Latin America needs to improve its infrastructure, education and efficiency, experts say.
Even in the midst of the sunny outlook for Latin America, the risk of crisis lingers on the horizon, experts warned during a regional conference on the region. “Latin America really is booming; everyone wants to be in Latin America,” said Walter Molano, the head of economic and financial research at BCP Securities in Greenwich, Connecticut.
But Molano, a veteran financial analysts looking at the region, said Latin America must step up its efforts to compete globally. “Latin America still hasn’t done enough to modernize its infrastructure, to improve its education, to improve its efficiency,” Molano said. “If it doesn’t, this is going to be a great party with a really bad hangover.”
Speaking at the conference Forecast 2011: Economic and Political Risk Scenarios for Latin America, Molano said the region had very good economic numbers going into the global financial crisis.
FISCAL DEFICITS
Today, many countries in the region face a current account shortfall, fiscal deficits or the erosion of fiscal balances, overvalued currencies and in some cases rising consumer debt, Molano told the January 28 conference, hosted by the University of Miami’s Center for Hemispheric Policy.
The financial analyst said the greatest potential for economic risk was Brazil, where he warned the country needed to address its severe infrastructure deficit, especially since it will host the World Cup in 2014 and the Summer Olympics in 2016.
“Colombia and Peru are really the stars of Latin America right now – call it El Dorado,” he said. He said that the new government of President Juan Manuel Santos was focusing on reparations and restitutions in an effort to improve relations with neighbors and within Colombia, but did face the risk of an overvalued currency and had many infrastructure needs.
He called Peru a “very well-managed country,” which had successfully diversified its economy and exports. Molano called Peru “the California” of South America and said it had a surprisingly good infrastructure. In Chile, for instance, he said despite a good infrastructure in Santiago, the rest of the country needed better transportation.
VENEZUELA: A FAILED STATE
Molano called Venezuela “a failed state,” but added he saw no solution to the polarizing presence of President Hugo Chávez. “Chávez is a reflection of some of the problems that lie below the surface in Latin America,” he said, adding the region needs to address the infrastructure, education and need to improve social mobility – the result of conservative societies – or face more Chávez’s around the region.
This is a very big challenge, he said. “The conservatism is something that has been embedded in the region for 400 years.”
Molano was echoed by Cynthia Arnson, director of the Latin American Program at the Woodrow Wilson International Center for Scholars in Washington. Arnson outlined recent regional opinion polls, which showed that support for democracy was at one of the highest levels in decades. But Arnson noted that the region was not uniform. Mexico, Central America and the Caribbean were not sharing the same “rosy picture” – high economic growth numbers – as South America. She also noted that Peru scores the lowest in the region, with high levels of dissatisfaction with the system. “There are extreme vulnerabilities in the region,” Arnson said, adding that populism is a “reflection of profound problems,” especially the need for more social and economic inclusion.
Kathryn Rooney Vera, senior economist at Bulltick Capital Markets in Miami, said that Brazil was facing the growing imbalances in the current account deficit, set to reach some $64 billion this year, with risks of rising inflation and appreciation of the Brazilian currency. “The central bank has been aggressively intervening,” said Rooney Vera, adding that she expected investors to react at some point to “this hostile, anti-investment flow environment.”
MEXICAN REBOUND
Alfredo Thorne, the head of global markets for Grupo Financiero Banorte, said that Mexico was experiencing a strong rebound and had been gaining market share from China in the U.S. export market. The country was especially strong in advanced technology products.
Mexico was moving in the opposite direction from Latin America because of its close economic ties with the United States, Thorne said. “Mexico has moved away from Latin America,” he said. “It is not very simple to compare Mexico and Brazil."
Richard Feinberg, the director of the Asia Pacific Economic Cooperation Study Center at the University of California San Diego, said that he was concerned that President Barack Obama referred to approving the free-trade agreement with South Korea during his recent State of the Union but made only passing reference to trade and investment agreements with Colombia and Panama. “If I were the Colombians, I would say we are being left behind,” Feinberg said.
SEEKING PRODUCTIVITY
The former foreign minister of Chile, Alejandro Foxley, set the tone for the conference by calling for fewer meetings and treaties and more efforts to boost productivity and build a working infrastructure in the region, such as constructing roads to link the Atlantic and the Pacific oceans.
He also warned of political risks. “If we really want to be taken seriously by the rest of the world, and we really want to join the club of the advanced economies … I would think that there is no substitute for representative democracy,” said Foxley, now the president of the Corporación de Estudios para Latinoamérica in Santiago.
Source: http://www.latinbusinesschronicle.com
Monday, January 31, 2011
Sunday, January 30, 2011
Latin America needs a `Sputnik moment'
President Barack Obama's call for a ``new Sputnik moment'' in his annual State of the Union speech was a dramatic wake-up call for America. Now, he should expand the reach of his message, and turn it into a call to action for all countries of the Americas.
