[260714.EN.BIZ] US Companies Face Risks as Latin American Economies Hit Hard Times

AMERICAN companies, Ford Motor, 3M and Caterpillar have reported second quarter earnings that highlight weakness in their Latin American operations illustrating risks in relying on emerging markets.

While Venezuela's weak currency valuation previously weighed on US corporate finances, the latest results indicate tepid performance in Brazil, the biggest economy in Latin America, where some economists fear recession.

"The place where we see a little bit more of a challenge is Latin America," 3M CEO Inge Thulin said, while cutting its full-year revenue forecast for the region, the worst-performing in the quarter.

US companies that have looked to emerging Latin economies for growth have seen those expectations dented by Brazil's political and economic turmoil, Venezuela's currency woes and Argentina's renewed battle with creditors.

A Reuters poll of more than 60 economists from earlier this month found that Latin American economies will probably grow at a slower pace than previously thought this year.

Economies in Brazil, Argentina and Chile are expected to be weaker this year than in 2013, while Mexico is far from achieving the fast growth promised by sweeping economic reforms, the poll found.

US corporate prospects in Latin America have also been dampened by competition, lack of expected growth among the middle class and fluctuations in commodity prices, said Rafael Amiel, director for Latin America economics at research firm IHS.

"For multinational companies, the growth they were expecting in many Latin American markets is not happening," he added.

South America was the only region in the world where Ford posted a quarterly loss US$295 million, compared with a $151 million profit a year earlier.

Source : HKSG.