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Across Latin America, ad shops are planning for tomorrow, though they say "contingency plans" are pointless because the variables are too numerous. Instead, executives are focusing on understanding the changing consumer, with research playing a larger role in the decision-making process. And more clients are honing promotional efforts to replace costly advertising-in part to do more with less.

Latin America's consumer society is drawing attention-with a population of 467 million and growing-with rapid increases in education and changes in communications and entertainment. The burden of hyperinflation, at least in some markets, is held in check.

"There's a sort of newness in Latin America that represents the possibility for a very quick expansion for the consumer market," said Paul Donato, senior VP with Audits & Surveys Worldwide, a New York-based consumer research company. Fifteen months after the collapse of the Mexican peso in December 1994, multinational marketers remain cautiously optimistic about what awaits them in Latin America.


According to regional media expenditure estimates, marketer optimism is growing. Figures from Zenith Media, London, put total 1995 spending at $18.64 billion, up 8.4% over 1994. Mexico saw $5.87 billion in spending in 1995, up 28.2%. The company forecasts ad expenditures to grow pan-regionally by better than 12.1%, especially as governmental inflation controls take effect.

Mexico remains bogged down in an economic quagmire. Agencies have laid off staff and scaled back operations, while larger multinationals have moved in and bought in at depressed, fire-sale rates.

Like many other advertisers, Ford Motor Co., Mexico City, saw its ad budget halved, resulting in sales that plunged 68%, said Salvador San Martin, advertising manager for Ford. The company will spend more on advertising in 1996 to back new product launches.

Recession remains. Print ad rates have risen between 30% and 110%-attributed to the economic crisis in Mexico and increased newsprint costs. Agency executives say many smaller and medium-size companies were priced out of the TV ad market, as Televisa-the former monopoly that remains the dominant network in a market where TV accounts for 67% of all ad investment-effectively raised its rates by more than 50% for 1996.


However, larger marketers say they were able to cut deals before the end of 1995, said Liz Paul, director of strategic development and operations at J. Walter Thompson Mexico, Mexico City.

This year may prove more difficult for agencies, Ms. Paul said, because marketers have made their 1996 TV buying decisions with almost a full year of crisis behind them. According to her figures, advertising spending in pesos rose 13.6% from 6.6 billion pesos in 1994 to 7.5 billion pesos in 1995. Her forecast of 8.25 billion pesos for 1996 represents "a 25% increase in peso terms but a 46% decrease in dollar terms," she said.

"Clients who could not advertise on Televisa now can't afford to use radio either because they have raised their prices by a similar percentage rate," said Carlos Vizcaino, president of Young & Rubicam Mexico, Mexico City.

One country's decline became another's albatross. When Mexico slid, it took a reluctant and angry Argentina with it. That country's ad market has been flat since 1994, with buys totalling $2.832 billion in 1994, $2.825 billion in 1995 and $2.892 billion forecast for 1996, according to Zenith.

But Argentina wasn't alone. Venezuela faces its third consecutive year of deep recession and hyperinflation, though down from 70% in 1994 to 60% in 1995. A combination of high interest rates and inflation, strict foreign exchange and currency controls and an overvalued currency precipitated the recession, which was further complicated in 1994 and 1995 by a banking crisis in which 14 banks collapsed. Price controls have further added to the turmoil. Add to that consumer fears, and market stagnation shows no signs of relenting.

At the same time, advertising there has dropped to $500 million in 1995, down 37.5% from 1993, said Bobby Coimbra, president of J. Walter Thompson de Venezuela, Caracas. All agencies have been affected, but as multinational agencies' billings tend to focus on multinational clients, they have considerable advantages over their local counterparts, said Mr. Coimbra, whose $39 million agency represents Alimentos Kraft de Venezuela, Ford Motor de Venezuela and Alimentos Kellogg's.

Other agencies remained unaffected-if only because they are being overlooked as minor players in the regional economy.


In Costa Rica, for example, marketing directors said their economy was unaffected-even helped-by the Mexican crisis. The cheap peso has helped more Mexican products enter Central America, thus Mexican companies are beginning to find they need to advertise more in the isthmus, explained Rodrigo Garnier, regional director for Central America for Garnier/ BBDO, San Jose, Costa Rica.

Then there are power players who have stayed the course. The Chilean ad market in 1995 was flooded by demand, with the entrance of new products, the ongoing battle of local breweries and the emergence of seven carriers in a highly competitive telecommunications arena.

"The `tequila effect' and Argentine recession were not felt in the advertising market, even though the stock market took a dive," said Malcolm Henderson, media director at Santiago shop AMW. The country's advertising volume grew by 8%-similar to overall market growth-in 1995, while revenue was $550 million, up from $493 million the year before.


Local marketers expect to maintain an 8% growth rate for 1996. Unlike years past, when higher income groups were the bull's-eye for marketers' campaigns, the biggest boost now comes from increased disposable income in lower socioeconomic groups.

Marketers are beginning to target those groups with new campaigns-representing the biggest change in the industry, said Jose Peschiera, with J. Walter Thompson, Santiago.

The upside from the various crises-if there is one-is that agencies, marketers and consumers alike are learning to cope. Some are seeing real gains in the market.

San Antonio-based D'Arcy Masius Benton & Bowles/Americas has seen its share grow from $150 million in 1993 to more than $500 million today, said Managing Director Ken Lambert, whose Mexican billings went from $75 million to half that overnight in December 1994. This year it will reach $55 million, with projections hitting $75 million by 1997, he said.

The key to the future is staying the course, even when economies crumble.

"You've gotta be brave and be in it, and not [only] half in it," he said. "When Mexico tanks on you, you can't say, `I've got to get out."'

Contributing to this report: Peter Brennan, San Jose, Costa Rica; Sophie Hares, Caracas; Tara Sullivan, Santiago; Mary Sutter, Mexico City.

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