After two years of recession, the GDP of Latin America and the Caribbean recovered in 2017 and will expand further in 2018. The LT 500 companies--our ranking of the 500 firms with the highest revenues in the region--are taking advantage of the improvement in the macroeconomic environment by boosting output, broadening their product bases, and gearing up to increase revenues, earnings and market shares.
Latin America's GDP will grow by 2.2% in 2018, gaining new ground after a 1.3% upswing in 2017, and following a dip of 0.5% on average in 2015-2016, according to the Economic Commission for Latin America and the Caribbean (ECLAC). Some of the region's largest economies, such as Brazil, Colombia and Chile, will expand at much higher rates than last year, creating increasingly favorable prospects for business.
The companies that make up the LT 500--whose combined revenues of $1.97 trillion in 2017 were up an average 13% from 2016--are planning to maintain or increase this growth rate. A common denominator among their different strategies is to broaden their product base to satisfy consumers who are ever more demanding and whose purchasing power is recovering.
That is the conclusion from Latin Trade interviews with senior executives of four multinationals that represent key economic sectors in the region: Fedex, in logistics; Millicom, from the telecommunications and information technology industry; Nestle, in the highly competitive food sector; and Volkswagen for the automotive industry.
VW: WIDENING CONSUMER NICHES
The dynamic that is sweeping the automotive sector is exemplified by the growing trend for companies to broaden their product range to fill increasingly specific consumer niches. Paolo Di Si, president & CEO of Volkswagen for South America, Central America and the Caribbean said his company will produce 20 new car models in South America by 2020 as it looks to increase market share.
The giant carmaker is putting more emphasis on the SUV segment, where it is adding five new models. As a result, Volkswagen's offer in crucial markets like Brazil and Argentina will be present in 92% of vehicle segments, up from the current 70%. Di Si summarizes the expansion as "the most aggressive strategic product launching plan in the company's entire history in the region. The strategy will bring us closer to the consumer."
The plan is paying off. In 2017 Volkswagen's revenues for all of Latin America ballooned by 43%, to about $12 billion.
Di Si is...