Now is the Time to Invest in Latin America

Jun 19, 12 Now is the Time to Invest in Latin America

Gone is the Latin American economy of the eighties. For the first time in history, almost every Latin American country has elected its government and since the nineties, the economies of Latin America have been on the rise. The time to invest is now. Why?

According to Lorena Isla’s article, “Mega Trends Underlying Latin America’s Future Growth- Marcro- Micro Implications,” “the future consumer market of Latin America is projected to be 665 million people and combined GDP of almost $6.8 trillion in 2020.”1 The growth is highly concentrated in the middle class leading to a thriving economy. This middle class is projected to increase its purchasing power which in turn means they could purchase more goods from multinational corporations.

Not only are there eager consumers, but many Latin American countries will have the workforce to support this investment because “emerging economies such as Brazil and Mexico with a large estimated young and working age population represent a prime location for companies looking for a high quality labor force particularly in the services and manufacturing sectors.”1 This is important because other countries such as Japan and Germany will be facing worker shortages in the future.1 With a low labor supply in these countries, wages will be forced up, thus increasing the operating costs of businesses. Latin America can offer a cost effective alternative to this scenario.

Some concerned critics point to the fact that stocks in Latin America took a hit in recent years, but most stocks globally have declined, not just Latin America.2 The Eurozone crisis and Recession in the United States have not only affected these regions, but the world. According to Reuters.com, “Brazil and Chile have already drawn up anti-crisis plans, and others should follow suit.”2 This fiscal responsibility demonstrates that Latin American countries want to be prepared for any potential storm that the recessions in the United States and Europe might bring and makes Latin America a solid investment. The same article states, “its [Latin American] financial systems are strong, banks well capitalized.”2 While every investment comes with risk, it appears that Latin America has made changes to its systems, so that investments can grow safely. Latin America is currently looking like a much better investment than the United States or Europe.

According to the CIA World Factbook, Brazil (8) and Mexico (12) are in the top 20 largest GDPs when measured by PPP. Argentina (22), Colombia (29), Venezuela (35), Peru (42), and Chile (45) all rank within the top 50 GDPs (if measured by PPP).3 These countries currently out rank traditionally strong economies such as The United Kingdom (9), and Canada (15). If investors are willing to put their money into the UK and Canada, whose economies have declined, why are some unwilling to invest in the Latin American countries that have surpassed these traditional powerhouses? George L. San Jose, President and Chief Creative Officer of The San Jose Group says, “Latin America appears to be a solid and fruitful investment.” According to Forbes, “investment in corporate bonds in Latin America yield about 5%.”4 The time to change our minds about Latin America is now and we should invest.

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