In his Jan. 25 address, Obama said the United States is falling behind other countries in education, science, technology and innovation. The United States needs to invest much more in science and technology programs, much like it did in the 1950s after the Soviet Union sent the Sputnik satellite into space, and Washington started the space program that eventually led to the first manned spacecraft to the moon, he said.
``The world has changed,'' Obama said. ``China and India realized that with some changes of their own, they could compete in this new world. And so they started educating their children earlier and longer, with great emphasis on math and science. They are investing in research and new technologies.''
``Just recently, China became the home to the world's largest private solar facility, and the world's fastest computer,'' he said. To succeed in this new environment, ``we need to out-innovate, out-educate and out-build the rest of the world,'' he added.
It was the centerpiece of Obama's most important scheduled speech of the year, and it carried a bold proposal: to drastically increase U.S. investments in education, technology and scientific research, while cutting almost everything else from the budget to reduce the giant U.S. budget deficit.
Obama called on Congress to fund the training of 100,000 new teachers in math, science and technology, as well as huge investments in biomedical research, information technology and clean energy technology.
Obama's speech should be required reading in Latin America, where despite an eight-year cycle of strong economic growth largely due to high world commodity prices, most countries are falling behind the rest of the world in education and innovation, but few are paying attention. Consider:
EDUCATION
• In the recently released Organization of Economic Cooperation and Development's PISA tests measuring 15-year-olds' proficiency in math, science and reading comprehension, China's city of Shanghai, Singapore and Finland occupied the first places. The United States ranked 17th, Spain 33rd, Chile 44th, Uruguay 47th, Mexico 48th, Colombia 52nd, Brazil 53rd, Argentina 58 and Peru 63.
• Only 2 percent of all world investments in research and development of new products are carried out in Latin America. By comparison, 36 percent take place in the United States and Canada, 32 percent in Europe, and 27 percent in Asia, according to Ibero-American Network of Science and Technology Indicators.
• All 32 Latin American countries together, including giants Brazil and Mexico, register less than 3 percent of the patents registered annually by just one Asian country, South Korea, according to the U.S. Trademarks and Patents Office.
PATENTS
In 2009, South Korea registered 8,800 patents, while Brazil registered only 103, Mexico 60, and Argentina 45.
• There is not one single Latin American university among the best 100 universities of the world ranked respectively by the British-based Times Higher Education Supplement and the Shanghai, China-based Jiaotong University, despite the fact that Brazil and Mexico are among the world's 12 largest economies.
• Many Latin American countries have the longest school vacations on earth. While the school year has 243 days in Japan and 220 days in South Korea, it has 200 days in Mexico and 190 days in Argentina, but -- when you include teacher strikes and unscheduled holidays -- it often numbers 160 days.
My opinion: If President Obama was searching for a theme for his Latin America policy, and for a concrete plan to take to the next Summit of the Americas to be held in Cartagena, Colombia, in April 2012, this is it. He should broaden his State of the Union address to include the whole hemisphere, and offer U.S. cooperation and know-how to improve education, science and technology standards across the region.
To grow steadily and reduce poverty at much faster rates, Latin America badly needs a ``Sputnik moment'' to wake it up from decades of complacency and declining education standards. Education, science, technology and innovation should not be just a U.S. obsession, but the new joint cause of the Americas.
Source: http://www.miamiherald.com
In his Jan. 25 address, Obama said the United States is falling behind other countries in education, science, technology and innovation. The United States needs to invest much more in science and technology programs, much like it did in the 1950s after the Soviet Union sent the Sputnik satellite into space, and Washington started the space program that eventually led to the first manned spacecraft to the moon, he said.
``The world has changed,'' Obama said. ``China and India realized that with some changes of their own, they could compete in this new world. And so they started educating their children earlier and longer, with great emphasis on math and science. They are investing in research and new technologies.''
``Just recently, China became the home to the world's largest private solar facility, and the world's fastest computer,'' he said. To succeed in this new environment, ``we need to out-innovate, out-educate and out-build the rest of the world,'' he added.
It was the centerpiece of Obama's most important scheduled speech of the year, and it carried a bold proposal: to drastically increase U.S. investments in education, technology and scientific research, while cutting almost everything else from the budget to reduce the giant U.S. budget deficit.
Obama called on Congress to fund the training of 100,000 new teachers in math, science and technology, as well as huge investments in biomedical research, information technology and clean energy technology.
Obama's speech should be required reading in Latin America, where despite an eight-year cycle of strong economic growth largely due to high world commodity prices, most countries are falling behind the rest of the world in education and innovation, but few are paying attention. Consider:
EDUCATION
• In the recently released Organization of Economic Cooperation and Development's PISA tests measuring 15-year-olds' proficiency in math, science and reading comprehension, China's city of Shanghai, Singapore and Finland occupied the first places. The United States ranked 17th, Spain 33rd, Chile 44th, Uruguay 47th, Mexico 48th, Colombia 52nd, Brazil 53rd, Argentina 58 and Peru 63.
