2021 Latin America Outlook - The Good, the Bad and the Ugly March 2021
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2021 Latin America Outlook The Good, the Bad and the Ugly A special report from Americas Market Intelligence by John Price March 2021
About AMI
Americas Market Intelligence (AMI) got its start intelligence, consumer insights and business
in 1992 in Mexico City under the brand name intelligence for a wide variety of firms operating
InfoMex, focused primarily on Mexican market in both B2B and B2C channels in Latin America.
intelligence. By 1995 we were conducting
studies in South America, prompting a name Typically, the types of clients who bring on AMI to
change to InfoAmericas. In 1997, a second office help spur their success in Latin America include
was opened in São Paulo, and in 2000, a regional consumer insights leaders, CMOs, marketing
office was opened in Miami. and market research directors, strategic
planners, LAC division presidents, CFOs, CEOs,
By 2005, our team had completed its as well as shareholders and board members.
1,000th client engagement in Latin America.
InfoAmericas was sold to Kroll in 2007, forming As part of our work, we share the insights we
Kroll’s first market intelligence division. In develop on the INSIGHTS section of our site,
2011, our consultants regrouped under a as well as through webinars, whitepapers
new independent brand, Americas Market and special reports like this one, which
Intelligence. By 2012, our team had completed was originally published as a blog piece
its 2,000th assignment in Latin America and by that we shared through our newsletter.
early 2018, its 3,000th. We have recast it as a special report to
serve as a resource for valued clients.
In 2003, we realized that Latin American
market experience was not enough to serve We hope that you find the report to be useful as
our client needs, so our consultants began you continue executing your strategic plans for
forming industry practices. We have since built Latin America during this year and beyond.
eight: Payments, Logistics, Healthcare, Mining,
Energy, Consumer, Insurance, & Education.
Furthermore, our expanding client needs obliged
us widen our service offering. Today, our blend
of market research, competitive intelligence,
political, regulatory and economic risk analysis
is put to work both to help companies seek
opportunity as well as mitigate risk.
The greatest testimony to our success is the
confidence placed in our firm by our clients.
85% of our revenue comes from repeat clients, John Price
some of whom we have retained for more than Managing Director
20 years. We evolve at the pace of our clients. Americas Market Intelligence
Beyond its core industry practices (Payments, jprice@americasmi.com
Logistics, Healthcare, Mining, Energy, Consumer,
Insurance, Education), AMI provides competitive
2 www.americasmi.com
Introduction
This report was originally published in a special key trends driving opportunity and risk in Latin
edition of our AMI Perspectiva newsletter, which America this year. We support our assessments
we entitled “The Good, the Bad and the Ugly.” of the region’s challenges and bright spots with
The title is taken from Sergio Leon’s classic a wealth of data displayed in graphics that are
Western, and our idea for this special edition was laid out throughout, so perusing the report
to highlight the good, bad and ugly possibilities, should offer some useful numbers and insights
not only for Latin America in general but also for your own planning.
for our specific practices, such as Payments,
Logistics, Energy and others. The edition itself Of course, the analysis we offer may well not
proved to be quite popular with readers, and you answer all of your questions—in fact, it may
can find both the 2021 edition and earlier stories provoke a few more. That is to be expected, and
on our website in the INSIGHTS section. if this is the effect of our report, please feel free
to reach out to us. Providing strategic answers
In this report, we are only including the overall to crucial questions impacting your business
good-bad-ugly outlook for Latin America, though in Latin America is our specialty as the leading
as part of our analysis we do touch on a variety of independent market intelligence and advisory
industries, including mining, healthcare, brick- firm in Latin America.
and-mortar retail and education, among others.
We trust and hope that the report serves to
While this is far from an exhaustive analysis (that strengthen your understanding of the issues
could easily turn into a book-length project facing Latin America this year, and lends a little
considering Latin America’s size and diversity), to your success in 2021 and beyond.
this report will give you a solid grounding of the
www.americasmi.com 3
Contents
THE GOOD: Country Analyses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Dominican Republic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Guyana. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
THE GOOD: Sector Analyses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Growth Industries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exports of Goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
THE GOOD: Mega-Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
China, India and U.S. Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Search for Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Remittance Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
THE BAD: Country Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Mexico. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Colombia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Caribbean Tourism Economies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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THE BAD: Sector Analyses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Public Sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Healthcare. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Brick-and-Mortar Retail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
THE BAD: Mega-Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Vaccine Diplomacy vs. Hoarding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
THE UGLY: Country Analyses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Argentina and Venezuela. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
THE UGLY: Sector Analyses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
THE UGLY: Mega-Trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Poverty and Austerity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Afterword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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After the most disruptive year (2020) in over a century,
Latin America investors must now navigate a region
as laden with risk as it is with opportunity. COVID-19
and its accompanying lockdowns have sadly divided
us far more than united us, in spite of the remarkable
moments of humanity shown across the region since the
pandemic struck. Even before the onset of COVID-19, Latin
America was struggling with stalled economic progress,
underinvestment, and flirted with political populism.
Such a backdrop adds several challenges to the region’s
economic recovery, which begins in earnest in 2021.
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The Good:
Country Analyses
www.americasmi.com 7
THE GOOD | Country Analyses
Chile
The world stood in awe in October 2019 as two In April 2021, voters will convene to elect
million Chileans marched in Santiago, protesting the diverse assembly of leaders who
their government’s brash displays of insensitive will rewrite their constitution, a bold
policies and poor governance. Some predicted experiment that will once again demonstrate
the end of Chile’s economic miracle. They were Chile’s nation-building prowess.
wrong. Democracy and economic growth are
alive and well in Chile.
