Rationale Optimism

Issues Driving Explosive Growth in Latin America

GIL Latin America 2013

January 2013

“Only those who will risk going too far can possibly find out how far one can go.” – T.S. Eliot

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Macro Micro

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business and markets

Sub TrendA sub-layer of trends that has a

wide ranging impact

Impact to Your IndustryVisualising the roadmap of these critical forces through segment identification and market level

analysis

Impact on Future Product/ Technology

Analysis of Opportunities and Unmet Needs

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Definition of Mega Trends

Our Mega Trend Definition? Impact of Mega Trends on Key

Organizational Functions

“Mega Trends are global, sustained forces of

development that are transformational to

business, economy, society, cultures and personal lives”

Marketing and Strategy

R&D Budget Spending

Product Planning and Development

Technology Planning

Innovation Scouting

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Perspective

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Motivation

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Motivation Infrastructure

Business

MOTIVATION

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MOTIVATION

Gen YGeo Socialization

“She-conomy”

Aging Population

Reverse Brain Drain

Middle Bulge

Generational Political

Shift

Surge in Asian Work

Pool

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2.6%5.5%

6.7%

8.4%(17.2)

18.4%(37.7)

31.9%(65.4)

26.5%(54.3)

Generation Y - Latin America to Have Almost 31% of Its Population (204.9 million) in Gen Y (15–34 years) in 2025

Total Population = 661 million

65 years and above 35–64 years 15–34 years 0–14 yearsChileVenezuela

Argentina

Colombia

Mexico

Brazil

Rest of LA

Note: Figures in brackets denote million of people Source: CEPALSTAT 2012, Frost & Sullivan Analysis.

Total Population = 577 million

Population Breakdown by Age, Latin America, 2010

Population Breakdown by Age, Latin America, 2025

Gen Y : Breakdown by Country, Latin America, 2025

27.7% (159.8)

34.2%

(197.3)

31.2%

(180.0)

6.9%

(39.8) 22.0% (145.4)

31.0% (204.9)

36.5% (241.3)

10.5% (69.4)

Personalization and Individualization

Techno Savvy and Connected 24 X 7

Civic and Environmentally

Friendly

Demanding and Impatient – “Fast and the Furious”

Gen Y Consumption Behaviour

(11.3)

(13.7)

(5.3)

The Middle Bulge: Middle Class Individuals to Account for 69% of Latin America’s Population (461 million) in 2025

Source: IADB, ECLAC, Frost & Sullivan Analysis.Note: Figures in brackets are millions of individuals.Poverty Line based on ECLAC definition of poverty - $2.5 US dollars per person per day in market prices

2025

661 million Individuals

2011

577 million Individuals

$32,000

$14,600

$60,000

$3,650

$100,000

10.8%(62)

Below Poverty Line

Poor

Lower Middle Class

Middle Class

Upper Middle Class

Rich

31.1%(206)

9.7%(64)

13.8%(91)

27.2%(180)

11.3%(75)

Income Per Annum

Poverty Line

12.9%(74)

32.6%(188)

6.6%(38)

19.2%(111)

17.9%(103)

6.9%(46)

Income Pyramid, Latin America, 2010 and 2020

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Informal Settlements- Over 163 million people living in Informal Settlements in Latin America needing $3 trillion investments in housing by 2020

Sanitation

Telecom&Energy

Macro to Micro Implications

Banking the unbanked

Retail

Consumer goods

Education -

Micro credit and pre-paid credit card

Sewage collection and tratment

Low cost and formal Pay TV adn energy services

Public financing for higher education

- Economic size, same quality less design

- Mini-stores and check out appreciation

1990 2001 2010 20200

200

400

600

800

1,000

111 128 143 163123 188

271

419420

533649

807

Asia Africa Latin America

Population Living in Informal Settlements, Selected Regions, 1990 - 2020

Source: ECLAC, Frost & Sullivan

Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat; CEPAL; Frost & Sullivan analysis.

The region remains net exporter of workforce, but the difference between the number of people moving out and

people moving in is dropping.