• Only 2 percent of all world investments in research and development of new products are carried out in Latin America. By comparison, 36 percent take place in the United States and Canada, 32 percent in Europe, and 27 percent in Asia, according to Ibero-American Network of Science and Technology Indicators.
• All 32 Latin American countries together, including giants Brazil and Mexico, register less than 3 percent of the patents registered annually by just one Asian country, South Korea, according to the U.S. Trademarks and Patents Office.
PATENTS
In 2009, South Korea registered 8,800 patents, while Brazil registered only 103, Mexico 60, and Argentina 45.
• There is not one single Latin American university among the best 100 universities of the world ranked respectively by the British-based Times Higher Education Supplement and the Shanghai, China-based Jiaotong University, despite the fact that Brazil and Mexico are among the world's 12 largest economies.
• Many Latin American countries have the longest school vacations on earth. While the school year has 243 days in Japan and 220 days in South Korea, it has 200 days in Mexico and 190 days in Argentina, but -- when you include teacher strikes and unscheduled holidays -- it often numbers 160 days.
My opinion: If President Obama was searching for a theme for his Latin America policy, and for a concrete plan to take to the next Summit of the Americas to be held in Cartagena, Colombia, in April 2012, this is it. He should broaden his State of the Union address to include the whole hemisphere, and offer U.S. cooperation and know-how to improve education, science and technology standards across the region.
To grow steadily and reduce poverty at much faster rates, Latin America badly needs a ``Sputnik moment'' to wake it up from decades of complacency and declining education standards. Education, science, technology and innovation should not be just a U.S. obsession, but the new joint cause of the Americas.
Source: http://www.miamiherald.com
Thursday, January 27, 2011
Expo Pack México to contain Latin American innovation
Scheduled for June 21-24 at the Centro Banamex in Mexico City, Expo Pack México 2011 will showcase technologies in packaging and processing from more than 900 exhibitors from 20 countries.
"Each year, decision makers visit Expo Pack México and find innovations that address all aspects of their production lines, from processing through packaging," says José Martínez, director of the Latin America office of show producer PMMI. "I am confident that they'll once again find what they're looking for—and more."
PMMI expects more than 22,000 packaging and processing professionals from throughout Mexico and Latin America to attend from a range of industries, including food, beverage, pharmaceutical, personal care, graphic arts, medical, chemical, automotive and more. The consumer packaged goods firms (CPGs) they represent are looking for innovations and solutions to meet increasing consumer demand and address market trends that include lighter-weight packaging materials, and greater functionality and practicality.
These are trends CPGs all over the world are addressing, Martinez notes, and to help them achieve their show goals, Expo Pack México 2011 will introduce two new pavilions.
"The Procesa Pavilion will feature the latest developments in processing machinery and technology, and the Containers and Materials Pavilion will be a focal point for new efficiencies and branding concepts" Martinez says. "In Mexico and in Latin America, like the rest of the world, consumers demand constant innovation from CPGs, whether that means finding more environmentally-friendly packaging or learning new ways to enhance the consumer experience."
Mexican economy signals stability and growth
Mexico boasts the 11th largest population in the world. In addition, exports of manufactured goods from Mexico are on the rise.
"Economic predictions for Mexico in 2011 and beyond are signaling stability," Martínez says. "Mexican economists predict approximately 4 percent growth this year. They also say they expect inflation will be sustained and controlled at 3.8 percent for 2011 and 4.4 percent for the decade."
Mexico consistently ranks among the top 10 countries importing packaging machinery, bringing in approximately $500 million in machinery and parts annually.
"The peso is strong, and will remain strong throughout the year, so importing machinery remains a very good option for Mexican companies," adds Martinez.
Besides the economic growth, Mexico has the advantage of location making it easy for neighboring countries like Guatemala, El Salvador, Costa Rica and Honduras to visit the show and find solutions that fit their needs.
Source: http://www.packagingdigest.com
"Each year, decision makers visit Expo Pack México and find innovations that address all aspects of their production lines, from processing through packaging," says José Martínez, director of the Latin America office of show producer PMMI. "I am confident that they'll once again find what they're looking for—and more."
PMMI expects more than 22,000 packaging and processing professionals from throughout Mexico and Latin America to attend from a range of industries, including food, beverage, pharmaceutical, personal care, graphic arts, medical, chemical, automotive and more. The consumer packaged goods firms (CPGs) they represent are looking for innovations and solutions to meet increasing consumer demand and address market trends that include lighter-weight packaging materials, and greater functionality and practicality.
These are trends CPGs all over the world are addressing, Martinez notes, and to help them achieve their show goals, Expo Pack México 2011 will introduce two new pavilions.
"The Procesa Pavilion will feature the latest developments in processing machinery and technology, and the Containers and Materials Pavilion will be a focal point for new efficiencies and branding concepts" Martinez says. "In Mexico and in Latin America, like the rest of the world, consumers demand constant innovation from CPGs, whether that means finding more environmentally-friendly packaging or learning new ways to enhance the consumer experience."
