Latin American Businesses look to past in adapting to Current Economic Downturn.

Businesses across Latin America are using the global recession as an opportunity to call on past economic experience as they review and reshape their operations and prepare for economic recovery, a new survey by KPMG International revealed.

According to the survey — issued today in a report titled “Out of Adversity” at KPMG’s Ibero-America Tax Summit in Santiago, Chile — Latin American businesses appear to have taken the recent global recession in stride, drawing on their experiences during past difficult economic times within their own countries to manage through the current downturn.

The KPMG poll, which surveyed 165 business executives in Argentina, Brazil, Chile, Columbia, Mexico, Peru, and Venezuela on their reactions to the current recession and plans for the recovery, indicates that only 5 percent of Latin American respondents had no past lessons to help them deal with the downturn.

“The survey results tell KPMG that in many Latin American countries the global problems are viewed as an almost routine part of business, and executives are adapting quite well by responding thoughtfully and
moderately,” said Shaun Kelly, chair, Americas Tax, for KPMG LLP, the U.S. audit, tax and advisory firm.

“Their responses indicate that the financial crisis has had a different impact within Latin America than in regions whose economies had been enjoying unprecedented prosperity for some years, such as Europe and the United States,” Kelly said.

The KPMG survey reports that 61 percent of Latin American businesses said they are making substantial changes to their near-term (12-month) business strategies, ranging from finding new markets to focusing on cutting costs and optimizing business processes.

Mexico leads in this area, where 80 percent of companies surveyed planned changes in the year ahead and 76 percent planned longer-term changes. In addition, 59 percent of respondents are also radically
rethinking their long-term strategies, considering significantly changing their business operations or developing new products.

Latin American companies also have a sharp focus on tax management, according to the KPMG survey, with 45 percent of respondents reporting they have identified tax as a potential source of cash savings and have stepped up their tax planning to take advantage of these opportunities.

Latin America Takes Middle Road, versus Europe and Asia Pacific

Latin American responses to the KPMG survey place companies in the region firmly between those in Europe and those of the Asia-Pacific countries in their approach to recovering from recession.

European respondents to KPMG’s global survey of business leaders indicate that relatively few European companies are making far-reaching plans to re-organize their businesses to take advantage of the recovery, either in the short-term or long-term. Ireland is one exception, with 67 percent of businesses planning a change in strategy in the next year and 63 percent in the next decade. In Belgium and Switzerland, on the other hand, only a third of businesses are planning a similar change in the short-term and just 25 percent of Belgium businesses expect radical change in the long-term.

In sharp contrast to Latin American executives, a large proportion of European companies (42 percent in Germany and Italy) told KPMG the recession was unprecedented and that there was nothing from previous experience to help them find their way through it.

The KPMG survey found that companies in the Asia-Pacific region are well-advanced in their preparations for a recovery. Japan (87 percent), Singapore (84 percent), China (66 percent) and India (72 percent) report that they have extensive plans to reshape their businesses in the next decade, and Singapore (64 percent), India (62 percent) and Japan (57 percent) rank high for short-term plans, as well. Companies in these countries are looking for new markets, developing new products and formulating new business models in expectation of a new emerging world economy.

Governments Seen as Partners in Recovery

Nearly all Latin American respondents to the KPMG survey want their governments to play an active part in working to improve economic conditions, with only four percent saying that governments have already
done enough.

Overall, 23 percent of respondents looked for a cut in the corporate tax rate. The second most popular option overall at 10 percent was an increased investment in infrastructure.

Some 81 percent of Latin American respondents to the KPMG survey said they would be prepared to be more open with tax authorities in exchange for more flexible regulation, but more than half (56 percent) of businesses also said their tax authorities appear unwilling to help them develop their international business.

“Latin American businesses clearly look to their governments to act as partners in business growth,” said Kelly, “but companies also appear to believe that tax authorities, perhaps under pressure to bring in revenue, have moved away from efforts to improve relationships with corporate taxpayers.”

“We believe the desire and the energy for improved relationships exists among Latin American businesses, and governments working to build fairer and more effective tax systems will find an excellent foundation among them,” he concluded.

For more information at http://www.kpmg.com