How is Latin America’s Recession Impacting Panregional Marketing?
With Brazil being mired in wide corruption scandals and most Latin American countries going through a recession and heavy local currency devaluations, the economic framework for panregional marketing has changed substantially. 5 things You need to know.
1. Currency Devaluations Generally do not Spell Well for the Miami Marketplace
With Latin American currencies (e.g. Mexico, Argentina, Brazil) having been devalued between 20% and 100% over the last 18 months it is becoming very expensive for major corporations to finance marketing and advertising investments with U.S. dollars. It makes much more sense for them to invest in local currency which they obtain through their local sales. This way, media purchases tend to be made through local media subsidiaries. The one exception to this is for companies that do not have local Latin American subsidiaries (this is the case for some fashion and luxury goods corporations). Their sales often adjust to the dollar value of the local currency and they are able to finance media buys in dollars on a panregional level, often the media buy is coordinated by a Miami based international media agency. (Check out: Is Miami still the Capital of Latin American Marketing and Media? 8 Things You Need to Know).
The main culprit, we believe, is the strength of the U.S. dollar and the relative weakness in local currencies.
2. Panregional Buy, Does Not Necessarily Mean Miami Buy
Panregional media buying, (meaning coordinated media buys in 2 or more Latin American countries, do not necessarily have to be done out of Miami. In fact, over the last few years Mexico City, Buenos Aires (Argentina), Brazil and Central America (Panama), have become important buying centers.
3.Brazil, always a huge island in itself
In Brazil, output has been falling for most of the past nine quarters. It contracted 3.8% last year. The OECD expects another 4% fall this year, the deepest slump since national records began in 1901. Economic contraction certainly curbs marketing and advertising investment in Brazil. But the truth is that Brazil usually has been isolated from the panregional media buying space. As Latin America's largest country and with more than half of the region's advertising volume, Brazil follows its own rules almost independently of the evolution of the Spanish-language panregional space.
4. 2016 Olympic Games Only Make a Difference on Local Markets, mostly Brazil
Brand marketers and media executives asked by Portada note that the Olympic Games, perhaps contrary to the 2014 Soccer World Cup, are not turning out to be a major driver of advertising. Olympic Games are only "pushed" by the broadcast right holders and are not a panregional –global phenomenon like the World Cup. Only local media properties, particularly in host city and country (Rio de Janeiro and Brazil), will reap some of the increased ad expenditures of local and international brands.
5. Online Video’s Lower Growth Rate
While online video and digital advertising continues to grow in most Latin American markets, the growth rate is slowing a bit. "As pertains the amount of money devoted to online video advertising in response to economic pressures, we have seen recent decreases in the projected growth of online video ad budgets, " says Javier Salom, Co-Founder & CEO of online video ad network Impaktu. "The main culprit, we believe, is the strength of the U.S. dollar and the relative weakness in local currencies. Accordingly, online video ad budgets continue to grow but the rate of growth has slowed down. Said another way, advertisers continue to shift monies from other ad formats to online video, but not as quickly or as much as had been forecast previously. From conversations we've had with advertisers and publishers alike throughout the region, we believe the slowdown has affected all facets of advertising and not just online video, " Salom concludes.