Latin American Business Outlook
Part of the Global Business Outlook
A joint survey effort between
Duke University,
Fundação Getúlio Vargas
and
CFO magazine
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
1
Top Concerns for Latin American CFOs
1. Government policies
2. Economic Uncertainty
3. Regulatory requirements
4. Cost of benefits
5. Weak demand for product/services
6. Inflation
7. Rising wages and salaries
8. Currency risk
9. Corporate tax code
10. Attracting and retaining qualified employees
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
2
Business Optimism Index
CFO business climate optimism remains low, optimism about own company is much higher.
Global Trends
Dec 2014 Response
Country / Region
Country Business Optimism Index
70
60
50
40
Dec 2013
Mar 2014
Jun 2014
Sep 2014
Latin America
United States
Asia
Africa
Dec 2014
80
70
60
50
40
30
20
10
0
Europe
Brazil
Chile
Peru
Ecuador
Mexico
Own Company
Own-Firm Business Optimism Index
70
60
50
40
Dec 2013
Mar 2014
Jun 2014
Sep 2014
Latin America
United States
Asia
Africa
Dec 2014
80
70
60
50
40
30
20
10
0
Europe
Brazil
Chile
Peru
Ecuador
Mexico
Notes: Presented data are the mean value for each region or country, Scale from 0-100
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
3
Expected Increase in Product Prices
Latin American Inflationary expectations are lower this quarter.
Global Trends
Dec 2014 Outlook
Product Prices
10%
10%
5%
5%
0%
Dec 2013
-5%
Mar 2014
Jun 2014
Sep 2014
Latin America
United States
Asia
Africa
Dec 2014
Europe
United Europe
States
Inflation expectations decrease in Latin America


0%
Latin American CFOs expect the prices of their
firm’s products and services to increase by 2.3%
in 2015
CFOs in Europe and Asia also expect inflation to
temper, US CFOs expect stable product prices.
Asia
Latin
America
Brazil
Peru
Mexico Ecuador
Inflation expectations high in Brazil and Ecuador
 Of responding countries, Ecuador has the highest
inflationary expectations, followed by Brazil.
 Prices are expected to increase slowly in Peru.
Notes: Presented data are the mean values for each region or country.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
4
Expected Growth in Sales Revenue
Latin American CFOs expect rapid top line growth, anticipating a 9.0% increase in revenues
during 2015.
Global Trends
Dec 2014 Outlook
15%
15%
Revenue
10%
10%
5%
5%
0%
Dec 2013
-5%
Mar 2014
Jun 2014
Sep 2014
Latin America
United States
Asia
Africa
Dec 2014
Europe
Latin American revenue growth up


0%
United Europe
States
Asia
Latin
America
Brazil
Peru
Mexico Ecuador
Asian companies expect fastest growth
Expectations up from last quarter, when L.A.
CFOs expected revenue growth of less than 6%
Latin American revenue growth expected to be
slightly lower than Asia but greater than other
regions.
 Asia expects the highest sales revenue growth in
2015, while Europe anticipates the lowest.
 Among responding L.A. countries, revenues in
Mexico will grow the fastest, followed by Ecuador,
Peru and Brazil.
Notes: Presented data are the mean value for each region or country.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
5
Expected Increase in Capital Spending
Latin American capital spending is expected to increase 2.0% in 2015
Capital Spending
Global Trends
Dec 2014 Outlook
15%
15%
10%
10%
5%
5%
0%
Dec 2013
-5%
Mar 2014
Jun 2014
Sep 2014
Latin America
United States
Asia
Africa
Dec 2014
Europe
-5%
Capital spending growth remains low


0%
Business spending varies within Latin America
Latin American expects business spending to increase by
only 2%, below spending in other parts of the world
Capital spending plans are also low in Africa, declining to
2% growth
 Capital spending will grow strongly in Ecuador but
decline in Brazil and grow only slowly in Chile.
 Business spending is strong in the US and Asia.
Notes: Presented data are the mean value for each region or country.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
6
Expected Change in Earnings
Earnings expected to rebound in 2015
Earnings
Global Trends
Dec 2014 Outlook
15%
20%
10%
15%
5%
10%
5%
0%
Dec 2013
-5%
Mar 2014
Jun 2014
Sep 2014
Latin America
United States
Asia
Africa
Dec 2014
Europe
United Europe
States
Earnings growth to rebound next year in L.A.


0%
Latin American earnings growth fell from 13.4% in
2014Q1 to -0.3% in 2014Q3, but rebounds this
quarter to 11.2%
US, Asian and African earnings growth decreases.
Europe expects mild growth in earnings.
Asia
Latin
Brazil
America
Peru
Chile
Mexico
Weaker earnings in surveyed Latam countries
 Chile and Mexico expect earnings to rebound in
2015 from very low levels this past year
 Earnings expectations are moderate in Peru and
modest in Brazil
Notes: Presented data are the mean public company value for each region or country.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
7
Moderate Increase in Fulltime Employment
Latin American CFOs expect to increase fulltime domestic employment by only 1.3% in 2015
Global Trends
Dec 2014 Outlook
# FT Employees
10%
10%
5%
5%
0%
Dec 2013
Mar 2014
Jun 2014
Sep 2014
Dec 2014
0%
United
States
-5%
Latin America
United States
Asia
Africa

Asia
Latin
America
Brazil
Peru
Mexico Ecuador
Europe
-5%
Employment growth moderates in Latin America