Mexican economy signals stability and growth
Mexico boasts the 11th largest population in the world. In addition, exports of manufactured goods from Mexico are on the rise.
"Economic predictions for Mexico in 2011 and beyond are signaling stability," Martínez says. "Mexican economists predict approximately 4 percent growth this year. They also say they expect inflation will be sustained and controlled at 3.8 percent for 2011 and 4.4 percent for the decade."
Mexico consistently ranks among the top 10 countries importing packaging machinery, bringing in approximately $500 million in machinery and parts annually.
"The peso is strong, and will remain strong throughout the year, so importing machinery remains a very good option for Mexican companies," adds Martinez.
Besides the economic growth, Mexico has the advantage of location making it easy for neighboring countries like Guatemala, El Salvador, Costa Rica and Honduras to visit the show and find solutions that fit their needs.
Source: http://www.packagingdigest.com
Wednesday, January 26, 2011
Obama to Visit Latin America in March
U.S. President Barack Obama says in his State of the Union speech that he will travel to Latin America in March.
In his prepared remarks, President Obama says he will travel to Brazil, Chile and El Salvador to forge new alliances for progress in the Americas. Two years ago, Mr. Obama visited Trinidad and Tobago to attend the 34-nation summit of the Americas.
Last March, the president met with Salvadoran President Mauricio Funes in Washington, and pledged U.S. support for efforts to strengthen the economy of that Central American nation. Mr. Obama said the U.S. wants to be an equal partner with El Salvador and other countries in the region. For his part, the Salvadoran leader said he hopes Washington will be a strategic partner to counter the problems of drug trafficking and organized crime.
Separately, President Obama notes in his speech that the United States will pursue free trade agreements with Panama and Colombia, and will continue Asia-Pacific and global trade talks.
Earlier Tuesday, a top Republican in the U.S. House of Representatives said Congress should move quickly to approve the pending agreements with Colombia, Panama and South Korea.
Dave Camp, the new chairman of the House Ways and Means Committee, called for the deals to be approved in the next six months.
He said the deadline is being driven by the need to create jobs for American workers. He also urged President Obama to set a timeline during the State of the Union address for passing those deals .
The three agreements were signed in 2007 during the administration of President George W. Bush. The deals have been held up mostly because of Democratic lawmakers' concerns, including provisions in the South Korea deal affecting the U.S. auto industry, and labor rights complaints in Colombia.
The top Democrat on the Ways and Means committee, Sander Levin, expressed optimism that the agreements could be approved with some changes. In prepared remarks Tuesday, he said the pacts should not be considered all at the same time, but individually, based on their own merits.
Source: http://www.voanews.com
In his prepared remarks, President Obama says he will travel to Brazil, Chile and El Salvador to forge new alliances for progress in the Americas. Two years ago, Mr. Obama visited Trinidad and Tobago to attend the 34-nation summit of the Americas.
Last March, the president met with Salvadoran President Mauricio Funes in Washington, and pledged U.S. support for efforts to strengthen the economy of that Central American nation. Mr. Obama said the U.S. wants to be an equal partner with El Salvador and other countries in the region. For his part, the Salvadoran leader said he hopes Washington will be a strategic partner to counter the problems of drug trafficking and organized crime.
Separately, President Obama notes in his speech that the United States will pursue free trade agreements with Panama and Colombia, and will continue Asia-Pacific and global trade talks.
Earlier Tuesday, a top Republican in the U.S. House of Representatives said Congress should move quickly to approve the pending agreements with Colombia, Panama and South Korea.
Dave Camp, the new chairman of the House Ways and Means Committee, called for the deals to be approved in the next six months.
He said the deadline is being driven by the need to create jobs for American workers. He also urged President Obama to set a timeline during the State of the Union address for passing those deals .
The three agreements were signed in 2007 during the administration of President George W. Bush. The deals have been held up mostly because of Democratic lawmakers' concerns, including provisions in the South Korea deal affecting the U.S. auto industry, and labor rights complaints in Colombia.
The top Democrat on the Ways and Means committee, Sander Levin, expressed optimism that the agreements could be approved with some changes. In prepared remarks Tuesday, he said the pacts should not be considered all at the same time, but individually, based on their own merits.
Source: http://www.voanews.com
Tuesday, January 25, 2011
Colombia, Mexico Criticize Rich Countries On Monetary, Fiscal Policies
PARIS (Dow Jones)--Latin American countries Monday criticized rich countries' monetary and fiscal policies that hurt their economies through currency swings.
During a seminar held in Paris on Monday, the Colombian President Juan Manuel Santos criticized the loose monetary policy in rich countries.
"This policy of issuing money to get out of recession is reevaluating currencies in Colombia, Chile, Brazil and all the countries in Latin America," Santos said in a speech in Paris, where he attended a forum to discuss the economic situation.
