The table below presented by the United Nation’s Economic Commission for Latin America and the Caribbean (ECLAC) compares the GDP growth forecasted for 2019 at the end of 2018, the latest estimates for 2019, and the 2020 projections.
|LATAM/Countries||2019 Initial Forecast||2019 Latest Estimates||2020 Projections|
What are the takeaways from the 2019 numbers and the 2020 projections?
2019 Initial Forecast vs 2019 Latest Estimates
- After the commodity boom that ended around the middle of the decade, the region is having trouble returning to healthy economic growth. The worldwide economic slowdown, tariff wars, strong dollar, and political unrest has resulted on virtually no growth in 2019.
- Except for Colombia, every country performed worse than expected.
- Although the short-term forecast was not very precise it was directionally correct since all the economies that were expected to grow did not go into a recession, and Argentina’s GDP did fall as expected.
- Current WW macro trends do not bode well for the region. Growth in 2020 will be a meager 1.3%.
- Colombia and Peru are the only two countries that will exceed the 3.0% growth mark; Argentina should experience another recession year in 2020.
Despite the paltry economic data, some positive data is coming from business climate surveys:
- The America Market Intelligence, a leading provider of intelligence data, found a positive outlook among international companies doing business in the region:
- Almost 50% of the companies surveyed expected a much better or better year in 2020 and only 17% somewhat worse.
- The average expected growth rate was 9.3%.
- The countries with the highest growth expectations were Brazil and Colombia; Argentina and Mexico have negative outlooks.
- The most common growth hurdles were currency devaluation, weak demand, and onerous regulations.
- The companies that are already in the region seems to understand the local dynamics and find ways to increase sales despite the lackluster economic growth. It helps that international companies attract strong talent and are well funded which support an above- average performance
- The leading companies in the region continued to invest in technology to deliver innovative services securely to their customers. These companies have higher growth rates than the median of the market.
Some facts and practical guidelines in deciding on a go-to-market strategy are presented below:
- LATAM’s GDP ($5.5T) and the large enterprises in the region performing their digital transformation to compete internationally will provide companies entering the market with interesting opportunities.
- Companies should explore strategies that allow for canvasing opportunities across countries and adopt risk-sharing strategies to achieve positive ROI from year one.
- Focus in at least 2-3 countries to hedge against country risk.
- Companies can enter successfully a country even in not ideal economic years if they have the business networking and a differentiated solution that delivers value. For example, LinkIT LATAM’s clients captured strategic and profitable opportunities in Argentina during 2019.
- Companies should assess the deployment of in-country resources after gaining a good understanding of market demand by country and having enough data to prepare reliable Pro-forma P&L.
From LinkIT LATAM’s experience developing business for IT companies in LATAM, it’s more important to choose an agile and cost-effective go-to-market strategy that leverages known business contacts than timing entering the region based on short term economic growth forecast.
Wishing you a happy and successful 2020!