Latin America: Support for Democracy in 2018
(by country)
Venezuela 75%
Costa Rica 63%
Uruguay 61%
Chile 58%
Argentina 58%
Colombia 54%
Bolivia 53%
Nicaragua 51%
Ecuador 50%
Dominican Republic 44%
Peru 43%
Panama 42%
Paraguay 40%
Mexico 38%
Honduras 34%
Brazil 34%
Guatemala 28%
El Salvador 28%
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Chile’s greatest virtue as a nation is its Thanks to a First World-style vaccination
collective sense of prudence and restraint. program that is leaps and bounds ahead of
The rainy day fund that they built on the any other Latin American equivalent, Chile
back of copper royalties, combined with will reach herd immunization 3-12 months
decades of fiscal discipline, enabled Chile ahead of its Latin American neighbors. By
to fund one of the world’s most impressive mid-2021, if not sooner, droves of affluent
counter-cyclical economic relief programs Brazilians, Argentines, Peruvians and Colombians
designed to aid the most vulnerable during will fly to Chile to get vaccinated ahead of
COVID lockdowns. Poverty levels in Chile did their own countries’ plodding vaccination
increase but by a far fewer measure than schedules. As a result, Santiago hotels and
in countries like Mexico and Colombia. luxury shopping malls will get a much-
needed shot in the arm (no pun intended).
Looking forward, Chile’s export mix of copper
and food products enjoys rising world prices
and demand, such that billions of vital foreign Vaccine Doses Given
currency will flow into Chile over the next 24 (as a % of the population)
months, strengthening the peso and the living as of February 21st, 2021
standards of Chileans. An economic recovery
that is swift and widespread will be the best
% of the
antidote to any rise in populism on the heels of Global rank Country population
the 2019 protests and COVID lockdowns. 9 Chile 15.3
46 Brazil 3.15
Chile Exports 49 Costa Rica 1.91
(in USD billions)
55 Mexico 1.30
57 Panama 1.05
120
62 Peru 0.49
100.2
100 95.7 69 Bolivia 0.09
89.4
85.2
79.5 78.9 70 Colombia 0.07
80
71 Ecuador 0.05
60 Source: Bloomberg
40
20
0
2018 2019 2020 2021 2022 2023
Source: EIU
www.americasmi.com 9
THE GOOD | Country Analyses
Brazil
Brazil’s thinking class shudders with to loosen monetary policy (lower interest rates).
embarrassment every time President Bolsonaro The strategy began unleashing the animal spirits
opens his mouth and yet the country continues of Brazilian investors who had repatriated billions
to steer a net positive and sensible path when it back to their country from off-shore savings. Low
comes to economic policy. An interesting case interest rates have prevented Brazil’s real from
in point was Bolsonaro’s dismissal of Petrobras’ recovering lost ground caused by capital flight
competent CEO, Roberto Castello Branco, when COVID struck.
who was replaced by an old army crony of
the president, General Silva e Luna. This was a Now Brazil’s financial strategy has altered
perilous move that destroyed 20% of Petrobras’ course again. Bolsonaro proved to be the most
market cap in 48 hours. But Petrobras is, below generous spender in Latin America during
its highest echelons, a meritocracy, one that COVID, sending billions to the poor and small
generated USD$11 billion profit in its last business. Now, in order to reign-in inflation, the
reported quarter. Compare that with Mexico’s Central Bank will need to raise rates in 2021,
Pemex, the most inefficient oil major on the which will strengthen the real, much to the
planet, which continues to drain scarce Mexican delight of foreign investors.
government funds under the leadership of
AMLO. Petrobras will survive political meddling Bolsonaro’s Robin Hood-style spending helped
at the top because it is institutionally sound. bolster his popularity, even while his motley
Much the same can be said about Brazil’s coalition of small parties lost their ability to
wider government, which in spite of Lavo Jato, pass legislation. Now Bolsonaro is in league
impeachments and the Bolsonaro family, still with Brazil’s most powerful Centrão political
boasts the strongest institutions in Latin America. parties, the once-maligned (by Bolsonaro)
champions of pork barrel congressional politics.
Heading into the COVID crisis, Brazil was the Bolsonaro devotees are chastened by the new
economic darling of Latin America, having political alliance but Brazilian policymaking
tackled important reforms and promising more. and political stability are the better for it. The
Reversing almost three decades of tradition, pro-business reform path remains in play
Finance Minister Paulo Guedes pursued tight and, with wider legislative support, becomes
fiscal policies and encouraged the Central Bank more viable, albeit somewhat diluted.
