1. This information is confidential and was prepared by Mesoamerica solely for the use of our client; it is not to be relied on by any 3rd party without Mesoamerica's prior written consent. DRAFT M ESOAMERICA Our Region’s Challenges What We’ve Learned July 2009 Harry Strachan

2. Topics Perspectives and Challenges? Lessons for Business? Lessons for Leadership? 2 1 - CFR Red.pot

3. Who “we” are … Mesoamerica … Our regionOur history “Core” countries Offices Bain & Co. CR M ESOAMERICA Mesoamerica’s roots (1993-1998) -Bain Costa Rica – Consulting -Mesoamerica Fund 1 (1996-1998) Mesoamerica (1998 – present) -Strategy consulting, -Mergers & acquisitions -Private equity -Mesoamerica Foundation Offices: San Jose (1998), Bogota (2008) 35 Professionals: 13 Nationalities; variety of educational and work backgrounds

4. Topics Perspectives and Challenges? - Survey re Global Crisis - Key challenge & CAFTA - $64,000 Question Lessons for Business? Lessons for Leadership? 4 1 - CFR Red.pot

5. The Survey (12/08 – 2/09) Screnarios & probabilities in U.S. 1 Typical “V” Recession Prolonged “U” Recession Severe “L” Recession or Depression Impact of the crisis in Central América 2 Worse in Central America Better in Central America Evidence of the crisis in your company 3 Yes No Actions taken as a result of the crisis 4 Defensive Offensive Leadership in the crisis 5 Advice to our governments Advice to the International Agencies & other countries

6. Probable scenarios? A.Typical Recession Recovery by end of 2009 Dow Jones ↑ >11,000 Credit available B.Prolonged recession In recession until 2010/11 Dow Jones @ 8,000 has hit bottom ↑ above 9,000 by end of year Crédit available but expensive C.Severe Recession Profound recession > 3 years Dow Jones not hit bottom Goes bellow 7,000, doesn’t recover quickly Crédit hard to get 49%16%13%22% Optimistic (>30%) In middle Pessimistic (>30%) All 39%65%42%57% 12%19%45%21% 21 (20%) 72 (69%) 12 (11%) 105 # responses (Percent)

7. Historic correlation is a fact … Correlación: - Contemporánea: 0.62 - Un trimestre rezagado: 0.72

8. Impact of crisis in Central America? 69%48%30%52% Optimistic (≥60%) In middle Pessimistic (≥60%) All 31%52%70%48% A.Better in C.A. than U.S. Region less linked to U.S. China & India new motors of growth Region less vulnerable, more diversified economically Government reserves high and local banks are healthy. B.Worse in C.A. than U.S. “When the U.S. gets a cold, we get penumonia.” Governments don’t have much counter cyclical capacity. 53 (54%) 9 (10%) 36 (36%) 98 # responses (Percent)

9. Our major challenge – closing the gap GDP/Capita (2000) G7 Latin America Central America Source: World Development Indicators 2002, The World Bank Group The economic Gap between Central America and developing countries has increased in the past 40 years …

10. 060324 Briefing for US Ambassader2 In education and poverty, the gap is significant … * % of households whom income is less than double the cost of basic family needs Source: World Bank, ECLAC, PNUD. Information to December 2003

11. The key cause -- lost decades War, instability Note: 1979 is included in the 80s decade Source: World Development Indicators 2002, The World Bank Group In spite of strong periods of growth, internal conflicts and lack of sustained strategies often destroy much progress …

12. 1 % of countries with GDP CAGR >3% 11 / 15 (73%) 4 / 74 (5%) CAFTA increases the likelihood of sustainable growth … Percentage of countries with Economic Growth > 3% (89 Countries in Development, 1970-1989) 1 A country is “always open” if it has: a) Non-tariff barriers on less than 40% of trade, b) Average trade tariffs less than 40%, c) Difference between official and black market figures is less than 20% d) non-socialist economic system, and e) Open market in its main exports Source: Economic Reform and the Process of Global Integration, J.D. Sachs and A. Warner, Harvard University Trade policy

13. CAFTA contributes to the elements of a strategy for sustained development Social:  training and opportunities for development  investments in education and health Impact FTA CA-US Economic:  trade and investment  employment and salary levels  productivity and competitiveness  growth and incomes in equitable manner  consumer prices  poverty Institutional:  transparency and improve/ strengthen rule of law  corruption  political stability

14. $64,000 Question in 2009 14 1 - CFR Red.pot Will the current crisis lead to protectionism in the world and populism in the region that undercut CAFTA and the progress of the last two decades and send us into another “lost decade?”

