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The dragon in the backyard
From The Economist print edition
Latin America is tilting towards China, Iran and the global "south" — and away from the United States
If all goes to plan, by 2012 the first shipments of copper from Toromocho, a mine in the Peruvian Andes, will be sent by train and truck to a new $70m wharf in the port of Callao. From there, they will be shipped across the Pacific to China. The mine is being developed at a cost of $2.2 billion by Chinalco, a Chinese metals giant. Both it and the wharf will be the most visible symbols of the burgeoning trade and investment that are fast turning China into a leading economic partner for Peru and many other Latin American countries.
In the first six months of this year China became Brazil's biggest single export market for the first time (partly because Brazil's manufacturing exports fell sharply in the recession). During two days of talks in Beijing in May between Brazil’s president, Luiz Inácio Lula da Silva, and his Chinese counterpart, Hu Jintao (pictured above), an agreement was signed under which the China Development Bank and Sinopec, a Chinese oil company, will lend Brazil's state-controlled oil company, Petrobras, $10 billion in return for up to 200,000 barrels a day (b/d) of crude oil for ten years from the country's new deep-sea fields. Weeks earlier China offered Argentina a currency-swap arrangement involving use of yuan worth $10 billion, and lent cash-strapped Jamaica $138m to enable it to stave off a debt default. Chinese companies have bought stakes in oilfields in Ecuador and Venezuela, and are talking of building a refinery in Costa Rica. This week China National Petroleum Corporation and CNOOC, another oil firm, were reported to have bid at least $17 billion for the 84% stake in YPF, Argentina's biggest oil company, held by Spain's Repsol.
It is not just China that is taking a much bigger interest in Latin America. So too, in different ways, are India, Russia and Iran. These developments are prompting some to declare the end of the Monroe Doctrine — America's traditional insistence, voiced by President James Monroe in 1823, that any meddling by outsiders in its hemisphere is "dangerous to our peace and safety". Never mind that Yanqui dominance has always been disputed by Latin American nationalists as well as by Europe, and never mind that the United States (and Europe) are still far bigger traders and investors in Latin America as a whole than China, let alone India or Russia (see chart 1). What is clear is that there are new and potentially powerful actors in the region.
LATIN AMERICA: Driving Toward Sustainable Business Advantage
Like many other regions impacted by the global economic crisis, investors and business executives across Latin America have been forced to recalculate expectations of return on investment and corporate earnings.
In recent months, most financial analysts have revised growth expectations for the region downward. A recent survey of more than 100 executives from large, mid-sized and small banks from 19 Latin American and Caribbean countries by the Inter-American Development Bank and the Latin American Bank Federation (FELABAN) finds that most of these respondents expect to feel the impacts of the global financial crisis for one to three years.
The Organisation for Economic Co-Operation And Development (OECD), in its Latin American Economic Outlook 2009, acknowledges important challenges for the region, including "revenue generation that relies on volatile non-tax sources and regressive indirect taxes…" and recognizes the key linkage of fiscal policy and development as a key indicator of economic growth within the region's high-potential economies.
The clear consensus among the region's bankers and other business executives is that 2009 will, no doubt, be a challenging year for Latin America and other regional players in the world economy. Yet the same OECD outlook report recognizes steps taken by Latin American governments since the end of the debt crisis of the 1980s that have "reduced deficits, lowered fiscal volatility, increased public expenditure and pioneered fiscal innovations."
Lessons learned from the region's past experiences with debt and currency crises and volatile commodity markets provide Latin American business executives the perspective, experience and agility to adapt to shifting business challenges and the resourcefulness to seek out new opportunities for business growth. While the business community in some parts of the region remains in need of political and economic stability, there remains a significant growth story to tell.
Long overshadowed by the explosive growth of Asian economies, Latin America continues to reveal its market potential even amid the turbulence of the global economic dynamic...
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How to grow your business in Latin America
By Matt Assay / cnet news
As the developed economies crater, many vendors are looking beyond the borders of North America and Western Europe to grow into Asia-Pacific, Eastern Europe, and Latin America. For open-source companies, in particular, Latin America shows a great deal of promise, as countries such as Brazil and Argentina deliver many leads--but to too few closed contracts.
