Country & Regional Focus
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Chile, Peru and Uruguay: Small but Smart

by Florent Michel, Managing Partner, Latina Finance & Co

Managing treasury and financing operations in Latin America remains more complicated than in many other places in the world. This is mainly due to cumbersome financial regulations, tax burden and lack of regional integration. On the South American continent, however, three countries offer a friendlier environment than others for treasurers to manage cash, liquidity, foreign exchange risks and cross-border transactions. They are Chile, Peru and Uruguay.

Those three countries are at very different stages of development. Chile is clearly one apart with its AA rating and its OECD membership (Chile and Mexico are the only Latam members). As a result of more budgetary discipline, a boom in commodities exports and very strong foreign direct investments, Peru for its part has registered an unprecedented growth in the last four years, making it a true economic miracle. Finally Uruguay, recovering from the 2001 Argentinean crisis, even if still dependent on its neighbour, is managing a strong economic growth with great pragmatism. Chile, Peru and Uruguay will have registered 6% growth in 2011.

Despite the fact that the three countries have different cultures, historical backgrounds and economies, they share the fact that they are some of the smallest in the region. Like other small countries in the world they have quickly understood that international opening, simplification of cross-border transactions, easing of regulations and favourable investment framework for foreign investors would be keys to economical success. Politically Chile and Uruguay have historically been relatively stable, while Peruvian history has been somewhat more hectic. However, since the recent election of the Gana Peru party led by the current president Humala at the end of 2011 one can say that the country is on the right track. On another important subject in the region which is corruption, Chile and Uruguay are the only two countries in the region to have a CPI* higher than 6 (Chile [7.2], Uruguay [6.9]). Peru still has some efforts to make in that respect with a mark of 3.5.