Latin America has fared better than most during the global financial crisis. As a result, it has become an attractive locale for international investment.
While it slightly reduced its growth projection for Latin America, the International Monetary Fund still projects healthy growth for the region. In its World Economic Outlook released in January, the IMF forecast economic growth of 3.6 percent for Latin America. The prediction for Latin America is far better than the IMF's projection for advanced economies liked the United States, which is expected to grow at only 1.4 percent.
The projected uptick was also confirmed by a December report issued by the United Nations’ Economic Commission for Latin America and the Caribbean. The report projected an overall growth rate of 3.8 percent for the region, but forecast several countries to expand by more than 4 percent. The projections include: Bolivia (5 percent), Chile (4.8 percent), Colombia (4.5 percent), Nicaragua (4.5 percent), Panama (7.5 percent), Paraguay (8.5 percent), Peru (6 percent), and Uruguay (4 percent).
It is important that investors and their advisors are aware that not all Latin American countries are seeing the same rate of growth. As the Wall Street Journal noted in November, “The global slowdown of the past two years has created a divide in the region between countries that pushed a more aggressive free-market agenda and kept a tighter grip on the public purse and those that used the swell in coffers from rising commodity prices to embrace a bigger role for government in the economy.”
Brazil and Argentina are seeing growth slow to a crawl, while Peru and Chile posted growth of 6.5 and 5.7 percent respectively in the third quarter of 2012. As a result, businesses are focusing more attention on these countries. The WSJ reports that Ralph Lauren has pulled out of Argentina, while carmakers Volvo and Honda are expanding their operations in Mexico, whose economy grew 4.2 percent during the first nine months of 2012.
As with any business opportunity, investors must perform due diligence before investing in Latin America or any emerging economy. While past performance is not always an accurate predictor of future growth, a number of countries in Latin America have shown that they are better insulated from global financial problems than many other world economies.
If you have any questions about Latin America investment or would like to discuss this issue, please contact me or the Scarinci Hollenbeck attorney with whom you work.