Latin America is filled with a myriad of natural resources, and for generations many Latin American countries relied on exporting these endowments for their wealth. However, the tides are beginning to change in Latin America. For the first time in history, a large number of Latin Americans are choosing to be entrepreneurs. In 2010, just 2.6% of the world’s applications for patent registration were filed in Latin America. With the new surge of entrepreneurship in the region, expect that number to change.
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Inflation has been credited with being the main reason for Moody’s Investor service choosing to downgrade Venezuela. In terms of currency, inflation has been more than fifty percent year to date, even after President Nicholas Maduro created the law to make businesses cut the cost of consumer goods. The high risk of a collapse and the economic imbalances of the Venezuelan economy have also been cited as a reason for the downgrade because the caused currency and bond ceiling ratings to move to a “speculative” grade. The government is planning on devaluing the Venezuelan currency in 2014. The current account surplus has also decreased by thirty five percent for the past three quarters in comparison to the three quarters last year. All of these statistics point to an economic collapse, but there might just be a way out.
Latin America has taken big steps in the last 15 years in terms of financial stability. Since 1998, the average frequency of crises in Latin America has fallen from 0.7 crises per year to 0.29 crises per year. Economists attribute this to better fiscal management, with gross domestic product becoming less reliant of government spending and outside help. The economies are starting to run with less assistance, generating a more stable financial situation with fewer crises. Latin American economies are on an upward trend nowadays, but there is still one major setback: Crime.
Latin America has not had one of their best economic years. The International Monetary Fund has predicted a lower-than-average 2.7 percent growth in Latin America's total economies. This is not surprising, seeing as several factors such as poor trade, inflation, and slow economic growth are affecting many nations from this region in a rather devastating manner. Here is a closer look.
In recent years, the Chinese and Latin American business relationship has done very well, especially in the South American countries. China is now the main market for most of the exports for Latin American countries, along with being a big source of imports as well. There has been much greater investment in Latin America by Chinese companies such as mining in Argentina, Brazil and Peru, manufacturing in Brazil and Uruguay, and tourism in the Bahamas. With all of these influences from China taking place, there have been some major imbalances of different kinds.
After reading the globalEDGE blog series on Latin America, you should now have a good understanding of the various trends in Latin America that are affecting the international business world. We looked at many topics this week including Latin America’s growing middle class and the regulatory environment of the region. To help further your knowledge of Latin America, globalEDGE offers several resources specifically regarding the growing market of Latin America. We will now take a look at some of these useful Latin American resources!
Regulatory environments vary significantly from country to country and have a dramatic impact on business, both domestic and international. In the Doing Business 2013 report, senior managers reported that they spend 11% of their time dealing with government regulations and more than 50% of them feel that regulations are inconsistent. The Doing Business Report is a study that rates the attractiveness of a country based on its legal institutions and regulatory environment. Latin America is making progress according to the report, but no country from the region has been able to break into the list’s top 30. What does this mean for Latin America’s role in international business?
In the modern business world, domestic markets are simply not enough for businesses striving to reach new customers and serve a growing world. Emerging markets and regions across the globe have provided businesses, small and large, the opportunity to expand their operations beyond domestic markets. Latin America happens to be one of these emerging regions and its growth prospects have caught the attention of businesses worldwide. This week the globalEDGE blog team will give you an in-depth outlook on Latin America and how the region is affecting international business.
In today’s interconnected and globalized world, receiving investments from abroad is a major factor contributing to economic growth for countries all across the world. Spain has recognized the importance of international business and foreign investment by implementing strategies to change the flow of investment. In the late 1990s, many Spanish companies began investing in Latin America and also started a vast amount of business operations there. Now, Spain is looking for investments to flow in the complete opposite direction.
Franchises have been booming worldwide. Close to 10 million employees work at approximately 400,000 franchise locations worldwide. Franchise owners enjoy that they can open a restaurant without as much risk, and the restaurants enjoy the increase in revenue coming from new stores in a variety of countries. One of the most recent booms in the franchise world is the massive growth in Latin markets. In the past year alone Brazil has experienced a 15% growth in franchises, Mexico has had a 13% increase, and Argentina also had double digit growth with 10.5%.
When globalEDGE released its Market Potential Index (MPI) for 2011, it’s no surprise that Asian countries dominated the top of the rankings. For several years now, countries in Asia have been considered the leading emerging markets in today’s economic climate. This year, Singapore found itself as the highest rated emerging market in the MPI rankings. Looking at Singapore, there are several factors that contributed to its success in this year’s rankings.
Latin America is on the rise. Not only has the region experienced a significant amount of economic growth in the last decade, it has begun to dominate large areas of trade worldwide. Latin America contains a large amount of land, along with a large population ready to drive its international success. While often Latin America is looked at as impoverished, author Raul Rivera points out that in fact Asia and Africa are much poorer regions. Latin America is filled with natural resources, and a population that is ready to explore more business ventures.
All around the world technology remains a key component of business success and innovation. Places like India, China, and the United States are well known for their innovation and technological development. However, Latin America happens to be one of the fastest-growing technology markets in the world. With Brazil being one of the largest economies in Latin America, many people may assume Brazil is leading the way in technology. Yet, this is not the case. This past year Panama replaced Uruguay as Latin America’s technology leader.
