october, 2015 presentación luis...5 mediocre global outlook, but not the end of the world source:...
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Luis Oscar Herrera BTG Pactual Andean Region & Argentina October, 2015
Global economic outlook and Latin America
For additional information, please read carefully the notice at the end of this presentation.
2
Transitioning from the post-financial crisis world
US recovery and FED interest-rate liftoff
China’s slowdown, deleverage and demand rebalancing
Latin America stuck in the middle of all
3
Agenda
My five key takeaways from the Lima meetings
4
1 Global growth rotation and the “new mediocrity”
5
Mediocre global outlook, but not the end of the world
Source: IMF WEO October 2015
World GDP growth (% y/y, PPP adjusted)
2015 2016 2017-20
World 3.1 3.6 3.9
AECs 2.0 2.2 2.1
US 2.6 2.8 3.4
EMEs 4.0 4.5 5.1
China 6.8 6.3 6.2
5,4
4,2
3,4 3,3 3,4 3,1
3,6 3,8
0,0
1,0
2,0
3,0
4,0
5,0
6,0
2010 2011 2012 2013 2014 2015 2016 2017
Other EMEs China Advanced Economies
6
0,6 -2,0
0,0
2,0
4,0
6,0
8,0
10,0
12,0
14,0
16,0
2000 2003 2006 2009 2012 2015 2018
Commodity exporters China EMEs ex China
Global growth rotation
Source: IMF WEO October 2015
Advanced economies (GDP %y/y)
Emerging economies (GDP %y/y)
EMs and resource exporters slowdown, modest pickup in AEs
-8,0
-6,0
-4,0
-2,0
0,0
2,0
4,0
6,0
2000 2003 2006 2009 2012 2015 2018
Japan United States Eurozone
7
2 Commodities glut to drag on
8
Commodities prices to remain “low-for-long”
Source: IMF WEO October 2015, ICSG October 2015 EIA October 2015.
Metals & oil world production (2000=100) Metals & oil real prices (index, 2000=100)
Faltering demand, new capacity and lower production costs
0
50
100
150
200
250
300
350
2000 2005 2010 2015 2020
Metals Oil
40
90
140
190
240
290
340
80
90
100
110
120
130
140
150
160
170
180
2000 2003 2006 2009 2012 2015
World GDP Oil
Copper Iron Ore (RHS)
9
Commodity exporters will face an uphill climb
2,9 3,8
1,7
4,7
0 1 2 3 4 5
EMEs: Commodity exporters
Other EMEs
2012-2014 2015-2017
GDP growth (% y/y) Investment (% GDP)
23,2 23,8
22,2
24,0
21
22
23
24
25
EMEs: Commodity exporters
Other EMEs
2012-2014 2015-2017
Current account balance (% GDP) Fiscal balance (% GDP)
2,1
-2,7 -1,8 -1,9 -4
-2
0
2
4
EMEs: Commodity exporters
Other EMEs
2012-2014 2015-2017
-0,9
-4,5 -5,7
-4,3
-8
-6
-4
-2
0
EMEs: Commodity exporters
Other EMEs
2012-2014 2015-2017
10
3 Risk rotation and capital retrenchment from EMEs
11
-450
-300
-150
0
150
300
450
2005 2007 2009 2011 2013 2015
Portfolio inflows Other inflows Total inflows
Tighter financial conditions in EMs will continue
Source: IIF October 2015 & Bloomberg
Asset prices in LatAm (January 2010=100) Capital inflows to EMEs (US$ billions)
75
55
62
40
50
60
70
80
90
100
110
120
130
2010 2011 2012 2013 2014 2015
Credit Equities Currencies
Taper Tantrum
Taper Tantrum
Fear of the FED, weaker growth and external deficits
12
Stronger national and sovereign balance sheets in EMs
Source: World Bank Development Indicators, IMF Global Financial Stability Report October 2015
Corporate debt in EMs (US$bn) International Reserves in LatAm-6 (%)
But higher leverage of non-financial corporations in EMs
7
28 34
11
29 29
14
34
57
20
40
62
0
10
20
30
40
50
60
70
% GDP %M2 % External Debt
1980 1997 2007 2014
LatAm-6 corresponds to the simple average of Brazil, Chile, Colombia, Mexico, Peru and Uruguay
0
10
20
30
40
50
60
70
80
-
3.000
6.000
9.000
12.000
15.000
18.000
21.000
EMs excluding China China EMs (% GDP, RHS)
13
4 Latin America´s “golden years” are over
And they will not return for a long time
2010 2013
14
29,3
35,2
32,8
20
25
30
35
40
45
50
1980 1990 2000 2010 2020
35
40
45
50
55
60
65
2000 2012
Latin America´s Golden Decade: 2004-13
Rising GDP per head, falling poverty and lower inequality
Source: World Economic Outlook October 2015, World Bank Development Indicators.