10 www.americasmi.comBrazil’s Growth and Exchange Rate
2019-2023
4.0% 80
3.0% 70
67.8 3.2%
2.0%
59.7 60.1 60
56.5
1.0% 53.2
1.4% 2.0% 1.6% 50
0%
40
-1.0%
30
-2.0%
-4.4%
20
-3.0%
-4.0% 10
-5.0% 0
2019 2020 2021 2022 2023
Real GDP growth % Real Effective Exchange Rate (1997=100)
Source: EIU
www.americasmi.com 11THE GOOD | Country Analyses
Dominican Republic
It is a mystery to many how low the COVID Abinader eschews much of the ornate protocols
death rate is in the DR (29/100,000 people) that still exemplify the presidency, one of the
given how generally lax its social distancing rules most powerful of any Latin American nation. He
and enforcement have been. Peru, a country inherits a system of government that is rife with
of similar age and income demographics fiscal blubber and waste. Abinader ‘discovered’
to those of the DR, where lockdowns were that about 10% of the government payroll
far more severe, has suffered a per capita is made up of empleados fantasmas, friends
COVID death toll that is five times greater and family of senior bureaucrats who draw
than that of the Dominican Republic. handsome salaries in spite of never reporting
for work. This well-known tactic of corruption
Such COVID exceptionalism helped engender was purportedly used lavishly by the previous
voter support for the rapid re-opening of three presidential administrations. It remains
the DR’s vital tourism industry. As of the to be seen if Abinader’s uncharacteristically (for
end of February 2021, visitors (and returning the DR) efficient governing style is really a new
Dominicans) can enter the country without beginning for the DR or just a timely gesture in a
proof of a recent negative COVID test. Testing period of austerity.
of temperatures in DR airports and random
breathalyzer testing of 3-5% of passengers can Another point in the DR’s favor is the enormous
lead to airport-administered COVID tests but success of the Pueblo Viejo gold mine, jointly
95+% of visiting air passengers enter the country owned by Barrick Gold and Newmont Mining.
untested. The DR has led the opening of the This massive mine directly contributes 4% of the
Caribbean’s largely closed tourism sector. As a nation’s tax bill (and indirectly, closer to 6%) and
result, after plummeting more than 80% in Q2, 17.5% of its export volumes. Abinader seems to
2020, foreign arrivals to the DR climbed each grasp that the DR’s continued growth will come
successive month from July to December 2020. from globalization: attracting foreign tourists,
investors and customers. If he maintains his
Six months into his mandate, the DR’s new applauded private sector discipline, the DR will
President, Luis Abinader, is viewed positively lead Caribbean growth once again.
by most analysts. A businessman by vocation,
12 www.americasmi.comTHE GOOD | Country Analyses
Guyana
If you still can’t spot it on a map, you soon will, Over the last three years, Georgetown has
for Guyana is, and will remain for the next four become a boomtown, with real estate
years, the fastest-growing economy on earth. The appreciating two to threefold. Now that
tiny nation (800,000) of cricket, pork knockers production has begun, Guyana can expect even
and mild curries is now home to Latin America’s greater growth. Everything from housing to
fifth-largest proven oil reserves (c. 9 billion skilled labor to basics is in short supply. Guyana
barrels), ahead of Colombia and Argentina, and will no longer be ignored by global players. For
rivaling Ecuador. Adjoining the world’s largest the politically incorrect oil and gas industry,
oil reserve nation, Venezuela, future exploration Guyana is an economic blessing. For logistics
is bound to uncover even greater black gold suppliers, technology providers, and just about
under the territorial waters of Guyana. everyone else, Guyana’s high growth and higher
prices represents a welcome exception in a
region still struggling to recover from COVID.
Guyana — the World’s Fastest-Growing Economy
Guyana’s GDP Growth vs. Global GDP Growth, 2019-2023
3.8
2023
28
4.2
2022
49
5.1
2021
12
-4.4
2020
26.2
2.8
2019
5.4
-10 01 02 03 04 05 0
Real GDP Growth in Guyana Global GDP Growth
Source: EIU
www.americasmi.com 13The Good: Sector Analyses 14 www.americasmi.com
THE GOOD | Sector Analyses
E-commerce, Payments,
Logistics and Digital Media
Much has been written of the impressive growth distribute government stipends, and various
of e-commerce realized in Latin America over contactless payment tools. The logistics industry
the last year. By some estimates, 50-60 million is still racing to catch up with the radical new
Latin Americans experimented with digital structure of consumer driven supply chains.
commerce for the first time in 2020. Similarly, From the point of import entry to the last mile
it was the 2003 outbreak of SARS in China (and delivery to our doors, the path of products we
accompanying lockdowns) that helped make consume has changed, forcing massive new
e-commerce a middle-class purchasing habit investments from traditional logistics firms and
in the world’s largest online market. Though creating new local hero fulfillment companies,
some purchases (like groceries, medicines, and including one of Latin America’s largest unicorns,
clothing) will return en masse to traditional Rappi, valued in mid-2020 at $3.5bn USD.
retail as the pandemic subsides, Latin America’s
new digital consumers will continue buying The world’s most ardent viewers of Netflix
online products that are a little harder to —Mexico is ranked 1st out of 190 countries in
find in retail (books, niche clothing, sporting Netflix hours viewed per customer— demand
goods, computers) as well as those must have more and more local content, sparking
products and services that are unavailable massive growth in local video production.
with cash: Netflix, Disney+, Uber and others. LAMAC reported in 2020 that digital content
viewing in Latin America grew close to 40%
The embracement of digital commerce in Latin that year. Netflix was not the only winner.
