The Top 5 Expansion Trends of 2014
- Catalina Osorio
- Dec 30, 2014
- 3 min read
As we close out 2014 and consider the opportunities and challenges that await us in the New Year, we want to reflect on some of the major trends facing companies expanding across the Americas.
Here are the top 5 expansion trends that made our list for 2014:
1. Diverging growth across the Americas
While the US economy continues its steady economic recovery and its bullish stock market buzzes right along, we find that Latin America is more like a tale of two continents. As we covered earlier this year here the region can be divided between the surging Pacific coast-facing countries -- Colombia, Chile, Peru and Mexico -- and the stagnating economies in the Atlantic-facing countries, chiefly Brazil and Argentina. The recent drop in worldwide oil prices may impact 2015 growth projections across the region, but it is too early to tell if this trend will extend into next year. Argentina’s presidential elections also require monitoring as does any potential resolution of Argentina's strange default (see here for a summary of the default situation).
2. Relentless rise of middle class
Another macro trend that continues unabated despite the uneven growth in Latin America's various economies is the relentless rise in the middle class. As we discussed in our post on attendance figures at the 2014 World Cup (see here), middle income Latin Americans are surging in numbers and driving important spending trends. Companies capable of addressing middle market consumers face an exciting race to capturing the hearts and minds of this potentially massive demographic.
3. Spread of Internet and Social Media
Driven in large part by the surging middle class, 2014 cemented Latin America as a major driver of a continuing rise in new Internet users. One industry that has benefitted enormously from this trend is social media. As we covered here, Facebook now relies on regions like Latin America and Asia for almost all of its growth as once-hot markets in US and Western Europe have stalled. And social media is not the only Internet-related growth story in Latin America. As we discussed recently here, an analysis of sensor technology trends suggests that Latin America will be a hot bed of Internet of Things (IoT) activity as millions and eventually billions of Internet-connected devices and products begin to hit the market.
4. Crackdown on Corruption
Unfortunately, 2014 also saw a slew of corruption and bribery stories relating to Latin America. At a national level, many countries continue to be vexed by significant levels of corruption (see here for Transparency International data). While some countries, like Brazil, have passed strict legislation aimed at combatting corruption, see here, recent FCPA-related stories involving companies like Walmart and Hewlett Packard show that there is still a long way to go before this trend is reversed, see here. Let's hope 2015 is a beginning of this reversal.
5. Market-liberalization reforms in Mexico
Finally, a series of market liberalization reforms in Mexico made our list because of their potential for opening entire industries to foreign investment and expansion. The first reform, involving Constitutional amendments opening the telecommunications industry to foreign direct investment took hold in 2014 with the creation of the IFETEL agency that now combines regulatory and competition clearance for companies seeking telco licenses (see here for a case study that Nextant participated in with the newly-formed IFETEL).
2014 also gave rise to legislation that opened up Mexico’s oil industry – long dominated by state-owned Petroleos Mexicanos (Pemex) -- to foreign investment. Not surprisingly, major oil giants have already sought and received initial licenses for oil field rights in what is thought to be a top ten world market for oil reserves.
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We will no doubt be covering more on these and a new set of trends in 2015. Until then, thank your for your readership and may the New Year bring you great success.
For a downloadable pdf version of this article, please see here.
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Andres Snaider is a founding partner of Nextant, a consulting firm specializing in assisting companies expand their businesses in international markets, with a strong focus on Latin America. With a degree in law and experience working as an international attorney and businessman, Andres has advised clients on a range of commercial matters and investments across the Americas. He is a graduate of the Harvard Law School and currently lives and works in Boulder, Colorado.
Email Andres at : asnaider@nextant.com
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Nextant has extensive experience in assisting leading clients through its Market Expansion and Business Optimization services. For more information on our services, please visit www.nextant.com
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