Julie Bowen : Speculating and
accumulating with Latin America
You might be forgiven for thinking that the Latin American economy is not one of its stronger areas, with many international commentators preferring instead to focus on culture and tradition, art and history, and tourists sticking with the well-trodden paths. But Latin America has been one of the financial success stories of the first decade of the new millennium, with the area showing unprecedented new growth and development, developing its export market and strengthening international trade links. Latin America is recognized too for its abundance of energy sources. In 2010 its population was placed at over 590 million, and the region had a combined GDP of 5.16 trillion US dollars, with Brazil and Mexico the biggest contributors.
Energy Sources in Latin America
Latin America enjoys an abundance of riches in terms of energy sources, both renewable and fossil fuels. While historically the world has looked to the Middle East and the likes of Saudi Arabia for its oil fields, Latin America has quietly become a world class player. As well as large US equity forms keen to work with Brazil in developing renewable energy building supplies, it would seem that Venezuelan oil reserves have more than tripled to 296.5bn barrels. This is a considerable development of at least 14% in the last half decade and means that they can lay claim to somewhere in the region of 18% of the world’s oil supplies. A significant reserve has been found in the gulf of Mexico, which increases their status as well. Venezuela ranks 7th on the global list for proven natural gas reserves, with Argentina and Brazil at 35th and 37th respectively.
The middle of the twentieth century saw Latin America realize the benefits of internal economic development, and the latter half saw a move to export, with the development in the 1960s of the Latin American Free Trade Association and Central American Common Market aiding global economic integration. The economy of Latin America is a success story of recent times, and the region has enjoyed a decade long boom that has seen much of its population rise from poverty. By the end of the 1990s Foreign Direct Investment was the primary source of international capital in Latin America. In 2012 the economy of Latin America and the Caribbean grew by 3.1%, which was easily higher than the global growth of 2.2%. Individual countries even outperformed the region with Panama enjoying a growth of 10.5%, Peru 6.2% and Chile 5.5%. By way of comparison, in the Eurozone the economy experienced a contraction of 0.5%. This follows the trend of the past eight years where growth in the Latin American economy has outstripped its European counterpart, and although growth forecasts are more modest than they were at the start of the year, the area is still forecast to grow at 3%, and still outstrip more developed economies.
Current Trends in Investment Opportunities
As well as appealing to global companies, according to money.co.uk Latin America is considered an excellent long term opportunity for private investors with an eye to safe investments. In spite of the global economic downturn, low debt levels, a maturing financial sector and a growing customer base are among the factors making Latin America an “excellent opportunity”. As well as looking for relative assurance in a volatile market, consumers are also changing what they look for in terms of the backgrounds of the countries and companies they invest with. Investing in a BRIC fund is becoming an appealing option to many investors, as policies often cover not only investment in the 4 BRIC nations specifically, but also companies based in other countries that are likely to benefit directly from the BRIC success story, thereby covering a range of markets with multiple benefits. And in 2012, investments in clean energy in Latin America (not including Brazil) saw a rise of 127%.
Reflecting these successes, the region has developed its own annual trade show, Trade Americas Expo to demonstrate the depth and strength of small to medium enterprises, held in July of this year in Miami. The two day conference also provides an excellent resource for emerging companies that are interested in finding out about the growth opportunities and risks associated with entering new markets. Over 40 international experts were in attendance, with presentations on such topics as ‘Doing Business in Latin America’ and success stories from the region. There were many high profile figures involved in the presentation, including US Assistant Secretary of State for the Western Hemisphere, Roberta Jackson, who was invited to deliver the keynote address of the event, detailing the new agenda for economic engagement in the Americas. Other high ranking participants from within the region included the Uruguayan Minister of Economy and Finance, the Dominican Minister of State Jean Alain Rodriguez, the Peruvian Vice Minister of Tourism and United States Export-Import Bank Board Member Sean Robert Mulvaney. Global involvement was there too, with representatives from the IDB, the World Bank, Bulltick Capital Markets, and Visa also attending the conference and taking part in discussions on the economic prospects for the region, which certainly looks bright.