When looking at Latin America, Brazil is usually looked upon as the top country of the region with the strongest emerging economy. However, the country of Chile is leading in another aspect of business. According to the 2011 Latin Business Index, Chile remains the country with the best business environment in Latin America. The index studied 18 countries in Latin America and broadly measured the climate for business in each country with Chile coming in at the top of the list. Five major categories were the focus of the study including the macro environment, corporate environment, globalization, infrastructure levels, and the political environment. There were many business factors in Chile that accounted for its success in each of these categories.
The Dominican Republic is usually known as the country leading the tourism industry of Latin America. However, that’s not necessarily the entire picture as the Dominican Republic is increasingly boosting its other sectors such as mining, finance, telecommunications, and infrastructure. Foreign direct investment flowing into the country allows this growth to be sustainable and continue into the future. There are many business factors that provided the foundation for the Dominican Republic’s growth in these various sectors.
When looking at economic indicators in Uruguay, government officials and businessmen have much to cheer about. In 2010, the economy grew by 8.5 percent giving Uruguay the fourth-highest increase in Latin America. This growth is predicted to continue as officials estimate a growth rate of 5 to 6 percent this year. Some predict the GDP growth rate to be even higher as both domestic and external demand continues to climb at a very healthy pace. There are many reasons that account for the positive growth rate of Uruguay.
Did you know that only 14% of children who live in Latin America receive a private education? As with many parts of the world, education and economic status go hand-in-hand in this region. Recently, large companies have viewed Latin America as a unique test bed to join business with social issues for the benefit of children’s education. Microsoft has come alongside organizations whose goal is to provide one laptop per child throughout Latin America. This is just the tip of the iceberg in growing education, technology and human capital concurrently in a part of the world that is considered an emerging market.
Free trade agreements (FTAs) have long been in controversy. By some they are hailed as the end all be all of economic growth, while others view them as a tool for the strong to exploit the weak, or a hindrance of worker’s prosperity. While there are degrees of truth to both arguments, the fact remains, trade increases, economic activity increases, and average wealth increases. FTAs need to be utilized with caution however, as many industries in many countries are not up to the competitive standards of the established powerhouses of developed countries. In addition, first-mover advantages often need to be cultivated in insulated environments where kinks in production can be removed and experiments explored without loss of the initial advantage. All of that being said, FTAs drive competition, and competition, in the end, is the best driver of economic growth and innovation.
The fourth annual Americas Competitiveness Forum is happening right now in Atlanta, Georgia. Representatives from countries all over the Americas will be there to give updates about their country and region and brainstorm improvements for export collaboration across borders. This event has over 1,000 participants including government officials, educators, trade experts, and business leaders and is the foremost economic and commercial event in the Western hemisphere. Its main focus is on the competitiveness of companies within the region and trade facilitation and border clearance. There are numerous of different topics that will be discussed but the four main themes of the conference are:
- Innovation and green technologies
- Education and workforce development
- Entrepreneurship and small business development
- Trade facilitation, border clearance and supply chain logistics
Government, business, and academic leaders are coming together this week from throughout the Western Hemisphere to discuss the pursuit of competitiveness and innovation in the Americas. These distinguished representatives will discuss trends, ideas, and best methods that have been utilized to stimulate economic activity in the region. The Americas Competitiveness Forum (ACF) is being held in Atlanta, Georgia and will be hosted by United States Secretary of Commerce Gary Locke and Atlanta Mayor Kasim Reed. This week’s blog series will dig deeper into the goals of this conference as well as analyzing the state of competitiveness in businesses around the world.
While many United States and European airlines have been floundering, the Latin American airline industry has been soaring and is expected to continue to grow into next year. New non-stop flights, frequent flier miles partnerships and alliances of airlines have propelled the airline industry in Latin American countries. While much of the globe has been hit hard in the airline sector, the International Air Transport Association expects Latin America to thrive.
In the past decade, China has grown its relationship with Latin America immensely. China has been very interested in South America’s natural resources and their potential for power production. China has been importing South American copper, soybeans, iron ore and many other materials for many years. They have also begun lending money to the major energy companies in the region.
Recently, P.S. Surana, founder of Surana & Surana International Attorneys, released the book, “Uruguay-India: on trade and links.” In the book, he states that Uruguay presents a “wonderful, little explored opportunity for Indian businessmen.” Is there any truth to this? And if so, what makes Uruguay and India so right for one another for trade opportunities?
In response to the growing need for globally-minded business leaders, more business schools are now offering international MBA programs. The easy way to create such a program is to throw in a few international business courses into the school’s core curriculum. Yet many of the top American b-schools wouldn’t exactly be “international” if they basically stuck to the same curriculum while catering primarily to American students on U.S. soil. More and more schools are now courting foreign students, and some are even transplanting faculty and students alike to sister schools abroad. A recent article by Latin Trade encapsulated the trend very well.
A recently published report in the Latin Business Chronicle highlights the fact that cross-border trade among Latin American countries has grown significantly in the recent past. Imports, exports and mergers among Latin American countries that were unthinkable a decade ago have begun to play a key role in the business environment in that region. And although several economies in Latin America are complementary (i.e., they compete with one another), new alliances and trade agreements within Latin America have recently surfaced.