22.1Panama
5.77.05.54.3Colombia
4.08.74.43.4Chile
18.531.318.713.7Venezuela
8.98.98.810.9Argentina
4.75.73.64.2Brazil
2009200820072006CPI Percent Change
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31
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Exchange Rates: Overshooting? … not yet, maybe Mexico
50
60
70
80
90
100
110
Jun-04 Mar-05 Dec-05 Sep-06 Jul-07 Apr-08 Jan-09
Brazil Chile Colombia
Uruguay Peru
Exchange Rates(June 2004=100)
80859095
100105110115120125
Jun-04 Mar-05 Dec-05 Sep-06 Jul-07 Apr-08 Jan-09
Argentina Mexico
Exchange Rates(June 2004=100)
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32
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Enhanced Debt Profile: Total Debt as percent of GDP declined substantially
0
10
20
30
40
50
60
1999 2001 2003 2005 2007 2009
0
200
400
600
800
1000
1200
as % of GDP (left scale) in US$ Billions (right scale)
Latin America & Caribbean: Total Foreign Debt
`
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33
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Enhanced Debt Profile: Debt Service unchanged in nominal terms but significantly lower compared to exports
0
60
120
180
240
1999 2001 2003 2005 2007 2009
0
10
20
30
40
50
60
in US$ Billions (left scale)
as % of Exports (right scale)
Latin America & Caribbean: Debt Service
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34
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Enhanced Debt Profile: A sizeable cushion of International Reserves
0
100
200
300
400
500
600
1999 2001 2003 2005 2007 2009
0
10
20
30
40
50
60
in US$ Billions (left scale) as % of Debt (right scale)
Latin America & C: Foreign Exchange Reserves
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35
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Will the Region remain attractive for foreign investors?
0
25
50
75
100
125
1999 2001 2003 2005 2007 2009
Latin America & C.: Foreign Direct Investment(U.S $ Billions)
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36
Copyright © 2009 IHS Global Insight. All Rights Reserved.
External accounts are back to negative territory but partially financed by FDI
-120
-100
-80
-60
-40-20
0
20
40
60
1999 2001 2003 2005 2007 2009
LATAM & C: External Balance: Current Account(U.S $ Billions)
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37
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Stock Market Correction
0
100
200
300
400
500
Feb-01 May-02 Sep-03 Jan-05 Apr-06 Aug-07 Dec-08
Brazil Mexico Argentina Chile
Stock Markets(Jan 2001 = 100)
0
500
1000
1500
2000
Feb-01 May-02 Sep-03 Jan-05 Apr-06 Aug-07 Dec-08
Colombia Peru
Stock Markets(Jan 2001 = 100)
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38
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Slow down all across the region
6.13.79.28.9Peru
2.3-2.31.33.2Mexico
3.51.04.05.4Latin America & Caribbean
4.01.53.57.6Colombia
4.62.43.75.1Chile
3.21.65.68.4Venezuela
3.61.05.68.6Argentina
4.01.55.15.7Brazil
2010200920082007GDP Percent Change
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39
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Final Remarks
• The region is set for a sharp deceleration, although risks differ across countries
• Latin American economies are better prepared for external shocks, however a severity of the US crisis will bring some countries into recession too
• External inflationary pressures are fading with correction in commodity prices
• Under the assumption that commodity prices will not drop substantially from current levels, external and fiscal imbalances will be manageable
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40
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Final Remarks
• The region should recover in 2010 in line with improved US and world economic conditions, but growth rates are expected to be moderate
• Venezuela, Argentina and Ecuador may have to deal first with macroeconomic mismanagement
• Under the assumption that commodity prices will not drop substantially from current levels, external and fiscal imbalances will be manageable
-
Thank you!Thank you!
Rafael Amiel
Managing Director, Latin America
610.490.2723
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42
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Mexico’s Economy Chilled by U.S. Recession
• Manufacturing and remittances are adversely affected by the U.S. recession
• Monetary policy makes a U-Turn
• Fiscal policy is expansionary
• Currency adjustments have improved competitiveness
• Declining oil production is a problem
• More structural reforms are needed
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43
Copyright © 2009 IHS Global Insight. All Rights Reserved.
-6
-4
-2
0
2
4
6
8
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Mexico United States
(Percent change, real GDP)
A Downturn in Mexico’s Economy
-
44
Copyright © 2009 IHS Global Insight. All Rights Reserved.
-8
-4
0
4
8
12
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Real GDP Industrial Production
(Percent change)
A Downturn in Mexico’s Economy
-
45
Copyright © 2009 IHS Global Insight. All Rights Reserved.
