An overview on the Latin American Advertising Business

Adversing Business Review—October 2014
<strong>An</strong> <strong>overview</strong> on the Latin
American Advertising
Business
this issue
<strong>An</strong> <strong>overview</strong> on the
Lan America
Adversing Business P.1
Argenna P.4
Brazil P.5
Peru P.5
Colombia P.6
The Lan American adversing market raises a great number of quesons for
Mexico P. 7
Chile P.7
many people who look at it from a distant perspecve. However, this industry Countries to Watch (Bolivia,
does not show a lot of differences between any other side of the globe. In Costa Rica, Paraguay, Ecuador
& Panama) P.8
this market, the main players are also the great six holdings in the world:
Uruguay P.9
WPP, Omnicom, Publicis, Havas, Interpublic and Dentsu. Along with those,
How we can help you P.9
there are many other local agencies, which, based on outstanding talent –
plenful in this region – endeavour to posion themselves in order to develop their own business. The
behaviour of this Lan American market in the light of certain smulaons, such as technological advances,
is usually similar to the European market. The growth of adversing on the internet, which, in Argenna,
during 2013, represented 14% in the adversing investment in the country, is just one of so many examples
to menon in this summary.
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This is the reason why, when dealing with the
Lan American adversing market, it is impossible
to give explanaons very different from the ones
which would be given about other markets in the
world, but it is possible to get a deeper knowledge
of it in order to make the right decision about the
country or area that is the most suitable for some
business development.
Although it could be agreed that there are many
similaries within the Lan American adversing
industry, it is essenal to point out that there are
some markets which are bigger than others, with
dissimilar results depending on the types of services
and areas where creavity plays a more (or
less) primary role at the internaonal level.
Argenna, Brazil and México stand out above the
others since their adversing markets are highly
developed in comparison with the rest of the
countries in the region. With regard to Argenna,
its backbone is the superb creavity accomplished
by talented, skilful professionals
who are renowned worldwide.
Among other achievements, this
fact has allowed Argenna to become
one of the top ten most creave
countries in the world along a
with Brazil, according to the
awards won in Cannes Lions 2014.
As regards Brazil and Mexico, besides
the outstanding talent of the
professionals who work at their various agencies,
these countries were able to add to the maturity of
their markets an outstanding increase in adversing
investments, which is mostly related to their large
populaons.
Nevertheless, the adversing market
in Lan America is much bigger
and not restricted to just these
three countries. There are several
emerging countries which, based on
benefits for the industry, an open
atude towards the world and the
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constant efforts of the professionals working in this
business to improve their capabilies, seek to posi-
on themselves in order to be compeve. Chile,
Peru and Uruguay are good examples of the previously-menoned
group.
This general <strong>overview</strong> clearly shows that the adversing
industry in Lan America offers excellent possibili-
es, both to capitalize on the local markets and to
become a producon center towards the world.
The Region has strong acvity in M&A deals.
M&A Volume—Q3
Source: Merril Datasite M&A Report
Relang to agencies (Adversing, Media Buying or
Digital) average raos in Lan America, Employment
Cost / Gross Income is between 50% to 60% and Operang
Profit / Gross Income, between 15% to 20%,
similar to internaonal standard raos obtain in
other bigger markets like UK or USA. Raos has
been steady during several years.
In case of Gross Income and Operang Profit per
Head, valuated in USD, a comparison between Argenna
(with a lower exchange rate among its currency
and USD than other Lan American countries)
and UK with a stronger currency than
USD, shows just an average relaon of
55% in case of Gross Income per Head
and near a 70% on Operang Profit, than
raos obtain in UK market, which shows
that despite of market size, currency and
cost of living, at the end, profits obtain by
agencies in Lan America could also be
among reasonably internaonal standard
raos .
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what happens in other countries, several of the
most disnguished creaves in Lan America are
1
2
3
3
5
5
7
8
9
10
currently working. This creates a mature, highquality
and highly compeve local
market.