The strong currencies in Latin America in turn hurt those countries' exporters, who lose competitiveness, he added.
The policy of interest rates close to zero and the massive cash pumping into the economy through a quantitative easing program is counterproductive, Santos added. "If we want to get France, Spain, the U.S. out of recession with dynamic exports, the best recipe is to put countries that imports those goods, not killing their growth capacity."
Santos mentioned the possibility to set up controls on capital inflows toward emerging countries as a possible solution to the currency appreciation.
Santos position is contradictory, Goldman Sachs Economist Alberto Ramos said. Latin American countries' economies are doing well so they are attracting investors and the flow of capitals make their currencies stronger, which is a good indicator. But on the other hand, Latin American countries need a swift recovery in the rich world to secure a demand for the goods they produce.
Quantitative easing is a good way for developed countries to keep their economies afloat. If growth in wealthy countries faltered, commodity prices would plummet and this wouldn't be the best thing for emerging markets.
During his speech, Santos said Latin American countries, which have known devastating crises in the past, can certainly teach lessons to some beleaguered developed countries who struggle under the weight of excessive debt and gaping budget deficits.
Mexican Finance Minister Ernesto Cordero, who also attended the forum in Paris, opposes capital controls. He suggested Latin American countries instead reduce their fiscal deficits so they can loosen their monetary policy, setting lower interest rates, and reduce the effects of carry-trade on their currencies.
The carry-trade is the investment strategy consisting of borrowing in a currency from a low-interest-rate country to invest the proceeds in a currency from a country with higher rates.
Cordero's ideas are more likely to have a positive effect than Santos's, Goldman Sachs's Ramos said.
Cordero, whose country will lead the Group of 20 industrial and developing countries in 2012, also said wealthy nations should focus on fiscal discipline.
As Mexico expects its deficit to reach the equivalent of a modest 0.5% of gross domestic product, excluding the investment program of its state-owned oil firm, its economy is likely to grow a decent 4% in 2011.
As Latin America weathers the financial crisis in a better position than Europe and the U.S., its leaders want more say in the world's financial debates. Santos asked France, who heads the G-20, to consult non-member countries such as his during this year's talks.
Source: http://online.wsj.com
During a seminar held in Paris on Monday, the Colombian President Juan Manuel Santos criticized the loose monetary policy in rich countries.
"This policy of issuing money to get out of recession is reevaluating currencies in Colombia, Chile, Brazil and all the countries in Latin America," Santos said in a speech in Paris, where he attended a forum to discuss the economic situation.
The strong currencies in Latin America in turn hurt those countries' exporters, who lose competitiveness, he added.
The policy of interest rates close to zero and the massive cash pumping into the economy through a quantitative easing program is counterproductive, Santos added. "If we want to get France, Spain, the U.S. out of recession with dynamic exports, the best recipe is to put countries that imports those goods, not killing their growth capacity."
Santos mentioned the possibility to set up controls on capital inflows toward emerging countries as a possible solution to the currency appreciation.
Santos position is contradictory, Goldman Sachs Economist Alberto Ramos said. Latin American countries' economies are doing well so they are attracting investors and the flow of capitals make their currencies stronger, which is a good indicator. But on the other hand, Latin American countries need a swift recovery in the rich world to secure a demand for the goods they produce.
Quantitative easing is a good way for developed countries to keep their economies afloat. If growth in wealthy countries faltered, commodity prices would plummet and this wouldn't be the best thing for emerging markets.
During his speech, Santos said Latin American countries, which have known devastating crises in the past, can certainly teach lessons to some beleaguered developed countries who struggle under the weight of excessive debt and gaping budget deficits.
Mexican Finance Minister Ernesto Cordero, who also attended the forum in Paris, opposes capital controls. He suggested Latin American countries instead reduce their fiscal deficits so they can loosen their monetary policy, setting lower interest rates, and reduce the effects of carry-trade on their currencies.
The carry-trade is the investment strategy consisting of borrowing in a currency from a low-interest-rate country to invest the proceeds in a currency from a country with higher rates.
Cordero's ideas are more likely to have a positive effect than Santos's, Goldman Sachs's Ramos said.
Cordero, whose country will lead the Group of 20 industrial and developing countries in 2012, also said wealthy nations should focus on fiscal discipline.
As Mexico expects its deficit to reach the equivalent of a modest 0.5% of gross domestic product, excluding the investment program of its state-owned oil firm, its economy is likely to grow a decent 4% in 2011.
As Latin America weathers the financial crisis in a better position than Europe and the U.S., its leaders want more say in the world's financial debates. Santos asked France, who heads the G-20, to consult non-member countries such as his during this year's talks.
Source: http://online.wsj.com
Monday, January 24, 2011
CNBC Davos 2011: Latin America Flexes Its Economic Muscle
After decades of boom to bust behavior, economies from Mexico to Brazil are looking dynamic, diverse and durable, helped by a wealth of natural resources and a good measure of fiscal discipline.