America has unleashed demand for digital
payments, such as value-stored cards used to
Latin America: E-Commerce Total Sales Volume
(billions of USD)
400 365
350
300 281
250 213
200 186
150
100
50
0
2019 2020 2021 2022
Source: AMI analysis
*These numbers include all locally-issued payment methods, including credit and debit cards, cash-based payment platorms,
bank transfers, digital wallets, prepaid and gift cards, cash on deliery, etc. (excluding cash payments made for ride railing and
delivery apps)
**These numbers include cross-border spend on locally-issued payment methods. It excludes local purchases from foreign
visitors on payment methods issued outside the local market.
www.americasmi.com 15THE GOOD | Sector Analyses
Mining
After hobbling along for half a decade (2014- Q2 2020. As mines came back online, pricing
2019) following the collapse of metal prices continued to climb thanks to the mid-2020
in 2013, Latin America’s mining industry is revival of manufacturing in China and the
back. Unprecedented global central bank US. What will keep copper at elevated prices
money expansion (close to $10 trillion) helped moving forward is the metal’s strategic role
raise demand for gold, putting back in play in three promising sectors: electric vehicles,
hundreds of gold and silver mining projects electrical grids & infrastructure programs in
that had been mothballed across the region. general, which governments will rely upon to
put people back to work. Those same industries
COVID mining interruptions, particularly in will also help attract investment into Latin
Chile, Peru, and Australia, where lockdowns America’s iron, zinc, and lithium mining.
were severe, helped boost copper prices in
Metals and Minerals
Price Index
120
102.8
100
88.6
75.7 77.9
80 74.5
60
40
20
0
Jan-17 Jan-18 Jan-19 Jan-20 Jan-21
Source: World Bank
16 www.americasmi.comTHE GOOD | Sector Analyses
Exports of Goods
Latin America excels in the production and manufacturing. That helps organic food growers
exportation of price-elastic commodities and in Colombia displace supply in California,
assembly. Though economists bemoan the lack helps electronics assemblers in Mexico steal
of value-added production in Latin America, contracts from Chinese competitors and
the region’s commoditized export mix does attracts downstream chemical producers to
give it a head-start in times of recovery. build plants close to Peruvian gas producers.
COVID, like other global economic disruptions Greater commodity production competitiveness
before it, caused massive capital flight out will be one of the engines of economic
of Latin America (though proportionately recovery in Latin America from 2021 to
less than in the past), and devalued its 2023, by which time their currencies
most traded currencies. Weaker currencies should appreciate back to, if not exceed,
provide an important competitive advantage pre-COVID F/X levels versus the USD.
in the price-sensitive global market for
energy, mining, agriculture and assembly
www.americasmi.com 17The Good: Mega-Trends 18 www.americasmi.com
THE GOOD | Mega-Trends
China, India & US Growth
COVID-19, a pandemic that disproportionately border of human traffic and digitally monitoring
harmed the elderly, revealed Europe’s greatest its people, the US and India unwittingly chose or
weakness: demographics. The old continent is were obliged (the debate will rage for a decade)
not only greying, it is struggling to assimilate to pursue the path of herd immunization. The
younger non-European immigrants into its death toll in the US was catastrophic, blunted
ranks. As a result, global growth over the moderately by an impressive vaccination
next two decades will be driven by three program. In India, containment efforts, though
economies: China, India and the USA. That strict, proved futile. India’s COVID death tolls
bodes well for Latin America because all three were far less than the US or Europe due to young
behemoth economies are net-importers demographics and low population density —only
of LAC’s largest commodity exports. 35% of India’s 1.5 billion people live in urban
surroundings. Three very different COVID legacies
In the immediate term (2021), these three have nonetheless unified these economies in a
economies will together add $2.5 trillion to the promising 2021-2022 economic path as pent-
global economy. While China chose to revive up savings are spent on pent-up demand.
its economy by stamping out COVID, sealing its
The Big Three
Nominal GDP (USD trillions)
Country 2019 2020 2021 2022
USA 19.1 18.4 19.1 19.6
China 14.7 15.2 16.8 18.2
India 2.9 2.6 2.8 3.1
3-country total 36.7 36.2 38.7 40.9
Net change -0.5 2.5 2.2
Sources: IMF, EIU
www.americasmi.com 19THE GOOD | Mega-Trends
Search for Yield
(Low Interest Rates)
One of the greatest technocrat achievements even negative rates (in real interest rate terms)
in Latin America over the last 30 years is the in spite of capital flight. This seldom-noted
fostering of domestic savings, led by the creation fact helped Latin America’s corporate sector
of privately managed pension funds. Those evade massive bankruptcies in 2020 as it
savings, combined with bulked-up foreign rolled over its high debt levels at reasonable
reserves, helped stabilize the openly traded rates. 2020 is a far cry from previous economic
currencies of Peru, Mexico, Chile, Colombia, crisis in Latin America, when central banks
and Brazil, which collectively represent had no choice but to raise interest rates to
close to 80% of Latin America’s GDP. prevent overwhelming capital flight and the
vicious cycle of depreciation and inflation.
Those reserves and domestically invested
pension funds helped central banks in Latin
America to lower interest rates in 2020 to
Real Interest Rates
(Interest rates minus inflation)
20 www.americasmi.comTHE GOOD | Mega-Trends
Remittance Flows
Latin America was the only region in the world the “castle economy” took hold and Americans
to experience positive remittance growth in lavishly remodeled their homes in lieu of
2020, in spite of dropping precipitously in traveling. For recently arrived Central American
the month of April 2020. For several Central and Mexican immigrants living in the U.S.,
American and Caribbean nations, remittances construction is often the best-paying job option.
are a vital lifeline for the working class,
contributing upwards of 20% to national GDPs. In Latin America, the very people who rely
on remittances were the worst-affected by
As lockdowns began in the US and service lockdown because their jobs (80+% informal)
sector reliant immigrant populations were could not be transferred online. As they reached
hit disproportionately hard, many feared that out to family and friends in the U.S. for more
remittances would dry up. Thankfully, for millions remittance help, online remittance channels,
of Latin Americans under lockdown south of now more popular than traditional brick and
the U.S., most American governors kept their mortar, helped keep the money flowing.
economies open. The U.S. construction sector,
locked down in April and May, bounced back as
Help from Abroad
Exports and remittances rebounded strongly
Sources: Haver Analytics, national authorities and IMF staff calculations.
