Key Takeaways from our Brazil Executive Roundtable

Frontier Strategy Group recently held its bi-annual Latin America Senior Executive Roundtable in São Paulo, Brazil. The day-long event hosted over 20 heads of Latin America and Brazil and focused on “Planning for an Uncertain Future in Latin America.”

In the morning sessions, executives in attendance were exposed to Frontier Strategy Group’s latest thinking on where the region’s business environment is headed in 2015-16, as well as what a second term for Dilma Rousseff will mean for Brazil’s near- and long-term prospects.

In the afternoon, FSG’s Head of Global Management Excellence Research, Dan Kornfield, introduced a framework for building textured, narrative-based scenarios aimed at helping companies prepare for the uncertainty that is currently clouding much of the region’s outlook. Attendees were then given the opportunity to apply that methodology in break-out sessions, building three-year scenarios for their industries in Brazil. Below are several key takeaways from day’s sessions:

BrazilERT

Key takeaway #1: New capabilities will be required to succeed in a slower LATAM

  • Many participants discussed how important it was for them to adapt their regional capabilities to Latin America’s slowing environment, with 61% of those in the room stating that it would be very important for them to build a stronger organization in 2015.
  • When pressed to elaborate on what a strong organization looked like to them, executives expressed that many multinationals have been more focused on growth in Latin America, and therefore their organizations are dominated by people with a growth-oriented skill set, which is becoming less relevant as the imperatives of profitability and efficiency loom larger.
  • Additionally, executives mentioned that their organizations need to become a lot more precise and professional by developing better segmentation strategies and partnerships and that they need people who can manage in Latin America’s increasingly volatile environment.

Key Takeaway #2: Brazil remains a top opportunity, but with important caveats

  • 44% of executives in attendance felt that Brazil remained their biggest opportunity for top-line growth over the next 12-24 months. However, many executives were quick to point out that Brazil’s potential to generate top-line growth was predicated on continued investment from the corporate center, which some felt would be difficult to come by in the coming years.
  • The next biggest opportunity reported by those at the event was Mexico, which received 38% of client votes. Mexico was also the top opportunity cited by executives in the room for bottom-line growth, a reflection of the relatively mature businesses most companies have in the market.

Key Takeaway #3: Alignment around targets for Brazil remains elusive

  • Despite the fact that Brazil’s economy has been slowing since 2012, executives reported that it has been difficult to build alignment with corporate around Brazil’s potential. Indeed, 59% of those in attendance reported that their corporate center’s top-line growth expectations were not very aligned with reality in Brazil, while 41% reported only moderate alignment.

Key Takeaway #4: Multinationals are better positioned to weather the region’s volatility

  • During the scenario building exercise, executives uncovered many actions that they felt would be important to take in order to help mitigate their exposure to risk and preserve market share if Brazil were to see a credit crunch or more significant devaluation.
  • In particular, executives mentioned that they would consider extending financing to preferred partners, as well as drawing upon their global scale and resources to make acquisitions in local manufacturing to hedge against cheaper currencies. Many executives remarked that these actions are likely easier for multinationals to take than for local companies to take and therefore present an advantage to them as foreign companies.

Click to access our most recent quarterly market review on Brazil.

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