From Realtà Mapei International n° 78 - 1/21/2020

Mapei's long-term plans on the Latin American market to counteract economic uncertainty

In spite of the challenges of the Latin American market, we believe there are also great opportunities.

In 2019, growth in the Latin American economy still hasn’t been able to be kick-started after a more or less stagnant 2018. The forecasts of the IMF (International Monetary Fund) have “trimmed” estimates even further to reach more or less 0%. The economic and financial problems Argentina is facing, political turmoil in Venezuela coupled with a collapse in trade (-35% for the GDP in 2019 and -10% in 2020), the uncertainties in Brazil and the weakness in investments in Mexico are all impacting the situation.

But Latin America is travelling at two different speeds. The brake put on growth by the major economies is being counteracted by the dynamic economic positions of the “smaller” countries, such as Peru and Colombia, where the economy is forecast to grow in spite of the period of general stagnation of the continent.

Within this not particularly brilliant overall picture, the unfavourable economic slump in the construction sector needs to be highlighted, which in 2018 recorded the worst trend at global level with a strong drop in investments. Signs of an inversion in this trend, albeit rather weak, are expected in 2020. In fact, in the two-year period 2019-2020, investments in residential constructions are forecast to grow by 2.3% across the continent as a whole, with an expansion cycle driven by Chile and Peru which, along with an upturn in the Brazilian market, will all play their part in bringing the dynamics of investments back into positive, in spite of the decline of the Argentinian market well into 2019.

Overall, for 2020, we can expect a higher increase in GDP than in 2018 (when it rose by 0.4%) and a period of general stagnation in 2019. The outlook for South America, however, must also take into account a slowing down of the global economy (global growth is at its minimum level since 2008, the year of the economic crash), starting with Europe and the United States, a situation that has forced the IMF and the OECD to also reduce forecast growth in 2020 for Latin America. According to the most recent outlook from the IMF, overall growth in Latin America will be 1.8% with an increase in GDP in Brazil of 2% (against an estimated 0.9% for 2019), while in Argentina the recession will continue its negative trend (-1.3%) following the fall over the last two years. More positive performances are expected from Colombia and Peru.

However, even within a macroeconomic and political context that presents so many complexities, Mapei Group is determined to invest in Latin America; proof of this determination are the new facilities recently opened in Mexico, Peru and Colombia and the new investments in production operations in Argentina.

We will continue investing because we have medium to long-term projects and we firmly believe there is a possibility of sustainable development in this area. Latin America is a strategic region for the Group and, even though it was only recently that we concentrated on expanding in this continent, we intend to continue on this journey of balanced and long-lasting growth without focusing on local (economic and political) issues and circumstances that could influence the decisions we take in the short-term. In spite of the challenges of the Latin American market, we have a long-term vision and we continue to be firm believers in the opportunities it has to offer, implementing the changes required in order to exploit them to the full.

 

Realtà Mapei Tags: #theworldofmapei #insights

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