Note: Exports include Argentina, Brazil, Chile, Colombia, Mexico and Uruguay. Remittances include Colombia, Dominican
Republic, El Salvador, Guatemal,a Honduras and Mexico.
www.americasmi.com 2122 www.americasmi.com
The Bad:
Country Analyses
www.americasmi.com 23THE BAD | Country Analyses
AMLO’S Mexico
Present-day context does not allow us to But humility alone does not a good leader
properly judge how disastrous of a president make. In an effort to exact revenge on certain
is Andrés Manuel López Obrador. We are, business elites, engage in class warfare
after all, in the middle of an unprecedented for political advantage, and reconcentrate
pandemic, free trade is alive and well, the enormous power in the presidency, AMLO
peso is out-performing its peers, exports are has gradually dismantled some of the
growing and the verdadero Teflon President most important institutions that form the
still enjoys remarkably high approval ratings. bedrock of Mexico’s modern democracy. The
dysfunctionality of Mexico’s COVID response
To his credit, AMLO is an effective communicator, (from containment to vaccinations) exemplifies
constantly connected to the masses through the weakened state that Mexico has become.
his morning briefings. Mastering a folksy and AMLO’s tactics, backed by the unchecked
more humble style than any Mexican president political power of the Morena party, which
in living memory, AMLO is a refreshing change controls all three branches of government, has
from the aloof and/or brash styles of recent frightened Mexico’s business elite into action.
predecessors, especially Enrique Peña Nieto, who An estimated USD$284 billion of capital flight
was as elusive and arrogant as he was corrupt. is anticipated throughout the course of AMLO’s
Anticipated Capital Flight under AMLO versus Bolsonaro
(USD billions)
Brazil (Bolsonaro)
2019-2022 Mexico Brazil
(AMLO (Bolsonaro
admin) admin)
Average Annual
Capital Flight $47.3 $28.3
(USD billions)
Mexico (AMLO)
2019-2024 as a % of 2019 GDP 3.7% 1.5%
05 0 100 150 200 250 300
Sources: EIU, IMF, World Bank
24 www.americasmi.comsix-year presidency. Keep in mind that all Latin from China to northern Mexico delivers
American (and most emerging markets) suffer employment and export dollars, and a soon
chronic capital flight, but the pace and volume to be booming US economy will continue to
of capital flight from Mexico reflects more than shine on Mexico. But during his six-year reign,
affluent investor diversification—it reflects fear. AMLO (and the Morena party’s) policies will
Often compared to Latin America’s other leading drive billions of productive Mexican business
populist, Bolsonaro, AMLO is proving far scarier interests off-shore, the rule of law will be further
to business elites than his Brazilian counterpoint, weakened, cartels will grow more powerful,
if we use capital flight as a yardstick. billions will be wasted propping up inefficient
and dirty PEMEX and CFE state enterprises,
Mexico will not self-destruct as an economy and thousands of Mexico’s best and brightest
under AMLO. A (still) independent and hawkish will emigrate. Only decades from now will we
Central Bank keeps the peso relatively strong. realize the damage done by President AMLO.
The steady migration of assembly operations
www.americasmi.com 25THE BAD | Country Analyses
Colombia
Few countries have navigated COVID unscathed. made up of the 70% of the population toiling
Fewer still have suffered more than Colombia. informally, swelled in ranks by three million
The country and people that most foreign undocumented Venezuelans, often unprotected
businesspeople visit, a Colombia of sophisticated, by the law, and dangerously exposed to
industrious, open-minded, disciplined people Colombia’s stubbornly high crime rates.
rebuilding a nation ravaged by civil war, is only
one of two Colombias. The other Colombia is
Direct Economic Impact
of COVID-19
80% 75%
71%
70% 62%
59% 57%
60%
47% 50%
50%
40% 35% 38% 38%
34%
30% 27%
19%
20% 11% 13%
10%
0%
I lost my job I lost job My HH income I started working I will continue
temporarily permanently has been from home working from home
reduced in the near future
Brazil Mexico Colombia
Source: AMI study, June 2020
Before COVID, Colombia was the 4th most mortality rates in the world. Colombians ask,
unequal society in Latin America (out of 18 to what end did we sacrifice so much?
measured). When the Gini coefficient is next
measured, Colombia may well climb to the A pall of frustration grips the working classes
top of that shameful rank. By imposing some of Colombia today, angry at a government that
of the strictest lockdowns in Latin America failed to protect them, resentful of Venezuelan
as a health measure but unable to afford the immigrants who erode wages, and spiteful of
direct payment programs needed to keep the elites who maintained—if not grew—their wealth
unemployed fed, an estimated three million during the pandemic. Such ripe conditions are
more Colombians fell below the poverty line. what a well-known (if flawed) populist politician
could only dream of in order to mount another
With less than a fraction of 1% of the population run at the presidency in 2022, so entering stage
vaccinated at the end of February 2021, it left we have Senator Gustavo Petro. The two-
remains unclear as to when the economy, round election system helps keep the presidency
schools and travel can fully reopen, even if centrist. Nonetheless, the prospect of a man of
most of the informal economy is now free Petro’s political lineage reaching the presidency
to work again. Endless months of lockdown frightens investors, despite the fact that currently,
did little to prevent Colombia from achieving he leads all candidates in multiple polls.
