by Dennis Dubois, Director, Global Trade – Latin America, Bank of America Merrill Lynch
Latin America is continuing its two-speed economic development with regional growth driven by the stronger economies of Peru, Colombia, Ecuador, Chile, Mexico and Brazil. Venezuela and Argentina are sorely lagging due to runaway inflation and being hampered by structural, political, and institutional problems caused by government intrusion into the marketplace. For companies investing in the region, all have opportunities – but choosing the countries that are most suitable for a company’s needs is an essential part of the process.
For the fast-growing economies of Latin America, overall prospects continue to be favourable. Brazil and Mexico represent 60% of Latin America’s GDP , and while Brazil’s GDP growth has slowed more than expected in 2013 and Mexico is doing only marginally better, the economies of Chile, Colombia and Peru grew at rates of 5.6%, 4% and 6.3% respectively in 2012.
In the region’s stronger economies, growth is driven by a number of factors. The main catalysts in Brazil continue to be infrastructure projects such as the 2014 World Cup, 2016 Olympics and anticipated investments in ports and transportation as well as continuing, though waning, consumer strength. In dollar terms, Brazil is also the region’s most important destination for foreign direct investment (FDI), particularly attracting Chinese investment in areas including energy and metals.
In Mexico, growth is likewise being driven by the influx of new FDI, most of which is focused on manufacturing . Mexico’s growth is also a reflection of increasing labour costs in Asia, which are prompting some US companies to consider moving manufacturing operations closer to their consumer markets.