Doing Business: Regional Competitiveness In Latin America

Transcription

1 Doing Business: Regional Competitiveness In Latin America Dr. Jerry Haar, Associate Dean of International Programs Director of the Pino Global Entrepreneurship Center College of Business Administration, Florida International University

2 Regional Report Card from Can Latin America Compete? Jerry Haar and John Price, eds. New York and London: Palgrave Macmillan

3 Global Competitiveness Report Competitiveness is Built from the Ground Up Improvement Logistics Technology Access Innovation Consumer & SME Credit Access Reform Capital Market Reform Legal Reform Regulatory Reform Tax Reform Labor Reform Infrastructure The rule of law Macro-economic fundamentals Education Public Safety 3

4 Global Competitiveness Report Country Global Competitiveness % Change 2011 Honduras 11.1 Bolivia 8.6 Peru 7.7 Brazil 7.5 Colombia 5.0 Panama 4.8 Mexico 2.4 Argentina 0.0 Chile -4.1 El Salvador -4.9 Venezuela Source: The Global Competitiveness Report

5 Doing Business -- Regions Business-Friendly Economies in Latin America 5

6 Doing Business -- Regions Doing Business rankings 2012 (1-181) 6

7 Regional Report Card from Can Latin America Compete? Economic Reforms: Mission Accomplished? While Latin America has made significant progress in improving the management of its macroeconomic policies, policies are needed to support sustainable results in the region. Successful Reforms Exchange rate policy Inflation targeting Central bank independence Liberalization of trade Privatizations Fiscal management 7 Areas of concern Reliance on oil Creeping interference in central banks Domestic gov t debt Fuel subsidies

8 Regional Report Card from Can Latin America Compete? Education: public money ill-spent Most Latin American governments spend as much or more per student on education than their Asian counterparts, and yet. Perverse upside-down spending Educating but not training = skills gap Inflexible, poorly trained body of teachers 8

9 Regional Report Card from Can Latin America Compete? Bad laws, little enforcement Weakens ability to enforce regulation Lack of credible commercial law Provokes capital flight Reduces Competitiveness Kills innovation Stifles investment Reduces ability to collect taxes Weak rule of law impacts ever corner of the economy and society: Innovation Safety Investment Employment Growth Savings Democracy 9

10 Regional Report Card from Can Latin America Compete? Hard Costs Direct costs between 3-13% of GDP Violence among top 5 causes of death Indirect Costs FDI, domestic investment Low tourism, bad tourism Brain drain, innovation Public Safety : the cost of living dangerously Growing problems Income distribution Gangs Drugs & guns Ineffective police Corruption 10 Sources World Bank, 2003 World Development Indicators, UN office on drugs and crime, 2003 Latin America is the world s most dangerous region, leading the world in kidnapping

11 Regional Report Card from Can Latin America Compete? The overburdened entrepreneur Labor laws From a bygone era Too rigid, yet too weak unsuitable for highskilled Red Tape + = Too many rules, poor enforcement Double the admin costs for companies Discriminates SMEs Informal Economy Reform 11

12 Regional Report Card from Can Latin America Compete? Expanded Credit : The region s great success Combined Markets (85% of region): Brazil, Mexico, Colombia, Venezuela, Chile Improvement Credit Card Billings USD billions Debit Card Billings USD billions 12 Sources: central banks, EIU

13 Regional Report Card from Can Latin America Compete? Spending in R&D Lagging 13 Source: ECLA, OECD

14 Innovation and How to Boost Competitiveness: Specific Actions Logistics is the software that drives an economy Lack of investment in transportation and logistics has: Created bottlenecks in trade Further restricted investment in the area What is holding back logistics development in Latin America? Customs Reform Trust Trucking regulations Lack of standards 14

15 Global Innovation and How to Boost Competitiveness: Specific Actions Infrastructure: hard lessons learned Successful Privatization Telecommunications Investment must come from Public and Private Sources Gas distribution Ports Railways Principal Highways 15 Electricity distribution Secondary Roads Water Unsuccessful Privatization

16 Global Innovation and How to Boost Competitiveness: Specific Actions Taxes: The region s 2nd favorite sport Excessive taxes are a detriment to competitiveness Tax Policy Trends Only 7 economies reduced tax rates in the past 6 years. LAC firms spend on averag 385 working hours a year paying taxes Easiest for business in high-income economies Latin America needs to control and improve the effectiveness of expenditures and let competitive tax provisions encourage the private sector. Reform 16

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18 Competitiveness & Latam: are they allowed in the same sentence? Munir Jalil, Vice President of Economic Research, Citi Colombia and Venezuela