some of the highest COVID infection and
26 www.americasmi.comTHE BAD | Country Analyses
Caribbean Tourism
Economies
The countries that were the most successful proving difficult. Most voters in Jamaica, Trinidad
at containing the spread of COVID across & Tobago, the Bahamas and other English-
the world were island nations: New Zealand, speaking Caribbean countries prefer to keep
Taiwan, Australia, Iceland, and Fiji, as well their borders shut until vaccines fully protect
as Cuba, Trinidad & Tobago, Jamaica and them. Even while American and European
Grenada, among others. Island nations tourists are beginning to venture abroad in
can shut their borders within hours. The search of sun and sanity, these Caribbean
sense of collective purpose found in island islands choose to keep them out — while the DR
nations is unmatched and very helpful when and Mexico welcome them with open arms.
emergencies require a unified response.
Without tourism, there is little to sustain as many
However, that collective sense of siege that as a dozen island nations in the Caribbean.
binds islanders together during emergencies Quarantine policies in tourist origin countries
can be difficult to unwind, particularly when the like Canada, the UK and China continue to keep
enemy, in this case a virus, is invisible and often customers away but by the same token, the
misunderstood. Around the world, politicians travel entry policies of many Caribbean islands
exploited the collective COVID fears of voters prevent even the adventurous from visiting. As
to better their standing, boost budgets and a result, these nations will not realize much
drive compliance. Unwinding that fear, in an of an economic rebound until 2022 or later.
effort to re-open their economies to tourism, is
The Two Caribbean Economies
GDP real growth (%)
11.4
10
5 4 4.4
2.4
0.20 .2
0
-0.2
-5
-10
-9.8
2019 2020 2021 2022
Tourism-dependent Caribbean countries Caribbean commodity exporters
Source: IMF
www.americasmi.com 27The Bad: Sector Analyses 28 www.americasmi.com
THE BAD | Sector Analyses
Public Sector
2020 was a good year for many companies as trending towards sovereign downgrade.
supplying goods and services to Latin American It is little wonder that the sudden rise in US
governments: select healthcare supplies (e.g. bond yields at the end of February sent shock
gloves and masks), payments solutions, logistics waves across emerging markets, including
services, computers, and software, to name a Latin America. If yields continue to climb, the
few. Fiscally strong and/or large nations like free pass given to profligate spending in Latin
Chile, Peru and Brazil were able to access cheap America will end even sooner than anticipated.
debt to fund massive spending programs. Some governments will try to balance spending
Others jeopardized their sovereign debt grades cuts with greater taxation on a few winning
by going deeper into debt but at little cost as industries, such as e-commerce, mining and
interest rates around the world dropped. agrifood sectors. Others will have little choice
but to shrink deficits through austerity. Either
Now Latin American governments must way, Latin American governments will not be
tighten their belts again. In its October 15th, lucrative customers for the next couple of years.
2020 report, Fitch named 11 LAC countries
Primary Budget Balance
(% of GDP)
2
0
-2
-4
-6
-8
-10
-12
2018 2019 2020 2021 2022 2023
Brazil Chile Peru Colombia Argentina Mexico
Source: IMF
www.americasmi.com 29THE BAD | Sector Analyses
Healthcare
It is commonly perceived that the healthcare On the equipment and pharma sides of the
sector is expanding under COVID, but that is healthcare industry, both winners and losers
simply not the case. The service side of the were created by COVID. Suppliers of testing
business, made up of hospitals, clinics and kits, gloves, and masks realized massive profits,
private practices, lost 20-50% of their full-fee but the purveyors of equipment and devices
paying foot traffic in 2020. Programmable used in ER and programmable surgeries saw
surgeries, regular check-ups, and preventative sales drop off a cliff. In pharma, suppliers of
treatments were all postponed by either patients drugs used to treat chronic diseases saw sales
or medical professionals, fearful of COVID decline due to a lack of doctor visits, while
transmission. Issuing COVID tests and vaccines select suppliers of antiviral medicines and of
does not cover even a fraction of the revenue lost course vaccines did very well. When all is said
from traditional patients. With fewer people at and done, 2020 was the worst year in decades
work, commuting in cars, and otherwise outside, for the healthcare industry in Latin America.
accident volumes fell, so emergency rooms went 2021 will see improvements but until people
unused for the types of medical treatments that feel it is safe to visit a hospital or clinic, recovery
keep the lights on in hospitals. COVID sometimes to pre-COVID levels will remain stalled.
tested hospital capacities but, again, treating
COVID brought in low fees, often capped by
law. While we applauded the heroics of our
medical communities, their wages plummeted.
