Latin America prepares for economic downturn
Washington, DC, United States (AHN) – Latin American finance ministers are trying to shield their countries from disaster amid predictions U.S. government budget cutbacks could hurt the region’s economies.
Economic ministers from the 11-nation Unasur organization met last week in Buenos Aires, Argentina, to discuss defensive strategies. They are working on an agreement that would create a roughly $12 billion emergency fund to bail out collapsing economies.
They also seek to reduce their dependence on the U.S. dollar for international trade and to develop policies to balance their trade deficits.
Unasur consists of Brazil, Colombia, Bolivia, Chile, Ecuador, Guyana, Paraguay, Peru, Surinam, Uruguay and Venezuela.
So far, Latin America’s economy has avoided the worst of the economic collapses in the United States and Europe that began in 2008 with a stock market collapse and recession. A brief drop in commodities prices along with government spending programs that shored up declining industries helped them avoid the worst of the crisis. However, economists predict the resilience of Latin American economies will not last much longer.
South American economies grew at an average of 6.6 percent last year, according to the International Monetary Fund.The Fund’s economists predict growth will slow to 4.7 percent this year and 4.1 percent in 2012.
By comparison, U.S. economic growth this year is running at 2 percent. Some European countries are showing no growth.
Stock markets in Latin American countries fell as much as 15 percent last week on news the credit rating service Standard & Poor’s downgraded the U.S. credit rating to double-A plus from triple-A.
Augusto de la Torre, the World Bank’s chief economist for Latin America and the Caribbean, said this week the outlook for Latin America is uncertain as concerns grow about another crisis for the United States and Europe.
China could be the next to falter as Western markets dry up for their manufactured products, he said.
“If China has a hard landing, that will hit us hard,” de la Torre told the Peruvian news media during an economic meeting.
Unasur leaders are exploring options to increase trade with China as its Western markets for manufactured products fizzle.
Protecting the economy is a major campaign issue in Argentina, where current president Cristina Fernandez won a landslide victory in primary elections this week.
She said at a press conference after the primaries that keeping Argentina’s economy strong would be a top priority for her if she is re-elected in October.
Low-income persons are most likely to be hurt by U.S. budget cuts that could reverberate around the world, including Argentina, she said.
Wall Street economists warn that her policies of price controls and using central bank reserves to pay debts could backfire for South America’s third largest economy.
The policies strengthen government control but depress market forces that help to balance the economy, according to some economists.
Argentina’s inflation rate is running close to 25 percent.
Other economic concerns are arising in Brazil, where inexpensive imported products are hurting the domestic manufacturing industry.
Chile and Peru still have stable economies as investors try to protect their assets by purchasing gold and copper, but economists predict declines in the precious metals market.
A decrease in demand for oil is depressing the economies of Venezuela and Mexico.
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Whirlpool 3Q Profits Down 9.2 Percent
Benton Harbor, MI, United States (AHN) – Whirlpool reported third-quarter profits Wednesday that met analysts’ expectations but declined 9.2 percent. The world’s largest appliance manufacturer lowered its full-year outlook for shipments in North America, citing a challenging economy.
Earnings for the quarter ended Sept. 30 was $79 million, or $1.02 a share, down from $87 million, or $1.15 per share, a year ago. Adjusted for charges under a $93 million agreement with the Canadian and U.S. governments to settle a price-fixing case of a subsidiary, profit was $2.22 per share.
Sales rose 0.5 percent to $4.5 billion, driven by double-digit growth in Asia and Latin America.
Revenues in Asia increased 21 percent to $195 million. Without currency adjustments, sales rose 16 percent. Whirlpool expects its shipments to the region for the full year to jump 8 to 10 percent, instead of 5 to 8 percent as it had previously forecast.
In Latin America, sales rose 13 percent, or 9 percent excluding currency shifts, to $1.1 billion. Full-year outlook for shipments in the region remains at 10 percent.
Sales in Europe fell 8 percent to $827 million but the Michigan-based company says it expects shipments to increase 1 to 3 percent.
