Top 5 Expansion Trends of 2015

As another year draws to a close, it is time to reflect on the top expansion-related stories and trends of 2015. (See our 2014 list here). This year’s list is a mix of slowing economic growth in the Americas, surprising election results, two whopping international corruption scandals, and a new way of doing business that has already generated ground-breaking cross border expansion successes.

1. Economic Growth Slows Across the Americas

2015’s most important economic story in the Americas is the slowing of growth across the hemisphere. While the US economy continued to grow for the fifth consecutive year, growth rates remain sluggish leading many observers to question whether it can provide a counterweight to slowing worldwide economy. See here. Outside the US, growth in the hemisphere has slowed significantly and even tipped toward recession in major markets including Canada, Brazil and Venezuela. Plummeting prices for oil exports and reduced foreign direct investment from major markets, primarily China, have weighed heavily on almost every country in Latin America. Mexico, Colombia, Peru and Chile remain the bright spots as they continue to grow, but at slower rates than in recent years. See here.

Not all is bleak in the region however and companies seeking to grow or invest in the region are wise to consider 2016 as a year to look for signs of recovery and early-mover advantages. The US Dollar continued to gain value versus weaker currencies making importation of goods and services into the US, as well as other forms of foreign investment, relatively cheap. Latin American economies will look to benefit when demand for their relatively inexpensive exports and manufacturing capabilities builds again, giving rise to increased domestic consumption. Recent statistics show that this trend may have already begun in countries such as Mexico (see here) – which we predicted one year ago would benefit from the liberalization of industries such as telecommunications. See here and here.

2. The Inter-connectedness of World Economies

While globalization is nothing new, the economic struggles of 2015 put an exclamation mark on how truly inter-connected world economies have become. Plummeting prices for just one commodity – oil – caused economic pain and related ripple effects across the globe and, as mentioned above, the Americas were especially hard hit. (One might even draw comparisons between the 2015 oil price crash and the 1973 oil crisis in terms of the far-reaching effects of oil prices). Similarly, slowing growth and demand from one economic powerhouse – China – resulted in significant negative effects across the Americas, especially in Latin America which had for several years benefitted from spiking trade and investment with China.

What does this mean for 2016 and beyond? For the Americas, it may usher in a re-establishment of harmonious trade relations between North and South as governments seek to diversify their economic trading partners and platforms. Recent political trends in Latin America suggest that governments there desire stronger trade relations with the US which will likely result in more favorable conditions and opportunities for companies seeking to expand into new markets in the region.

3. Important Elections in Latin America

On the topic of political trends, several key elections in Latin America made our list of top stories of 2015. The most important political event – and the most surprising one for many observers – came in late November when Argentina elected pro-business conservative Mauricio Macri who promises to end years of interventionist policies practiced by the outgoing government of Cristina Fernandez de Kirchner. Foreign investors will eagerly await signs that Macri’s government will make good on their promise of making Argentina once again a safe and profitable place for foreign investment and trade. See here.

Significant electoral and legislative events also took place in Brazil where President Dilma Rousseff faces possible impeachment in connection with her administrations’ role in the Petrobras scandal. Venezuela also just voted in a new legislative majority that is opposed to the Chavista-styled policies of President Nicolas Maduro. The beleaguered Brazilian and Venezuelan administrations have recently become the topic of conversation and juxtaposition with the rise of Macri and his criticism of the Venezuelan government in particular. See here.

Companies and investors interested in these three markets will be interested to see if a power shift akin to Macri’s rise in Argentina or related reforms may be on the near horizon as well.

4. The FIFA and Petrobras Scandals

While many international companies sought to strengthen their codes of conduct in the wake of the increasing crackdown on corruption-related practices (which was one of the top stories in 2014 .. see here), few observers predicted that 2015 would bring about the two of the biggest, most far-reaching international corruption cases ever, the FIFA and Petrobras scandals. or that its target would be FIFA, once considered to be untouchable given its stronghold on the world’s most popular sport. As we wrote here, however, the FIFA case involves the US Justice Department working together with foreign authorities to charge virtually every top FIFA official for their participation in a recurring pattern of schemes involving awards of the commercial and marketing rights to prominent tournaments in exchange for illicit kickback payments. As we predicted, the allegations have now extended to Sepp Blatter himself, resulting in the suspension of the once kingly head of the organization. See here.

While FIFA has gotten more coverage, the Petrobras scandal in Brazil is producing a range of economic, political, and social consequences that are still being played out as the investigation keeps broadening. See here and here. We will monitor the case closely to see if this case makes 2016 the year in which a corruption case topples the administration of a major market in the Americas.

5. The Sharing Economy

The expansion-related business model that takes the prize in 2015 goes to the group of companies involved in the so-called sharing economy, comprised of companies that serve as clearinghouses for services owned and operated by private parties. As our coverage of Uber shows, see here, sharing economy companies own almost no assets other than the application or websites that link private owners or contractors to find customers for their services (car rides, home rentals, , etc.). It is precisely their lack of assets that places companies involved in the sharing economy at an advantage against other firms that require significant local presence – such as offices, warehouses and factories -- to operate abroad. And it is these advantages that have brought about a call for increased regulation to reduce the expansion-related advantages of sharing economy firms.

We will keep close watch of all of these and other trends in 2016. Until then, thank you for your readership and may the New Year bring you great success.

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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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