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2017-08-08 06:01 CEST
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YPO Global Pulse Survey: Business confidence in Latin America reaches three-year high

Confidence amongst Brazilian business leaders fades in second quarter

SÃO PAULO, 8 August 2017 - YPO, the premier chief executive leadership organisation in the world, reported today that confidence among business leaders in Latin America climbed to its highest level since January 2014 in the second quarter of this year (2Q 2017). The YPO Global Pulse Confidence Index for Latin America, which tracks economic confidence levels among chief executives on a quarterly basis, increased 2.1 points to 59.2.

Latin America has seen a steady increase in business confidence over the past two years and has recovered strongly from its position in the third quarter of 2015, when it was down at a lukewarm 49.6.

While the overall trend across Latin America was one of improved confidence, there were markedly different stories in the region's major economies.

Mexico saw a sharp upturn in sentiment in 2Q 2017, jumping 6.8 points to 67.6, its highest level since January 2016. There were also significantly improved outlooks in Columbia, Ecuador and Guatemala.

However, Brazil, as the largest economy in the region with the heaviest weighting, reported a drop in confidence, slipping 4.2 points to 57.6. This reverses most of the gains from the first quarter of this year, when confidence increased by 6.7 points.

"Unfortunately, Brazil once again finds itself trapped in a "stagnant" mood, given that there isn't enough clarity as to whether much-needed reforms will be voted in by Congress. The attention of legislators is fully devoted to the consequences of the high-profile political scandal, which is also profoundly important to the long-term business environment," said YPO member Felipe Mendes, Managing Director of GfK, Brazil. 

"Hopefully we will see a quick resolution to this uncertainty, as in the third quarter most of the budget planning sessions are held, and key investments decisions are made at corporate level."

Key findings in Latin America

Chief executives remain confident about growth

Business leaders were positive when asked about the prospects for their own organisations over the next 12 months, with confidence holding steady in each of the three key indicators in the study, tracking sales, employment and fixed investment.

While the YPO Sales Confidence Index for Latin America slipped marginally, by 1.4 points to 66.4, it still remained in firmly optimistic territory. Nearly two-thirds (65%) of chief executives expected to increase revenue in the next year, while only 6% predicted a reduction in turnover.

With regards to hiring, the YPO Employment Confidence Index rose 3.1 points to 55.2. More than a third (36%) of chief executives expected to increase headcount in the next 12 months, compared to only 11% who predicted cuts to staff numbers. This is a significant improvement on the previous quarter, when only 23% predicted increases to their workforce numbers, and 16% expected a reduction in headcount.

The YPO Fixed Investment Confidence Index edged up 1.9 points to 58.9, its highest level since October 2014. Nearly half (46%) of respondents predicted increased levels of investment in the next year, while 45% expected investment to remain at the same level. Only 9% of business leaders forecasted reduced spending.

Economic conditions set to improve in second half of the year

Chief executives also painted a positive picture when asked how economic conditions are likely to change over the next six months. Half (51%) of respondents felt that economic conditions would improve, compared with only 13% who predicted that conditions would worsen. More than a third (36%) thought the economic environment would remain largely unchanged. This is a far more positive view than in the previous survey, when 43% of chief executives predicted an improvement in the economic climate and as many as 26% felt that conditions would deteriorate in the following six months.

Key findings in Brazil

Chief executives more concerned about short term economic conditions

Business leaders in Brazil reported a more subdued outlook when asked about the short-term economic climate in the country. Only half (52%) of chief executives expected business and economic conditions to improve over the next six months, down significantly from the April survey, when 77% predicted that conditions would improve in the following six months.

Sales outlook fades but hiring and fixed investment forecasts hold steady

Business leaders in Brazil reported a drop in confidence when it came to sales growth over the next year. While more than half (54%) of respondents predicted their organisations would increase revenues in the next 12 months, this was significantly down from the previous survey when 80% believed they would increase turnover in the following year. This was reflected in the YPO Sales Confidence Index for Brazil, which fell 4.5 points to 62.2.

There was little change when it came to hiring and fixed investment. The YPO Employment Index lost 1.0 point to land at 53.1, and the YPO Fixed Investment Index edged down 0.1 point to 57.4.

Global review

Globally, the YPO Global Pulse Confidence Index slipped 0.5 point to 62.0 over the second quarter, while executives in Australasia proved to be the most optimistic as confidence increased 3.6 points to 67.0. In Asia, confidence declined 1.8 points to 61.5, reversing the gains made in the first quarter of the year. Confidence in the United States remained firmly in positive territory, with a slight decline of 1.6 points to 63.3, while in Canada, business confidence rose 0.8 point to 62.9.

In the European Union (EU), confidence climbed 2.1 points to 63.0, its highest level in the eight-year history of the YPO study, while executives in non-EU Europe countries indicated a dramatic improvement, up 8.5 points to 60.3, largely due a complete reversal in Swiss sentiment, which was the main detractor in the region last quarter.

Elsewhere, confidence in Africa edged up 1.9 points to 56.3, but despite this being its highest level for two years, it still retains its position as the second-least confident region.

The Middle East and North Africa (MENA) region slid 4.5 points to 50.7, its lowest rating ever, making it the least confident region in the world.

YPO Global Pulse Confidence Index
The quarterly electronic survey, conducted in the first two weeks of July 2017, gathered answers from 1,161 YPO chief executive officers across the globe, including 133 in Latin America. Visit www.ypo.org/globalpulse for more information about the survey methodology and results from around the world.

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