19 Table of Contents 1. Latam Facts 1 2. Infrastructure 6 3. Institutional Effectiveness External Sector 13

20 1. Latam Facts

21 US$ % of World GDP GDP Growth Latam GDP in 2011 displayed a 4.2% annual growth, and it is expected to grow a 2.9% this year. Chile s annual GDP growth is expected to grow 4.9% this year, standing below the last year s print of 6.0% Brazil s annual GDP growth is expected to grow just 1.8% in 2012, standing below the last year s print of 2.7%. Colombian annual GDP growth stood at 5.9% in 2011 and is expected to grow 4% this year. Mexico, displayed a 3.9% GDP annual growth last year and its expected to maintain the same growth this year. Peru s annual GDP growth expectation for 2012 stand at 5.7%, standing below the last year s print of 6.9% GDP per capita 15, GDP as a share of world GDP ,144 7,826 9,947 6,634 10, Brazil Colombia Mexico Peru Chile Latam 0.00 Brazil Colombia Mexico Peru Chile Latam 1 Source: Citi Research

22 Real GDP Growth YoY With slowing growth, the central banks of Colombia, Chile and Peru have turned more dovish as a result of activity data pointing toward slower growth. We also see further room for monetary easing to continue in Brazil, although in Mexico rates are likely to remain stable % 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% -2.00% % -6.00% -8.00% Chile Brazil Colombia Peru Mexico Latam 2 Source: Citi Research

23 Unemployment Rate (%) Unemployment Rate Latam unemployment stood at 6.6% by the end of No changes are expected for this year. Chile s unemployment rate stood at 7.13% by the end of 2011, and its expected to decrease to 7.04% to this year. Brazil is expected to register a 6.3% unemployment rate by the end of this year, above last year s print 6.1% Colombian unemployment rate has been decreasing during the past year, we expect it to stand at 10.9% by the end of this year. Mexico s unemployment rate has stayed relatively steady since 2009 at 5.3%. Peru s unemployment rate has stay relatively flat and we expect it to remain that way Chile Brazil Colombia Mexico Peru 3 Source: Citi Research

24 Population Facts Population (Millions): Population growth rate: Median Age: Urban population: Brazil: Brazil: 1.102% Brazil: 29.3 years Brazil: 87% Chile: 17.1 Chile: 0.844% Chile: years Chile: 89% Colombia: 45.3 Colombian: 1.128% Colombian: 28 years Colombian: 75% Mexico: Mexico: 1.089% Mexico: 27.1 years Mexico: 78% Peru: 29.5 Peru: 1.016% Peru: 26.2 years Peru: 77% 100.0% Age Structure 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Brazil Colombia Mexico Peru Chile 65 and over 6.7% 6.1% 6.6% 6.4% 9.6% % 67.2% 65.2% 65.1% 68.1% % 26.7% 28.2% 28.5% 22.3% 4 Source: Cia Factbook

25 % of Population % of GDP Education Education expenditure Primary education enrollment rate: Brazil: 94.2% Chile: 95.7% Colombian: 89.6% Mexico: 98.1% 2.00 Peru: 94.4% Brazil Colombia Mexico Peru Chile Literacy Secondary education enrollment rate: Brazil: 100% Chile: 90.4% Colombian: 94.6% Mexico: 89.9% Peru: 89.1% Tertiary education enrollment rate: Brazil: 34.4% Brazil Colombia Mexico Peru Chile Chile: 54.8% Colombian: 37.0% Mexico: 27.2% 5 Source: CIA FactBook and The Global Competitiveness Report-World Economic Forum Peru: 34.5%

26 2. Infrastructure

27 % of Population % of Population Infrastructure / Telecommunications Internet users Broadband Internet subscriptions Brazil Colombia Mexico Peru Chile 0 Brazil Colombia Mexico Peru Chile 7 Source: CIA FactBook and The Global Competitiveness Report-World Economic Forum

28 Km. Km. Infrastructure / Transportation ,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 Number of Motor Vehicles per 1000 people ,751, , Roadways 366, , Brazil Colombia Mexico Peru Chile Number of Motor Vehicles per 1000 people 80,505 Brazil Colombia Mexico Peru Chile Quality of overall infrastructure: Brazil: 3.6 Chile: 5.5 Colombian: 3.6 Mexico: 4.2 Peru: 3.5 Quality of roads: Brazil: 2.8 Chile: 5.7 Colombian: 2.9 Mexico: 4.3 Peru: = extremely underdeveloped; 7 = extensive and efficient by international standards 30,000 25,000 20,000 15,000 10,000 5, ,538 Railways ,166 1,906 7,082 Brazil Colombia Mexico Peru Chile 8 Source: CIA FactBook and The Global Competitiveness Report-World Economic Forum

