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Deutsche Bank
Latin America Outlook
49° Coloquio Annual de IDEA
Argentina: Claves para el Desarrollo
Mar del Plata, Argentina
16 al 18 de Octubre, 2013
Gustavo Cañonero, Managing Director
Chief Economist
Emerging Markets
Deutsche Bank Securities
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covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1. MICA(P) 146/04/2013
Gustavo Cañonero
Deutsche Bank
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(1 212) 250 - 7530
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Drausio Giacomelli
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(1 212) 250 - 7355
Agenda
I.
Global Outlook
II.
Latin America Outlook
III. Brazil
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1
I. World Outlook
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2
Global Outlook
Global growth is returning to trend, but slowly
10
8
% yoy
Real GDP grow th
Forecast s
6
4
2
0
-2
-4
-6
2000
World
Advanced economies
Emerging economies
Trend: World
Trend: Advanced economies
Trend: Emerging economies
2002
2004
2006
2008
2010
2012
2014
Source: IMF, Haver Analytics, DB Global Markets Research
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3
Global Forecasts
Yet a challenging macro environment for EM,
after a decade of strong growth
GDP growth, YoY
2012
2013F
2014F
G7
-US
-Japan
-Euroland
EM Asia (ex-Japan)
-China
-India
EMEA
-Russia
LatAm
-Argentina
-Brazil
-Chile
-Colombia
-Mexico
-Peru
Industrial countries
EM countries
Global
1.7
2.8
2.0
-0.6
1.3
1.8
1.8
-0.2
2.3
3.2
1.0
1.2
5.9
5.9
6.9
7.8
7.8
8.6
4.1
3.7
5.3
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2.7
2.4
3.4
3.4
2.0
3.3
2.7
1.2
0.9
5.6
4.0
3.8
6.3
1.4
4.7
3.0
2.5
2.4
2.5
4.3
3.8
1.3
6.3
1.2
4.5
2.8
2.9
1.6
2.1
4.5
4.5
3.3
6.3
2.2
5.4
3.7
CPI Inflation, YoY
2012
2013F
2014F
1.9
2.1
0.0
2.5
1.5
1.7
0.2
1.5
2.3
2.6
2.7
1.4
3.8
2.6
7.5
5.0
5.2
3.4
2.5
5.9
4.9
6.7
4.0
3.5
5.4
4.9
5.8
7.9
24.0
5.4
3.0
3.1
4.1
3.7
1.9
4.8
3.3
9.3
26.3
6.2
2.3
2.6
3.7
2.5
1.5
4.7
3.0
8.6
29.0
5.7
2.7
2.7
3.8
2.4
2.1
5.0
3.5
Source: DB Global Markets Research
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Global Forecasts
Steady terms of trade increases are now being
replaced by stable commodity prices at best
Commodities (USD, Annual Average)
WTI (barrel)
Brent Blend (barrel)
Gold (oz.)
Copper (lb)
2012
106.0
116.0
1850
3.3
2013F
99.9
109.0
1432
3.2
2014F
98.8
106.3
1338
3.1
2015F
95.0
105.0
1325
3.3
1.25
110
6M
1.23
111
12M
1.18
115
3M
0 - 0.25
2.50
0.50
0 - 0.1
6M
0 - 0.25
2.75
0.50
0 - 0.1
12M
0 - 0.25
3.00
0.50
0 - 0.1
Exchange Rates
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Current
3M
USD/EUR
JPY/USD
1.36
97
Interest Rates
Fed Funds
10-Y Treasuries
ECB rate
ODR rate
Current
0 - 0.25
2.63
0.50
0 - 0.1
Source: DB Global Markets Research
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II. Latin America Outlook
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6
Latin America Outlook
Latam did benefit from ToT shocks, external flows,
and macro stability
Regional growth
ToT (rhs)
% YoY
% YoY
10%
25%
8%
20%
6%
15%
4%
2%
Rollingfour-quarter sum (% GDP)
16.0
14.0
12.0
10.0
10%
8.0
5%
6.0
0%
4.0
0%
-5%
2.0
-2%
-10%
0.0
-15%
-2.0
-4%
EMEA
Q4 -04
Q4 -05
LatAm
Q4 -06
Q4 -07
Q4 -08
Asia (ex -China)
Q4 -09
Q4 -10
Q4 -11
Q4 -12
Mil. US$
Current account
REER (rhs)
2000
110
1000
105
0
-1000
-2000
-3000
100
95
90
-4000
85
-5000
80
Source: BIS, Haver Analytics & DB Global Markets Research
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Latin American Outlook
But positive ToT brought Dutch disease in some cases
Relative unit labor costs vs USA (USD, 2002=1)
3.00
2.50
ARG
2.00
BRA
1.50
1.00
0.50
CHI
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COL
MXC
PER
0.00
Steady REER appreciation on the back of wage increases and low labor productivity growth is
raising the costs of doing business in EM. The average relative ULC increase observed in the large
Latin American countries is at 70%, although the calculation includes the extreme 150% relative
increase in Brazil and a negligible increase in Mexico and Peru.