LatAm income distribution (Gini Index) LatAm GDP per head (% advanced econ., PPP)
15
y = 0,22x + 2,42 R² = 0,25
0,0
1,0
2,0
3,0
4,0
5,0
6,0
-5,0 0,0 5,0 10,0 15,0
GD
P p
er c
apit
a %
y/y
ToT %y/y
China and the commodities super-cycle
LatAm & China GDP growth (% y/y) LatAm GDP & ToT (% y/y, avg. 2004-13)
Source: Bloomberg, including consensus forecasts up to 3Q15, World Bank WDI
It was good while it lasted
Chile
Peru
Colombia
2
4
6
8
10
12
14
16
-4
-2
0
2
4
6
8
10
2004 2006 2008 2010 2012 2014
LatAm China
16
-3,9
-1,0
-5,8 -6,0
-4,5
-3,0
-1,5
0,0
1,5
3,0
1996 1999 2002 2005 2008 2011 2014
-2,9
0,2
-3,3
-6,0
-4,5
-3,0
-1,5
0,0
1,5
3,0
1996 1999 2002 2005 2008 2011 2014
Rising fiscal and external gaps after the 2008/09 crisis
Funded mainly through FDI and local currency debt
Source: IMF WEO October 2015
LatAm fiscal deficit (% GDP) LatAm current account deficit (% GDP)
17
41
67
36
22 26
47
84
38
22 21
69
109
53
31 34
0
20
40
60
80
100
120
Brazil Chile Colombia Mexico Peru
1997 2007 2014
62
13
25
43 41
64
4
32 38
32
65
14
38
50
21
0
10
20
30
40
50
60
70
Brazil Chile Colombia Mexico Peru
1997 2007 2014
Rising public and private leverage
Loose monetary and fiscal policies after the crisis
Source: IMF WEO October 2015
Domestic credit private sector (% GDP) Gross government debt (% GDP)
18
Low and uneven growth in LatAm
Source: BTG Pactual and IMF WEO October 2015
Latam-8 GDP growth (% y/y, PPP adjusted)
2015 2016 2017-20
LatAm-8 -0.6 0.1 2.4
Mercosur -2,8 -1,9 1,7
Brazil -3.1 -2.0 2.1
Pacific Alliance
2,4 2,7 3,5
Mexico 2,3 2,8 3,2
Andean-3 2,6 3,7 3.8
-0,6
0,1
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
1980-2014: 2.8% y/y
LatAm-8 corresponds to the GDP weighted average of Argentina, Brazil, Chile, Colombia, Mexico, Peru, Uruguay and Venezuela.
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5 2016 is at the crossroads
Smooth normalization or going from mediocre to miserable
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China slowdown, deleverage and demand rebalancing
A tough balancing act
21
U.S. Fed interest rate liftoff
Which way?
22
0,5 0,3
0,6
-0,6
1,2
0,1
-1,0
-0,5
0,0
0,5
1,0
1,5
Latin America EME & LDCs OECD
1990-2000 2000-2014
2,0
1,7
0,9
2,3
1,7
0,8
0,0
0,5
1,0
1,5
2,0
2,5
3,0
Latin America EME & LDCs OECD
1990-2000 2000-2014
Negative TFP growth in Latin America
Economic growth driven by labor and capital accumulation
Source: The Conference Board. 2015. The Conference Board Total Economy Database™, May 2015
TFP growth: LatAm vs RoW (% y/y) Labor growth: LatAm vs RoW (% y/y)
Luis Oscar Herrera BTG Pactual Andean Region & Argentina October, 2015
Global economic outlook and Latin America
For additional information, please read carefully the notice at the end of this presentation.