29 Km. Km. Km. Km. Infrastructure / Pipelines Gas Pipelines 8,000 Oil Pipelines 7,499 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, ,594 13,514 4,801 3,064 1,526 Brazil Colombia Mexico Peru Chile 7,000 6,000 5,000 4,000 3,000 2,000 1, ,334 3,729 1, Brazil Colombia Mexico Peru Chile 8,000 7,000 6,000 5,000 4,684 Refined products Pipelines 7,264 2,500 2,000 1,500 Liquid petroleum gas pipelines 2,152 4,000 3,000 2,000 1, , Brazil Colombia Mexico Peru Chile 1, Brazil Colombia Mexico Peru Chile 9 Source: CIA FactBook and The Global Competitiveness Report-World Economic Forum

30 3. Institutional Effectiveness

31 % of Income per Capita Number of Procedures Days Doing Business Procedures Brazil Colombia Mexico Peru Chile Starting a business Dealing with construction permits Getting electricity Time Brazil Colombia Mexico Peru Chile Starting a business Dealing with construction permits Getting electricity 1200% 1000% 800% 600% 400% 200% 0% Costs Brazil Colombia Mexico Peru Chile Dealing with construction permits Getting electricity Starting a business RHA 14% 12% 10% 8% 6% 4% 2% 0% 11 Source: Doing Business Report The World Bank

32 US$ per container Number of Documents Days Doing Business / Trading Across Boarders Documents Time Brazil Colombia Mexico Peru Chile Documents to export Documents to import 0 Brazil Colombia Mexico Peru Chile Time to export Time to import Costs Brazil Colombia Mexico Peru Chile Cost to export Cost to import 12 Source: Doing Business Report The World Bank

33 4. External Sector

34 % of GDP External Sector Exports, FOB (2012E) Latam: $USBn. Chile: 80.9 $USBn. Brazil: $USBn. Colombia: 66.1 $USBn. Mexico: $USBn. Peru: 47.3 $USBn. Imports, CIF (2012E) Latam: 907.2$USBn. Chile: 73.1 $USBn. Brazil: $USBn. Colombia: 60.2 $USBn. Mexico: $USBn. Peru: 40.0 $USBn. 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% International Commerce Brazil Colombia Mexico Peru Chile Exports as % of GDP Imports as % of GDP Source: Citi Research 14

35 External Sector: Brazil Brazil: Imports Brazil: Exports Others 50% United states 15% China 14% Others 48% China 20% United States 10% Colombia 1% Mexico 3% Peru 0% EU 17% Peru 1% Mexico 2% Colombia 1% EU 18% Machinery and transport equipment: 38.3% Mineral Fuels: 18.5% Chemicals: 18.5% Manufactured goods: 11.4% Food and live animals: 3.8% Others: 9.5% Crude Materials Ex Fuels: 28.64% Food and Live Animals: 21.62% Machinery and transport equipment: 15.13% Manufactured goods: 11.23% Mineral Fuels: 10.46% Chemicals: 5.91% Others: 7.01% 15 Source: Citi Investment Research and Analysis, Instituto Brasileiro de Geografia e Estadistica

36 External Sector: Chile Chile: Imports Chile: Exports Asia 29% Others 19% Colombia 3% EU 15% Estados Unidos 20% Argentina 6% Brasil 8% Asia 47% EU 20% Other 12% México 2% Argentina 1% Estados Unidos 11% Brasil 6% Colombia 1% Consumer Goods: 26.78% Intermediate Goods: 48.14% Petroleum Products: 7.86% Capital Goods: 17.23% Chemical Products: 6.68% Food & Beverages: 8.71% Industrial Sector: 30.41% Mining Sector: 50.17% Agriculture Sector: 4.02% 16 Source: Citi Research and Banco Central de Chile

37 External Sector: Colombia Colombia: Imports Colombia: Exports Others 31% United States 24% Others 34% United States 39% Brazil 5% EU 12% Mexico 11% Peru 2% China 15% Brazil 2% Mexico 1% Peru 3% China 6% EU 15% Industrial Sector: 49.5% Chemical Products: 17.0% Vehicles: 11.9% Machinery: 11.3% Food and beverages: 5.8% Agriculture Sector: 4.1% Crude oil and Natural Gas: 44.5% Industrial Sector: 38.0% Mining Sector: 13.4% Agriculture Sector: 4.0% 17 Source: Citi Investment Research and Analysis, DANE

38 External Sector: Mexico Mexico: Imports Colombia Others Brazil 1% 6% 1% United States 79% Mexico: Exports Asia 31% Europe 12% United states 50% Others 8% Colombia 2% Brazil 1% Asia 4% Europe 6% Manufacturing: 83.4% Petroleum Products: 8.8%. Agriculture: 4.3%. Petrochemical Products: 2.7%. Mining: 0.4%. Natural Gas: 0.4% Manufacturing: 80.5% Crude Oil and other related products: 14.9% Agriculture: 3.7%. Mining: 0.9% 18 Source: Citi Investment Research and Instituto Nacional de Estadistica y Geografia (INEGI)

