Argentina’s economy has recovered from the recession of 2016. However, the fruits of the economy’s expansion have not been distributed equally and many parts of Argentina’s society – from citizens to multinationals – have not benefited. Thus, one of our biggest questions at FSG’s Buenos Aires Executive Breakfast was how strong and widespread Argentina’s economic recovery would be.
Key takeaway 1: Argentina and Southern Cone GMs were more optimistic about Argentina’s market outlook than they were last year.
- Through live polling, 53% of the clients in the room were confident in their company’s ability to hit its 2018 top-line target for Argentina (in US$ terms). This complements that fact that 31% of those same clients finished significantly above their 2017 target
- MNCs were also more confident than not that they would be able to keep their operation costs in check during the next two years despite high labor costs, inflationary pressure, and an immense tax burden. That said, there is some hesitancy about this given that 40% of clients responded, “somewhat confident”
Key takeaway 2: There is still divergence across industries in terms of performance
- B2B and healthcare companies are doing much better than their B2C peers
- Even within the B2C space, companies that offer premium product lines are outperforming retailers of fast-moving consumer goods (FMCGs)
Key takeaway 3: Approximately one-third of FSG clients in the room could tap into corporate resources to fund investment growth in Argentina
- FSG did not expect this because clients have consistently mentioned the challenge of making the case for Argentina to corporate centers over the past year
- Clients said that they would also fuel investment growth through past profits in Argentina (24%) and new operational efficiency gains (19%). Some companies in the room (16%) responded that they would not increase investment in Argentina relative to 2017
Key takeaway 4: There are concerns of maintaining profitability in 2018 as FX depreciation is expected to outpace inflation
- This trend is expected to reverse in 2018 making it harder to pass on the price of importing goods. FSG clients are not sure that they can sell at higher volumes to make up for inflated revenue figures from last year
Key takeaway 5: Inflation is certainly the biggest short-term challenge that the government faces
- After the Central Bank of Argentina and the Ministry of Finance established separate inflation targets for 2018, market expectations for year-end inflation increased
- The most popular response to asking clients which factor concerns them the most as it relates to the success of your business in Argentina was inflation (25%). This is more than last year when 12% of clients answered inflation to a similar question
For a debriefing of FSG’s Buenos Aires Executive Breakfast, please contact your Client Services Director. Not a client? Please contact us to learn more