RSM's Regional Leader for Latin America, Bob Burdett, reflects on current and possible future growth patterns across the continent.
Last week in Mexico I met with leaders of RSM firms from 16 Latin American countries. In almost all cases their business is strong, reflecting the continued growth in Latin American economies right across the continent, from Mexico to Argentina.
One of the things that got my attention over the course of the five day meeting was reports of young professional-level Spanish and Portuguese immigrants arriving in Brazil and the Spanish-speaking countries in quest of jobs and opportunities. We live in a world of changing realities, and reversals in migration patterns both reflect and produce unanticipated changes. But of course Latin America is very large and very diverse, so what goes for one country does not necessarily carry over to another.
Brazil has slowed down in the past year, a victim of its own successes and excesses. Its strong currency, brought on by its strong banking and financial sector, has hurt its exports and manufacturing. The country’s failure to deal with corruption and stifling bureaucracy has caused many foreign investors to look elsewhere.
Does Brazil represent a trend in Latin America? Probably not. Latin America remains a top destination for global investment, with some commentators suggesting that this decade could be dominated by the Latin American growth story in much the same way that China was the talk of the first. And where once all the talk was of Brazil, investor interest has in part shifted to Mexico.
Over the past couple of years, Mexico has regained its lustre as an off-shore manufacturing location. News earlier this month that 3D Robotics, a silicon valley-based tech company, has shifted production from China to Mexico neatly underscores that point. This is due in part to increasing costs associated with production in China, but no less important is Mexico’s proximity to the United States, the ease of doing business in Mexico, a skilled labour pool, and the profound impact of the North America Free Trade Agreement (NAFTA) on integrating North American economies right down to the grocery store level.
But while Brazil and Mexico are Latin America’s two largest markets, they are not necessarily the most dynamic. Peru and Colombia take this honour, with strong growth in all key sectors. Walk the streets of Bogota today and you will feel the energy and see all the signs of a booming economy. It’s a striking, beautiful city, with a striking history and culture. No one has ever quite called Lima beautiful, but the vitality of the city and country are on the same plain as Colombia, and it serves as a major air hub for travel throughout Latin America. It is a great place for a regional business centre.
Boom followed by bust is an old Latin American story, but while lower commodity prices certainly pose a risk, many Latin American economies have been investing rather than consuming the windfall from commodities. According to Augusto de la Torre, chief Latin American economist at the World Bank, the region’s largest economies are investing an average 24 per cent of GDP. Economies such as Mexico are in the ‘high investing’ category and, given it is less dependent on commodities than a number of other countries (including Brazil), it is in a strong position for sustainable growth.
Where will this growth lead? Many people in other parts of the world are unaware that Latin Americans share a common great heritage of intellectual curiosity and respect for education, human rights and the arts. This is true particularly in the Portuguese and Spanish speaking sectors. It is hard to find a people who are better traveled or more knowledgeable of the world. Hard work, family, and traditional values are at the core of the culture. As economic growth and wealth provide the means, be prepared to look to Latin America for a future of innovation and world leadership.