Consulting market of South America grows 4% to $2.6 billion

01 August 2018 4 min. read
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The management consulting industry of South America grew by 4% last year, to a total value of nearly $2.6 billion. Brazil remains the region’s largest consulting market, estimated to be worth around $1.2 billion.

South America’s consulting market is described as “complicated” by many consultants in the region, according to a report released by Source Global Research. The researchers interviewed 21 leaders operating in the region from consultancies such as Bain & Company, EY, Deloitte, KPMG, OC&C Strategy Consultants, Protiviti, PwCRoland Berger and ZS Associates.

The senior consultants highlighted that language and cultural differences, combined with a mix of traditional big spenders but also many smaller (emerging) local companies, make the South American consulting market a diverse and fragmented landscape.

“Each country has its own story with its own problems. It changes dramatically from country to country,” explained Fernando Fleider of ICTS, a São Paulo-based consultancy that is affiliated with Protiviti. Nevertheless, the researchers found that despite such differences and a backdrop of political and economic instability, across the board, the consulting markets of the region’s twelve countries (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela) have grown modestly, by 3.6%.

Brazil is by far the largest market in South America, valued at nearly $1.2 billion, making up almost half of the total ($2,568 million) by value. However, recent political and economic troubles have seen the market grow slower than the region’s average, and as a result Brazil’s consultancy growth is being eclipsed by that of the much smaller markets of Argentina, Chile and Colombia. Growth in Brazil’s consulting spend did, however, recover in 2017 at a growth rate of near 3%, compared to a flat performance in 2016. Heloisa Montes, a leader at Deloitte in Brazil, said “We are back to growth.”

The consulting market of South America and Brazil ($ billion)

According to Jean-Claude Ramirez, partner in Bain & Company's São Paulo office, the strategy consulting segment in the country showed good signs of recovery. “2017 was a strong year for us, particularly in Brazil. Brazil was starting to emerge from a very deep recession, and that recovery sparked an uptick in the strategy consulting market.”

The positive development comes just two years after Brazil’s management consulting industry grew by just 0.1% (in 2016), and as a result consulting firms were forced to cut costs internally to cope with a widespread reduction in fees. Due to what many describe as the worst economic crisis in the country’s history, the consulting firms which were able to offer operational improvement and cost reduction services were the ones that outperformed the rest. Wladimir Constante, Executive Vice President at Alexander Proudfoot in Brazil, remarked last year: “Clients needed help with efficiency, cost reduction, and operational improvement work and that generated large, profitable contracts for us. As a result, we performed very well.”

Outlook for South America

In its outlook for South America, Source Global Research warns in its report that the upcoming elections across the continent make it increasingly likely that instability will continue to plague the region for some time. However, there are signs of good news. One is that consulting services might be gaining more and more interest from smaller clients, a group which previously hardly made use of consultants. Victor Hugo Ferreira Junior, founder of Actavox Management Consulting explained “Five years ago, it was only large companies that wanted consulting services. Now, even very small companies are looking for consultants, which represents a cultural shift.”

Another promising development is the growing uptake of digitization in the region, as clients recognize its potential to improve their businesses. One of the biggest areas of interest in digital take-up is in its potential to cut costs and improve efficiency, with significant interest in data & analytics. In preparation for the boom, South American consulting firms are working hard to ready themselves for expected growth in this market. Globally, the size of the digital transformation market has jumped from $23 billion to $44 billion in the past twelve months. 

The management consulting industry is defined by the researchers as all business advisory services, excluding audit & accounting, the implementation of IT systems, the delivery of outsourced/offshored services, HR compensation/benefits administration and technology, and tax advisory. M&A work performed by consultants (strategy, commercial and operational due diligence, post-merger integration) is included in the sizing; corporate finance fees on deals are excluded.