North American sales dropped 3 percent to $2.4 billion. Whirlpool lowered its full-year forecast of 5 percent growth in shipments to 3 percent.
The company projected full-year earnings per share of between $7.80 and $8.30 after charges under the anti-trust plea agreement. Before charges, earnings are expected to be $9.56 to 10.06 per share.
“As expected, we faced a challenging environment during the quarter which resulted in a significant slowing in sales growth compared to the first half of the year,” chairman and chief executive Jeff Fettig said in a statement. “Our ongoing focus on cost reductions, productivity and innovative new product launches continues to enable us to adapt to changes.”
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Nestle Reports Strong Nine-Month Sales
Vevey, Switzerland (AHN) – Nestle reported better-than-expected sales in the first nine months of the year on Friday and maintained its forecast for the full year.
Sales from January through September grew to 82.8 billion Swiss francs ($85.2 billion), up 4.1 percent from 79.5 billion Swiss francs ($81.8 billion) during the same period last year.
Foreign exchange reduced revenues by 2.7 percent, while acquisitions added 0.7 percent, putting organic growth, which excludes the effects of currency, acquisitions and divestments, at 6.1 percent.
Revenues from food and beverage businesses jumped 5.7 percent, excluding currency changes that left sales 2.8 percent less, and acquisitions that added 1.6 percent.
Organic growth for food and beverage in the Americas was 5.5 percent. The world’s largest food manufacturer reported “broad-based improvements” in North America that compensated for continued weak demand for the premium segment of the ice cream market as well as frozen food products such as Lean Cuisine and Lean Pockets.
In Europe, sales increased 3.3 percent despite “challenging” demand in Russia. Growth was led by brands from various categories, including Herta in prepared meats products and Friskies and ProPlan in petcare.
In emerging markets in Asia, Africa and Oceania, organic growth was 11 percent, fueled by sales from Maggi Noodles and Nestea Litro. Nestle plans to support such rapid growth with new facilities launched in the third quarter, such as an infant cereal factory in Ghana and a CoffeeMate plant in Latin America and the Caribbean.
Other food and beverage brands such as Nespresso performed well worldwide. In its largest European markets, the premium coffee grew more than 20 percent.
The Switzerland-based company, which does not report quarterly earnings, said it continues its expansion of Nespresso boutiques worldwide and will have 220 stores by the year’s end.
Nestle’s forecast for the full year remains at about 5 percent organic growth for food and beverage. The company expects improvements in its operating profit margin.
“The first half’s growth momentum continued unabated in the third quarter, providing a good base for the full year as we face challenging comparatives in the final quarter,” chief executive Paul Bulcke said in a statement.
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Global Software Revenues To Surpass $232 Billion
Stamford, CT, United States (AHN) – Worldwide enterprise software revenue is on pace to surpass $232 billion in 2010, a 4.5 percent increase from $222.4 billion in 2009, according to the latest forecast from Gartner, Inc.
“After declining 2.6 percent in 2009, the software market is recovering well with signs of continuing growth on horizon,” Joanne Correia, Gartner managing vice president, said in a statement.
“Aging systems as well as greater demand for security and aligning software with business requirements are key decision factors for end-users increasing their spending within infrastructure software market,” she added.
Emerging regions such as Asia-Pacific and Latin America are expected to invest heavily in enterprise software initiatives in the next few years as they continue to round out IT infrastructures necessary to do business, Gartner said.
Software spending in North America is forecast to reach $110.8 billion in 2010, an 8.5 percent increase from $102.1 billion in 2009.
“These earnings were driven primarily by pent-up software demand and having been mostly satisfied, somewhat slower growth is expected for latter half of 2010,” said Colleen Graham, Gartner’s research director.
Spending in the Europe, Middle East and Africa region is expected to decline this year to $64.5 billion, a 3.4 percent decline from 2009.
The Asia-Pacific region, excluding Japan, is expected to gain the fastest growth in revenue, estimated to reach $22 billion in 2010, up 13 percent.
Australia and South Korea are the region’s most mature markets with majority coming from maintenance revenue streams making them the second- and third-largest in Asia-Pacific.
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