Buenos Aires City has
Moreover, in recent
several Districts with tax
years, in order to guarantee
the growth of
benefits for Design, Audiovisual
and Technology
the industry, a special
developments
district has been established
in the City of Buenos
Aires, with tax advantages
for the agencies and producon companies located
there. This was considered as a beneficial issue
by the big companies and also small and mediumsized
companies, which gave them support which
enabled them to reposion themselves in the internaonal
market.
The Gunn Report (World
ARGENTINA
Creavity Ranking) Posion:
2013: 7; 2012: 6; 2011: 4;
2010: 6; 2009: 3; 2008:3
Not only is the Argenne adversing market established
among the most 20 prominent ones in the world but it
also has several interesng aspects worth analyzing.
The combinaon of these factors: a developed
market, experienced, young creave (already in
the country) and the cultural diversity of its capital
All the most important internaonal holdings are represented
by their main agencies where, as opposed to
city make this place a great opon to have the
lead in the region. Thus, not only is it possible to
Area
2,780,400 km²
exploit the local adversing market
Populaon
40,117,096 inhabitants
but also the parcular characteris-
cs of this place allow it to offer
GDP
Total: USD 611.8 million
the opportunity of dealing with accounts
from all Lan America from
Per capita: USD 14,760
Currency
Argenne Peso (ARS
this country.
$8.16 = 1 USD)
Official Language
Spanish
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The Gunn Report (World
BRAZIL
Creavity Ranking) Posion:
2013: 4; 2012: 5; 2011: 3;
2010: 5; 2009: 7; 2008:6
If a leading role in the region had to be selected,
without a doubt all the eyes of the experts in the adver-
sing market would be on Brazil. The size and maturity
of its market, the current welfare of its economy in general
and the level of local creavity make this country
not only the greatest in terms of investment but also a
role model.
Perhaps the only weak point when appraising the
feasibility of doing business at a regional level, is
its language barrier, because language is Portuguese
as opposed to the other Lan American
countries that speaks Spanish. That is the single
fact that could possibly make Argenna or Mexico
reduce the gap when it comes to establishing
Area 8,514,877 km 2
headquarters to provide services
for several countries.
Populaon
201,032,714 inhabitants
However, the size of the local
market enables Brazil to be considered
GDP
Total: USD 2,242.854 million
as a connent in itself.
Per capita: USD 11,310.87
Currency
Real (R$2.28 = 1 USD)
Hence, this is a country where
any player in the adversing
industry with great expectaons
Official Language
Portuguese
should be present.
With astonishing numbers in adversing investments
(above 15.860 million dollars), Brazil is the perfect place
to experience a very fast growth in this market. Besides,
it should be borne in mind that it offers different possibilies
for those groups seeking to set up a branch
office there, since it has several highly developed cies
such as Rio de Janeiro and Sao Paulo.
A special characterisc of this market is the fact that,
due to various regulatory and commercial issues, crea-
ve agencies keep media planning and buying under
there responsibilies, unlike the rest of the countries in
the region, where the media agencies are consolidated
and have a very significant parcipaon in the business.
PERU
It is widely known that one of the Lan American
countries which has been experiencing greater
growth for the last few years is Peru. Consequently,
its adversing market is also accompanying this
general rise of the country.
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Between 2009 and 2013, the adversing investment in
Peru went from USD 416 million to USD 715 million per
year, a solid, steady increase of more than 70%, regardless
of the digital area, which has had a notable growth
since 2011.
Considering all the sectors in the adversing industry,
we can state that at the end of the year 2013 it reached
over USD 800 million in revenues, experiencing a
growth similar to the one of the GDP.
All these figures summarize that there is clearly a consolidated
market in this country. Nevertheless, the next
big challenge for the Peruvian agencies will be to posi-
on themselves among the most creave countries in
the region.
Area 1,285,216.20
km 2
Populaon 28,220,764
inhabitants
COLOMBIA
The adversing
market in
Colombia
has had a
very important
growth during
the last two decades, to such an extent that,
according to a report carried out by the Colombian
Naonal Associaon of Traders (FENALCO, for its
inials in Spanish), the adversing investment in
the tradional media (print, radio and television)
has grown 5.9 per cent in 2013 as compared to
2012, with a total amount of resources for 1.2 million
dollars.
