Latin America - risk management and export opportunities

Santi Lopez | Mar 23, 2012

Steady...but not immune to influences

Despite the softening growth in China, the unprecedented southern European crisis and the slow economic recovery of the US, Latin America will actually grow economically by almost 4% this year. Yes, its sharply down from the 6% rise that this region saw in 2010, but it's still remarkable considering how critical China is to the fate of this region and how dependent South, Central America and the Caribbean are to healthy commodity market prices. Sadly, what’s in store for the region has more to do with outside forces than internal ones. Fear of European banks divesting from LatAm to cover their own debts could send a few shock waves through the region, but to counter this sucking sound, a string of investment dumping may simultaneously push currency prices of the Brazilian Real up which would result in inflationary pressures.

Abundant resources to balance cyclical trends

But, despite the external turmoil surrounding LatAm, the long-term prospects look quite good because of the abundance and breadth of commodities throughout the region. Thus, it’s a pretty safe bet looking out to the southern horizon if you consider its robust list of commodities. Petroleum deposits, energy and refineries are in Brazil, Mexico, Colombia, Ecuador and of course Venezuela. Natural gas is abundant throughout Brazil as is sugar, coffee, cacao, and many tropical fruits. Metal is exported out of Chile and Peru. Peru also produces corn as does, Mexico, and Central America and wheat comes from Argentina. Seafood, specifically sea bass, trout, salmon, shrimp and red snapper is exported from Peru and Chile and beef from Argentina and of course Brazil, who controls most of the beef trade in the U.S. Sorghum, carnations and marigolds come out of Colombia and Ecuador. Other tropical fruits like bananas, pineapples, mangos, guavas, papayas and coconuts come from many countries throughout LatAm and the Caribbean. Finally, copper, zinc and other precious minerals can be found in Peru and Chile.

brazil manufacturing changes emerging market fluctuations and risks"Value-added" manufacturing supplements commodities

Additionally, during the last 40 years, Latin America has become less dependent on commodity exports and begun exporting non-commodities or value added goods which further strengthens the long-term outlook of the region for potential investors.

The bottom line?  It's both an exciting time and a scary one in Latin America.  Just in the last few days Argentina has signaled increasing inclinaiton toward nationalization of assets,  and RiskWatchdog recently identified 3 daunting short-term challenges for Brazil.

But here's a newsflash.  Go ahead!  Alert the media!  There are big risks in the domestic market too!  And yet you probably aren't considering shutting down all your domestic business activities.  So why would you take that approach in a different market?  Instead, contact Consilium Global Business Advisors.  We have the expertise to help you identify opportunities and manage risk to profitably build international business.  Our export advisory services and international business development assistance programs are designed to launch small and medium businesses into profitable new markets.

Download our eBook "Demographics Really Matter" for further information regarding the larger trends that are at play in global markets, including Latin America.  Plan for the hiccups, but keep a strategic eye on the macro trends!  No matter what you heard, good or bad, about Latin America, opportunities exist.

Created on 04/07/12 at 10:39:46