Download opportunities for swedish companies in central america

CONFIDENTIAL
FOR INTERNAL USE WITHIN
CLIENT COMPANY ONLY
OPPORTUNITIES FOR
SWEDISH COMPANIES IN
CENTRAL AMERICA
August 2015
Business Sweden - Mexico
CENTRAL AMERICAN ECONOMIES ARE GROWING BUT
REMAIN VULNERABLE TO EXTERNAL FACTORS (1:2)
 The Central American market was valued at 202 B USD in 2012 and has registered a steady growth (average CAGR
9%) between 2006 and 2014,
 The region holds a market of +44 million inhabitants in their early 20s
 Central America has low oil reserves, making economies sensitive to international oil prices
 Main sources of foreign currency are remittances and commodity exports, changes in prices of the later have a direct
impact on inflation rates
 Increase access to healthcare and education services in remote locations; lower debt levels; reduce poverty and
inequality are key for long term development of the region
 Central American economies have strong ties with the USA
 USA is the main trade partner, with participation between 20% (Panama) and up to 58% (Nicaragua) of international
trade
 Large base of emigrants, for instance 20% of the population in the case of El Salvador, is based in the US making
remittances one of the main sources for foreign exchange in the region
 The USA economy recovery is expected to increase FDI, aid and tourism inflows to the region
 Central American economies have a positive outlook in the current low oil prices situation, which lowers the costs of
imported goods and energy prices, increasing disposable income for domestic consumption
SOURCE; BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN
4 SEPTEMBER, 2015
2
INFRASTRUCTURE PROJECTS AND IMPORTS OF CAPITAL
GOODS ARE THE LARGEST OPPORTUNITIES (2:2)
 Services are a major part of the regional economy (60%). Outsourcing of business services to the region is a growing
trend
 Although agriculture is not a large GDP contributor, it is a major employer and source of most of the regional exports in
the form of coffee, sugar and bananas
 Larger opportunities exist in the infrastructure and energy sectors for the improvement of roads, logistics platforms,
housing and commercial construction as well as touristic infrastructure, at a larger scale in Costa Rica, Panama and
potentially Nicaragua, if the construction of a new transoceanic Canal concretes. Expected investment from multilateral
banks is estimated at 55.8 B USD for these projects
 Creation of Free Trade Zones, in Panama and Costa Rica, and a growing trend for establishing manufacture centres for
re-export (maquila) are expected to foster and diversify the regional industrial activity. Today food processing and
textiles processing and assembly are the main manufacturing activities
 In the short term imports of capital goods remain high and an opportunity for Swedish suppliers
 The relatively recent implementation of the Association Agreement with the EU and the Central America Free Trade
Agreement with the USA and the Dominican Republic, will facilitate the elimination of non-tariff barriers and the
diversification of regional commercial partners
SOURCE; BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN
4 SEPTEMBER, 2015
3
CENTRAL AMERICA OVERVIEW
Belize
Costa
Rica
El
Salvador
Guatemala Honduras
Nicaragua
Panama
GDP
(2014)
1.6 B USD
49,6 B USD
24.3 B USD
53,8 B USD
18.6 B USD
11.3 B USD
42.6B USD
GDP ppp
(2013)
8.2 T USD
14.9 T USD
8 T USD
7.5 T USD
4.7 T USD
4.7 T USD
19.5 T USD
2%
3.4%
1.7%
4%
3%
4%
6.6%
347.4 T
4.81 M
6.14 M
14.91 M
8.76 M
5.9 M
3.65 M
GDP growth
(2014)
Population
(2014)
- More than 44 million inhabitants in the region with a median age between 22 and
30 years
- Costa Rica’s and Panama’s income per capita are close to other emerging
economies in the region such as Mexico
- The region has shown economical stability and moderate growth since the crisis
in 2009
SOURCE: CIA FACTBOOK
