Challenges & Opportunities in Latin American Economies

2. Investment advice is neither given nor intended 2014 CME Group. All rights reserved. The research views expressed herein are those of the author and do not necessarily represent the views of CME Group or its affiliates. All examples in this presentation are hypothetical interpretations of situations and are used for explanation purposes only. This report and the information herein should not be considered investment advice or the results of actual market experience. 2

3. 2014 CME Group. All rights reserved. Risks of trading futures and swaps Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contracts value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade. 3

4. 1. Latin American economic growth prospects 2. Global context continues to constrain growth 3. Scenarios for market reaction to a possible US 2014 CME Group. All rights reserved. Fed rate rise in 2015 4. An FX perspective relative to short-term rates, inflation, equities, and political risks 4 Latin America

5. Latin American real GDP growth to improve only modestly in 2015 4.65% Latin American Real GDP Estimates 2014 CME Group. All rights reserved. 5 2.67% 2.47% 0.37% 2.56% 0.97% 1.72% 2.31% 0.61% 4.32% 0% 2% 4% 6% Colombia - 2014 2015 Peru - 2014 2015 Chile - 2014 2015 Mexico - 2014 2015 Brazil - 2014 2015 Annual Average Real GDP Percent Change from Previous Year. Source: CME Economics Estimates.

6. 2014 CME Group. All rights reserved. Global constraints on Latin American economic growth #1 China has been decelerating. #2 The Euro- Zone nations have been struggling. #3 The US has been posting only modest real GDP growth. 6

7. China: Real GDP Growth Rates by Decade Estimated 2014 CME Group. All rights reserved. China Long-Term 7 2.02% 7.30% 9.69% 9.96% 10.48% 6.73% 4.25% 12% 9% 6% 3% 0% 1960s 1970s 1980s 1990s 2000s 2010s 2020s Annual Average Real GDP Growth Source: World Bank Real GDP Index from the Bloomberg Professional (WRGDCHIN). Estimates by CME Economics Research.

8. Europe still struggling to find its way forward 2014 CME Group. All rights reserved. 8 4% 2% 0% -2% -4% -6% Percent Change in Annual Average Real GDP Euro-Zone Economic Growth Source: Historical data from the World Bank via Bloomberg Professional (WRGDEURO). 2014 and 2015 estimates by CME Economics

9. Scenarios for Fed decision to raise rates 2014 CME Group. All rights reserved. Scenario #1 US labor markets continue to improve while core inflation only creeps very slowly higher. Fed pushes short-term rates higher in 1H/2015 as confidence in the economic expansion improves. (60%) Scenario #2 US labor markets continue to improve and core inflation rises above 2% year over year rate, and inflation expectations rise for the years ahead. Fed pushes short-term rates higher sooner rather than later. With some inflation pressure, the Fed is perceived as being behind the game. (30%) Scenario #3 Global economy hits a rough patch and slows US growth. The Fed stays on hold. US Treasuries may rally. (10%) 9

10. US unemployment rate projected to decrease to 5.5% by Mid-2015 The last time the unemployment rate went above 10% (1982), it took 5 years to get back below 6%. -- the same time path the economy is currently following. 2014 CME Group. All rights reserved. 12% 9% 6% 3% 0% Percentage US Unemployment Rate Source: St. Louis Federal Reserve Bank FRED Database (UNRATE) 10

11. Inflation path is key to bond market reaction to a Fed rate rise decision 2014 CME Group. All rights reserved. 4% 3% 2% 1% 0% US Core Inflation Scenarios 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Year-over-Year Percent Change Source: Data from St. Louis Federal Reserve, Projections by CME Economics. 11

12. Scenarios for new dynamics in FX depend heavily on central bank divergence 2014 CME Group. All rights reserved. Scenario #1 US and UK economies perform well enough to lead to expectations of rate rises in 2015, while Euro-Zone and Japan hit economic rough patches. USD (and GBP depending on Scottish vote) outperform EUR and JPY. (60%) Scenario #2 Creeping inflation in the US and UK versus deflation fears in Europe and Japan magnify country differences. (30%) Scenario #3 US, UK, Euro-Zone, and Japan all disappoint on economic growth. Zero rates remain in all countries. No trends, not much volatility. (10%) 12

13. Return of FX Carry Trade depends on 2014 CME Group. All rights reserved. #1 Market confidence in a global economic expansion with moderate US growth, stabilized China, and improved European prospects. #2 Continued zero short-term rates in Japan and the Euro-Zone (European Central Bank). #3 Political stability, moderate economic growth, and short-term rate not far from prevailing inflation in Latin American economies. 13

14. FX Performance: QE Taper Talk Period in the United States 30 April through 31 December 2013 Brazilian real Chilean peso Mexican peso Peruvian nuevo sol Colombian peso 2014 CME Group. All rights reserved. 14 FX Depreciation: -20% -15% -10% -5% 0% Currency Percent Change versus US Dollar. Source: Bloomberg Professional.