39 External Sector: Peru Peru: Imports Peru: Exports Others 38% United Sates 24% Euro Zone 9% Others 41% United Sates 15% Euro Zone 18% China 14% Mexico 4% Colombia 4% Brazil 7% Mexico 2% Colombia 2% Brazil 4% China 18% Consumer Goods: 18.92% Fuels: 15.18% Raw materials for agriculture and industry: 32.41% Capital Goods: 32.77% Others: 0.73% Mining: 58.8% Oil and Natural Gas: 10.9% Agriculture: 9.8% Textiles: 4.3% Chemicals: 3.6% Others: 12.6% 19 Source: Citi Investment Research and Analysis and Instituto Nacional de Estadistica e Informatica INEI

40 Argentina Area: 2,780,400 sq km Population (2012E): 42.1MM Nominal GDP (2012E): US$474Bn GDP per Capita (2012E): US$ Real GDP Growth (2012E): 3.0% CPI (2012E): 3.6% Exports FOB (2012E): $85.6Bn Imports CIF (2012E): $75.6Bn FDI (2012E): $4.4Bn Main Cities: Buenos Aires (Capital) 12.9MM Cordoba 1.4MM Rosario 1.2MM Mendoza 0.9 MM 20 Source: DANE, Citi Investment Research and Analysis

41 Brazil Area: 8,514,877 sq km Population (2012E): 197.0MM Nominal GDP (2012E): $2424Bn GDP per Capita (2012E): $ Real GDP Growth (2012E): 3.3% CPI (2012E): 5.3% Exports FOB (2012E): $251.7Bn Imports CIF (2012E): $224.7Bn FDI (2012E): $55.0Bn Main Cities: Sao Paulo 19.96MM Rio de Janeiro 11.8MM Belo Horizonte 5.73MM Brasilia (Capital) 3.78 MM 21 Source: DANE, Citi Investment Research and Analysis

42 Chile Area: 1,141,748 sq km Population (2012E): 17.3MM Nominal GDP (2012E): $256Bn GDP per Capita (2012E): $ Real GDP Growth (2012E): 4.5% CPI (2012E): 3.0% Exports FOB (2012E): $79.6Bn Imports CIF (2012E): $71.9Bn FDI (2012E): $18.1Bn Main Cities: Santiago(Capital) 5.8MM Valparaiso 0.8MM 17 Source: DANE, Citi Investment Research and Analysis

43 Colombia Area: 1,138,910 sq km Population (2012E): 46.5MM Nominal GDP (2012E): $363Bn GDP per Capita (2012E): $7,809 Real GDP Growth (2012E): 5.0% CPI (2012E): 3.6% Exports FOB (2012E): $66.1Bn Imports CIF (2012E): $61.6Bn FDI (2012E): $14.2Bn Main Cities: Bogotá(Capital) 8.2MM Medellin 3.4MM Cali 2.3MM Barranquilla 1.9 MM 18 Source: DANE, Citi Investment Research and Analysis

44 Mexico Area: 1,964,375 sq km Population (2012E): 115.1MM Nominal GDP (2012E): $1.144Bn GDP per Capita (2012E): $9.947 Real GDP Growth (2012E): 3.9% CPI (2012E): 3.7% Exports FOB (2012E): $381.3Bn Imports CIF (2012E): $384.9Bn FDI (2012E): $20.3Bn Main Cities: México City(Capital) 19.3MM Guadalajara 4.3MM Monterrey 3.8MM Puebla 2.2 MM 19 Source: DANE, Citi Investment Research and Analysis

45 Peru Area: sq km Population (2012E): 29.7MM Nominal GDP (2012E): $197Bn GDP per Capita (2012E): $6.634 Real GDP Growth (2012E): 5.7% CPI (2012E): 3.0% Exports FOB (2012E): $47.1Bn Imports CIF (2012E): $40.3Bn FDI (2012E): $7.3Bn Main Cities: Lima(Capital) 8.76MM Arequipa 0.7MM 20 Source: DANE, Citi Investment Research and Analysis

46 Venezuela Area: sq km Population (2012E): 29.7MM Nominal GDP (2012E): $374Bn GDP per Capita (2012E): $ Real GDP Growth (2012E): 5.0% CPI (2012E): 24.5% Exports FOB (2012E): $95.7Bn Imports CIF (2012E): $53.7Bn FDI (2012E): $-3.6Bn Main Cities: Caracas(Capital) 3.0MM Maracaibo 2.1MM Valencia 1.7MM Puebla 2.2 MM 21 Source: DANE, Citi Investment Research and Analysis

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