Birches Group LLC (New York) Introductions Brief Overview of Latin - PowerPoint PPT Presentation

Warren Heaps Partner Birches Group LLC (New York)

• Introductions • Brief Overview of Latin America & Caribbean Region • Presentation on Brazil • Open Discussion

• Warren Heaps – Partner, Birches Group (New York) • Renato Rovina – RewardsLab (Brazil)

• Warren is a Partner with Birches Group LLC in New York. • He manages Business Development and private sector outreach, as well as several client relationships. • Prior to Birches Group, he spent 20 years at Colgate-Palmolive in various benefits, compensation, HR generalist and global mobility roles, including HR Generalist for Latin America from 1992-1995. • From 2001-2004, he was the President of the Latin America Compensation and Benefits Forum (FMCGs) • Early in his career, he worked for TPF&C (now Willis Towers Watson) • He holds a degree in mathematics from CUNY-Lehman College • Contact information: warren.heaps@birchesgroup.com +1-646-837-5586 www.birchesgroup.com

Ren enat ato o Rovi vina na  Renato is a senior HR professional with over 18 years of experience. Currently providing consulting services to local and international companies, he is the former head of Human Resources at IRB Brasil RE, Brazil's largest reinsurer. Prior to joining IRB, he led the compensation, benefits, employee mobility and HR MIS functions for Banco Itaú BBA. Renato has also worked for other leading organizations such as Vale, Aon Hewitt and Mercer, where he started his career.  As part of his international experience, Renato has lived and worked in San Juan, Puerto Rico, Miami and Coral Gables, Florida, Stamford, Connecticut and São Paulo and Rio de Janeiro, Brazil.  Renato received a Bachelor's degree in Business Administration by PUC- Sao Paulo, and his MBA from IMBEC-Rio de Janeiro, Brazil. He has attended a management program at the Massachusetts Institute of Technology - MIT and a leadership development program at IMD, Switzerland. He served as a member of World at Work's Global Advisory Council for three years.  Conta ntact ct informat ormation ion renato.rovina@rewardslab.com.br +55 (21) 99850-8667 5

• Growth has slowed • Inflation has increased • Conditions in Argentina and Venezuela have been especially challenging

• Overall growth is projected to be Source: World Trade Resources, World Bank Group 1.3% in 2016 • In addition to Argentina and Venezuela, Brazil is forecasted at -4.0% • Middle class has been growing (now 35%) but there is still a large inequality and widespread poverty in the region • Commodity prices have dropped • Region must focus more on export markets for recovery

• Inflation is estimated at Source: World Trade Resources, World Bank Group 5.8% for the region (excludes Argentina & Venezuela) • Brazil and Colombia facing higher inflation • Chile and Mexico stable • Pressure on wages • We recommend always to consider cost of labor, not cost of living, in wage setting

Country Professionals Support Staff Argentina 26.16% 23.96% Brazil 8.21 7.57 Chile 1.0 1.12 Colombia 6.29 7.15 Mexico Not available Venezuela 32.48 31.04

• Birches Group surveys cover all of the Latin America region (except Mexico) • We capture both incumbent average data and salary range information • At each percentile, we can show the going rate as well as the range in the market (we call this the Market Footprint ) • The next chart shows data across the region for one job at the 50th percentile

Foc ocus us on on Braz azil il How to adapt to the current Economy This presentation is informational only. It does not constitute legal or professional advice. The authors do not accept any responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained in it.