Europe
While Latam CFOs expect modest employment
growth in the next year, workforce increases
should still outpace Europe.
Europe expects little if any growth; Africa and
Asia expect strong employment growth
Employment declines expected in Brazil
 Brazil expects reductions in fulltime employment.
 Employment will grow about 3% in Ecuador and
2.5% in Peru and Mexico.
Notes: Presented data are the mean value for each region or country
#FT=Number of Fulltime Employees
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
8
Expected Wage and Salary Increase
Wages and salaries are projected to increase by 5.9% in Latin America, slightly lower than
Africa and Asia.
Global Trends
Dec 2014 Outlook
10%
Wages & Salaries
10%
5%
5%
0%
Dec 2013
-5%
Mar 2014
Jun 2014
Sep 2014
Latin America
United States
Asia
Africa
Dec 2014
Europe
United Europe
States
Rapid wage growth in emerging economies


0%
Latin America, Asia, and Africa all expect wages to
rise around 6%, which is higher than the overall
inflationary expectations in LA and Africa
The US and Europe expect wages to grow by
around 3%
Asia
Latin Brazil
America
Peru
Chile
Mexico Ecuador
Wages to soar in Brazil and Ecuador
 In line with high product market inflation,
companies in Brazil expect to increase wages and
salaries by 8.9% in 2015, followed by Ecuador (5%)
 In Peru, Chile and Mexico, wage hikes will be
around 3.5%.
Notes: Presented data are the mean value for each region or country
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
9
Important Qualities of Board Directors
What are the most important qualities for members of your board of directors?
(Choose 3)
60%
40%
20%
0%
Experience in Outside-the-box
C-level
People skills
Experience
our industry
thinker
experience as a (e.g., consensus running a large
manager at a
builder)
organization
top company
Specific skills
(e.g.,
engineering,
accounting)
Industry and C-level managing experience are expected qualities of board directors
 In addition to industry experience and as a C-level manager, companies like directors who are outsidethe-box thinkers.
 People skills are also sought after.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
10
Composition of the Board of Directors
What is the target (current) composition of your board for men, women and
minorities?
100%
80%
60%
40%
20%
0%
Men
Target Composition
Women
Minorities
Current Composition
Only 6.8% of Latin American firms have specific goals or guidelines for the mix of men/women/minorities
on the board.
 Many boards fall short of their gender and minority targets.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
11
Percentage of Millennial Employees
To the best of your knowledge, approximately what percentage of your
company's employees are “Millennials” (under the age of 35)?
50%
41.8%
44.0%
40%
43.4%
44.1%
36.3%
31.9%
30%
25.8%
27.3%
20%
10%
0%
US
Europe
Latin America
Asia
Africa
Brazil
Peru
Chile
Asia has the highest percentage of Millennial workers, followed by Latin America.
 In Asia, around 44% of the workforce are Millennials, followed by 41.8% in Latin America.
 US and Europe have the lowest level of Millennial workers, fewer than 30%.
 Chile has the lowest proportion of Millennial workers within L.A.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
12
Advantages of Employing Millennials
What are the primary advantages of employing Millennials under age 35?
60%
40%
20%
0%
Technologically
savvy
More creative and
innovative
employees than
older workers
More energetic
Cost savings in
terms of salary
More efficient
workers
Millennials are valued for their technological and creative abilities
 Employing Millennials can save firm costs in terms of salary.
 Few firms consider Millennials to be more efficient workers.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
13
Challenges Related to Employing Millennials
What are the primary challenges related to employing Millennials (under age
35)?
60%
40%
20%
0%
Less loyal to company More interested in their Require more intense
own professional
management
development than in the
company
Demand change in
culture of company
Me-first attitude
Firms consider Millennials to be less loyal to the company and more interested in individual professional
development than in the company
 Millennials require more management oversight and demand changes in corporate culture
 Around 10% of firms concerned about the Me-first attitude of Millennials.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
14
Make Changes to Retain or Recruit Millennials
Has your company made any changes in an effort to retain or recruit Millennials
(under age 35)?
100%
80%
60%
40%
20%
0%
US
Europe
Latin America
Yes
Asia
Africa
No
Asia and Latin America have implemented the most changes to recruit or retain Millennials.
 More than 60% of Asian and Latin CFOs say they have made changes in an effort to retain or recruit
Millennials, consistent with the fact that Millennials are a larger proportion of workforce in these regions.
 US , African, and European firms are less accommodating to Millennials.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
15
Changes Made to Retain or Recruit Millennials
Has your company made any of the following changes in an effort to retain or
recruit Millennials (under age 35)? Among firms that have made changes:
35%
30%
25%
20%
15%
10%
5%
0%
Redefined work
Implemented a Redefined company Implemented new Implemented new
hours to be more social responsibility
culture
training modules
mentoring
flexible
policy for company
programs
Firms redefine work hours and implement social responsibility policies for Millennials.
 Firms redefine work hours to be more flexible, implement social responsibility policy and redefine
company culture to retain and recruit Millennials.
 Firms also implement new training and mentoring programs for Millennials.
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
16
Return on Assets (ROA)
Profit growth varies by country in Latin America
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
US
Europe
Asia
Latin America
Approximate ROA in 2013
Africa
Brazil
Peru
Chile
Expected ROA in 2014
Profit margins are expected to rise in all regions, relative to 2014 profits, but not less so Brazil and Chile
 ROA expectations have declined in Brazil and Chile
 CFOs in Latin America generally expect modest ROA improvement
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
17
Duke/FGV CFO Survey in Latin America Press
The Latin American Business Outlook is frequently reported in the press
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
18
Duke/FGV CFO Survey in Latin America Press
The Latin American Business Outlook is frequently reported in the press
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
19
Latin American Business Outlook
Part of the Global Business Outlook
A joint survey effort between
Duke University,
Fundação Getúlio Vargas
and
CFO magazine
Latin American Business Outlook
Duke University / FGV / CFO Magazine
Dec 2014
20