Healthcare Spend
(USD billions)
$400
$350
$300
$250
$200
$150
$100
$50
$-
2018 2019 2020 2021 2022
Brazil Mexico Argentina Chile Colombia Peru Ecuador
Sources: World Bank, WHO
30 www.americasmi.comTHE BAD | Sector Analyses
Brick & Mortar Retail
COVID dealt a triple blow to the brick and often are few in number and located far from
mortar retail industry in Latin America: customers. Latin American urban traffic is second
only to that of Asia. Increasingly, Latin Americans
llLockdowns forced retailers, especially smaller will choose to buy online versus spending
ones, to close their doors for months on end. hours getting to and from a specialty store.
When lockdowns were lifted, upper class
Latin Americans stayed away from stores, Now that e-commerce has significant volume
opting to buy online. outside of Brazil, fulfillment, returns and
other vital customer service elements should
llMercado Libre, Amazon, Alibaba and other improve as logistics firms invest billions in
pure e-commerce players, with their best-in- modernizing distribution models. New,
class fulfillment models, stole a lot of market more agile fulfillment models will bring
share from traditional retail, most of whose down the delivery cost of small purchases,
e-commerce efforts came too little and too helping e-commerce compete in all retail
late. categories. Latin America’s relatively youthful
consumer base will adapt even more quickly
to e-commerce than American and European
llUnemployment, wage decline and currency
consumers have in recent years. COVID was just
devaluations continue to suppress overall
the beginning of the end of retail as we knew it.
demand.
Now that well over 100 million Latin Americans
buy physical products online, the traditional
retail sector faces even more disruption ahead.
The first to go will be specialty stores, which
Retail Sales
(USD billions)
1,300
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
2017 2018 2019 2020 2021 2022 2023
Brazil Mexico Argentina Chile Colombia Peru Ecuador
Sources: IMF, national central banks
www.americasmi.com 31THE BAD | Mega-Trends
Vaccine Diplomacy
versus Hoarding
With the exception of Chile, Latin American re-open important segments of the economy
vaccine programs are off to an inauspicious —so the stakes are huge. As countries like
start, struggling to gain traction. There are Chile pull ahead in the race to vaccinate,
many factors involved, including poor planning, politicians in other nations will feel the
a lack of intergovernmental coordination, heat of criticism. A popular scapegoat will
low-tech healthcare systems, fiscal scarcity, become the list of wealthy nations that are
and good old-fashioned corruption and clearly hoarding the purchase of still-scarce
nepotism that leads to the selection of vaccines, even while failing to deploy them.
poor quality, overpriced suppliers.
By one yardstick (vaccines purchased under
Vaccines are needed to alter consumer contract), the most egregious of hoarders are
behavior, open schools, welcome tourists and Canada, Australia and New Zealand, who have
32 www.americasmi.comsigned contracts to buy far more vaccines in their generous and morally irreproachable
than their populations need but have failed foreign aid programs, especially when
to deploy them. Add to those three countries benchmarked against China. The bad optics
another 15+ European nations who also boast shown by vaccine hoarding promises to
a huge gap between vaccine purchases and upset and possibly upend some of the soft
deployment. The Americans and Brits, by power enjoyed by these countries in Latin
comparison, have done a better job of deploying America, opening the door for Chinese vaccine
vaccines but have also been accused of hoarding diplomacy. The consequences of this diplomatic
supplies, albeit from Europe and Canada. oversight may prove damaging to future trade,
procurement and investment linkages.
The list of European and Commonwealth
hoarders are the very countries that take pride
The Hoarding of Vaccines
Millions of doses % of population Doses deployed as a % of
Country purchased (Feb 11, 2021) coverd by doses population (Feb 23, 2021)
Canada 125,879 335.4% 4.23%
Australia 63,678 249.5% 0.01%
New Zealand 12,157 246.8% 0%
France 149,941 231.3% 5.92%
Germany 192,204 231.3% 6.28%
Italy 139,620 231.3% 6.1%
Netherlands 39,857 231.3% 4.68%
Poland 87,836 231.3% 7.27%
Romania 44,886 231.3% 7.41%
Spain 107,527 231.3% 6.81%
Sweden 23,890 231.3% 6.25%
Brazil 160,524 76.4% 3.49%
Colombia 36,745 72.9% 0.09%
Dominican
7,364 71.1% 0.14%
Republic
Argentina 31,455 70% 1.66%
Costa Rica 3,158 62.2% 1.99%
Panama 2,463 58.4% 1.4%
Ecuador 8,441 48.9% 0.05%
Peru 12,518 37.7% 0.6%
Source: Bloomberg
www.americasmi.com 3334 www.americasmi.com
The Ugly:
Countries, Industries
and Mega-Trends
www.americasmi.com 35THE UGLY | Country Analyses
Argentina & Venezuela
A decade ago, Latin American sales departments depreciation. Government intervention in
focused on the region’s Big 7: Brazil, Mexico, product pricing and the labor market kills
Argentina, Chile, Colombia, Venezuela and profits at both ends and currency controls
Peru. Venezuela was a precarious place for make it very costly to extract profits. A steadily
investors but remained a very profitable declining per capita income has reduced
export market for many products. Five years Argentine consumers to the bottom half of
ago (for some even earlier), the same regional Latin American purchasing power, a once-
departments stopped pouring any money unthinkable trend. The emigration of Argentina’s
into their sales operations in Venezuela as the talented entrepreneurs and thinking classes
purchasing power of even the upper classes leaves behind a political narrative that is rife
plummeted. They focused on the Big 6 instead. with populism and disinformation. The failure
of the Macri administration to achieve success
Today, Argentina is being dropped from the with what appeared to be sensible policies
list of priority markets for many companies. only confirms the skeptical view that a pro-
Firms are divesting from a country incapable business Argentina cannot be revived. Latin
of conquering the spiral of inflation and America will soon be left with the Big 5.
