Synergos

Business prospects in Latin America – As of December 1, 2020

By: Ignacio Barros

Introduction.-

As a result of the pandemic, market analysts from various latitudes have been expressing divergent opinions about the ability of their own economies to recover in the short term.

Covid-19 has forced the vast majority of companies to go digital on several fronts, and has clearly exposed the shortcomings and weaknesses of those whose business models had relatively low levels of technological penetration. Persistent uncertainty about the future raises questions from CEOs and directors about the “new normal” and how their business models will or will not fit in a drastically altered business environment.

Attitudes towards the future of Latin American economies, however, seem positive according to the results of two surveys conducted in August and October of this year by Biz Latin Hub Group (BLHG) to a sample of 1,200 medium and large companies from North America. America, Latin America, Europe and Asia. Respondents discussed the opportunities for economic and business growth in many of the region’s emerging economies, with some suggesting that the industries that are benefiting, or at least not being affected as much, were those with a strong digital focus.

The projected growth of the Latin American economies.-

If we measure them by gross domestic product, the five largest economies in Latin America in 2019 were Brazil, Mexico, Argentina, Colombia and Chile. Projections for GDP growth in 2021 show that these five countries will experience strong growth, without fully compensating for the drop in 2020, but recovering it and – in some cases – exceeding it in 2022. In the case of Peru, for example, It is estimated for this year 2020 a drop in GDP of 15-16%, and a recovery in 2021 of 11% approx.

In the BLHG surveys, complemented by a SYNERGOS survey from September of this year (survey conducted on a sample of 150 companies with annual turnover greater than USD 30 million, located in Chile, Colombia, Ecuador, Panama and Peru), the respondents agreed with the statement that “despite the economic debacle that this crisis has meant, most Latam countries forecast strong economic growth in 2021 and a full recovery by 2022 or 2023.”

The opportunities that appear.-

In the BLHG surveys, respondents were asked to comment on their perception of the current economic landscape and the future of doing business in Latin America. More than 57% of those surveyed expressed their intention to continue expanding in their own country (when the company was from Latin America) and/or in the region (when the company was foreign). Although many (68%) indicated that they did not plan to hire staff in 2020, almost half (46.6%) confirmed that they would seek to hire staff in 2021. The qualitative data collected indicated that, in the long term, many were positive about the ability of Latin economies to recover in a post-coronavirus era, understood as one that should begin around April 2021.

While some acknowledged the level of uncertainty surrounding the current situation and projected a potentially slow recovery for some economies, others said that the region’s economies show “clear long-term growth prospects” and that companies in the region can even become more competitive internationally. One respondent mentioned that “service providers in the more established traditional economies (i.e. first world ones) will lose market share to Latin American companies, not only in terms of costs, but also in terms of outlook and attitude. “

Interestingly, several Central American markets stood out among those showing potential for recovery and long-term growth. Panama, Costa Rica and El Salvador received special attention in the BLHG report.

Based on this feedback, continued economic growth, competitive labor costs, and proximity to the US market appear to be factors driving overall positivity toward Latin America as a viable trade destination.

The technology, the technology, the technology.-

The results of both the BLHG and SYNERGOS surveys indicated that “respondents who work in industries most adaptable to the online world, such as professional services, IT and communications, risk management and network marketing, They expressed satisfaction with how their industry has remained strong during this time, and optimism that it will continue to do so.”

Although it is a trite phrase, it must be emphasized and repeated that the arrival and persistent effect of Covid-19 make technological adaptation urgent. Offices and workspaces have had to migrate to remote environments to achieve continuity, and that has meant the need to strengthen network platforms to ensure teams can communicate with each other, with customers, and with key suppliers.

With the expansion of companies like Amazon and MercadoLibre in Latin America, running businesses online and selling in e-commerce marketplaces is a key element in modernizing sales channels. As companies become more sophisticated, and this is very close, the incorporation of technologies such as artificial intelligence, machine learning, data analysis and predictive analysis will intensify.

It is extremely important to prepare your organization and your executives for the “evolution of your business model” (I mention it that way so as not to use the also hackneyed phrase “digital transformation”). Although the countries of Latin America are still determining what the “new normal” will mean for their economic roadmap, advances in digitalization in recent months suggest greater access and adoption of electronic commerce and digital platforms for the provision of services. and communications in the region.

Although access to digital resources has been a challenge for some populations in the region, Research Gate’s report “The Latin American Path to Digitization” noted in 2014 that “Latin America has been increasing its level of digitization at a rate of growth compound annual growth rate of 6.48% since 2004, a level comparable to East Asia and the Pacific (5.63%) and Eastern Europe (7.84%), however, since 2010, digitization has increased dramatically in the region.”

Final words.-

With the growing access and digital development, I believe that Latin America is positioning itself to offer greater technological access to its populations and, therefore, a larger consumer market. Companies that know how to step onto this new playing field will achieve success in the region by accommodating their offerings to a period of changing preferences.

Sources:

en_US