BUSINESS SWEDEN
4 SEPTEMBER 2015
4
THE REGION HAS HAD A MODERATE GROWTH AND IS
EXPECTED TO CONTINUE THIS TREND
FORECASTED GDP GROWTH, B USD 2006-2018
 Moderate short term regional growth (4% in average by
2018)
90
80
 US economy recovery will favor higher FDI, remittances
and tourism flows
70
 Nicaragua and Panama fastest growing economies
(13% 2006-2014 CAGR )
60
50
 Belize and El Salvador, have lowest growth expectations
due to high levels of debt, unemployment and informal
economy base
40
30
 Steady population growth will result in a larger
economically active population until 2045
20
 Infrastructure plans, in Panama (Canal expansion),
Costa Rica (Touristic infrastructure) and potentially
Nicaragua (Canal to rival Panama’s) attract FDI
10
0
BLZ
2006
CRI
2010
SLV
GTM
2014
HND
NIC
2018
PAN
INCREASED PRIVATE CONSUMPTION AND LARGE INFRASTRUCTURE PLANS ARE MAJOR GROWTH DRIVERS
SOURCE: WORLD BANK; EUROMONITOR; IHS; IDB; BUS ANALYSIS
BUSINESS SWEDEN
4 SEPTEMBER 2015
5
REGIONAL ECONOMY IS LARGELY BASED ON SERVICES,
PARTICULARLY IN PANAMA
ECONOMIC ACTIVITIES, % OF GDP 2013
 More than 60% of the economy is service based
100%
90%
 75% of GDP in Panama
80%
 Financial services are a key contributor
 Agriculture has low contribution to the economy
(average 13%), but employs 25% population and is a
major contributor to exports
70%
60%
50%
 Main products are coffee, bananas and sugar
40%
 Manufacturing for re-export is a growing economic
activity in Panama, Costa Rica and El Salvador
30%
 Mainly for the textile industry to supply North America
20%
10%
0%
BLZ
CRI
Services
SLV
GTM
Industry
HND
NIC
PAN
Agriculture
MANUFACTURES ARE MOSTLY FOR LOCAL CONSUMPTION
SOURCE: WORLD BANK; EUROMONITOR; IHS; IDB; BUS ANALYSIS
BUSINESS SWEDEN
4 SEPTEMBER 2015
6
DOING BUSINESS IN CENTRAL AMERICA IS RELATIVELY
COMPLEX
EASE OF DOING BUSINESS, RANKING 2015
USA
 Panama is the most business friendly country and the
only economy in the higher 30% of the index
7
SWE
MEX
 All countries outperform Brazil, Argentina and
Venezuela, well known to be complex countries do to
business with
11
39
PAN
GTM
CRI
HND
SLV
 Results vary a lot in between cities. Overall, larger cities
perform better compared to second largest cities. El
Salvador and Nicaragua had the most homogenous
performance
52
73
83
 Doing business ranking does not consider issues which
may be a concern in the region such as:
104
109
 security,
BLZ
118
 corruption,
NIC
119
 macroeconomic stability,
BRA
120
 level of training and skills of labor force
SOURCE: DOING BUSINESS INDEX, WB
BUSINESS SWEDEN
AREAS INCLUDED IN THE INDEX: STARTING A BUSINESS, DEALING WITH CONSTRUCTION PERMITS,
GETTING ELECTRICITY, REGISTERING PROPERTY, GETTING CREDIT, PROTECTING MINORITY INVESTORS,
PAYING TAXES, TRADING ACROSS BORDERS, ENFORCING CONTRACTS AND RESOLVING INSOLVENCY
4 SEPTEMBER 2015
7
MAIN CONCERNS IN THE REGION ARE POVERTY,
NATURAL DISASTERS AND SECURITY
NATURAL DISASTERS
- The region is vulnerable to natural disasters including earthquakes, hurricanes, active volcanos
and floods
- Natural disasters may cause major damages to infrastructure which could unbalance public
expenditure
- Cost of disasters damage in the past decade is valued at 34.4 B USD*
SECURITY
- Insecurity has grown in the region due to organized criminal organizations (human and narcotics
trafficking) as well as for civil conflicts
- Disputes over territories remain among several countries
- Some CA cities are considered among the most dangerous in the world
OTHER
- Poverty and high inequality is widespread in the region (30 - 50% of population depending on the
country), except for Costa Rica (20%), specially in rural areas
- Among the lowest education rates in the region
- Rural areas have low access to electricity and healthcare services
POVERTY, LOW EDUCATION RATES, INCOME DISPARITY AND GOVERNMENT DEFICITS CONTRIBUTE TO INCREASE THESE RISKS