15. Topics Perspectives and Challenges? Lessons for Business? -Magnitude of the Challenge 1993 -Strategies that worked 1993-2008 -Tools for the future? Lessons for Leadership? 15 1 - CFR Red.pot

16. The business challenge in 1993 What is the magnitude of change that globalization will require? Costo 0.46 0.52 0.50 Calidad 2.20 2.00 1.79 Fuente: Bain & Company, muestra de compañías globalizadas

17. 17 030827-JAS-XCD-INTEL PREEZ6 The formula that worked for companies that met the globalization challenge… Current Value Potential Value Strategic Focus  ROIC > WACC  Strategic position (RMS)  Sustainable growth Operating Excellence  Benchmarking  Best practices  Organizational effectiveness Key to Competitiveness

18. 18 030827-JAS-XCD-INTEL PREEZ6 Benchmarking and best practices’ was a very powerful tool for rapid improvement … Average 0.87 Fuente: Bain & Company Taller 1Taller 2Taller 3Taller 4Taller 5Taller 6Benchmark USA 1.14 1.00 0.86 0.79 0.77 0.66 3.04 0 1 2 3 4 Vehicles Per Day Vehicle repairs per day per mechanic

19. The focus of our consulting today … Sustainable and profitable growth Competitiveness Organizational Effectiveness Productivity A winning business strategy and a solid business model Core business’ full potential Corporate governance best practices Typical projects: -Review of business portfolio -Evaluation and redesign of strategies and business models -Business planning and performance monitoring Typical projects: -War planning -Turnarounds -Benchmarking Typical projects: -Full potential analysis: core business and adjacencies -Growth strategies -Strategic due diligence and integration of acquisitions Typical projects: -Organizational redesign -Role of the center -Family-company relations Consulting

20. 20 030827-JAS-XCD-INTEL PREEZ6 Critical Paths NON COMPETITIVE POSITION  Strategic Alliances  Acquisitions  Mergers  Exit Strategies In order to achieve leadership, implement best demonstrated practices, and acquire competencies, local companies must often engage in strategic alliances, mergers, or acquisitions

21. 21 030827-JAS-XCD-INTEL PREEZ6 Lesson 5: Negotiation Process Families -Dividends -Succession issues -Local/Nacional Loyalties -Others Mutlinationals -Enterprise value -Continuity and professionalism -Multicountry loyalties -Others It is critical to understand the objectives and interests of the parties in order to determine if there is a common ground to reach a mutually beneficial agreement ZONE OF MUTUAL BENEFIT Case A: Case B: NO MUTUAL BENEFIT

22. An Important Business Question 22 1 - CFR Red.pot Where will companies find the “gold” in the future? Superiority in the basics: cost and quality? Innovation? M&A and regional expansions? Financial engineering? What sectors?

23. Topics Perspectives and Challenges? Lessons for Business? Lessons for Leadership? -INCAE 1981 Seminar “Live cases in leadership in chaos” -Participants List of lessons -Personal implications 23 1 - CFR Red.pot

24. The “Live” Cases Some examples: -Automobile Inventory as Managua is taken by the Sandinistas -“Under the gun” pay raises in a maquilador -What to do about the New Office Tower? – Complete, Distressed sale and Miami? -Rural hardware stores in the civil war 24 1 - CFR Red.pot

25. Effective leadership in crisis: Realism and critical analysis Proactive action Care for your people Energy and optimism Audacity Source: Participants INCAE Seminar 1981, Leadership In Chaos based on live cases

26. Becoming an effective leader in crisis Left Brain Right Brain Analytic Intuitive PesimisticOptimistic