EMIL LATIN AMERICA 2011

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Top ten MACRO and MICRO Trends shaping Logistics and Supply Chain Strategies in Latin America. Includes top 10 consumer trends!

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EMIL-SCS Program LATIN AMERICA 2011:

EMIL-SCS Program LATIN AMERICA 2011 Maria Rey – Latin America Logistics Center

Themes of Conversation:

Themes of Conversation Logistics & Supply Chain Management in Latin America: Macro, Micro, and Consumer Perspectives 8:00 – 9:00 am Macro Perspectives on National and Regional Logistics in South America 9:15 – 10:15 Supply Chain Management in Latin America: The Corporate Perspective of Demand Response 10:30 – 11:30 The Latin American Consumer 11:45 – 12:00 pm Conclusions

Key Sources:

Key Sources Inter-American Development Bank (IDB Washington) World Bank The Economist Financial Times United Nations Economic Commission for Latin America and the Caribbean (ECLAC) World Economic Forum on Latin America IMF Hernando de Soto (The Mysteries of Capital) PriceWaterhouse Coopers + Booz & Co. + Accenture Standard & Poors Institute of Logistics iLOS (Brazil) Country-specific logistics benchmarking reports Latin Trade Magazine America Economia Magazine “The business grapevine”! Andres Openheimer ( Cuentos Chinos)

I. Top 10 Things to Know About the Context of Logistics in Latin/South America:

I. Top 10 Things to Know About the Context of Logistics in Latin/South America Commodity rich countries with healthy budgets and infrastructure investment appetites but vulnerable to global buying cycles. Growing middle class with purchasing power requiring more access to everything! Growing South-South trade compensates fluctuations on international trade due to North’s crisis Corruption has been fueled by economic growth and public investment and lax judicial systems (and poorly understood resourcefulness and social justice) Governments acknowledge lack of trained human talent to set-up public policy for trade, logistics and transportation sectors Trend setting countries step up in their institutional response to TLT requirements Interagency coordination and service mindsets remain the key concerns about logistics and SCM on government level Strong focus on Total Logistics Cost and easiness of Doing Business along with Competitiveness Rankings and Benchmarking Projects Geography determines many cost and productivity realities in South America (and cultural differences!) China and South America together may change a regional and global landscape in TLT

1. Growth and Vulnerability as of September 15, 2011 (Standard & Poor’s) :

1. Growth and Vulnerability as of September 15, 2011 (Standard & Poor’s) Top 10 Macro LATAM

2. Larger Middle Class with Purchasing Power Fuels Growth Internally:

2. Larger Middle Class with Purchasing Power Fuels Growth Internally 16% 28.9% 52.5% 24.9% 34.4% 29.4% 31% 2 8.6% 19.8% 22.4% 52.5% 55.2% 19.6% 28% 33.8% 18% 25.8 % 31.4% 32 % -20% -30% -40% -21.2 % -25.4 % -38.5% 16.4% 25 % 28.5 % 29.1 % A B C D/E A B C D/E A/B/C 2 C 3 C 4 D/E % Population % Purchasing Power % Income Devoted to Consumer Goods 2.6% 11.3% 20.5% 10.9% 1.5% 11.3% -10% -15% 37.2% 52.5% 52.9% 33 % 33.5% 24% 26.2 % 3 8.1 % 20.1 % 41.8% 52.5% 49.9% 42.8% 2 3.3% 21.1% 17.6 % 48.4% 21.1 % 12% 36.2 % 50.3% 36.6% 34.5 % 25.3% 40.3% 25 .3% A B C D/E A B C D/E A B C D/E 2.2% 7.7% 12.8% 14.8% 6.2% 2.1% 12.8% 12.9% 11.9% 1.6% 17% 7.1% Brazil México Argentina Colombia Chile Costa Rica % Population % Purchasing Power % Income Devoted to Consumer Goods % Population % Purchasing Power % Income Devoted to Consumer Goods % Population % Purchasing Power % Income Devoted to Consumer Goods % Population % Purchasing Power % Income Devoted to Consumer Goods % Population % Purchasing Power % Income Devoted to Consumer Goods Top 10 Macro LATAM

… but new fiscal and monetary policies will cool down consumption:

… but new fiscal and monetary policies will cool down consumption Top 10 Macro LATAM

3. South-South Trade (1995):

3. South-South Trade (1995)

3. South-South Trade (2009):

3. South-South Trade (2009) Top 10 Macro LATAM

Slide 10:

