Despite economic crisis, Latin America executives still optimistic
Miami, April 6, 2009 – In spite of today’s volatile global economy and reports of a slow recovery, small and medium-sized enterprises (SMEs), considered the foundation of the Latin American economy, remain optimistic about their prospects according to UPS’s Business Monitor Latin America (BMLA). According to the survey, almost half of SMEs project an economic improvement for their companies over the course of the next 12 months. The answer to the economic recovery could come in the form of increased global trade, or so the survey suggests with over 50 percent of executives forecasting growth in commerce within the Latin America region (51%) and with Asia Pacific (45%).
Now in its third edition, the UPS Business Monitor Latin America (BMLA) surveyed more than 900 SME top-level executives in eight Latin American countries, lending insight into the latest opinions, attitudes and practices of SME decision makers throughout the region.
Economic Growth and Climate
Although compared to last year’s results (84%) there has been a significant drop in optimism for the next 12 months, almost half of SMEs surveyed (47%) still feel they will be in a better economic position by the end of 2009. The remaining half feels that their position will stay the same (30%) or worsen (20%). Many of the countries surveyed were even more positive, such as Colombia (62%), Brazil (54%), the Dominican Republic (54%) and Costa Rica (51%).
“The results from the latest BMLA study demonstrate that although Latin American SMEs are enduring a difficult business climate, they are looking forward to continued growth down the line,” said Stephen Flowers, UPS Americas President. “The UPS Business Monitor is designed to provide businesses in the Region with a resource that reflects trends and opinions influencing business strategy, which is particularly important this year as we all focus on emerging from these economic conditions with stronger companies.”
Given Latin America’s strong economic ties to the U.S., it is no surprise that an overwhelming majority (69%) estimate that the weakening U.S. economy will negatively impact their business throughout the year. In addition, six out of ten (61%) don’t see the economic position of their northern neighbor improving until 2010; although, if Mexico has their way, improvement could come as early as 2009 according to 49 percent of respondents.
In line with concerns over an economic slowdown affecting their companies, 59 percent of those surveyed intend to retain the current number of employees over the course of the next 12 months, while another 11 percent plan to reduce their payrolls. Only 28 percent of SMEs surveyed anticipate adding more staff, with Brazil leading the trend at 38 percent. However, over half (51%) foresee difficulty in finding qualified candidates to fill open positions.
The study further reports on key investments among the SMEs surveyed. About 27 percent list investments in marketing and sales over the next three years as the highest priority, while infrastructure, information technology and research for product development were identified as additional areas of focus.
The technology, information and telecommunications sector, shows the highest growth potential for SMEs in Latin America garnering 61 percent of all responses, followed by agriculture (35%), transportation and logistics (34%), and hospitality and tourism (31%).
Optimism for Trade
More than half (53%) of SME top-level executives in Latin America agree that global trade positively impacts their business. In fact, the majority (51%) foresee a continued growth in trade, especially within Latin America over all other regions, followed closely by trade with Asia-Pacific (45%). A 28 percent decline was noted in SMEs outlook on prospective trade with North America.
In 2008, Latin America reached a new record in trade of an estimated $2 trillion, which was an increase of 20.3 percent from 2007, according to a Latin Business Chronicle analysis of new data from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). According to the same analysts, the strong increase in exports helped boost international reserves to $508.5 billion in 2008. However the trade deficit between the United States and Latin America declined year-over-year by more than 69% in January of 2009, according to a recent report from the U.S. Census Bureau.
Additionally, Latin America stood out among SMEs in the Americas Region, with 65 percent (588) engaged international trade versus their U.S. (22%) and Canadian (19%) counterparts. This result demonstrates how Latin American SMEs understand the importance of participating on a global scale to be competitive in today’s economy.
Although the BMLA III results indicate that the majority of SMEs surveyed believe global trade to be a benefit to their businesses and a large portion of them are currently participating, there are still various barriers perceived by executives for entering the global market. According to executives surveyed, the cost involved with global trade presents the largest barrier to entering this arena, while the customs process is perceived as the second largest obstacle.
“As the world’s largest package delivery and supply chain services company, UPS is well positioned to strengthen trade, not only within Latin America, but between the region and major global players, such as the U.S., Europe and Asia through its integrated global network,” said Flowers. “UPS frequently works with various governments in order to stimulate economic confidence among its businesses and consumers to promote trade and commerce throughout Latin America.”