Situation Analysis Macroeconomic situation and outlook for 2015 LATAM Mexico, Chile and Brazil. By Miguel Valdivieso

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1 Situation Analysis Macroeconomic situation and outlook for 2015 LATAM Mexico, Chile and Brazil - Execu6ve Search & Human Capital

2 Current Situation Macroeconomic situation in the LATAM area The pace of economic expansion in Latin America will be more modest than in the last five years. The predictions for GDP growth indicate a slight recovery in 2015, up to 2.0%-2.5%. External factors, such as a drop in the prices of raw materials, mainly due to the economic slowdown in China, as well as the increased cost of external financing and more modest prospects for capital inflows are contributing factors to this slowdown process. The heterogeneity of differing growth models is still present in the region, and has to do, in part, with different strategies of economic management; these projections illustrate the end of a decade of higher economic growth in Latin America compared with the OECD average.

3 Macroeconomic Situation Mexico JP Morgan predicts a solid outlook, with a GDP growth of 3.8%, arguing that this positive forecast rests on two pillars, having to do, among other factors, with the economic acceleration, boosted by a strong recovery in domestic demand, plus the positive perspectives of the manufacturing and construction sectors. The three main sectors for the year 2015 are: 1.Automotive sector: In 2014, seven companies announced the installation of manufacturing plants in the country: Nissan-Renault, Honda, Mazda, Audi, Mercedes-Benz, BMW and Hyundai, with a total investment of 8,263 million dollars (mmd). The prospects for Mexico have deteriorated significantly in recent months because of the insecurity crisis and low economic growth and, particularly, owing to the fall in the price of oil in world markets. In the course of 2015, particularly in the first half of the year, world markets are adjusting to two main current impacts: 1) The fall in the price of oil 2) The end of the expansionary policy of the Central Bank of the United States (Federal Reserve). Mexico, even if unwillingly, will have to adapt to the new conditions created by these two shocks, whether in an orderly and wellconsidered fashion or in a disordered way involving high social costs. 2.Tourism: Figures from the Central Bank show that in the first 10 months of last year the number of foreign tourists amounted to 23.2 million people, representing an increase of 18.6% compared with the same period in The fall in oil prices might lead to a decline in fuel prices and, consequently, air traffic connected with international tourism might be stimulated. Additionally, a more favorable rate of exchange might have an impact in attracting foreign visitors. 3.Investments: The low degree of penetration in the financial sector and macroeconomic stability could boost lending, with double-digit growth rates in the sector. The addition of new companies to the supply chain in the automotive, energy and tourist sectors is one of the main incentives sustaining the healthy economic outlook in this sector.

4 Macroeconomic Situation Chile After the boom observed between 2010 and 2012, the GDP growth fell to 2.2% in the first half of 2014, affected by a decline in the mining sector due to the end of the investment cycle and a fall in copper prices. This was in addition to a decline in private consumption. Concurrently, unemployment has risen from 5.7% in November 2013 to 6.5% in June Chile has been one of the fastest-growing economies in Latin America in the last decade, but the international crisis has been knocking at its door, and since 2003 a gradual slowdown in economic activity has been recorded. The deceleration in economic activity has been sharper than expected in 2014, and this trend is expected to continue in the first half of 2015; however, the outlook for the second half is more optimistic, with a rebound in consumption and investment, provided expectations are adequately managed. In this context, a recovery in economic growth is expected for The Central Bank has downgraded its economic growth forecast to between 1.75% and 2.25% in September 2014 from between 3.75% and 4.75% in December As a result of ongoing expansive monetary and fiscal policies, a recovery in private investment and the normalization of the current economic cycle, economic growth is expected to rebound to between 3.75% and 4.75% next year. Challenges and strengths of Chilean economy: The energy sector in Chile is at a turning point now. It offers enormous potential for developing renewable forms of energy and energy efficiency and becoming a world leader. The two main challenges for the economy of Chile are how to leave behind its traditional dependence on the price of copper (copper production represents 50% of the country s exports, and the fall in the prices of copper during the crisis has had a profound effect on Chilean economy) and how to become self-sufficient in food production.