*Annual average, **Billions of U.S. dollars
-50
-40
-30
-20
-10
0
2000 2002 2004 2006 2008 2010 20128
10
12
14
16
2000 2002 2004 2006 2008 2010 2012
-3
0
3
6
9
2000 2002 2004 2006 2008 2010 2012
Real GDP Growth (%) Consumer Price Inflation (%)
Exchange Rate per US$* Current Account Balance**
0
2
4
6
8
10
2000 2002 2004 2006 2008 2010 2012
Mexico Outlook Summary
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46
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Mexico’s Real Economic Growth by Sector
4.6-1.47.97.1Imports
4.3-3.21.86.2Exports
1.92.30.61.0Government Consumption
3.1-3.55.15.6Fixed Investment
1.91.33.14.2Private Consumption
2.3-2.31.33.2Real GDP
2010200920082007
(Percent change)
-
47
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Brazil’s Economy Faces Competitive Challenges
• The engines of growth—business investment and exports—have slowed abruptly
• Sound monetary policies have kept inflation low, but interest rates are still very high
• The global financial crisis has put downward pressure on the real’s exchange rate, correcting an overvaluation
• Competitiveness is undermined by high and complex taxation, heavy bureaucracy, and insufficient infrastructure investment
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48
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Brazil Outlook Summary
*Annual average, **Billions of U.S. dollars
-40-30-20-10
01020
2000 2002 2004 2006 2008 2010 2012
1.5
2.0
2.5
3.0
3.5
2000 2002 2004 2006 2008 2010 2012
0
2
4
6
2000 2002 2004 2006 2008 2010 2012
Real GDP Growth (%) Consumer Price Inflation (%)
Exchange Rate per US$* Current Account Balance**
0
4
8
12
16
2000 2002 2004 2006 2008 2010 2012
-
49
Copyright © 2009 IHS Global Insight. All Rights Reserved.
5.49.020.420.8Imports
6.82.13.06.7Exports
2.63.46.44.8Government Consumption
5.66.017.513.5Fixed Investment
4.03.96.26.3Private Consumption
4.01.85.15.7Real GDP
2010200920082007
(Percent change)
Brazil’s Real Economic Growth by Sector
-
50
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Chile’s Solid Fundamentals Payoff During Crisis
• Chile’s Economy is well positioned to weather the current crisis:�Low level of public debt (below 5% of GDP),
�US$ 50 billion in sovereign wealth funds and foreign reserves
�Countercyclical fiscal policy and prudent monetary policy
�Financial system with minimal exposure to global credit crisis
• The global financial crisis has put downward pressure on the peso’s exchange rate, mainly through less favorable terms of trade.
• The Chilean economy should resume a higher growth rate in 2010 as local demand and exports recover from the crisis.
• Annual inflation will converge to the 2-4% target zone by mid-2009
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51
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Chile Outlook Summary
0
1
2
3
4
5
6
2000 2002 2004 2006 2008 2010 2012
0
2
4
6
8
2000 2002 2004 2006 2008 2010 2012
450
550
650
750
2000 2002 2004 2006 2008 2010 2012
*Annual average, **Billions of U.S. dollars
Real GDP Growth (%) Consumer Price Inflation (%)
Exchange Rate per US$* Current Account Balance**
-5
-2
2
6
9
2000 2002 2004 2006 2008 2010 2012
-
52
Copyright © 2009 IHS Global Insight. All Rights Reserved.
6.72.415.114.3Imports
7.40.21.37.7Exports
5.15.65.35.8Government Consumption
8.80.519.111.8Fixed Investment
6.32.35.67.7Private Consumption
4.62.43.75.1Real GDP
2010200920082007
(Percent change)
Chile’s Real Economic Growth by Sector
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53
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Argentina’s Economy Faces Local and External Shocks
• Lower commodity prices will test external and public accounts
• Severe drought is affecting the agriculture sector
• Debt service secured in 2009 thanks to retirement funds
• Manipulation of inflation statistics continues, but inflation isdecelerating
• Fiscal balances continues to deteriorate. 2009 is an electoral year
• Deteriorating consumer confidence will contain household expenditure
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54
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Argentina: Surviving the 8-year economic cycle
-15
-10
-5
0
5
10
15
20
1990 1993 1996 1999 2002 2005 2008 2011
Real GDP Industrial Production
(Percent change)
-
55
Copyright © 2009 IHS Global Insight. All Rights Reserved.