Source: DB Global Markets Research, Haver Analytics, and IIF
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Latin American Outlook
Although ULC is only part of the story
Standardized average of 10 qualitative
indicators of cost of doing business
Ease of Doing
Business
Rank 2012
0.60
0.40
0.20
Arg
0.00
Bra
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Chi
-0.20
Col
-0.40
Mex
-0.60
Per
-0.80
-1.00
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: World Bank
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Chi
Per
Col
Mex
Arg
Bra
Ven
USA
37
43
45
48
124
130
180
4
9
Latin America Outlook
And capacity slack is not longer available, neither
stability bonus
Potential vs actual growth performance
Credit growth and GDP growth
%
8.00
% YoY
7.75
10
7.00
6.53
Regional growth
Credit to private sector growth (rhs)
% YoY
35
30
25
20
15
10
5
0
-5
-10
8
6.00
6
4.81
5.00
5.00
4.60
4.00
4
2
0
3.90
-2
3.00
-4
2.5
2.00
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Venezuela
Source: BIS, Haver Analytics, IMF & DB Global Markets Research
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10
Latin America Outlook
Despite everything, external debt levels seem to
remain relatively low from a historical perspective
Private External Debt
Public External Debt
Reserves
% of GDP
US$ Bn
60
120
50
100
40
80
30
60
20
40
10
20
0
0
% of GDP
Net foreign assets
18
16
14
12
10
8
6
4
2
0
% of GDP
REER (rhs)
110
105
100
95
90
85
80
Public interest
Private interest
Reserves
Public capital
Private capital
Current account
8
7
6
5
4
3
2
1
0
-1
-2
-3
FDI
REER (rhs)
110
105
100
95
90
85
80
Source: BIS, Haver Analytics & DB Global Markets Research
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Latin America Outlook
Thus, LatAm external position remains strong, while
global recovery could surprise on the upside
Strong net foreign assets positions
% GDP
EM exports and US, EU orders
%
150
150
Gross external debt (% GDP)
125
125
External debt service/Int. reserves (%, rhs)
100
100
%y/y, 3m MA
Latam (ls)
EMEA (ls)
Asia (ls)
US,EU Orders (-6) (rs)
3m MA
50
70
40
65
30
60
20
75
75
55
10
50
50
50
0
45
-10
25
25
0
0
2003 2012 2003 2012 2003 2012 2003 2012 2003 2012 2003 2012 2003 2012
Argentina
Brazil
Chile
Colombia
Peru
Mexico
Venezuela
40
-20
35
-30
30
-40
-50
25
04
05
06
07
08
09
10
11
12
13
Source: BIS, Haver Analytics & DB Global Markets Research
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14
Latin America Outlook
Weak growth numbers across the region portrait
different realities within the countries
GDP growth
% YoY
Inflation (average)
2011
2012
2013
% YoY
30
2014
10
2011
2012
2013
2014
25
8
20
6
15
4
10
2
5
0
0
ARG
BRA
CHI
COL
MEX
PEN
VEN
-5
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ARG
BRA
(% yoy unless stated)
2011
2012
COL
MEX
PEN
VEN
LATAM forecasts
Current account balances
% GDP
CHI
2013
2014
Real GDP growth
5
2011
2012
2013F
2014F
4.2
2.7
2.5
2.9
Priv. consumption
5.1
4.3
2.9
3.2
3
Investment
7.0
1.3
4.4
4.8
2
Inflation (eop)
8.6
7.9
9.3
8.6
Exports, USD bn
968.3
982.6
1008.7
1075.4
-1
Imports, USD bn
857.2
897.5
944.5
988.4
-2
Industrial production
2.9
0.7
2.3
3.1
-3
Unemployment (% )
6.6
6.2
6.4
6.5
-4
Fiscal bal. (% of GDP)
-2.2
-2.7
-2.9
-3.1
CA bal. (% of GDP)
-0.9
-1.4
-2.2
-2.2
4
1
0
-5
ARG
BRA
CHI
COL
MEX
PEN
VEN
Source: DB Global Markets Research
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Latin America Outlook
We do see a transition to slower growth than in the past,
at least for the next couple of years.
