Sluggish Latin American results show risks for U.S. companies

Fri Jul 25, 2014 1:13am EDT
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By Lewis Krauskopf

(Reuters) - U.S. companies are reporting sluggish financial results in Latin America, showing the risks they face in relying on Brazil and other emerging markets in the region for growth.

Companies ranging from Ford Motor Co to 3M Co and Caterpillar Inc reported second quarter earnings that highlighted weakness in their Latin or South American operations.

While Venezuela's weak currency valuation previously weighed on U.S. corporate finances, the latest results indicate broader struggles. Several companies reported tepid performance in Brazil, the biggest economy in Latin America, where some economists fear the country is on the verge of a recession.

"The place where we see a little bit more of a challenge is Latin America," 3M Chief Executive Officer Inge Thulin told analysts on the company's quarterly conference call on Thursday. The diversified manufacturer, whose products include office supplies and industrial adhesives, cut its full-year revenue forecast for the region, the worst-performing in the quarter, hurt by a sales decline in Brazil.

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

"This is kind of the up-and-down of emerging markets," said J. Bryant Evans, who manages an international equity income portfolio at Cozad Asset Management in Champaign, Illinois.

'NOT HAPPENING'   Continued...

Workers check new cars before they are transported to dealers in Sao Bernardo do Campo April 29, 2014. REUTERS/Paulo Whitaker