Latin American Business Outlook Part of the Global Business Outlook A joint survey effort between Duke University, Fundação Getúlio Vargas and CFO magazine 1 Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

Top Concerns for Latin American CFOs 2 1.Economic Uncertainty 2.Government policy 3.Currency risk 4.Weak demand for your product/services 5.Corporate tax code 6.Access to capital 7.Cost of benefits 8.Employee productivity 9.Regulatory requirements 10.Inflation Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

Business Optimism Index Global Trends Country / Region Mar 2016 Response 3 Notes: Presented data are the mean value for each region or country, Scale from Country Business Optimism Index Own-Firm Business Optimism Index Own Company CFO optimism moderate in Mexico and Peru; Brazil and Chile remain pessimistic Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

Expected Increase in Product Prices Notes: Presented data are the mean or median values for each region or country. 4 Product Prices Latin American inflationary expectations have fallen, though there is much variation across countries. Global Trends Inflation expectations stay high in Latin America  Latin American CFOs expect moderate inflation to decrease, driven by low inflation in Ecuador and Peru. CFOs in Europe, US and Asia expect low inflation. Inflation expectations high in Brazil  Of responding countries, Brazil has the highest inflationary expectations  Prices are expected to remain nearly flat in Ecuador and Peru. Mar 2016 Outlook Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

Expected Growth in Sales Revenue Global Trends Revenue 5 CFOS in Ecuador expect revenue reductions; Mexican CFOs expect strong growth in sales revenue. Latin American revenue growth decreases  Revenue expectations go down from last quarter’s 2.2% expected revenue growth  Revenue growth will be the slowest in Latin America. Chile and Ecuador expect lowest growth  Among responding L.A. countries, the revenue outlook in Ecuador is weakest, followed by Chile.  Mexico has the highest growth in sales revenue. Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016 Mar 2016 Outlook Notes: Presented data are the mean or median values for each region or country.

Global Trends Capital Spending 6 Expected Increase in Capital Spending Latin American capital spending will be modest, pulled down by Brazil and Chile Capital spending is low but steady  Latin American CFOs expect modest business spending growth  Business spending is also weak in the Africa and the US Business spending varies within Latin America  Brazil, Peru and Mexico anticipate positive business spending growth  Spending expected to stay flat in Chile and Ecuador. Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016 Mar 2016 Outlook Notes: Presented data are the mean or median values for each region or country.

Global Trends 7 Expected Change in Earnings Notes: Presented data are the mean public company value for each region or country. Earnings No earnings growth expected in Latin America Earnings growth is zero this quarter  Averaged across all countries, Latin American earnings are not expected to increase over the next 12 months.  European earnings are expected to recover in this quarter. Asian earnings growth will become negative. Weaker earnings in surveyed Latam countries  Mexico and Peru expect earnings to grow  Earnings expectations are negative in Brazil and Chile  Earnings in Brazil are even worse when you consider inflation expectations Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016 Mar 2016 Outlook

Global Trends # FT Employees 8 Reduction in Fulltime Employment Notes: Presented data are the mean value for each region or country #FT=Number of Fulltime Employees Latin American CFOs expect a reduction in fulltime domestic employment in 2016 Negative employment outlook in Latin America  L.A. CFOs expect negative employment growth in the next year.  Only the US expects much employment growth. Employment growth varies across L.A.  Brazil, Peru, and Chile expect reductions in fulltime employment.  Employment growth in Mexico is strong Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016 Mar 2016 Outlook

Global Trends Wages & Salaries 9 Expected Wage and Salary Increase Notes: Presented data are the mean value for each region or country Wages and salaries are projected to increase by 2.1% in Latin America. Rapid wage growth in emerging economies  Asia expects wages to grow 4.5%, which is higher than its overall inflationary expectations  Europe expects the lowest wage growth  US wages to grow 3% Real wage growth in Brazil  With product market inflation of 4.4% and wage growth of 7.3%, Brazil should experience real wage growth in this quarter  In Ecuador, 1% wage growth is expected. Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016 Mar 2016 Outlook

Probability of recession? 10 What do you think is the probability that your country's economy will be in recession at the end of 2016? Estimated probability of recession Latin American CFOS think there is a 38% chance of a recession in their countries by year-end 2016  African firms assign the highest probability of going into recession  The probability of recession in Asia is low  The probability of recession in the US (31%) is double the expectation from last June Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

Probability of recession? 11 Estimated probability of default varies greatly across Latin America  Brazil and Ecuador has very high recession probability  Peru and Mexico assign a moderate probability of recession What do you think is the probability that your country's economy will be in recession at the end of 2016? Estimated probability of recession Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

Key risk factors of recession? 12 What are the key risks that might lead to recession in your country at year-end 2016? Political risk is the factor most likely to drive L.A. countries into recession Slowdown in China, budget deficits and corruption are also among Latin American CFOs’ top concerns Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

13 Compared to interest rates today, how much would your borrowing costs have to increase to cause your company to reduce hiring/capital spending/borrowing plans? Borrowing cost vs. hiring/spending/borrowing plan Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

14 Peruvian presidential election If the following candidate wins the Peruvian presidential election, will it affect your company's investment? Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

Difficulty in Filling Key Positions 15 Hiring difficulties vary across Latam countries Mexican firms have the most difficulty, and Brazilian firms have the least How difficult is it for your firm to fill you key job opening? Percentage for finding it is difficult Many Latam firms have difficulty filling key jobs Europe is best able to fill positions, while emerging economies like Asia and Africa have more difficulty. Latin American Business Outlook Duke University / FGV / CFO Magazine Dec 2015

Is the stock market overvalued/undervalued? 16 I believe that the stock market in my country is: Percentage for overvalued/undervalued Global Business Outlook Duke University Sep 2015 Latin America is the only region in which CFOs think their stock market is undervalued  Only 6% of US firms think the US stock market is undervalued, lowest in the world  Most African CFOs think their stock markets are overvalued

Is the stock market overvalued/undervalued? 17 I believe that the stock market in my country is: Percentage for overvalued/undervalued Global Business Outlook Duke University Sep 2015 Many Latin American CFOs believe the stock market is undervalued  Brazil has the highest proportion of firms that believe the stock market is undervalued, at 78%  CFOs in Chile and Uruguay believe their stock markets are overvalued

Return on Assets (ROA) 18 Profit growth varies by country in Latin America Profit margins are expected to rise in all regions, relative to 2015 profits  CFOs in Latin America expect lowest ROA improvement compared to the rest of the world, with Brazil expecting the worst return on assets. Africa has the highest approximate and expected ROA. Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

Duke/FGV CFO Survey in Latin America Press 19 The Latin American Business Outlook is frequently reported in the press Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

20 Duke/FGV CFO Survey in Latin America Press The Latin American Business Outlook is frequently reported in the press Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016

Latin American Business Outlook Part of the Global Business Outlook A joint survey effort between Duke University, Fundação Getúlio Vargas and CFO magazine 21 Latin American Business Outlook Duke University / FGV / CFO Magazine Mar 2016