Without the shadow of a doubt, this situaon is
due to the high adversing budgets of many local
companies and, lately, to the arrival of various
mulnaonal corporaons.
As regards the players in this market, it is noteworthy
that, as it happens in the rest of the region,
all the great internaonal groups and many
local small and medium-sized agencies coexist.
Area 1,141,748
GDP
Currency
Official
Language
Total: USD
200,292
million
Per capita: USD
6,572.64
Nuevo Sol (PEN
2.78 = 1 USD)
Spanish
km²
Populaon 47,662,951
inhabitants
GDP
Currency
Official
Total: USD
388,858
million
Per capita:
USD
8,150.342
Colombian
Peso (COP
$1,892 = 1
USD)
Spanish
Language
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MEXICO
When considering
Mexico in
the context of
the Lan American
adversing
market, it
should be borne
in mind that this
is one of the three giants of the region.
While it is true that in terms of creavity it is sll far below
Argenna and Brazil, Mexico maintains a consolidated
place in this aspect, since for the last few years it
has been among the top 25 countries in the world, and
its market is the second largest in the region, just behind
Brazil. This fact is closely related to its large populaon
and to its existent level of adversing investment,
which is above USD 5.5 million.
As regards its map of adversing agencies, it should be
noted that not all of them operate from a single city but
they are distributed among the Federal District (Mexico
City), Aguascalientes, Monterrey and Guadalajara.
Area
1,964,375 km²
Populaon 112,336,538
inhabitants
GDP
Total: USD
1,327,021 million
Per capita:
USD
11,224.48
Currency
Mexican Peso
(MEX $13.25
= 1 USD)
CHILE
This country
is maybe
the biggest
of the
emerging”
ones and
the smallest
of the possible “leaders of the region”. Why? The
answer is quite simple: Its adversing market already
has an investment of 1.423 million dollars, a
figure that shows an evoluon higher than 40% in
the last ten years, if we take as a reference the
1.007 million dollars invested in 2004. Consequently,
in terms of figures, Chile is not such a
small market.
Besides, it has become established among the top
40 countries in local creavity, according to The
Gunn Report ranking, an achievement not yet obtained
by those countries that have recently been
experiencing the first rises in the adversing sector.
A stable economy with a tradional interna-
onal open atude is the reason why this country
is considered more and more as the best choice
for establishing headquarters to develop business
in the region.
Area 756,102.4
km²
Populaon 16,634,603
inhabitants
GDP
Total: USD
268,413
million
Per capita:
Currency Peso (CLP
$566.33 = 1
Official
Language
Spanish
Official
Language
Spanish
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BOLIVIA
the most cosmopolitan city in the country, concentrate
about 30% of GDP and has the largest number of higher
educaon instuons. Santa Cruz is a busiest place of
internaonal events of a global nature . It has a stable
economy with low inflaon and growing.
The coun-
COSTA RICA
Has a conducive and favorable GDP of U.S. $ 2 billion, which also includes Argenna,
Brazil and Uruguay. Excellent cost-benefit la-
investment climate. It has a
workforce of low cost with a bor in the region and lower social security contribuons
on wages;. Populaon mostly young and
high degree of technical exper-
se. The City of Santa Cruz, with great ease of learning and training.
try has an
excep-
onally
talented
young bilingual workforce. On average 95% of
employees of mulnaonal companies are local . Costa
Rica is a plaorm for preferenal access to 1/3 of the
world populaon, and 2/3 of global GDP. 87% of goods
exports through free trade agreements . Excellent business
climate based on a recognized tradion of democracy,
economic and polical stability . The quality of life
in Costa Rica is high. It is the safest country in Lan
America and one of the 5 countries with the best environmental
performance worldwide . In a survey conducted
by the World Bank for Global Governance Indicators
in 2012, Costa Rica ranked in second place in
Lan America for polical stability.
