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Leveraging Opportunities in Latin America: Insights into Cash Management in Brazil, Argentina and Mexico

Insights into Cash Management in Brazil, Argentina and Mexico

by Helen Sanders, Editor

Five years ago, a great deal of conference talk revolved around the ‘BRIC’ countries – Brazil, Russia, India and China. In reality, the logic of grouping these countries together was tenuous at best, with the only common factors being double digit growth and the potential for foreign investment. Between 2005 and 2010, with the crisis in between, the ‘BRIC’ economies have each had to tackle their own challenges and pursued their own distinct strategy and growth paths. The financial crisis threw some of the differences between the BRIC countries into sharp relief. For example, although the domestic market had grown in the years leading up to the crisis, Russia was hit hard due to its heavy reliance on commodity exports.  In 2008, Russia enjoyed a 5.6% increase in GDP while GDP fell dramatically in 2009 by 7.9%. In China, however, the crisis caused only minor turbulence in GDP growth (2008 – 9%; 2009 – 8.7%) with a strong and increasingly market-oriented economic outlook. However, the country has real environmental and demographic challenges ahead, including pollution, demand for natural resources such as water, the problems of an ageing population and spiralling social security costs.

The idea that BRIC exemplified, however - high growth economies with strong investment potential - has not disappeared, but the crisis has helped companies to refine their investment focus and to target countries specifically that offer particular opportunities in supply and/or demand. While Asia, particularly China, has dominated much of the trade press, Latin America has remained largely resilient during the crisis and companies of all types are increasingly recognising the potential in the region. This is reflected too by many of the major international banks announcing their expansion in Latin America, particularly Brazil.

As the largest economy in the region, Brazil has enjoyed increasing economic stability in recent years, including lower inflation, growing foreign reserves and greater fiscal responsibility. Although Brazil experienced recession for two quarters of recession, as both commodity exports and access to credit collapsed, this followed two years of record growth and the country quickly returned to growth, with expectations of 5% growth during 2010.