Latin America’s Lost Causes: Venezuela & Argentina
GDP per capita (USD)
$16.000
$14.000
$12.000
$10.000
Argentina
$8.000
$6.000
$4.000
Venezuela
$2.000
$-
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Sources: IMF, Central bank of Venezuela
36 www.americasmi.comTHE UGLY | Sector Analyses
Education
The instinct to protect our children is one their schools. In Latin America, policymakers
that every parent knows well. So it came as justified continued school closure on the
no surprise that schools around the world likelihood that kids can transmit COVID, even
quickly closed their doors when COVID struck. while remaining asymptomatic themselves.
However, after a few months of collecting This was a valid argument and a defendable
COVID infection, hospitalization and mortality one, until the same politicians re-opened
data, it became abundantly clear that our supermarkets, public transit, street markets,
children are not vulnerable to the ravages even movie theatres. Today, most Latin American
of COVID. Consider the following statistics, schools remain closed because of fear and
provided by the CDC on February 24th, 2021 ignorance that governments refuse to correct.
for the U.S. population, where COVID mortality
rates are similar to most of Latin America: The instinct to protect our children has robbed
them of a year of schooling, a year of social skill
ll204 children (ages 0-17) have died from development, a year of friendships, a year of
COVID, representing 0.6% of all deaths to play, creativity and fun. It will take some time
children. to measure the toll of Latin America’s greatest
llIn the same time frame, over 4,000 children COVID policy blunder, but it will come at great
died from car accidents, and more than 3,000 cost. On an important social level, education
died by firearms. is a great equalizer, one of the few institutions
llFor every million children in the US, 3 died in Latin America that fosters upward mobility.
from COVID. For those over 75 years old, Underprivileged children may prove to be the
13,873 per million died of COVID most tragic, if unwitting, victims of COVID.
When it became clear to scientists that COVID
kills the elderly, not the young, some countries
in Europe and Asia moved quickly to open
In-Class Education: 2020 2021
Re-opening schedules Q1 Q2 Q3 Q4 Q1 Q2 Q3
Argentina
Brazil
Chile
Colombia
Costa Rica
Dom Rep.
Mexico
Panama
Peru
Source: Council of the Americas
www.americasmi.com 37THE UGLY | Mega-Trends
Poverty & Austerity
One of the proudest achievements shared of lockdowns. While government officials
by almost all countries in Latin America over continued drawing a paycheck in the comfort
the last thirty years is the gradual but steady of their homes, waiting for infection levels to
decline of poverty levels. While affluent reduce to some arbitrary threshold before
countries have suffered from worsening income lifting lockdowns, the incomes of three-fourths
disparity, Latin America has mostly improved of their citizens dropped by half. Life savings
its Gini coefficient over the last generation. were obliterated and proud working people
went hungry. In a few countries, like Brazil, Peru
In the space of six months, COVID lockdowns and Chile, monies were efficiently distributed
reversed at least ten years of progress in to most of the vulnerable, but elsewhere help
poverty reduction. It was the working poor, never came—or was insultingly meager.
who rely on informal employment that cannot
be transferred online, that bore the brunt
Millions of People Sent to Poverty
by COVID
30
25 3
20
8
3
15
2
8
10
1
13
5
7
0
New COVID poor New poor after social assistance
Brazil Argentina Mexico Colombia
Source: Center for Global Development
38 www.americasmi.comA difficult situation made worse by Could this be the year that Latin America unempathetic policy makers is going to have rewrites its social contract? Look to Chile’s political consequences in Latin America. Polls efforts to rewrite its constitution. If done in Ecuador and Peru in 2021 point to a more well, Chile may once again design a worthy populist political narrative ahead. 2022 could blueprint the rest of the region can follow. end Colombia’s long tradition of centrist One can only hope in the time of COVID. politics as the nation pivots to the left. Even in ostensibly pro-business governments, the need to close fiscal gaps will necessitate targeting successful industries with greater taxation. www.americasmi.com 39
Afterword Thought Leadership
in Latin America
A free guide to
While our “Good-Bad-Ugly” analysis creating an effective
does cover a lot of ground, it is far from program
comprehensive. And as we all know,
predicting the future is a tricky business.
However, the better we understand conditions
on the ground, the better positioned we are to
adjust to them as they shift—and even anticipate
those shifts ahead of time. Available at: americasmi.com/About/
Analyses/Marketing Latin America Reports
That’s where market intelligence can make the
difference between profit and loss, between
flourishing new opportunities and missed Latin America Payments
chances, and between visionary decisions and 6 Megatrends for 2021
short-sighted blunders.
So if our assessments of any of these countries
or markets has piqued your interest, you may
want to explore monitoring them more directly.
Market intelligence can easily expand on what
we covered in the report to give you a much
clearer picture of whatever “good,” “bad” or “ugly”
areas impact your company.
As such, please feel free to contact us Available at: americasmi.com/About/
at info@americasmi.com or reach out Analyses/Payments LatAm Reports
to your specific contact at AMI.
In the meantime, we encourage you to explore
some of the other resources we’ve developed: 2021 Latin America Risk Symposium
Available at: americasmi.com/2021-latin-
america-risk-symposium
40 www.americasmi.comwww.americasmi.com www.americasmi.com 41
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