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LATAM 2017 | THE LATIN AMERICAN BRANDS IN A DE-GLOBALIZATION CONTEXT

LATIN AMERICA OVERVIEW

 

Recent facts have raised in the world the fear of a de-globalization process. Firstly, with the Brexit (British Exit), when the British citizens voted in June 2016 to exit the European Union, eroding the British pound to its lowest level in decades. And now the election of Trump, with his promise of protectionist trade policy in the presidential election campaign.

 

The tendency is that the countries start to think more locally in terms of trade. In this scenario, local brands will play a very important role, increasingly seeking to meet local needs. For global brands the challenge is even bigger, because they need to have different positioning for each local market, in order to meet these local needs. One good example of this movement is Unilever, a global company that has to adapt successful global brand concepts to suit local markets.

 

In terms of Political context, almost all socialist governments are facing problems and this can represent a very good opportunity for Latam brands. For example, Cuba is trying to open relationships with US but also with other Latin American countries. Venezuela is facing some economic issues, and probably can represent good perspectives for brands in the middle term. Brazil, which lived the impeachment of Dilma Doussef - a president with a clear Socialist positioning, is following this trend.

 

In this context, the Top 50 Most Valuable Latin American Brands Rankings increases in importance and relevance, showing that the region has important local icon brands that have successfully explored emotional attributes, aligned with local needs. Skol (Brazilian Beer), Telcel (Mexican Communication Provider), Bradesco (Brazilian Bank), Aguila (Colombian Beer) and Falabella (Chilean Retail) are examples of successful brand strategies focused in this purpose.

 

However, the Latin American region is living a crisis period.

 

The region continues showing steadily decrease in the GDP rates. In 2015 the GDP dropped 0,5%, the second worst performance in the last 13 years, having been surpassed only in 2009, when the GDP declined -1.8% in the world’s financial crisis.

 

Since 2010 the region doesn’t have GDP growth, mainly due to political instability and external economic factors, like the evolution of oil prices and the U.S. and China´s economies deceleration.

Despite of several economic and political problems in Brazil and Venezuela, which GDPs dropped in 3.9% and 5.7% in 2015, respectively, the other countries in the region showed positive GDPs rates: Peru 3.3%, Colombia 3.0%, Mexico 2.5%, Argentina 2,4% and Chile 2.1%.

 

As Brazil is the largest country in the Latin America, representing almost 33% of the GDP in US dollar, its weak performance had the largest impact in the GDP of the region.

For 2016 is expected an economic contraction of 0,9% in the Latin America’s GDP, according to CEPAL - Economic Commission for Latin America and the Caribbean. If this economic scenario were confirmed, it will mark the first time that the Latin America has registered two consecutive years of negative growth. Only in 1982 and 1983 this scenario happened, when the debt crisis was severe.

 

In terms of economic future trends, according to the McKinsey Global Institute study, the global economic growth is set to slow dramatically. The expectation is that the world economy growth rate for the next fifty years will be just half of what was observed in the past fifty years.



The concern is that the world is now entering in a slow and contracted economic growth, affecting both developed and emerging countries.

 

The China’s economic data gives clear signals of this economic deceleration: the country’s GDP rate dropped from 10.6% in 2010 to 6.9% in 2015. Considering that China is the main world’s importer of commodities, responding for approximately 60% of the total world trading of iron ore and wheat and 30% of cooper ore, its economic slowdown affects directly Latin American countries like Brazil and Chile.

 

The BrandZ ™ Top 50 Most Valuable Latin American Brands 2017 reflects all this unfavorable economic performance, as the total value of the Top 50 decreased 22% in 2017.

 

However, there are good news. Looking at the average Brand Contribution (the influence of the brand in the costumers’ purchase decision process), we can see that the index has improved year by year since the first Top 50 Latam ranking in 2012, what evidences that strong brands provide protection against financial crisis.