Latin American CEOs more optimistic than global average about future growth

With confidence in the local markets after a year of electoral uncertainty, 96% of Latin American CEOs expect their company will grow in the next three years. Due to a combination of local and global factors, the optimism exhibited by the continent’s CEOs is higher than the global average of 90%, according to a recent study by professional services firm KPMG.

The study compares the results from the recent 2018 Global CEO Outlook by KPMG International who interviewed 1,300 CEOs across the globe and 278 CEOs from Latin America. For the first time in a decade, Latin business leaders are confident about their own companies and their country’s business environment.

Latin America has undergone a tremendous change in the past ten years with Brazil and Argentina returning to growth after sustained recessions. In the past year, the region has moved towards an open business environment which is emanating rays of optimism. This sentiment contradicts a level of pessimism spreading through North America and Europe due a rise of what the consulting firm refer to as ‘territorialism’ in Spanish.

According to Scott Ozanus, President of the KPMG in the Americas Region, “Confidence sustained in the local economic recovery is keeping at bay electoral uncertainty as the threat of territorialism, with 90% of the Latin American CEOs who expressed optimism about the prospects for growth for your country for the next 3 years, which represents an increase in 20% from the survey conducted in 2017.”

Territorialism – the restrictions of trade and business due to inward looking policies i.e., Brexit and US President Donald Trump’s tariffs – has created a stir in the international business community. Whilst these policies will have an effect on Latin America trans-equatorial and trans-Atlantic trade, Latin CEOs considered it one of the smallest risks for their businesses (5% compared to 16% globally).

An increase in protectionist policies emerging from the US is actually creating a degree of regional integration throughout Latin America, according to the report’s authors. As the US vows to revisit NAFTA, “Mexico and other countries in the region can also benefit from a realignment in the trade blocs.” The amalgamation of Latin trade has also been met by increasing ties with ‘open-for-business’ Asia as opposed to the ‘isolationist’ United States.

These factors together have influenced Latin CEOs’ positive outlook but have also shaped their negative view on the global economy. In comparison to the world average of 67%, only 37% of Latin CEOs have confidence in the growth of the global economy in the next three years.“For the first time, I would say in the last ten years, there is synchronicity in growth throughout the region and in much of the world. CEOs feel confident about their own capacity to take advantage of the opportunities in this growth cycle,” said Víctor Esquivel, Senior Partner, KPMG, Mexico and Central America.

Latin American CEOs

"CEOs are taking advantage of the adverse winds of change to move their organizations towards growth,” said Bill Thomas, President, KPMG International. “The CEOs with whom I have spoken recognize geopolitical uncertainty, disruption and cyber threats as their new concept of normal. The best ones are in search of the opportunities that this creates, they are modifying their systems and, in certain cases, all of their business.” 

In order to capitalize on this optimistic sentiment, CEOs are turning towards implementing Industry 4.0 technology in leaps and bounds. With a highly tech-proficient and connected labor force, implementing advances in technology in Latin America will drive economic growth in the near future. According to Pedro Melo, Managing Partner of KPMG’s operations in South America, by replacing entrenched inefficient processes in Latin America with technology, “savings can be more immediate and more significant” because Latin executives have leapfrogged early stage tech-development.

Whilst technology will not counter a global shift in trade policies, it will help individual companies become more competitive on a global scale. And the technologies that can offer improvements in many parts of the world could have a large effect on the Latin American economy overall, driving growth and development in the next emerging global marketplace. It has been said that Industry 4.0 will offer Latin America many of the same opportunities that have occurred in Asia over the past two decades. 

“With such unique political, economic and cultural models in each country, and some recent difficult chapters in some of those countries, it is encouraging that our 2018 survey finds Latin American CEOs in a moment of shared optimism: 40 percent of them identified Central and South America as the main emerging market for expansion in the next 3 years,” said KPMG’s Americas Vice Chairman.

“In fact, its trust is shared by managers who also identified the expansion to emerging markets as a priority, with Central America and South America being their first selections, which is an additional sign of the growing global influence of Latin America.”

Overall the report concludes that the perspectives of Latin American CEOs are focused on the positives. As a mood which is in stark contrast to populist politics, Latin executives are optimistic about the fact that the recovering Latin economy is in sync with global economic growth and especially for the (re)emergence of the middle class.