News
Between October 26 and November 29, 2015
The Japan External Trade Organization (JETRO) conducted its 16th survey on the business operations of Japanese firms (both manufacturers and non-manufacturers) in seven countries in Latin America: Mexico, Venezuela, Colombia, Peru, Chile, Argentina and Brazil. The survey received valid replies from 400 firms (a 51.5% response rate) out of 776 to whom we sent questionnaires. The question items covered areas including:
1. Status of operations
2. Future business outlook
3. Managerial issues and countermeasures
The survey report is summarized as follows:
Japanese-affiliated companies in Mexico are performing well. Mexico marked the highest out of 37 countries, in both the diffusion index (DI) for 2015, which measures business confidence*, and the proportion of companies indicating business expansion within the next one or two years, with more than 30 valid responses. The reason most likely being that many Japanese companies operating in Mexico are engaged in the automobile industry and that Mexico has experienced positive influences of the stable US economy as a hub for manufacturing and exporting automobiles mainly to the US market.
* The figure is calculated by the proportion of businesses reporting increased operating profits minus those reporting decreased operating profits.
Among risks and issues of the investment environment in Brazil, with the Olympic games expected to be held in August this year, the percentage of respondents indicating unstable political and social conditions increased remarkably from 37.5% in the previous year to 74.3%, affected by a political corruption scandal concerning a state-owned petroleum company, Petrobras. The political chaos caused a delay in financial reforms and a fall in the value of its currency, the real. This resulted in a surge in the percentage of companies reporting the unstable exchange rate to be a concern from 45% last year to 82.4%. A significant drop in currency value triggered a rise in interest rates, also resulting in decreased domestic demand. Companies unable to add the increase in import costs to sales prices are especially facing a tough situation.
Argentina saw a substantial increase in the DI for 2015, from the negative 10.7 points of the previous year to 32.3 points, with business confidence placing second behind Mexico among the countries in Latin America. In addition, the percentage of respondents expecting business to expand within the next one or two years saw a considerable increase from 21.4% in the previous year to 45.2%, while those indicating downsizing decreased from 14.3% to zero. In November 2015, Mauricio Macri was elected president on the promise of reform by shifting to an open domestic economy and took office on December 10. Among the reasons to expect business expansion within the next one or two years, ''easing restrictions'' marked 57.1%, notably high among Latin American countries. The new administration has been presenting an array of policies regarding currency exchange and trade, which has contributed to increasing the expectations of Japanese-affiliated companies for the business environment to improve.
