WorldCity Business Magazine

CEO Survey: Executives Stay bullish on Latin America

by WC

There’s no end to the optimism over Latin America’s economic performance, according to a select survey of executives directing their companies’ operations in the region.

Some 78 percent of the respondents said they are seeing better performance in the region this year compared with 2005, which was a banner year for many of the companies’ Latin American operations. Another 19 percent said business is as good as last year.

And 89 percent said their companies had added jobs or planned to within the next six months.

For more than two years, the top executives who form *WORLDCITY’S *CEO Roundtable group have been watching and reporting back on Latin America’s business climate. These are decision-makers who use South Florida as their regional headquarters for Latin American operations. Results of their latest report card were released at the Miami Herald Americas Conference.

The survey’s 39 respondents included executives in charge of Latin America for AIG, Caterpillar, Danone, DHL, Hyatt Hotels & Resorts, MasterCard, Microsoft, Ryder and Symantec. During polling at sixmonth intervals over the past two years, they have been mostly upbeat about Latin America. Their enthusiasm continued with the latest report.

More than a third said the outlook for their business in 2007 was “much better than 2006.” Another 60 percent expected next year’s business results to be “slightly better” than the current year. Only 3 percent were preparing for a worse year.

“Our business is so outstanding that it’s scary,” Tom Gales, vice president of the Latin American division at Caterpillar, told an Americas Conference audience during the presentation of the survey results. He said revenues in the region are growing 30 percent a year and the company is unable to keep up with demand for its heavy machinery.

“If you want a mining truck I’m talking about a truck that costs $3 million we may be able to get you one in 2008,” he said. “This is the first time our business in Latin America has been up for this long three years straight.”

Gales said tourism expansion, mining operations, petroleum exploration, construction and infrastructure projects are helping to boost sales.

Richard Hartzell, MasterCard’s president for Latin America and the Caribbean, said the region has been the fastest-growing market for MasterCard over the past five years. He said growth is averaging about 29 percent annually.

“Latin America is growing at a pace faster than the average. We feel very, very positive,” Hartzell said. “The consumer and merchants have turned to plastic. Right now Latin America is a sweet spot for us.”

The credit card company has 5,000 employees globally and 200 in Latin America.

Although the next years looks promising, the business leaders in the CEO survey many of whom have longtime experience in Latin America were more subdued in their response to a question on whether growth rates in Latin America can be sustained.

A third of the respondents said the growth is strong and “is likely to continue that way for the foreseeable future.” However, another 31 percent predicted that there could be trouble in the near to medium term and an equal number selected the answer: “Growth has been strong but Latin America has a history of volatility so one should not be surprised if the region took a sudden turn for the worse.”

Five percent were unequivocal: The growth is not sustainable.

Microsoft’s CEO for Latin America, Eugenio Beaufrand, said his company expected to see continued growth in the region. However, he said Latin America’s economic expansion is not big enough “to transform the economies in any significant way.” “I think the region, from a micro-economic perspective, is better managed than ever. I think there is a new level of shared risk,” he said. “But I think we still have a lot of work to do. Recent reports speak to the need to work really, really hard on competitiveness.”

Caterpillar’s Gales, who has been working in and out of the region for more than three decades, has seen how quickly Latin American economies can go into a tailspin.

When asked to grade the performance of each country in the region, the survey respondents gave Brazil the highest marks overall. In their responses to a separate question about South America’s biggest economy, nearly a third expected growth to be stronger for the next three to four years. Another 39 percent predicted it would continue at the current pace.

Venezuela , meanwhile, was given the poorest grades by the respondents. And 71 percent of them categorized Venezuelan President Hugo Chavez as a threat to stability in the region.

China was also examined in questions on the survey, with only a minority of respondents calling it a threat to their business.

“Overall China can’t help but be good for Latin America. It’s not just a commodity market, but it also is a consumer market,” said Gales.