SOURCE: BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN
* INCLUDING MEXICO
4 SEPTEMBER 2015
8
THE ASSOCIATION AGREEMENT WITH THE EU WILL
STRENGTHEN LINKS WITH THE REGION
 Includes Panama, Costa Rica, Guatemala, El Salvador, Honduras and Nicaragua
(Initiated in 2013 and includes: elimination of most import tariffs; improved access to public
procurement, services and investment markets; better conditions for market access,
competition and property rights; better dispute settlement mechanism)
 Relies on three pillars: political dialogue, cooperation and trade
(Tools that will support economic growth, democracy and political stability in the region)
 EU share in Central American trade reached 11.3% in 2012
(EU imports from CA are office, machinery and transport equipment mainly – 59.6%,
followed by Agricultural products – 30.1%)
(Exports from EU to CA are machinery and transport equipment – 47.2% and chemicals –
21.5%)
SOURCE:EU COMMISSION
BUSINESS SWEDEN
4 SEPTEMBER 2015
9
SWEDEN STILL HAS A SMALL SHARE OF CENTRAL
AMERICAN FOREIGN TRADE WITH 0,2%
SHARE OF 93.04 M USD EXPORTS TO SWEDEN, 2014
SHARE OF 158 M USD IMPORTS FROM SWEDEN, 2014
4% 0%
0%
10%
22%
23%
41%
23%
6%
23%
10%
4%
22%
BLZ
CRI
GTM
12%
HND
NIC
PAN
SLV
BLZ
CRI
GTM
HND
NIC
PAN
SLV
IMPORTS FROM SWEDEN GREW FROM 81,7 TO 158.2 MUSD IN 14 YEARS, COSTA RICA AND PANAMA ARE MAIN TRADE PARTNERS
SOURCE: STATISTIKSERVICE
BUSINESS SWEDEN
4 SEPTEMBER 2015
10
CENTRAL AMERICAN EXPORTS ARE MOSTLY
COMMODITIES AND IMPORTS MAINLY CAPITAL GOODS
Guatemala
Belize
Main
exports
coffee, sugar,
petroleum, apparel,
fruits & vegetables
Main
exports
sugar, fruits, clothing,
sea products, wood,
crude oil
Main
imports
fuels, machinery and
transport equipment
Main
imports
fuels, machinery and
transport equipment,
manufactured goods
El Salvador
Honduras
Main
exports
offshore assembly
exports, coffee,
sugar, textiles, gold
Main exports
apparel, coffee,
shrimp, wire
harnessing, cigars
Main
imports
raw materials,
consumer goods,
capital goods, fuels
Main imports
machinery and
transport equipment,
raw materials
Costa Rica
Nicaragua
Main
exports
coffee, beef, shrimp,
lobster, tobacco,
sugar
Main
exports
bananas,
pineapples, coffee,
melons, sugar
Main
imports
consumer goods,
machinery and
equipment
Main
imports
raw materials,
consumer goods,
capital equipment
Panama
Main exports
bananas, shrimp,
sugar, coffee, clothing
Main imports
capital goods,
foodstuffs, consumer
goods, chemicals
SOURCE: UN TRADE
BUSINESS SWEDEN
4 SEPTEMBER 2015
11
HEALTH CARE, INFRASTRUCTURE AND ENERGY ARE
MAIN PRIORITIES FOR CENTRAL AMERICAN COUNTRIES
NATIONAL PRIORITIES
Health care
Infrastructure
OPPORTUNITIES
 Increased access to healthcare services in
remote locations for infants and women
 Mobile diagnosis equipment
 High maternal and infant mortality and
malnutrition rates
 Medical devices and biotech
 Solutions for remote medical attention
 Panama Canal expansion and potential
creation of Nicaragua Canal
 Consulting services for logistics platforms
development
 Growing touristic sector in Belize, Costa
Rica, El Salvador
 Increased demand for construction inputs
and machinery
 Underdeveloped roads networks in almost
every country
 Environment friendly solutions for
sustainable development
 Disaster relief and preparedness
 Geothermal and Hydroelectric potential
Energy
 All countries are part of the Puebla Panama
Plan to unify Central American electricity
grids
 Solutions for reducing costs and the
frequency of power disruptions
 Private investment for the development of
new power plants
INTERNATIONAL DONORS AND MULTILATERAL BANKS WILL ALLOCATE 55.8 B USD BETWEEN 2010-2017 TO THESE PROJECTS
SOURCE: IDB, BUS ANALYSIS
BUSINESS SWEDEN
4 SEPTEMBER, 2015
12
CONTACT US
BUSINESS SWEDEN IN MEXICO
Business Sweden
Miguel de Cervantes Saavedra 193 – 802. Mexico D.F. 11520
T +52 55 9126 3430, F +52 55 9126 3440
[email protected]
www.business-sweden.se/mexiko