"Latin America is among the regions leading the economic recovery," says Mona Pearl, founder and COO of BeyondAStrategy, a global business development firm. "Latin America's economic performance is certain to improve even more."
"Latin America has been notorious for centuries as having a poor track record for sustaining economic growth," says Larry Harding, founder and president of High Street Partners, an international business service firm. "But things are different now. The area is blessed with commodities and natural resources that are in demand and a lot of the political instability of the past is gone. It's really an economic engine."
It's a big engine at that—some 600 million people and 36 countries—from Mexico to the Caribbean islands to the bottom of the continent and Chile.
Once thought of as under-developed and ignored, Latin America boasts huge reserves of raw materials like oil and minerals, growing industries as well as population, while attracting billions in investment money from China, Europe and the U.S.
And despite 2010 being a recovery year because of the global economic downturn, Latin America still ranks second among emerging markets behind Asian countries in terms of gross domestic product growth, GDP, and represents nearly 18 percent of the total GDP from all emerging markets.
"The interesting thing is that before the Great Recession, during and now after, emerging markets have been growing fast than mature markets," says Bob Gitter, department of economics chair at Ohio Wesleyan University. "That is true of Latin America."
Analysts like Gitter, point to several factors for Latin America's economic boom. The area is experiencing a huge increase in purchase power due to growing income among lower wage workers. It also has a relatively young and educated labor pool, say experts. And the region is experiencing high demand for its natural resources from China that's turning into jobs and consumer spending.
"People in Latin America are doing well for the most part and that shows up in the world economy," says Jorge Pinto, a professor at Pace University's Lubin School of Business. "People are consuming goods and becoming wealthier. They are interested in the latest electronics and technology. As a whole, Latin America is doing well."
Taken as a whole, Latin America appears monolithic. But experts say that appearance is deceiving.
"It's impossible to discuss Latin America as an economic or cultural bloc," says Phillip Guarino, president of Elementi Consulting, a global business management consulting firm in Boston, Massachusetts.
"There are big ethnic differences in areas like language with various dialects of Spanish and even food," Guarino goes on to say. "The northern countries, like Mexico and Central America feel more aligned with the U.S., while Argentina and the other southern countries considers themselves more European in culture and business."
"Latin America is really four areas," says Hernando Diaz-Candia, the managing partner in the Caracas, Venezuela office of Squire Sanders & Dempsey, a business and corporate law firm.
"You have Venezuela, Ecuador, Bolivia, Nicaragua, Cuba and Argentina having left wing politics," Diaz-Candia says. "Then it's Colombia, Chile, Peru, Panama and most of Central America that embrace neo-liberal economic policies of capitalism. Mexico stands alone as one bloc with its special relationship with the U.S. And the final piece is Brazil which because of its size and different language (Portuguese) and pragmatic approach to politics and economics, is unique among them all."
Those differences can be hard on businesses, says Mark Barnes, principal in charge of the U.S. High Growth Markets practice at KPMG, a tax and advisory firm.
"Conditions really vary from country to country as there are different challenges including corporate tax structures, compliance rules and regulations," Barnes adds. "A recent study from our firm showed that 52 percent of respondents cite complex and high taxation as a potential barrier to investment in Brazil."
Not all of Latin America should be equal in the eyes of investors, says Antonio Morales-Pita, assistant professor of international political economy at DePaul University.
"Economic soundness and political stability are the main conditions for a country to attract foreign investment," Morales-Pita explains. "As far as Latin America, it's Chile, Argentina, Costa Rica and Brazil as the best candidates for investment in the region. Those countries are showing good economic growth for the most part."
Morales-Pita adds Mexico, which has the second largest economy in Latin America, to the list of investment opportunities even in the midst of a drug war.
Mexico's economic funadmentals aren't as string as some of the others, but they're good enough, says Morales-Pita. "And it's unstable in terms of the increase in crime due to the drug cartels and doesn't look attractive to foreign investors, but I'd put in on the list of best candidates in the region."
"Clearly there are areas in Mexico where violence is a problem and you need to avoid those areas" says Ohio Wesleyan's Gitter." "But most of the country is safe and you see a lot of American companies doing business there like Starbucks, Ford and Wal-Mart, which is the largest retailer in Mexico. A recovery has taken place there even if the growth rate is below the rest of Latin America."
Still drawing major headlines of its own is Venezuela, as President Hugo Chavez continues to exert what some call a "hostility to private enterprise."
"The socialist movement in Venezuela, Bolivia and Ecuador provides great risk for investors," says Raul Vega, president and CEO of Auxis Inc, a management consulting firm based in south Florida.
"While there are opportunities to generate profits in these countries, they are offset by great economic and political uncertainty," Vega argues. "Many multi-national companies operating in Venezuela have seen their earnings negatively impacted by unexpected devaluations of the Bolivar and they've struggled to find methods to expatriate those earnings."