01 CO CONT NTEX EXT: : THE THE PE PERFE RFECT CT STOR ORM 16

Over ervi view w on on Bra Brazil – “A Perfect Storm” Political Turmoil Record Unemployment Inflation Decrease in GDP 17

Inflation In ation Inflation for 2016 to be out of Central Bank’s ‘target range’ (up to 6,5%) after hitting a double -digit mark in 2015. 12.00 10.67 11.00 10.00 9.00 8.00 7.25 7.00 6.50 6.41 5.90 5.91 5.91 5.84 6.00 5.07 5.00 4.46 4.31 4.00 3.14 3.00 2.00 % 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 F 2017 F Inflation Rate Source: IBGE – Brazilian Institute of Geography and Statistics; 18 2016 and 2017 Forecast: Boletim Focus Sept. 26, 2016; (Central Bank report based on analysts projections)

Gr Gros oss s Do Domestic estic Pr Produc oduct GDP is expected to contract by 3,14%, resulting in two consecutive decreases (2015 and 2016). 10 7.5 8 Two consecutive 6 Worst contractions 3.9 result in - 1st time 4 3 25 years since 1930 1.9 1.3 2 0.1 0 -2 -3.14 -4 -3.8 % -6 2010 2011 2012 2013 2014 2015 2016 F 2017 F % of GDP Growth/Reduction vs previous year Source: IBGE – Brazilian Institute of Geography and Statistics; 19 2016 and 2017 Forecast: Boletim Focus Sept. 26, 2016; (Central Bank report based on analysts projections)

Unem Unemplo ployment yment Unemployment hits highest percentage (11,8%) since 2012 (around 12 million workers affected) 13 11.8 12 11.6 11.3 11.2 11.2 10.9 11 10.2 10 9.5 9 8 7 6 % January February March April May June July August % of Unemployed Workers - 2016 Source: IBGE – Brazilian Institute of Geography and Statistics; Sep/2016; trimester data 20

02 RE REFL FLEC ECTION TION ON ON HU HUMA MAN RE RESOU OURCES ES POL OLICIES ICIES AN AND PRA RACTICE TICES 21

Co Collectiv ective e Ba Barg rgai aining ning Employers negotiating increases below the inflation reference index (typically INPC – National Consumer Price Index) 12 Average Increase 9.8 9.8 9.6 9.6 9.5 9.5 10 8.2 7.8 8 Median Increase 5.5 6 Inflation Index 4 2 Average - Actual Gain 0 -2 -1.6 -1.7 Median - Actual Gain -4 -4 -6 % August/2015 July/2016 August/2016 22 Source: FIPE – Fundação Instituto de Pesquisas Econômicas [salarios.org.br]

How HR w HR is n s navi vigating gating the he st stor orm  Amplified communication with employees  Support in headcount reduction as payroll remains flat or grows below inflation  Streamline of organizational structure [less levels] and review of cost structures (punctual change of more senior employees)  Review of performance management programs – more direct link with performance and focus on top performers [especially for top executives]  Review of benefit plans (mostly focusing on healthcare plans) and introduction of cost-sharing mechanisms to reduce costs  Improvement of Governance processes due to reputation and corruption risks 23

Emplo Employment yment Pr Protection ection Pr Prog ogram ram  Government- sponsored “ Programa de Proteção ao Emprego (PPE)” – Employment Protection Program (Law 13.189/2015)  According to the government, over 60,000 job posts were preserved in around 100 companies its first year  Reduction in the number of hours worked and salaries for a determined period of time  Specific criteria must be met  Unions need to be involved in the agreement Reference of companies that are using/used the PPE: Volkswagen, Ford, Mercedes-Benz 24

Go Government ernment In Initiati tiatives es / Leg Legislati slation on  New payroll reporting requirements (eSocial) – effective 2018  Major reforms pending:  Labor law reform  State Pension System (INSS) reform  Review to outsourcing laws 25

03 DO DOIN ING BU BUSIN INES ESS S IN IN BR BRAZ AZIL IL 26

HR R Pr Prof ofes essi sionals onals ne new w to o the he en envi vironment onment  Understand local market data for total compensation competitiveness  Review of “stock” of labor liabilities [court cases] to identify potential flaws to current HR practices  Audit of current job levels/descriptions vs. actual duties performed by employees 27

TH THAN ANK K YOU OU 28

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