0
1
2
3
4
5
2000 2002 2004 2006 2008 2010 2012
Exchange Rate per US$**
Inflation (%)
-10
0
10
20
30
40
2000 2002 2004 2006 2008 2010 2012
CPI GDP Def lator
-10
-5
0
5
10
15
2000 2002 2004 2006 2008 2010 2012
Current Account Balance***
-4
-3
-2
-1
0
1
2
3
2000 2002 2004 2006 2008 2010 2012
Fiscal Balance*
*As % of GDP. **End of period, ***Billions of U.S. dollars
Argentina Outlook Summary
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56
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Argentina’s Real Economic Growth by Sector
5.8-3.317.420.5Imports
3.0-4.55.09.1Exports
3.23.47.47.6Government Consumption
6.24.011.713.7Fixed Investment
2.82.16.89.0Private Consumption
3.61.05.68.6Real GDP
2010200920082007
-
57
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Colombia’s Private Sector will Drag Economic Growth
• Monetary easing started rather late due to inflation resilience
• Limited maneuver space for fiscal expansion. The government is, in fact, cutting expenditures.
• Exporters are recovering some competitiveness thanks to a weaker peso
• Increasing unemployment and ponzi-schemes recently discovered affect consumer confidence
• Lower FDI will make it difficult to finance the current account deficit
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58
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A Downturn in Colombia’s Economy
-6
-4
-2
0
2
4
6
8
1990 1993 1996 1999 2002 2005 2008 2011
Colombia United States
(Percent change, real GDP)
-
59
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Colombia Outlook Summary
0
2
4
6
8
10
2000 2002 2004 2006 2008 2010 2012
Inflation (%)
-8
-6
-4
-2
0
2
2000 2002 2004 2006 2008 2010 2012
Current Account Balance***
1800
2100
2400
2700
3000
2000 2002 2004 2006 2008 2010 2012
Exchange Rate per US$**
-8
-6
-4
-2
0
2000 2002 2004 2006 2008 2010 2012
Fiscal Balance*
*As % of GDP. **End of period, ***Billions of U.S. dollars
-
60
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Colombia’s Real Economic Growth by Sector
7.31.48.013.9Imports
6.60.05.511.4Exports
3.12.72.24.5Government Consumption
9.57.010.415.1Fixed Investment
3.41.12.77.6Private Consumption
4.01.53.57.6Real GDP
2010200920082007
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61
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Venezuela and the Oil Bust
(year-on-year percentage change)
6.5
9.7
6.1
0.3
-2.4
4.0
-0.2
6.4
0.3
-6.0
3.7 3.4
-8.9-7.8
10.4
8.4
5.6
1.7
3.23.7 3.8
18.3
10.3
-15
-10
-5
0
5
10
15
20
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Coup attempt, Oil strike
Coup attempt, Oil strike
Oil production drops 9.1%
Oil production drops 9.1%
Oil Price SlumpsOil Price Slumps
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62
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Overdependence on Oil and Macroeconomic Mismanagement
• Chavez will redirect resources towards the domestic economy, Petro-Diplomacy will take a back seat during the oil price slump.
• New taxes and VAT tax rate raises already in the pipe.
• Risk of Devaluation of local currency, 35%-45% in 2009
• Inflation is still a problem.
• Myopic Short-Term Planning => Market Distortions:• Price Controls on Food Items and Essentials
• Foreign Exchange Controls, inefficiencies in the system
• Capital Controls
• Arbitrary Import Quotas, Higher Tariffs, on Selected Items
• Import Subsidies on Food Items
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63
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Show me the Money
US$27.7 billionDeposits Abroad
US$12.3 billionPortfolio Investments
US$22.9 billion
Accounts Receivables (credit lines to other countries/foreign enterprises)
US$16 billionFonden (Development Fund, unallocated funds)
US$0.8 billionFEM (Macroeconomic Stabilization Fund)
US$28.7 billionInternational Reserves
US$83.1 billionVenezuela’s Net Public Sector Assets (as of January 2009)
US$30.8 billionRevenues needed from the rest of the economy
US$5.7 billionNew Debt to issue, approved in budget
US$22.9 billion
IHS Global Insight’s Estimated Fiscal Revenues from Oil Sector (WTI price of US$37 per barrel)
US$59.4 billion2009 Fiscal Budget
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64
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Venezuela Outlook Summary
*Annual average, **Billions of U.S. dollars
-20-10
010203040
2000 2002 2004 2006 2008 2010 2012
0.0
1.0
2.0
3.0
4.0
5.0
2000 2002 2004 2006 2008 2010 2012
-15-10
-505
101520
2000 2003 2006 2009 2012
Real GDP Growth (%) Consumer Price Inflation (%)
Exchange Rate per US$* Current Account Balance**
0
10
20
30
40
2000 2002 2004 2006 2008 2010 2012
-
65
Copyright © 2009 IHS Global Insight. All Rights Reserved.