There are threats beyond Chavez that could sweep through the whole region, says Maria Pia Olivero, assistant professor at the LeBow College of Business at Drexel University.
"A drop in commodity prices would prove a major downside risk for all the region's economies," Olivero goes on to say. "Inflation is also a concern and if you look at it, capital inflows are increasingly speculative and fueling as asset prices and real estate bubble in many areas."
Olivero echoes words similar to former U.S. Fed Chairman Alan Greenspan about a past economic blow up.
"The current growth seems to be driven only by exuberance in consumption goods, not productivity," says Olivero. "Tighter fiscal policy to prevent overheating the Latin American economies may lie ahead."
While no one predicts endless growth for Latin America, for now at least, analysts see continued improvement in the region and the global economy.
"Latin America had a robust year in 2010 and while growth may be slower in 2011, regional performance will be positive," says KPMG's Barnes. "This makes the market attractive for investors and business in general."
"I always like to look at events, trends and then connect the dots," says Mona Pearl. "Since Brazil will host the World Cup in 2014 and the Olympics in 2016, this will have a huge economic impact on the whole region. The opportunities for benefiting from doing business in Latin America are endless."
Source: http://www.cnbc.com
"Latin America is among the regions leading the economic recovery," says Mona Pearl, founder and COO of BeyondAStrategy, a global business development firm. "Latin America's economic performance is certain to improve even more."
"Latin America has been notorious for centuries as having a poor track record for sustaining economic growth," says Larry Harding, founder and president of High Street Partners, an international business service firm. "But things are different now. The area is blessed with commodities and natural resources that are in demand and a lot of the political instability of the past is gone. It's really an economic engine."
It's a big engine at that—some 600 million people and 36 countries—from Mexico to the Caribbean islands to the bottom of the continent and Chile.
Once thought of as under-developed and ignored, Latin America boasts huge reserves of raw materials like oil and minerals, growing industries as well as population, while attracting billions in investment money from China, Europe and the U.S.
And despite 2010 being a recovery year because of the global economic downturn, Latin America still ranks second among emerging markets behind Asian countries in terms of gross domestic product growth, GDP, and represents nearly 18 percent of the total GDP from all emerging markets.
"The interesting thing is that before the Great Recession, during and now after, emerging markets have been growing fast than mature markets," says Bob Gitter, department of economics chair at Ohio Wesleyan University. "That is true of Latin America."
Analysts like Gitter, point to several factors for Latin America's economic boom. The area is experiencing a huge increase in purchase power due to growing income among lower wage workers. It also has a relatively young and educated labor pool, say experts. And the region is experiencing high demand for its natural resources from China that's turning into jobs and consumer spending.
"People in Latin America are doing well for the most part and that shows up in the world economy," says Jorge Pinto, a professor at Pace University's Lubin School of Business. "People are consuming goods and becoming wealthier. They are interested in the latest electronics and technology. As a whole, Latin America is doing well."
Taken as a whole, Latin America appears monolithic. But experts say that appearance is deceiving.
"It's impossible to discuss Latin America as an economic or cultural bloc," says Phillip Guarino, president of Elementi Consulting, a global business management consulting firm in Boston, Massachusetts.
"There are big ethnic differences in areas like language with various dialects of Spanish and even food," Guarino goes on to say. "The northern countries, like Mexico and Central America feel more aligned with the U.S., while Argentina and the other southern countries considers themselves more European in culture and business."
"Latin America is really four areas," says Hernando Diaz-Candia, the managing partner in the Caracas, Venezuela office of Squire Sanders & Dempsey, a business and corporate law firm.
"You have Venezuela, Ecuador, Bolivia, Nicaragua, Cuba and Argentina having left wing politics," Diaz-Candia says. "Then it's Colombia, Chile, Peru, Panama and most of Central America that embrace neo-liberal economic policies of capitalism. Mexico stands alone as one bloc with its special relationship with the U.S. And the final piece is Brazil which because of its size and different language (Portuguese) and pragmatic approach to politics and economics, is unique among them all."
Those differences can be hard on businesses, says Mark Barnes, principal in charge of the U.S. High Growth Markets practice at KPMG, a tax and advisory firm.
"Conditions really vary from country to country as there are different challenges including corporate tax structures, compliance rules and regulations," Barnes adds. "A recent study from our firm showed that 52 percent of respondents cite complex and high taxation as a potential barrier to investment in Brazil."
Not all of Latin America should be equal in the eyes of investors, says Antonio Morales-Pita, assistant professor of international political economy at DePaul University.
"Economic soundness and political stability are the main conditions for a country to attract foreign investment," Morales-Pita explains. "As far as Latin America, it's Chile, Argentina, Costa Rica and Brazil as the best candidates for investment in the region. Those countries are showing good economic growth for the most part."
Morales-Pita adds Mexico, which has the second largest economy in Latin America, to the list of investment opportunities even in the midst of a drug war.