PARAGUAY
Highest monetary and
fiscal stability in Lan
America (never had
sharp devaluaon, expropriaon
or freezing of
savings, etc.) Lower tax rate and a very simple tax system;
Quick recovery of economic growth and investment
aer the crisis of 2008-2009, 10% growth in 2010
based on food producon as global demand tends to
grow;. Access to MERCOSUR, a free trade area with a
Has one of the highest
indicators of growth in
the region. According to
ECLAC,
Countries
to Watch
the Ecuadorian economy is
among the countries with
the best economic performance
in Lan America.
Inflaon is a digit and is
lower than the average for
Lan America. The legal currency is
the US dollar, which provides security to investors,
as there is no risk of devaluaon. The economy
has a skilled workforce and salary is compeve
compared to its main competors. Strategically
located in the middle of the world (zero latude of
the equator)
The Dubai of the
PANAMA
ECUADOR
Americas and will soon
become the Singapore
of the area. Use US
dollar as legal currency.
Has lower inflaon rate, 2% in the last 40 years
with no risk of devaluaon. Panama City is a cosmopolitan
metropolis with excellent quality of life.
Because of the posion of Panama as a crossroad
of internaonal trade and transport, has a long
history of living and working with foreigners. Panama
has a sophiscated banking system and tax
benefits. The adversing business has achieved a
great development in last years.
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Area
Populaon
176,215 km²
3,286,314 inhabitants
GDP Total: USD 55,708
million
Per capita: USD
URUGUAY
Currency
Official Language
Uruguayan Peso
(UYU $23.53 = 1 USD)
Spanish
Although investments in the Uruguayan adversing
market are just 285 million dollars – a figure which is
not bad at all given the size of the country and its populaon
– it has a long-established tradion.
This is the reason why there are big internaonal agencies
and small and medium-sized local agencies in this
country which are included in a naonal associaon
(Uruguayan Associaon of Adversing Agencies –
AUDAP, for its inials in Spanish).
Regarding the creavity level in the country, it must be
remarked that it has been for years among the top 50 in
the world, a fact which emphasizes even more its tradi-
on in adversing in Lan America.
As regards the parcipaon of this industry in the general
economy of the country, adversing has an incidence
of 0.5 per cent on GDP.
Taking into account the fact that there is a compeve
market in this country, but also that maybe the final figures
of the volume of investment may be lower than
the potenal of their professionals, the challenge for
the local agencies is to develop their business in the region
as service exporters.
We can help you to develop
successful business in Lan America
Although you might have noced throughout this
report that there are many similaries between
the adversing business in Lan America and its
counterparts in the United States or Europe, it is
also true that there are several cultural differences.
In this business, in which the main capital
is the superior talent of the people who work
there, the awareness of these disncons and
the cultural approach become essenal to
achieving success.
Our wide experience and knowledge of the adversing
business, its players, idiosyncrasy, par-
cularies and possibilies will ensure you a suitable
process. Our cooperaon is not limited only
to all the corporate and profitability aspects but
also on some key issues such as a start-up and
pre- or post-mergers processes.
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About Us
Ad Business Embassy is a muldisciplinary organiza-
on made up of chartered accountants and strategic
consultants in various areas of experse with extensive
experience in counseling companies in the markeng
communicaons industry.
In our offices, located in Brazil, Mexico, Chile and
Uruguay, or in the rest of the representaons we
work with in Lan America, you will find professionals
who understand the problems of your business
and can provide soluons to the needs of your agency.
That is our mission, to be the main reference in each
country for agencies and other companies in the adversing
business, both local and internaonal, who
need to establish or develop their business.
hp://www.adbusinessembassy.com to know more
about us, services provided and clients we work for.
Contact us
Maas Tejero
Regional Manager
maas@adbusinessembassy.com
Skype: maas.tejero
(languages : Spanish / English / Portuguese)
Ad Business Embassy
HQ: Maure 4109 1° Piso
Buenos Aires, Argenna
(54) (11) 4553‐7000
Gonzalo Benítez
Research <strong>An</strong>alyst
news@adbusinessembassy.com
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