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Latin America: Stocking Up for Success

by Luiz Carlos Couto, Latin America Financial Institutions Sales Executive and Moises Vidal, Director, Latin America Financial Institutions, Bank of America Merrill Lynch

Latin America has experienced an abundance of investment from banks and multinationals expanding in the region over the last decade. One area that has left investors wanting more is stock exchanges, the key to any region’s economic success. Two initiatives – the Pacific Alliance and the integration of its member countries’ stock exchanges – are opening up some interesting opportunities for companies looking to invest in Latin America. However, a number of challenges must be overcome for both initiatives to reach their full potential. Not surprisingly, global banks will have an important role to play in driving development in the coming years.

Background

Formed in June 2012, the Pacific Alliance is a new trade bloc which incorporates Chile, Colombia, Mexico and Peru, accounting for around 35% of Latin America’s GDP. Consequently, the Pacific Alliance is the ninth largest economy in the world, and may continue to grow as other countries join. With a combined population of 207 million, the countries of the Alliance grew at an average GDP rate of 5% in 2012 and share similar economic ratings and business environments.

The Pacific Alliance has the potential to be very important for the region in the coming years, particularly given that other countries have expressed interest in joining. In May 2013, Costa Rica received approval to join the Alliance as a full member. In addition to the member countries, there are a number of registered observer nations - some of which aspire to become full members. The observer nations currently include Panama, Uruguay, Canada, Spain, Australia, New Zealand, Japan, Guatemala, Honduras, El Salvador, France, Dominican Republic, Paraguay and Portugal. The United States and Canada have also requested to become observer nations.