While
Western Europe, the United States, Canada, Japan, South Korea, Australia, New
Zealand, and other developed realms continued to benefit from mutual trade, the
Spanish- and Portuguese-speaking parts of the Western Hemisphere lagged.
Today, they’re catching up. While pockets of Latin America are still
susceptible to dictatorship and corruption, those countries are now the
exception. Four nations, in particular, are leading the charge toward market
prosperity in this often overlooked part of the globe.
Chile
Chile is one of the least publicized success stories in the Americas. The
nation has actively courted foreign investment for decades, dating all the way
back to the tyrannical regimes of the 1970s. Non-resident investors can take
advantage of Decree-Law 600, which subjects them to the same regulations as
native investors.1
The advantages of this are numerous. For instance, Chile’s top corporate tax
rate is 27%. (Prior to the Tax Cut and Jobs Act (TCJA) of 2017, the United
States' highest tax rate was 35%, relatively high in comparison to Chile's
highest corporate tax rate. However, now, as a result of the TCJA, the United
States’ highest corporate tax rate sits at 21%.)
A 2004 trade agreement between the countries set Chilean tariffs of a modest 6%
of just about every marketable product, with immediately realizable results.4 Imports increased 30% the first year,5 prompting Chile to sign subsequent trade
agreements with Canada, Mexico, China, Japan, the European Union, South Korea,
Brunei, New Zealand, and Singapore. Chile is now one of the Latin American
countries most actively pursuing bilateral trade agreements.
Colombia
Colombia’s 49 million citizens are, through fate, convenience or strategy,
inexorably linked to the fortunes of their largest trading partner, the United
States. Colombia exported $19.6 billion to the U.S. in 2017 (latest data
available). The U.S. is also the nation that Colombia imports the most from, by
a large margin. Thus, it’s imperative that Colombia keep a good thing going.
Colombia may not have what’s commonly regarded as a technologically advanced
economy—its semiconductor fabrication plants are nonexistent—but a nation can
succeed in spite of that. Last we checked, you still need raw commodities, and
Colombia not only has plenty of those, but the means to capitalize on them. For
one thing, the nation is in the top 20 exporters of petroleum around the world.
in 2019, Colombia exported approximately 616 barrels of crude oil per day.
The country has continued a program of trade liberalization that includes
lowering corporate income taxes. Colombia’s now stands at 30%. New tax
laws—enacted in late December 2018 and effective 1 January 2019—offer certain
tax incentives to promote investment, economic growth, and employment (in
addition to lowering the corporate tax rate from 33% to 30%).
Peru
Foreign investment in Peru goes well beyond the obligatory guided tours of
Machu Picchu at $300 a pop. And the results are tangible. By the World Bank’s
calculations, Peru is well on the road to eradicating poverty faster than was
previously thought possible. Barely a decade ago, three out of five Peruvians
fit the definition of “poor.” Between 2005 and 2013, the poverty rate (the
percentage of the population living on $5.50 a day) fell from 52.2% to 26.1%.
This was the equivalent of 6.4 million people escaping poverty during that time
period.
One of the quietest developments of the George W. Bush Administration was the
frequency with which it signed trade agreements with partners throughout the
Western Hemisphere. Case in point, the Peru Trade Promotion Agreement of 2006.
The pact immediately eliminated tariffs on 80% of manufactured exports to Peru,
with the remainder to be phased out by 2016. Farm exports enjoyed a similar
relaxation of tariffs.
Unlike Colombia and Chile, Peru’s major trading partner is not the United
States. Instead, the U.S. is a close second behind China. Peru's president,
Martín Alberto Vizcarra Cornejo has notably remained independent from political
parties, promoted reforms against corruption in the legislative and judicial
branches, and vowed to not run for president when his term ends in 2021.
However, the country's economy has been hard-hit by the economic impacts of the
global Covid-19 pandemic. Existing inequality, overcrowding, and a largely
informal economy played a role in the 30% decline in the country's gross
domestic product (GDP).
Mexico
Mexico was a signatory to the most famous trade deal of recent years, the North
American Free Trade Agreement (NAFTA) that also incorporated Canada and the
United States. Now in its 25th year, NAFTA created the largest trade bloc in
the world (although granted, a trade bloc incorporating the United States and
almost any two countries chosen at random would be the largest in the world).
It should come as no surprise that Mexico’s largest trade partner is thus the
United States, which would likely be the case even without the benefit of
NAFTA. Approximately 46.59% of Mexico’s imports originate in the U.S., while
76.49% of Mexico’s exports end up there. Mexico-U.S. trade has more than
quadrupled since the onset of the agreement; that being said, a
disproportionate part of that is accounted for by remittances. Expats sending
Western Union Co. (WU) transfers home isn’t the foundation of a lastingly
strong economy. Still, the impact of the 2009 recession—which shrank the
Mexican economy by 6%—seems to be behind us finally.
The Bottom Line
The notion of a “global economy” is more often a talking point than an actual
construct. As the movement of capital among countries continues to run into
fewer and fewer artificial barriers, the gap between the Luxembourgs and
Monacos of the world and the countries aspiring to get to that level continues
to shrink.
Brazil
The powerhouse of South America and the home of beautiful women
known the world over. Brazil has become an investors paradise with a
massive common market and regulations that have been eased to promote growth
and investment.
The upcoming years will prove to be the launching pad for Brazil
with unique global events such as the World Cup in 2014, 2016 Olympics, and
even the recent Rio +20 event. All of the events are forcing Brazil to
clean up its act and start playing at the new world standards.
There are little things that still plague the country, a small
example would be how I had trouble finding reliable internet to day trade in
Rio De Janeiro. That doesn’t mean that Brazil’s economy won’t continue to
grow.
It will continue to be engine of growth in South America and start
to be the new anchor in the region as countries start to rely less on United
States and more on Brazil.
Suriname
Many people don’t even know this country exists. The small
country nestled in the north east region of South America is nothing in size or
economic might, it does however boast a great combination of ethnic diversity
and law and order that I find very attractive for investment.
Suriname is one my
favorite countries in the world and the people have lived with law and order
for quite some time. This is the only place in the world where a Jewish
Synagogue and a Muslim Mosque sit right next to each, not on the same block or
around the corner, right next to each other.
Other investment destinations in South
America includes:
·
Argentina
·
Nicaragua
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