Mexico's economic funadmentals aren't as string as some of the others, but they're good enough, says Morales-Pita. "And it's unstable in terms of the increase in crime due to the drug cartels and doesn't look attractive to foreign investors, but I'd put in on the list of best candidates in the region."
"Clearly there are areas in Mexico where violence is a problem and you need to avoid those areas" says Ohio Wesleyan's Gitter." "But most of the country is safe and you see a lot of American companies doing business there like Starbucks, Ford and Wal-Mart, which is the largest retailer in Mexico. A recovery has taken place there even if the growth rate is below the rest of Latin America."
Still drawing major headlines of its own is Venezuela, as President Hugo Chavez continues to exert what some call a "hostility to private enterprise."
"The socialist movement in Venezuela, Bolivia and Ecuador provides great risk for investors," says Raul Vega, president and CEO of Auxis Inc, a management consulting firm based in south Florida.
"While there are opportunities to generate profits in these countries, they are offset by great economic and political uncertainty," Vega argues. "Many multi-national companies operating in Venezuela have seen their earnings negatively impacted by unexpected devaluations of the Bolivar and they've struggled to find methods to expatriate those earnings."
There are threats beyond Chavez that could sweep through the whole region, says Maria Pia Olivero, assistant professor at the LeBow College of Business at Drexel University.
"A drop in commodity prices would prove a major downside risk for all the region's economies," Olivero goes on to say. "Inflation is also a concern and if you look at it, capital inflows are increasingly speculative and fueling as asset prices and real estate bubble in many areas."
Olivero echoes words similar to former U.S. Fed Chairman Alan Greenspan about a past economic blow up.
"The current growth seems to be driven only by exuberance in consumption goods, not productivity," says Olivero. "Tighter fiscal policy to prevent overheating the Latin American economies may lie ahead."
While no one predicts endless growth for Latin America, for now at least, analysts see continued improvement in the region and the global economy.
"Latin America had a robust year in 2010 and while growth may be slower in 2011, regional performance will be positive," says KPMG's Barnes. "This makes the market attractive for investors and business in general."
"I always like to look at events, trends and then connect the dots," says Mona Pearl. "Since Brazil will host the World Cup in 2014 and the Olympics in 2016, this will have a huge economic impact on the whole region. The opportunities for benefiting from doing business in Latin America are endless."
Source: http://www.cnbc.com
Friday, January 21, 2011
Moody's sees gains for LatAm, Caribbean ratings
NEW YORK (AP) — Moody's analysts expect to keep raising the sovereign debt ratings of Latin American and Caribbean countries in 2011.
The region's economies prospered in 2010 while developed nations lingered in recession or anemic recovery, the analysts wrote in a regional outlook report Thursday.
A total of 10 countries were upgraded in 2010, while three others were assigned positive outlooks. Moody's says the nations are likely to build on those gains because of strong domestic demand, rising commodity prices and the global economic recovery.
Within Latin America, South American countries are likely to grow more slowly, while their Central American and Caribbean neighbors expand and catch up, the report says. It says Latin American countries will be less vulnerable to market shocks because they are borrowing for longer periods and building up reserves of foreign currencies.
The main risk faced by the region comes from China, the report says. The region depends heavily on demand from the United States and China. Export demand could decline if the U.S. recovery is anemic or if China's growth slows.
In addition, some investors are skittish after the Eurozone debt crisis, which was sparked by sovereign debt ratings downgrades there.
Brazil is vulnerable to those factors, but is likely to remain growing faster than it has historically, the report says. It says Brazil's rating of "Baa3," with a positive outlook, will likely be reviewed in the second quarter of 2011.
The team of analysts was led by Moody's Vice President and Senior Analyst Patricio Esteruelas.
Source: http://www.bloomberg.com
The region's economies prospered in 2010 while developed nations lingered in recession or anemic recovery, the analysts wrote in a regional outlook report Thursday.
A total of 10 countries were upgraded in 2010, while three others were assigned positive outlooks. Moody's says the nations are likely to build on those gains because of strong domestic demand, rising commodity prices and the global economic recovery.
Within Latin America, South American countries are likely to grow more slowly, while their Central American and Caribbean neighbors expand and catch up, the report says. It says Latin American countries will be less vulnerable to market shocks because they are borrowing for longer periods and building up reserves of foreign currencies.
The main risk faced by the region comes from China, the report says. The region depends heavily on demand from the United States and China. Export demand could decline if the U.S. recovery is anemic or if China's growth slows.
In addition, some investors are skittish after the Eurozone debt crisis, which was sparked by sovereign debt ratings downgrades there.
Brazil is vulnerable to those factors, but is likely to remain growing faster than it has historically, the report says. It says Brazil's rating of "Baa3," with a positive outlook, will likely be reviewed in the second quarter of 2011.
The team of analysts was led by Moody's Vice President and Senior Analyst Patricio Esteruelas.
Source: http://www.bloomberg.com
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