Around the world, you can find the products that Philip Morris International (NYSE:PM) sells. The Marlboro cigarette brand is an iconic presence across the globe, and Philip Morris has four primary segments that together span six continents. Yet in 2016, Philip Morris' weakest geographical location has been the one that's closest to its U.S. headquarters: its Latin American and Canada segment. Below, we'll take a closer look at how Philip Morris' operations in the Western Hemisphere have detracted from its overall performance.

Image source: Philip Morris International.

You can't go (close to) home again

Before turning to Latin America and Canada specifically, it's useful to put the segment into perspective as part of Philip Morris International's global empire. In the first nine months of 2016, Philip Morris brought in $19.71 billion in revenue net of excise taxes and $8.45 billion in operating company income. In terms of sales, Philip Morris gets roughly equal contributions from Asia, the European Union, and its segment covering Eastern Europe, the Middle East, and Africa. From a profit perspective, Asia lags somewhat behind the company's two European segments, with the EU division having a slight lead over its Eastern European counterpart.

By contrast, the Latin America and Canada segment is far smaller. It brings in barely a tenth of Philip Morris' net revenues, and it has been responsible for just over 7% of the overall company's operating company income during the first nine months of 2016. That is striking, given that Latin America and Canada have a combined population that isn't that much smaller than the entire European continent, and it shows some of the challenges that Philip Morris faces in dealing with the market.

Moreover, Philip Morris has seen key operational metrics fall more precipitously from year-ago levels than in any other geographical segment. Revenue is down 12% from the first nine months of 2015, and operating company income has plunged by more than a fifth.

Why is the Western Hemisphere holding Philip Morris back?

The biggest problem that Philip Morris has had to deal with in 2016 with respect to Latin America and Canada is the impact of ongoing currency weakness. When you back out currency impacts, the region has actually been Philip Morris' strongest performer, with revenue gains of more than 6% and a similar boost in operating company income. In particular, the Canadian dollar and Mexican peso have weakened considerably since 2015, and the Argentine peso has been under considerable pressure throughout 2016.

From a more fundamental standpoint, much of what Philip Morris has done in the Western Hemisphere has been promising. In Canada, shipment volume rose slightly to 7.47 billion units, and market share improved by more than half a percentage point to 38.3%. Mexico was even stronger, with a 7% jump in shipments to more than 18 billion units. In Mexico, Marlboro commands nearly half the market, having seen a full percentage point increase just this year.

However, in South America, conditions haven't been as benign. In Argentina, a dramatic contraction in the total cigarette market was partially responsible for a 12% plunge in shipments to 20.4 billion units. Despite retaining a commanding market share of more than three-quarters, Philip Morris International saw that share drop by 1.5 percentage points, with key losses in premium brands like Marlboro and Philip Morris weighing particularly on performance. Only better results from the low-priced Chesterfield brand prevented a more extensive drop.

Moreover, Philip Morris hasn't tapped into key economies in Latin America. Market share in Brazil and Colombia remains below 10%, and Brazil in particular is a huge untapped opportunity for the tobacco giant.

Will Latin America and Canada improve for Philip Morris in 2017?

It's hard to see currency-related risks dissipating much for Philip Morris' Western Hemisphere operations in 2017. The new Trump administration has already signaled an intent to rethink trade, and that could continue to keep investors uncertain about how new policies could affect sales and profits on exports. The moves Philip Morris has to make in local markets to stay competitive could hit its financial results further.

However, if Philip Morris can keep emphasizing its fundamental strength in Canada and Mexico, it's possible that currency concerns will dissipate. That would likely result in the segment becoming a much more positive contributor to Philip Morris' performance in 2017.