5 Macroeconomic Situation Brazil The economy of Brazil has accumulated important distortions in recent years. There has been a deterioration in government accounts, inflationary pressures and a significant increase in the external deficit. This situation has been fuelled by an increase in indebtedness and loss of external competitiveness. The impact of the adjustment and other internal and external factors will result in a continued stagnation of the economy in In addition, inflation is projected to remain high this year (close to 7%). The economic environment should improve slightly in The adjustment of the economic policy is already under way. Recent announcements reveal that the adjustment will be focused on fiscal and quasi-fiscal policy, but will also include changes in monetary policy. A switch to a more pragmatic, orthodox and transparent economic policy is essential to reverse the degradation of external accounts, fiscal deterioration and rising inflation. If implemented properly, it should make it possible for the country to grow again about 2.5%, in line with its potential. As for the outlook at sectoral level: Brazil has a great demand for architecture, construction and engineering to make up its deficit in infrastructures and housing, improve transport and build sporting facilities. Many companies in the sector have landed on Brazilian soil to benefit from the opportunities offered by this market. The importance of the country s textile, aerospace, pharmaceutical, automotive, steel and chemical sectors is increasing every day. Most leading automakers have set up production units in the country. The industrial sector represents just over a quarter of GDP, but is suffering a sharp slowdown, which the plan "Brazil Maior aims to stop. The tertiary sector accounts for two thirds of GDP, and 60% of the workforce is employed in this sector. In recent years, the country has embarked upon the production of high value-added services, particularly in the aeronautical and telecommunications fields. In general, many sectors afford excellent opportunities in the short term: raw materials, agriculture, agri-food industry, IT (hardware and software), energy, oil, gas, franchising, insurance, iron, steel, medical equipment, pharmaceuticals, mining sector, pollution control equipment, ports and airports, aeronautics industry, railroads, tourism and telecommunication infrastructure. The least attractive sectors for investors are: electricity and, more generally, energy, but there is a trend towards the opening of governmentcontrolled monopolies to the private sector under the control of a public regulatory body.

6 Office Network FITCH BENNETT PARTNERS 55, Avenue Marceau Paris France Tel : +33 (0) Fax : +33 (0) contact@fitchbenne*partners.com MIGUEL VALDIVIESO represents FITCH BENNETT Partners in these countries. Miguel, Development Systems Director, has developed his consulting career aligned to Organization Development mainly focused on sales transformation. Experience includes leading projects related to sales force development, either through process redefinition, implementation actions or Learning activities. Miguel has a cross industry experience in some of the major Banks, Telecom companies, Utilities and Public Sector, in Spain and internationally. Miguel has developed his professional experience within Accenture since 1997 where he became a Senior Manager. Miguel joined Development Systems to create and evolve the unit for Sales Force Development. Miguel assumes the Executive Search Unit since SPAIN MADRID Centro de Negocios Albatros Edif. B Anabel Segura Alcobendas (Madrid) BARCELONA Gran Via de Carlos III,94 Edificios Trade Barcelona PORTUGAL LISBOA Campo Grande, 383 C, 1ºB Lisboa LATAM MEXICO Homero, 1804 Ofi.504 Colonia Los Morales Polanco México D.F. BRAZIL SAO PAULO Sansâo Alves dos Santos, 433, 3º andar Conj.31 Ed.Horminio Maja Brooklin / Sâo Paulo, CHILE SANTIAGO DE CHILE Marchant Pereira, 221 Ofc. 51 Providencia, Santiago de Chile Business Development Customers Through our network of international partners, we cover the principal economic regions: Europe, Asia and America. We support our Customers in their international development with the support of local experts from a recognised Executive Search agency. We take on the role of Country or Regional project manager to oversee the smooth running of the mission, with particular attention to the selection of candidate profiles in line with the corporate culture and the Company s key objectives. These searches are always supported by specific reports to ensure the success of the mission. ARGENTINA BUENOS AIRES Avda. Cordoba, 959 P Buenos Aires Cap. Federal.