8.34.95.933.6Imports
2.4-3.5-0.6-5.6Exports
-0.44.66.55.1Government Consumption
10.14.22.525.4Fixed Investment
4.44.89.618.7Private Consumption
3.21.65.68.4Real GDP
2010200920082007
(Percent change)
Venezuela’s Real Economic Growth by Sector
-
PanamaPanama
Country Overview
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67
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Macroeconomic Fundamentals
• While many world economies struggle to keep afloat, Panama posted a 9.2% year-on-year GDP growth in the third quarter of 2008.
• Construction, the Panama Canal, and the Colon Free-Trade Zone are the drivers of growth.
• The Negatives:• The global trade slowdown expected for 2009 will affect two of the main
drivers of growth. Exports to the United States account for 34% of the total.
• They artificially fuel the construction boom, but will also raise the risk of a real estate bubble burst in Panama
• The Positives:• Panama's authorities and the Panama Canal authority have secured more
than 50% of the funds needed to build the Canal's expansion project.
• Panama's on-course fiscal performance should help the country in building a good reputation on the external markets and gain access to external financing.
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68
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Sluggish Economic Growth in 2009
(percent, change year-over-year)
-3
0
3
6
9
12
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-3
0
3
6
9
12
Panama USA
Global EconomicSlowdown
Global EconomicSlowdown
Panama Canal Extension Project, third locks
Panama Canal Extension Project, third locks
Tax incentives keep construction boom going
Tax incentives keep construction boom going
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69
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Strong Growth in GDP per Capita
1314
1617
20
24
26
29
31
35
39
0
5
10
15
20
25
30
35
40
45
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Nominal GDP (US$, billions) GDP Per Capita (US$, right axis)
-
70
Copyright © 2009 IHS Global Insight. All Rights Reserved.
More Moderate Growth in Disposable Income
1112
1314
17
19
21
23
25
28
31
0
5
10
15
20
25
30
35
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Disposable Income (US$, billions) Disposable Income Per Capita (US$, right axis)
Median household income in 2004: US$4,800
Median household income in 2004: US$4,800
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71
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Stable Local Currency
• Local currency pegged to the U.S. dollar is a double-edge sword.
• The annual inflation rate should reflect the impact of strong economic growth in the last stage of the Canal extension program.
Annual Average Exchange Rate
0.8
1
1.2
1.4
1.6
1.8
2
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Balboas/US$ Balboas/Euro
Balboa pegged to US$ one-to-one
Balboa pegged to US$ one-to-one
Annual Inflation Rate(percentage)
0
2
4
6
8
10
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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Population Growth is Decelerating
• Total population estimated at 3.3 million in 2007• 49.6% Female
• Aging population• Share of individuals aged 14 to 44 drops from 48.1% in 2003 to 46.4% in
2013
• Share of individuals aged 45 to 64 increases from 15.1% in 2003 to 18.5% in 2013
• Increasing participation rate in the labor force, declining unemployment rate, declining share of employment in the informalsector
Population Growth Rate(percentage)
0.0
0.5
1.0
1.5
2.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Panama USA
Distribution of Population by Age Bracket(percentage)
0
5
10
15
20
25
30
35
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
45.5
46.0
46.5
47.0
47.5
48.0
48.5
0 to 14 years 45 to 64 years65+ 15 to 44 years (right axis)
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Retail and Consumption
• Nominal Value-Added Retail Sector (NIA): US$489.3 in 2003 and US$729.3 million in 2007
• Private Consumption in Food and Beverages: US$3.8 billion in 2007
• Imports of Consumption Goods: US$2.6 billion in 2007, of which US$734 million were non-durable goods and estimated to have been US$1 billion in 2008
• Consumer confidence index indicates positive outlook in the next 12 months.
• Positive outlook at household and country level
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8.19,0371421,288Russia
45,595
8,766
9,720
6,847
975
2,483
GDP per Capita ($)
303
75
105
192
1,169
1,321
Population(Millions)
4.5656Turkey
2.013,808U.S.
3.21,023Mexico
5.41,313Brazil
9.01,140India
11.93,281China
Real GDP Growth (%)
GDP ($Billions)
A Comparison of Key Emerging Markets in 2007
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Bottom Line
• The global recession now underway will be the most severe of the postwar era
• If the financial crisis dissipates, a modest rebound in 2010 is possible, if not …
• De-leveraging in worst-hit countries could take years
• Falling commodity prices will rebalance growth and change the terms of trade
• North American resilience and Asian dynamism will reassert themselves once the crisis has blown over
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Thank you!Thank you!
Rafael Amiel
Managing Director, Latin America
610.490.2723