BMI View: The economic trajectory for the region remains divergent. Despite our expectations for slower real GDP growth in Panama in the next several years, it will remain the regional outperformer. On the other hand, we have a more mixed outlook for growth in the 'northern triangle' countries. While they will likely benefit from improved agricultural yields and stronger US demand for manufactured goods, Guatemala, Honduras and El Salvador are still vulnerable to significant structural macroeconomic weaknesses as well as ongoing political risk/gang violence . We have upgraded our 2015 real private consumption growth outlook for several Central American economies, mainly due to an uptick in remittances from the US and the positive effect of cheaper fuel prices on household spending.
Headline Industry Data (regional averages)
2014 per capita food consumption (US dollar terms) = +4.8%; forecast compound annual growth rate (CAGR) 2014 to 2019 = +4.4%.
2014 alcoholic drink sales (litres) = +5.1%; forecast CAGR 2014 to 2019 = +4.6%.
2014 soft drink sales (litres) = +5.0%; forecast CAGR 2014 to 2019 = +4.6%.
2014 mass grocery retail sales (local currencies) = +6.2%; forecast CAGR 2014 to 2019 = +6.5%.
Key Company Trends
SABMiller Aims T o Grow I n Latin America : In summer 2015, the president of SABMiller's Latin American unit, Karl Lippert, said that the brewer will expand its beer range in the region. He said the group had grown beer's share of total alcohol in its Latin American markets from 55% to 59% in the past four years, due primarily to taking share from cheaper spirits, and untaxed and inexpensive illegal alcohol. The company expects total volume growth of 3-6% from Latin America markets in the medium term, and EBITDA margin growth between 10 basis points to 30 basis points.
Walmart Investment Plans F or 2015 : In summer 2015, Walmart announced that it would invest about USD266mn over the course of the year in the construction and remodelling of stores in the region, which will lead to the creation of some 7,000 jobs. It followed earlier announcements this year that the company would open eight new stores in Costa Rica for the year, generating 2,400 jobs, and another six stores in Guatemala. The company has also stated its plans to add 162,000 sq m of new sales area in the region - in Central America, the sales floor will increase by 5.4%.
Florida Ice And Farm Exports T o Europe : In summer 2015 Costa Rican beverage company Florida Ice and Farm began marketing its most popular beer brand Imperial in Switzerland. Imperial currently is also available in the US, Australia and China. The company also said it plans to start selling its Tico beer in other European countries and across the Americas.
Key Risks To Outlook
Remittances act as a significant driver of daily consumption habits in the Central American region. The risks to our view for stronger remittance growth are evenly balanced. On the one hand, a sharper than expected acceleration in US growth would see remittances inflows come in higher than anticipated. On the other, should we see a substantial increase in deportations, this could modestly stymie remittances.