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Latin America: A Sunnier Outlook

The region&spamp;rsquo;s CFOs stand apart from their global peers in their increasing optimism.

15Nov

While CFOs in the United States and Europe were increasingly gloomy in the third quarter, and as Asia’s finance chiefs warily watched that region’s slowing growth, a bright spot stood out in the latest Duke University/CFO Magazine Global Business Outlook Survey: Latin America, and Brazil in particular.

Nearly half of finance chiefs in Brazil were more optimistic about their country’s economy in the third quarter than they had been three months prior, compared with just 22% of U.S. CFOs, 19% of Europe’s CFOs, and 33% of Asia’s CFOs. In Latin America as a whole, 38% of the 164 finance chiefs surveyed said they were more optimistic than they had been three months ago. On a scale of 0 to 100, Latin America’s CFOs rated their optimism about their region’s economy at 60. By comparison, U.S. CFOs rated their optimism about their home economy at 52. When asked about their optimism about their own companies, the score was even higher, at 70 out of 100.

Finance executives in Latin America said they expect to see revenue grow by 11% in the next 12 months, and they planned to increase spending in an array of key categories. CFOs said they plan to increase capital spending by 4% on average in the coming year, while also boosting marketing-and-advertising spending by 9% on average and research-and-development spending by 7%. They will also increase their technology outlays by an average of 6%.

In nearly all of these categories, Latin America’s CFOs reported markedly more-ambitious spending plans than their U.S. counterparts. And in every category, Brazil’s finance chiefs planned to spend more than their regional peers.

“Even though growth has softened for the world economy, many Brazilian companies continue to expand their operations and capabilities. The Brazilian government has undertaken several macroeconomic policies that aim to stimulate domestic demand and maintain high economic growth,” said Antonio Gledson de Carvalho, finance professor at Fundação Getulio Vargas School of Business in Sao Paulo, Brazil, and co-director of the Global Business Outlook Survey in Latin America, in a statement.

Workers Wanted
Latin America’s CFOs also reported plans to hire more workers than their U.S. peers, and here Brazil again outpaced the rest of the pack. Finance chiefs said they would expand their workforces by 3% on average in the coming year, twice the employment growth rate reported by U.S. CFOs. Brazil’s CFOs planned to hire slightly more than their colleagues elsewhere, at 4%, and planned to raise wages by nearly 8%. CFOs across the region said they expect to boost salaries by slightly more than 7% — compared with less than a 3% increase in wages reported by U.S. CFOs.

Attracting and retaining qualified workers ranked as a top concern for Latin America’s CFOs, and 72% said they have had difficulty filling an open position in the past year. Of those, more than half have hired junior staffers and have had to provide training to bring them up to speed. Nearly a third have improved their benefits offerings in the hopes of attracting new staff, a fifth have stepped up their recruiting efforts, and 14% have raised salaries.

Finance chiefs in Latin America cited consumer demand, federal government policies, and global financial instability as top macroeconomic concerns. In addition to attracting and retaining employees, they listed the ability to maintain margins and maintaining morale and productivity as top worries.

Forty percent of CFOs said slowing growth in Asia was having a negative effect on their companies, while 52% said the economic climate in Europe was negatively affecting their businesses. Sixty-five percent said the unraveling of the euro zone would have a negative effect on their companies. In Brazil, the number rose to 82%.

Legal Wrangling
One issue cited as a major concern by finance chiefs in Latin America that barely registered with CFOs in the U.S. and Europe was the judicial system in the region. Sixty-eight percent of Latin America’s CFOs said that system was a significant problem for their companies. The quality of decisions, uncertainty about procedures, delays, and costs all ranked as critical problems — a point for CFOs elsewhere to consider as they weigh expansion plans.



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