4. Corruption and Illegal Trade Top 10 Macro LATAM

General Competencies of a TLT Executive in the Public Sector in LATAM Research Project by SCL Institute for the IDB (Washington):

General Competencies of a TLT Executive in the Public Sector in LATAM Research Project by SCL Institute for the IDB (Washington) 5. Lack of talented resources dealing with TLT in the Public Sector

6. From Trend-Setting Countries and their Requirements for a TLT-TS (Technical - 1):

6. From Trend-Setting Countries and their Requirements for a TLT-TS (Technical - 1)

Results for a TLT-SPM (Technical):

Results for a TLT-SPM (Technical) Top 10 Macro LATAM

7. Bureaucracy and LATAM:

7. Bureaucracy and LATAM Top 10 Macro LATAM

8. Total Logistics Costs and Doing Business as a Performance Focus:

Source: Top Reformers Report, World Bank *Positive figures show improvements in business environment Doing Business Ranking Variation, 2007-2011* (Change in positions) Latin-America Ranking Country Mexico 35 Peru 36 Colombia 39 Chile 43 Panama 72 Argentina 115 Costa Rica 125 Brazil 127 Ecuador 130 Venezuela 172 8. Total Logistics Costs and Doing Business as a Performance Focus Top 10 Macro LATAM

9. Geography Shapes Everything!:

9. Geography Shapes Everything! Top 10 Macro LATAM

10. China & Latin America:

10. China & Latin America Top 10 Macro LATAM

II. Top 10 Things to Know About Operating South American Supply Chains:

II. Top 10 Things to Know About Operating South American Supply Chains Consumer goods and retailing operations drive best practices in logistics and supply chain management in South America Transportation remains an issue but it is no longer the only dominant concern Strong development of the logistics services industry Companies enjoy strong internal demand that favors imports when coupled with strong currencies Important infrastructure projects and global events fuel construction projects and risk a real estate bubble in countries like Brazil and Panama Good developments in SCM and Logistics MRO (Oil and Minerals) Concerns in some sectors over growing power of government on private sector operations Strong adoption of DDSN principles from creation of S&OP spaces and use of technology to sense and shape demand Growing connectivity between SCM and top-line growth strategies (sales and marketing) Increase concern in multilatinas over staffing needs and availability of local talent ; openness to recruit non-LATAM executives

1. Retail and Consumer Goods’ SCM drives best practices in the Region:

1. Retail and Consumer Goods’ SCM drives best practices in the Region Top 10 BIZ

2. More concerns about productivity and quality:

2. More concerns about productivity and quality Top 10 BIZ

3. Outsourcing is King:

3. Outsourcing is King Top 10 BIZ

4. Growth by Internal Demand :

4. Growth by Internal Demand Top 10 BIZ

5. Infrastructure for Good … and Bad:

5. Infrastructure for Good … and Bad Top 10 BIZ

6. Commodities + Infrastructure + Logistics = Good Marriage! :

6. Commodities + Infrastructure + Logistics = Good Marriage! Top 10 BIZ

7. Concerns on Government Power Against Private Sector :

7. Concerns on Government Power Against Private Sector Top 10 BIZ

8. DDSN and S&OP Adoption:

8. DDSN and S&OP Adoption

9. Connectivity Between SCM and Top-Line Growth:

9. Connectivity Between SCM and Top-Line Growth 9% 1 11 SKU s out of stocks out of every

10. Head-Hunting Latin Style: Where are they?:

10. Head-Hunting Latin Style: Where are they? Top 10 BIZ

III. Top 10 Things to Know About Latin Americans:

III. Top 10 Things to Know About Latin Americans LATAM has a “belly” of consumers that is fueling consumption LATAM consumers don’t feel poor, they just want to do better than their parents and provide education and opportunities for their children Consumers cope with reality with three strategies: magical thinking, family and entertainment in the form of football, music, food and drinking. There is a general disillusion with politics and politicians but growing nationalism and admiration for national celebrities and leaders. They feel they have arrived when they reach home and car ownership. There is a love-hate relationship with the United States as a cultural and economic point of reference. Learning mandarin in the 21 st century is equivalent to learning Russian and Esperanto in the 60s and 70s: It represents hope! Latinos feel the need to be taken “seriously” as a culture and to receive a minimum respect for the country and the region. Growing concerns about the quality of education and the risk of missing the technological revolution Social phenomena such as “ maras ” and gangs represent a reaction from years of lack of opportunities

Except in some occasions!:

i.e. News from Panama, Ecuador, Colombia, Mexico… Except in some occasions!

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