Net Migration - In 2020, emigration from LATAM will be 40% lower than in 2010.. Domestic market and labor force shall increase as consequence

*Net migration represents migration TO region (immigration) minus migration FROM region (emigration) in a given year

-1200

-1000

-800

-600

-400

-200

0

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

Mexico

2010 2020

-361,000

-263,0002010 2020

-100,000

-38,000

2010 2020

-218,000

-125,000

2010 2020

-52,000-18,000

Brazil

Andean Region

Southern Cone

- 40%

Average Net Migration per Year by Country(Latin America), 2010-2020

Average Net Migration per Year (Latin America), 2010-2020

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INFRASTRUCTUREINFRASTRUCTURE

Mega Cities: By 2025, it is expected that 85.7% of the population (566.5 million people) in Latin America will be living in urban areas

People per Square Kilometre

Highly Urban Countries More than 200 people

Medium-High Urban Countries 100 – 200 people

Medium Urban Countries 50 – 100 people

Low-Medium Urban Countries 10 – 50 people

Low Urban Countries Less than 10 people

Mexico CityPopulation

2025:24.6 millionGDP 2025:

$713.5 billion

BogotaPopulation

2025:11.4 millionGDP 2025:

$298.0 billion

Rio de JaneiroPopulation

2025:13.6 millionGDP 2025:

$327.1 billion

Buenos Aires

Population 2025:

15.5 millionGDP 2025:

$327.1 billion

Sao PauloPopulation

2025:23.2 millionGDP 2025:

$643.9 billion

Mega Cities in 2025

Emerging Mega Cities (4-8 million population in 2025)

SantiagoPopulation

2025:7.1 million

Belo HorizontePopulation

2025:6.6 million

GuadalajaraPopulation

2025:5.7 million

Source: United Nations, Department of Economic and Social Affairs Statistics, Frost & Sullivan and other regional and country level statistics bureau

LimaPopulation

2025:11.5 million

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Mega Corridors: Latin America to See 3 Mega Corridors by 2025 with almost 80 million inhabitants

Photo credits: Google MapsSource: Frost & Sullivan

Rio de Janeiro - Sao Paulo – Campinas

Corridor

Distance: 511 km

Population: 44.3 million

GDP Contribution: 57% of Brazil’s GDP

Toluca - Mexico City – Puebla Corridor

Distance: 198 Km

Population: 31.8 million

GDP Contribution: 39% of Mexico’s GDP

Buenos Aires – Rosario – Cordoba Corridor

Distance: 710 Km

Population: 21.1 million

GDP Contribution: 49% of Argentina’s GDP

Mega Corridors in 2025Emerging Mega Corridors in 2025

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Infrastructure in Latin America: Latin America’s infrastructure is significantly behind OECD countries, demanding significant investments

Broadband density per 100 people

Electric power consumption (kWh per capita)

1907 8376

6.6 23.8

Improved water as % urban population 97.1% 99.6%

Improved sanitation as % population 87.0% 94.0%

Roads, paved (% of total roads) 33.3% 86.5%

Latin American countries

OECD countries*

Latin America has a large infrastructure deficit…

Country / Region % of GDP

Argentina 4.0%

Brazil 8.0%

Chile 5.0%

Colombia 9.0%

Costa Rica 3.0%

Mexico 2.0%

Peru 11.0%

Venezuela 4.0%

Total LatAm 6.0%

Annual investment in infrastructure over 20 years to equal the same level of South Korea (as % of GDP)

And significant amounts need to be spent

Rail lines (total route-km)

Air transport, registered carrier departures (million)

562,410 km93,454 km

1,838,212 18,639,951

* Includes Chile and MexicoSource: The Worldbank WDI database, 2010; WHO World Health Statistics 2011

Oil & Gas Pipelines (length in km) 26,500 All continent

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Source: Central Intelligence Agency, DNIT, Frost & Sullivan analysis

Latin America 2010

• The lowest percentage of highway in total transportation (which is cheaper than other modals)

• Low pipeline system integrating countries

• Countries with low integration

Latin America 2025

• Focus on railroad• Extensive pipeline system increasing

the exports of liquid fuels• More balanced distribution among

modals• More integrated countries

Evolution of Latin America

Transportation

58%

33%25%

32%

13%

29%

4% 5%0.4% 1%

2005 2025

highway railroad hidroway pipeline aerial

Investments in Infrastructure: Investments in alternate modes of transportation in Brazil are expected to drop the utilization of highways from 58% to 33% by 2025

