FrontierView recently hosted a group of LATAM VPs of leading multinationals in the consumer goods, industrials, and technology spaces, to share our view on key macroeconomic assumptions underpinning 2023 strategic plans. We discussed the key challenges and opportunities facing executives in Latin America.

Navigating the Uncertainties: Challenges facing executives

  • Executives feel less confident about hitting their financial and commercial targets this year. Declining business confidence stems from already weakening sales growth at the end of last year in most sectors, and the realization that price increases will cease to be the main top-line growth lever in 2023. As such, companies will need to fight more fiercely for share as they try to maintain growth momentum.
  • Even though inflation will come down in 2023, companies will continue to face high input prices relative to pre-pandemic/pre-Ukraine-war levels. This will be especially true for energy, as well as for agricultural commodities. Margin pressures will therefore remain high, compounding higher price sensitivity.      
  • Companies will have to rely more on streamlining their OPEX to stay profitable, but still-tight labor markets and talent scarcity are reducing the options to generate cost savings.
  • Liquidity along companies’ supply chains is worsening rapidly on the back of interest rates that have risen at breakneck pace since 2021, and that are likely to remain high for most of 2023. This is already leading to higher DSOs in some markets, and to potential sourcing issues with smaller suppliers.
  • Companies will have to contend with higher taxes as governments try to increase revenue to maintain flagship social spending programs in a fiscally responsible manner.
  • Finally, political, and regulatory uncertainty will continue to complicate investment decisions in all top-6 countries in the region even though Argentina will be the only major market holding presidential elections in 2023.

The Future of Latin America: Ways Forward

  • Unlike previous slowdowns in Latin America, Brazil, and Mexico, which account by around 60-80% of companies’ regional revenues, will both avoid recessions in 2023. This should make it easier for companies to hit regional top-line targets. Central America and the Caribbean will also be more resilient relative to markets in South America.
  • From an industry vertical perspective, oil & gas, mining, and agribusiness should continue to outperform, together with the financial sector, healthcare, as well as personal services and tourism. Retail products tied to experiences such as cosmetics, liquor, or sporting goods should have a better year relative to big-ticket items.
  • Buyers’ price sensitivity is not increasing at the same pace in every country, industry vertical, or consumer segment. As such, companies will still be able to pass on higher costs (whether FX, or input-cost related) to prices, albeit in a more targeted way.
  • Companies with strong balance-sheets and the willingness to use them to help customers and partners stay liquid, could gain a competitive advantage over companies running on low cash or thinner operating margins.
  • Finally, multinationals operating in sectors deemed as strategic by regional governments will have more bargaining power as they try to shape industrial and tax policies.

FrontierView solutions:

  • Access a vast array of leading macroeconomic and industry indicators as well as 10-year forecasts, helping your company power P&L and balance sheet projections at the regional and country level in Latin America.
  • Build scenarios for your business based on key performance variables and align your organization vertically and horizontally around clear narratives and signposts to watch. Use FrontierView to revisit key plan assumptions during quarterly business reviews.
  • Engage directly with FrontierView analysts in one-to-one or one-to-many conversations, to customize market outlooks to your specific needs and train leaders in your organization in linking the macro to the micro.
  • Be part of a community of executives of leading Fortune-500 companies, get access to benchmarking data, and tap into management best practices, helping you accelerate your career within your organization.

Download an executive summary of the key highlights discussed during our Latin America Executive Roundtable

At FrontierView, our mission is to help our clients grow and win in their most important markets. We are excited to share that FiscalNote, a leading technology provider of global policy and market intelligence has acquired FrontierView. We will continue to cover issues and topics driving growth in your business, while fully leveraging FiscalNote’s portfolio within the global risk, ESG, and geopolitical advisory product suite.

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