Multilatinas from crisis to innovation.

Author:Ramirez, David
Position:MULTILATINAS
 
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Times are not easy for Latin America. Business leaders can attest to that. Nevertheless, while some industries are improving in relative terms, the leading multilatinas are aware that innovation remains an imperative even in times of economic adjustment.

The financial statements of the broad majority of larger multilatinas show unfavorable indicators since 2013 in line with the economic slowdown and the strength of the US dollar (which has an impact on figures stated in that currency).

Latin Trade's Multilatina Index measures the US dollar revenue of the 25 most dynamic non-financial multilatinas and shows that three sectors--oil, food and beverages, and mining--accounted for nearly 70% of total business revenues in 2011-2015. (Total revenues averaged $460.5 billion per year, according to the Index).

Based on the Multilatinas Index, we estimated a composite indicator--base year 2011--to better understand performance by sector. The data in the table shows that the food and beverages and retail industries turned in a better performance than the total for all sectors, which fell at an annual average rate of 4.2% in 2011-15. Production of industrial goods and telecoms also fell, but at a rate below the average, while airlines, mining and oil were the worst performers.

The Latin Trade Multilatinas Index for April-June 2016 shows a relative improvement in the behavior of firms. Although the majority of sectors kept falling, they did so at a much slower pace than in the second quarter of 2015. In fact, in the food and beverages sector, revenue in US dollars increased by five percent in the period.

BUSINESS LEADERS ARE NOT IN "WAIT MODE"

Despite the signs of hope, the region is far from buoyant. "These are very challenging times for multilatinas," Nicola Calicchio, head of Latin America for McKinsey, told Latin Trade. The positive news is that, according to the consultant, corporations are not centered solely on adjusting.

In comparison with the region's big crisis at the end of the 1990s, many things are different now, starting with the profile of businessmen. "Today's business leaders are not the same as those of 1999. They do not use the crisis as an excuse for their performance," Calicchio explained. "Leaders now just decided not to be part of the crisis."

In the view of the McKinsey consultant, this illustrates that multilatinas (and companies oriented to internationalization in general) are not centered solely on operational efficiencies, but are also determined to extract the maximum potential from the markets where they operate.

In many cases, the strategy is almost one of business as usual. In this regard, FEMSA told Latin Trade that "from a long-term perspective, the temporary volatility in the markets that we participate in does not lead to reductions in investments or delays in our business strategy."

Further, some multilatinas have continued to expand their markets even under the current adverse scenario. "Firms are...

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