**BRIC (without Brazil)*Europe (Germany, UK and Italy)

Infrastructure: Distribution of Modals by Region (Global), 2010

Expected Distribution of Modal Transportation (Brazil), 2005-2025

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City as a Customer – Concept and Definition

City as A Customer is an implication of urbanisationwherein cities (and not countries) are looked as potential customers and hubs of investment, wealth creation and economic growth .Every city will be highly unique in its infrastructure demands offering cross-sectoral micro implications and opportunities in following industries:

• Mobility• Building• Healthcare• Energy• Materials• Automation • Security• Retail

This in turn will drive:• Companies to internally revamp in house-competencies

and products/services portfolio to target cities as customers

• City Infrastructure market to develop into a new industry offering new white space market opportunities

• Highly customized and innovative city solutions and new urban business models

• Cities to wield economic and investment clout on par with countries

City as A Customer

Source: Frost & Sullivan analysis

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HEALTH

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BUSINESS

The Rise of Multilatinas: Multilatinas are poised to achieve an important role in several segments such as telecommunication, metals & mining and food & beverage

Sources: UNCTAD, OECD; The Emergence of Latin Multinationals (Deutsche Bank Research); AméricaEconomía; Frost & Sullivan analysis.

Local

National

Regional

Global

20202010200019901970 1980

Evolution of the market scope for the top Latin American companies

Profile of “Multilatinas” in 2020

Head office in Brazil, Mexico, Chile

Consolidated position in the domestic market

Managed by latin directores, educated abroad

Active M&A strategy towards foreign companies

Number of Latin American Companiesin the Forbes Global 500 List

20202010

99 1818

Is the stock of investments from

Latin American companies outside

their country of origin in 2010

$732.8 billion

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Reverse Brain Drain: By 2020, the flow of people is likely to have become intra region with the development of the countries such as Mexico and Argentina

Hot Spot: Brazil People coming mainly from USA, UK.

Source: Frost & Sullivan Analysis

2010

Hot Spots: Mexico, Argentina and Chile.Increase on the intra region flow of people

2020

The countries are expected to become specialized in some specifics areas (E.g: Mexico as a software developer and contact center hub)

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Income Redistribution Programs: The most important programs for income redistribution in Latin America are expected to grow at a 3.3 per cent average annual rate to reach 190 million of beneficiaries by 2020

Sources: Miguel Niño-Zarazúa, Brooks World Poverty Institute; Julia Johannsen, BID; ILO; SEDESOL (Mexico); Ministério do Desenvolvimento Social e Combate à Fome (Brasil); Frost & Sullivan analysis.

Argentina

Programa Familias para la Inclusión Social (Families for Social Inclusion): 7.5 million Regimen de Asignaciones Familiares (Scheme of Family Allowances): 5.7 million Pensiones Asistenciales (Social Pension): 0.3 million

Brazil

Bolsa Família (Family Assistance Program): 52 million Previdência Rural (Rural Pension): 11 million BPC (Benefit of Continuous Grant for Old Age and Disability) and RMV (Monthly Life Income for Old Age and Disability): 3.7 million

Bolivia

Bono “Juancito Pinto”: 9 million Bono Dignidad (Dignity): 3.4 million Bono “Madre Niño” and “Bono Juana Azurduy de Padilla”: 1.2 million

Colombia

Familias en Accion (Families in Action): 7.5 million Juntos (Together): 1.7 million

Mexico

Oportunidades (Opportunities, former “Progresa”): 27.5 million Programa de Apoyo Alimentario (Food Support Program): 4.1 million 70 y mas (70 and Over): 4 million

*An extended compilation of income redistribution programs for Latin American countries is available in the appendix section

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New Business Models: Latin American companies are now turning to new business models that will maximize the value added of their product and services

The Rise of Mobile Solutions

Personalization and Individualization

Collaborative Thinking and Crowd Sourcing

Source: Frost & Sullivan

Value for Many

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We will be witnessing

robots in homes

Digital assistants will guide our

lives

Cars to have autonomous

functions

Your health will be driven

Considerable Settlement Evolution

Designer drugs begin to emerge

Latin America is viewed as a

growth engine

Virtual world will threaten

Facebook

Innovating to 2020 – a few careful predictions to come

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Contact Details

Richard SearVice President – Visionary Innovation

(210) 247-3840

rsear@frost.com

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