Why Brokers Choose LATAM as a Place of Expansion: Know the Reasons

Despite their conflicts, problems and contradictions, the nations that make up what we commonly know as Latin America are still a good market, a place to invest in various assets.

Hence that many traders set their sights on these countries, where there are still untapped virgin niches. Below we will know the reasons why brokers are choosing LATAM as a place of expansion.

Latin America as an economy

Latin America is made up of about twenty nations. Taken as a whole, its area is 20 million kilometers and the population is 650 million inhabitants. Its total GDP is 5.45 billion USD, according to data from the World Bank.

Making a comparison, Europe has half of that territory, but with a hundred million more inhabitants. Similarly, the GDP of the old continent is almost triple: 16 trillion USD by 2021.

On the other hand, if compared with Africa, this continent has twice the population and 50% more territory: 1350 million inhabitants and 30 million square kilometers; but its GDP is 2.34 billion, less than half the GDP of Latin America.

In the same way, the comparison is also unfavorable in terms of GDP per capita: the one from Latam is 17,271.8 USD, and that of Europe is 38.411,1 (both figures from the World Bank for the year 2021). While the one in Africa is 1793 USD.

So, the Latin American economy is located at a midpoint. This means that it could get better if the conditions are right and investments are made and worked on, or it could get worse if provisions are not made.

SWOT of the economy in LATAM

Now, returning to the initial question, about the reasons why brokers currently choose LATAM as a place of expansion, we must consider the positive aspects that the region offers for those who want to invest, as well as disadvantageous situations, leaving aside particular situations of each country. 

Next, we will break them down in detail, through a SWOT matrix.

Strengths

– Minerals: in the region, there are three of the countries with the largest oil reserves, the fifth with the largest iron reserves (Brazil) and the largest copper producer (Chile).

 Latin America is one region very rich in different natural resources, with five countries in the top ten for primary forests.

– This also gives it great potential as a tourist attraction.

– Energy: since it has water resources in abundance, with mighty rivers, as well as oil and gas, energy production is not or should not be a problem in Latam.

Weaknesses

– Economic activity is mostly concentrated in raw materials; while its industry is relatively weak.

– Therefore, they maintain a dependency ratio concerning more technologized countries, with which they exchange raw materials at a low price and more expensive manufactured products.

– Their economies are vulnerable, subject to price rises and falls in international markets, and with inflation trends.

– Therefore, they have in general weak currencies, which suffer constant processes of devaluation.

– It has been observed, throughout its history, a significant lack of continuity in development plans economically.

Opportunities

– Young population: 67% of people are between 15 and 64 years old, that is, a high percentage are of economically active age.

– Recently, the tertiary sector has experienced greater growth, especially in technology companies (startups).

– According to the World Bank, Latin America and the Caribbean contribute less than 8% of the world’s greenhouse gas emissions; and its natural resources can be used in renewable energies.

Threats

– Due to the lack of contingency plans and the little attention given, in many cases, to natural resources, as well as mining and indiscriminate logging, the region is suffering from the effects of climate change.

– Because its inhabitants receive relatively low salaries, compared to other countries (from North America or the European Union), there is a tendency to lose specialized labor (talent drain).

– The continuous threat of political instability, where situations such as coups d’état, protests, and civic strikes, among others, affect economic development.

– Some of their governments adopt measures that are not conducive to free trade and exchange.

Growth of trading in Latam

Despite everything, favorable circumstances outweigh unfavorable ones. There are commodities to trade with, there are energy futures. And there are still many territories to discover, many possibilities to explore, to make trading. What is needed is to know how to take advantage.

As mentioned, the region has begun to show an interesting openness towards the tertiary sector and technology companies. Moreover, in 2020 it was the world leader in P2P Bitcoin trading growth.

In fact, something that makes the topic of investing in markets such as FOREX or cryptocurrencies attractive is that local currencies are not very strong. In this way, a weakness becomes a strength or, in this case, an incentive to invest.

Also, according to data from the online trading platform INFINOX, the total trading volume in Latam increased during the last year, as well as the number of registered traders, by more than 80%.In general, it is still considered an emerging market, where it is possible to invest and be pioneers in some areas. Therefore, it can be said that there are markets to invest in Latam, although the investment conditions could be better.