From The Editor's Desk

Annual financial results point to LATAM struggles for multinationals

By Simon Pitman

- Last updated on GMT

Annual financial results point to LATAM struggles for multinationals
In the past few weeks some of the largest multinational cosmetic and personal care players have released annual financial results that point to weaknesses in the LATAM market.

Most notable have been the results of Avon, L’Oréal​ and Unileve​r, which both reported strong global results that were dragged down by distinct weakness in the Latin American markets.

Likewise, Natura Brasil, which is one of the region’s biggest cosmetic and personal care and also an international player, has posted results that have underpinned distinct weakness in its Latin American market.

What is causing the troubles in the LATAM market?

In this article we are going to look at what the main issues that have caused the weaker results in the LATAM region and analyze whether or not the weakness is likely to persist as we move forward into 2019.

Certainly there have been were some struggles in the Latin America region, but markets such as Chile, and Mexico have been showing high growth rates in consumer spend, so how widespread are the problems and are they likely to persist?

There appear to have been two main reasons for the troubles in the LATAM market during the course of the last year, the first being economic problems in Argentina, and the second being specific challenges in Brazil during the first half of 2018.

Argentina economic outlook remains weak

The primary weakness for the big cosmetics players has largely been down to the Argentina market. During the course of 2018, the Argentina peso was significantly devalued against foreign currency, losing more than 50% of its value against the US dollar.

Indeed, the hyperinflation has had a significant impact on the country’s economy, with GDP shrinking in the last two quarters of 2018, officially putting the country into a recession by December.

The International Monetary Fund predicts that the economy will shrink a further 1.7% during the course of 2019, but international bail out loans have helped to slow down the shrinkage.  

This means that looking ahead to the rest of 2019, the Argentina market is still likely to pose challenges to international

In Brazil things are starting to turn around

In Brazil, which is by far the largest economy in the Latin American region, cosmetic and personal care players faced the challenge of the national truck drivers’ strike in the first half of 2018, and this really impacted businesses across a spectrum of sectors, including retail and consumer goods.

The retailers and consumer goods players were impacted simply because deliveries couldn’t get through, leaving store shelves and warehouses across the country empty.

But unlike Argentina, the outlook seems much better in Brazil. The truck drivers strike only impacted the country’s economy during the month of May, and since then the country’s economic recovery has continued you gain momentum.

On top of that, a new right-wing government was installed at the beginning of the year. Although the new president, Jair Bolsonaro has raised some eyebrows with his seemingly heavy handed manner, economist believe the regime could inject further impetus into the economy during the course of 2019.

Bearing this in mind, cosmetics and personal care players will be pinning their hopes on further economic growth and stability translating into increased consumer spend that will make 2019 a good year for them there.

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