GDP Growth (%)
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Venezuela
2011
2012
2013F
2014F
7.0
2.7
5.9
6.6
3.9
6.9
4.2
1.2
0.9
5.6
4.0
3.8
6.3
5.6
2.4
2.5
4.3
3.8
1.3
6.3
1.5
1.6
2.1
4.5
4.5
3.3
6.3
3.0
2011
Inflation (eop,%)
Argentina
23.7
Brazil
6.5
Chile
4.4
Colombia
3.7
Mexico
3.8
Peru
4.7
Venezuela
27.6
2012
2013F
2014F
25.2
5.8
1.5
2.4
4.1
2.7
20.1
29.4
5.8
2.5
2.8
3.5
2.8
45.0
27.0
5.6
3.0
3.3
3.7
2.4
30.0
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MANUAL
_CURRENT_ACCT_BAL
Actual_Release_Value
DB_Forecast
DB_Forecast
DB_Forecast
2011
2012 2013F 2014F
Current Account (%GDP)
Argentina
0.1
1.2
-0.1
0.2
Brazil
-2.1
-2.4
-3.6
-3.1
Chile
-1.6
-3.9
-4.7
-4.8
Colombia
-2.6
-2.9
-3.2
-3.4
Mexico
-0.9
-1.0
-1.5
-2.0
Peru
-2.0
-3.1
-3.3
-2.7
Venezuela
6.3
2.5
2.9
2.4
Actual_Release_Value
Actual_Release_Value
DB_Forecast
DB_Forecast
_FX_RATE
Fx (eop)
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Venezuela
12/31/2011
12/31/2012
12/31/2013
12/31/2014
2011
2012
2013F
2014F
4.31
1.88
521.00
1939.00
13.00
2.70
4.30
4.92
2.04
479
1767
13.00
2.55
4.30
6.24
2.30
510
1920
12.90
2.60
6.30
8.10
2.40
520
2000
12.60
2.65
8.50
Source: DB Global Markets Research
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III. Brazil
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15
Brazil Outlook
Long-term forecasts
GDP
Growth (%)
IPCA
Dec/Dec (%)
BRL/USD
year-end
SELIC
Average (%)
2010
7.5
5.9
1.67
10.0
2011
2.7
6.5
1.88
11.7
2012
0.9
5.8
2.04
8.5
2013F
2.5
5.8
2.30
8.4
2014F
2.1
5.6
2.40
10.3
2015F
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5.2
2.50
11.1
2016F
2.6
5.0
2.58
10.4
2017F
3.0
5.0
2.65
9.0
2018F
3.2
5.0
2.73
8.5
2019F
2.8
5.0
2.81
8.5
2020F
3.0
4.8
2.89
8.0
2021F
3.0
4.8
2.97
8.0
Source: National statistics, DB forecasts
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Appendix 1
Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the
subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not
receive any compensation for providing a specific recommendation or view in this report.
Gustavo Cañonero and Drausio Giacomelli
Deutsche Bank
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