Latin America is a region that although it has an abundance of natural resources and a large young population, is also defined by contradictions, mainly the result of some not-always-correct political decisions, which have an impact on free trade and, consequently, on its economic development.
Nevertheless, it is still an attractive alternative for investing. But, you have to take into account all the pros and all the cons. Below we will get to know 5 highlights that every broker should know about LATAM, before expanding or investing in these markets.
Highlight 1: Every country has its strengths
Each of the LATAM countries has its strengths and advantages, which we must consider when investing. This refers both to the predominant industry, activity or product, as well as to the conditions for commercial establishment in them. Let’s see.
– Brazil: The first economy in the region and the second in America is the most abundant in opportunities, because it has the largest industrial development in the region, as well as leading in agricultural production and mining, in several areas.
– Colombia: It is known as a coffee-growing country, and not for nothing. It is the third largest exporter in the world, with $2.655 billion, according to the ICO. Although Colombia lives not only on coffee, it also exports bananas (top 5 worldwide), it has great tourism potential and an important textile industry.
– Mexico: Thanks to the free trade agreements, has achieved great progress in the field of industry. Currently, it is among the first seven vehicle assemblers. It is likewise strong in tourism, due to its beaches and architectural heritage. Also in agricultural products, it stands out in several areas, such as avocados (30% of the world) and corn (seventh in the world).
– Chile: It has great mining resources. In fact, the southern country is the world’s leading producer of copper. In addition, it exports fertilizers of natural origin and is making progress in the field of green energy.
– Argentina is an agricultural power. It produces soybeans, sorghum, cattle, and dairy. Another important area is maritime cargo.
– Panama: We cannot fail to mention the case of the isthmus country, where there is an important commercial movement. In addition, it is one of the Latin countries with the highest growth and per capita income.
Highlight 2: Open to investments
The countries of LATAM have been trying to make themselves attractive to investment. This resulted in the creation of initiatives such as the Brazil Investment Forum (BIF). On the other hand, there are advances in legislative matters; for example, the Simplified Joint Stock Company (in Argentina).
As well, approaches have been promoted, establishing agreements, which seek to facilitate bilateral trade, either among themselves or with other nations. Significantly, several countries of the region (Mexico and Chile) have joined the Comprehensive and Progressive Agreement on Trans-Pacific Partnership.
And there are many more. With all these agreements, there is no doubt that LATAM intends to be open for business and receive investors from other countries.
Highlight 3: The economy is changing
Although in some the movement is slower than in others, the economies of Latin America are beginning to realize that they cannot rely on raw materials alone, whose negotiation will always be subject to the fluctuations of the market. A typical case of this is Venezuela, which depends mostly on global oil demand.
At the opposite end of the spectrum is Chile. Because it has fewer natural resources, it has had to reinvent itself. As a result, it is currently one of the leaders in technology in Latin America, along with Brazil.
In 2021, venture capital investments increased in this country, from 160 million USD to 2,915 million USD. And there are already several Chilean startups valued at more than 1,000 million USD. And a similar picture is observed in Colombia.
Highlight 4: Low costs
One of the greatest strengths of Latin American countries, and which can be a great attraction to invest in them, is that the costs are usually lower, in comparison with North America or Europe.
This refers to various categories in terms of goods and services, from the price of real estate (whether for acquisition or rental), raw materials, services (water and electricity), taxes, labor and much more. Of course, this varies from one country to another, even according to each city.
Highlight 5: Untapped niches
Something that every broker should know about LATAM is that in the region there are still many niches that can be considered virgin territories, which have not yet been explored. We just need someone to come and exploit them.
In a particular way, everything that has to do with trading, with markets like FOREX, is something that is just in the bud in several of these countries. In some it is known, in others, it has barely been heard of.
Not everything is perfect
Of course, there is never a missing “but” in life, and regarding these highlights that a broker should know about LATAM, not everything could be perfect. Historically speaking, Latin American economies are not the most stable, nor are their currencies the strongest. On the contrary, they have experienced inflationary and hyperinflationary processes, suffering devaluations of their monetary indicators.
On the other hand, something that cannot go unmentioned is that some countries, although they wish to attract investment, also have policies that can be discouraging, in terms of exchange control and restrictions for operating in markets such as FOREX, as is the case in Brazil.For 2023, low economic growth is expected for Latin America as a whole, at 1.4%. In Mexico and Central America, it could be 1.7%, but in the extreme south (Argentina and Chile), up to 1.2%, according to ECLAC estimates. Of course, this is a situation that may vary. In fact, in 2022 growth turned out to be higher than expected. We will see.