A strength of the Global business pulse is that it tracks two dimensions of health: growth expectations (measured by the ‘outlook’) and the barriers to growth (tracked by ‘restrictions’). In H2 of 2020, both of elements recorded improvements, underlining a more holistic improvement.

Of the two, the outlook increased the most, jumping 13pts to 54.2 in the second half with improvements apparent across all countries. The restrictions improved 5pts to -47 and even surpassed pre-pandemic levels recorded in H2 2019 by 3pts. While both Brazil and Mexico saw the restrictions score improve, Argentina’s score fell vs. H1, which speaks to the country’s continued economic challenges.

While mid-sized companies may not have the same immediate vulnerability as their smaller counterparts highlighted above, Nicolas notes that many are heavily dependent on domestic private spending, which may take some time to recover. More positively, and in the immediate term, he notes that companies that may not have built up the same scale and level of productivity as their larger peers, may enjoy a little more protection from the pressures of international competition.

All three elements of the outlook improved strongly compared with the first half, but it’s economic optimism that sets the pace. Currently, some 61% of businesses in both Brazil and Mexico feel optimistic about the economy over the next 12 months. The improvement is much less pronounced in Argentina with 47% of mid-market firms optimistic for the economic outlook, although this is higher than the 2019 average for the country.

There has been a similar improvement in conditions, which captures expectations for business growth, and investment intentions. Historically the Global business pulse has shown a strong correlation between these two elements globally, and it is encouraging to see firms in Latin America following their own convictions and investing in the face of continued COVID-19 uncertainty. The investment categories that companies are prioritising in the region are technology (66% looking to increase investments), R&D (52%) and staff skills (52%).

In terms of growth expectations, 60% of mid-market companies in Latin America are expecting to increase revenue over the next 12 months, the second-highest growth outlook of any region tracked by the Global business pulse. A significant 58% of companies are expecting to growth profits over the next 12 months.

By contrast, export expectations have only edged up slightly since H1. Just 38% of firms now expect to increase exports in the next 12 months. Recent analysis by the World Trade Organization points to a ‘deeply depressed’ trade environment for South America in 2021 despite big increases in global volumes.[iv]

There has been some debate about what impact the change in US administration will have on the region, but working on the assumption that America becomes more outward-looking and willing to trade, then Robert Hannah, global head of strategic growth markets at Grant Thornton International Ltd, believes it will be “hugely significant” and that the region stands to benefit massively as a resource hub for the US.

Roy makes the related point that if the US gets its recovery going and is willing to support Latin American countries with their vaccine needs, then that will also be a powerful stimulus for the region that we may see reflected in the next Global business pulse.

In contrast to many other regions, there was a marked improvement in the barriers to growth or ‘restrictions’ in Latin America – up 5pts to -47. But the three restrictions components (see below) tracked very differently during the period. Economic uncertainty was the element that showed the most improvement, reflecting some of the uplift seen in economic optimism. While, demand constraints, which track concerns about shortages of orders for goods and services, was flat for the period, reflecting the challenges ahead of the expected pick-up.

Encouragingly, supply constraints lifted materially during the period. The biggest single driver behind this was an improving picture when it comes to accessing finance. Only 41% of firms anticipate that a shortage of finance will be a constraint to their growth, down 12ppts from H1 2020 and now below levels seen in H2 2019. This is less of a concern across all three countries monitored by the Global business pulse, and the regional picture may be linked to the fact that several Latin American countries gained access to flexible credit lines from the IMF.[v] This is hugely important and will be the difference between success and failure for some in this prolonged pandemic.