15. Stock Market Performance: 2013 vs 2014 2014 CME Group. All rights reserved. Equity Performance (Local FX Terms) 15 US - 2014 YTD 2013 Peru - 2014 YTD 2013 Chile - 2014 YTD 2013 Colombia - 2014 YTD 2013 Mexico - 2014 YTD 2013 Brazil - 2014 YTD 2013 -30% -20% -10% 0% 10% 20% 30% Stock Index Percent Change. Source: Bloomberg Professional (SPX, IGBVL, IPSA, IGBC, MEXBOL, IBOV)

16. 2014 CME Group. All rights reserved. Political Risks 16 Brazil Latin American Elections October 5, 2014, with runoff on October 26 Incumbent Dilma Rousseff versus Marina Silva Argentina October 25, 2015 Incumbent Christina Fernandez de Kirchner cannot run Peru 2016 Incumbent Ollanta Humala Gana Peru cannot run Colombia May 25, 2014, with runoff held June 15 Juan Manual Santos (Party of U) reelected Chile November 17, 2013 Former President Michelle Bachelet won in a landslide (with low turnout) Mexico July 1, 2012 Enrique Pena Nieto returned PRI to power Source: CME Economics.

17. 31 December 2013 through 31 August 2014 2014 CME Group. All rights reserved. FX Performance 2014 17 Chilean peso Mexican peso Colombian peso Brazilian real FX Percent Change: -15% -10% -5% 0% 5% 10% Peruvian nuevo sol Currency Percent Change versus US Dollar. Source: Bloomberg Professional.

18. Short-Term Interest Rates and Inflation 2014 CME Group. All rights reserved. Short-term rates and inflation 18 0% 2% 4% 6% 8% 10% 12% Colombia - Inflation Short-Term Rates Peru - Inflation Short-Term Rates Mexico - Inflation Short-Term Rates Chile - Inflation Short-Term Rates Brazil - Inflation Short-Term Rates Percentage Rate Source: Bloomberg Professional.

20. Brazil: Inflation and Short-Term Rates Inflation 2014 CME Group. All rights reserved. Brazil: Short-term rates and inflation 20 30% 25% 20% 15% 10% 5% 0% Short-Term Interest Rate 2003 2005 2007 2009 2011 2013 2015 Annual Percentage Interest Rate, Year-over-Year Inflation Rate Source: Bloomberg Professional (BZPIIPCA, BZSELCIA)

22. Mexico: Short-term rates and inflation Mexico: Inflation and Short-Term Rates Inflation 2014 CME Group. All rights reserved. 22 12% 10% 8% 6% 4% 2% 0% Short-Term Interest Rate 2003 2005 2007 2009 2011 2013 2015 Annual Percentage Interest Rate, Year-over-Year Inflation Rate Source: Bloomberg Professional (MXCPI, MXIBTIIE)

24. Chile: Inflation and Short-Term Rates Short-Term Interest Rate Inflation 2014 CME Group. All rights reserved. Chile: Short-term rates and inflation 24 10% 8% 6% 4% 2% 0% -2% -4% 2003 2005 2007 2009 2011 2013 2015 Annual Percentage Interest Rate, Year-over-Year Inflation Rate Source: Bloomberg Professional (EHPICL, CHOVCHOV)

27. Peru: Inflation and Short-Term Rates Short-Term Interest Rate 2014 CME Group. All rights reserved. Peru: Short-term rates and inflation 27 8% 6% 4% 2% 0% 2003 2005 2007 2009 2011 2013 2015 Annual Percentage Interest Rate, Year-over-Year Inflation Rate Source: Bloomberg Professional (EHPIPE, PRBOPRBI) Inflation

29. Colombia: Short-term rates and inflation Colombia: Inflation and Short-Term Rates Short-Term Interest Rate Inflation 2014 CME Group. All rights reserved. 29 12% 10% 8% 6% 4% 2% 0% 2003 2005 2007 2009 2011 2013 2015 Annual Percentage Interest Rate, Year-over-Year Inflation Rate Source: Bloomberg Professional (COCPIYOY, CORRRMIN)

31. Argentina: Short-term rates and inflation Argentina: Inflation and Short-Term Rates Short-Term Interest Rate Inflation 2014 CME Group. All rights reserved. 31 30% 25% 20% 15% 10% 5% 0% 2003 2005 2007 2009 2011 2013 2015 Annual Percentage Interest Rate, Year-over-Year Inflation Rate Source: Bloomberg Professional (IINAARG, BAIBPPPM)

32. Latin American Game-Changers for 2015 1. A Fed rate-rise decisions largest impact might be improving market confidence in a lasting expansion. 2. Faster global growth depends on China stabilizing and ECB asset purchases bringing European economies back to life. 3. FX carry trade may return: Latin American rate differentials versus a zero-rate yen could prove attractive if 2014 CME Group. All rights reserved. Global economic risks decline and Local political risks also appear to diminish. 32

Economy & Finance

Challenges & Opportunities in Latin American Economies