As we enter the last quarter of 2017, we have decided to take a close look at major business opportunities in the LATAM region. Which countries should you invest in? Which sectors have a promising future in 2018? We have decided to focus our analysis on the 3 booming economies in Latin America: Mexico, Argentina and Chile.
Mexico, an Emerging Economy with Stable Growth
Mexico Economic Overview:
Despite the minor temporary slowdown of its economy since 2014, Mexico is predicted to grow steadily at an average of 2.7% GDP growth rate per year from 2020 onwards. The fact it managed to rehabilitate itself quickly from the 2008 financial crisis shows its great potential and resistance to external crises.
Mexico has a controlled inflation on the pesos and a surprisingly low public deficit. This past year they managed to bring down the deficit to 2.6% of the GDP, which is a great sign of economic sustainability. The main future threat Mexico has to face is that of the US-Mexico NAFTA trade deal renegotiation, although it is clear that both economies are interdependent. Some of its industries will be affected by the renegotiation, but which ones will prosper despite the threat?
Mexico’s tourism industry, a safe and prosperous industry:
The Mexican tourism industry is huge and is only predicted to grow more. This is due to a few factors that make it an extremely attractive destination. Let’s start with the fact that it holds 27 UNESCO World Heritage sites, placing it on the bucket list of destinations to visit for tourists around the world. Secondly, it’s geographic location is simply unique. A bridge between the U.S. and South America make it the best place to build a tourist destination, especially for tourists travelling on cruise ships.
It is a huge industry indeed, as it generated USD$ 4 billion just last year, as 35 million tourists visited the country despite various violence warnings. This was a 9% increase compared to the numbers in 2015. This industry is sure to thrive amidst new NAFTA negotiations as it is less dependent on the dollar than any other traded good is. And the government is well aware of this, as huge amounts of money are being invested in improving tourist infrastructure.
And within these tourists, there are the medical tourists who travel for healthcare services in a country where it is relatively cheap to obtain medical care. Obamacare was already quite scarce as it didn’t cover all individuals universally. President Trump is fighting to ditch Obamacare, which will inevitably create a new wave of medical tourists travelling to Mexico for essential treatments.
There’s an unlimited amount of businesses you can invest in or set off in the Mexican tourism industry. Hotels, tours, guides, restaurants, transport… etc. A whole wealth of promising investment opportunities for foreigners are in the Mexican tourism industry.
Argentina, Turning the Page on its Past
One may question why Argentina is one of the biggest economies in Latin America and yet it’s presence in international trade and business is still quite poor. With an average growth of 2.7% per year and a GDP of US$ 600 billion, Argentina’s economy is in good health, after having been through a troubled past. Since the 2008 crisis which hit its economy hard, the government had adopted protectionist policies which excluded it from the global market. 2015 was marked by the election of the neo-liberal politician Mauricio Macri who implemented decisive policies to open up the economy to foreign investment and trade. For instance, the NTP (National Transport Plan), invested $33.2 million in transport improvement to the PPP (Public-Private Partnership), a partnership that authorises private companies and investors to invest in major infrastructure projects.
Furthermore, they will be hosting the biennial World Trade Organization summit in December, before hosting the G20 summit in 2018. Argentina has entered into fifty bilateral investment treaties with the aim to protect foreign investment and to avoid double taxation. In addition, foreign investors are not required to obtain government permission to invest as it was before. Through these events and thanks to these new policies, Argentinians are going to be able to spread the message that they’re back among the greatest.
Argentina, a promising Green future:
In the recent years, there has been a growing demand for energy. However, there has not been enough money invested in this sector so private investors can freely invest in the energy sector. Renewable energy is the sector which has the most opportunities since it needs foreign investment and expertise. These investments will be facilitated with the up and coming reformed financial system.
With its 3.8 million square kilometres of landmass, Argentina is the third largest reserve worldwide of shale oil and shale gas. Its territory offers huge opportunities in renewable energy sources. The Law 27191 was enacted in 2015, which included incentives for more development in renewable energy by the end of 2017. As such, the World Bank Board of Directors has approved a USD$480 million guarantee to promote private investment in the renewable energy sector.
Seeing the growing demand for energy Argentina is facing, this sector is bound to grow substantially.
Chile, a Fast-growing Economy with Great Business Opportunities
Although it isn’t commonly known, Chile has been one of the fastest-growing economies in Latin America over the past decade. Since 1990, the economy has been growing at an average annual rate of 5%. Even more impressive, since 2010, the economy has been growing at a pace of 5.3%. The GDP has recently fallen slightly due to the arrival of the end of the commodity ‘supercycle’, which has brought a few challenges to the Andean nation. Chile’s economy is very dependent on the extraction of minerals, as it is often referred as the ‘Copper economy’. However, investors can bet on Chile given its strong and transparent financial system, its strong base in natural resources and it’s inevitable recovery in commodity prices going forward.
Wine: set to become Chile’s new copper
Chile stands amongst one of the best wine producing countries in the World. The country has a 2700 kilometres border on the Pacific coast. In addition, Chile’s latitude goes from 17 to 56 degrees south which offers it a whole wealth of different climates. The Andes offers Chile great soils and microclimates thanks to its high altitudes. These unique qualities have been praised by more and more local and foreign winemakers who consider it sometimes as a paradise for growing vines.
Chile has been making wine for nearly 6 centuries now and their wines are known Worldwide. Chile has caught the eye of various wine experts from Europe and the US. Although up until a few years ago Chilean wines were known as affordable average quality wines, this has been changing fast with the arrival of expert winemakers setting off high-quality wineries.
We can mention the world famous Casa Lapostolle, French by origin, or the recent arrival of the two famous French winemakers of Château Lafite Rothschild (Los Vascos in Chile), or Château Mouton Rothschild who created Almaviva. These winemakers and specialists are attracting a lot of foreign interest and investment accordingly.
Chile shares more than 20 FTA’s (free trade agreements), which makes it even more interesting to invest in as a foreigner. Through these agreements, Chile freely exports its wines worldwide, which is one of the main reasons it is praised worldwide. Chilean wines in Mexico are everywhere, and very often at a more affordable price than Mexican wines for tax reasons. Beyond no doubt, the Chilean Wine industry is going to grow at a great pace, and the business opportunities are flowing tremendously.
How to Succeed when Doing Business in LATAM:
Doing business in Latin America is often easier said than done. Latin America is an emerging region, which means that indeed, it has a lot of business opportunities. Nevertheless, a foreigner investing in Latin America often meets lots of difficulties when setting up, because the business environment is very unique, compared to in other parts of the world. For example, it is difficult to know if you’re enacting within the precinct of the law since it is very usual for these to change often. The same applies for tax paying – foreigners doing business in Latin America think they are paying the right amount of tax at the right time when actually they might not be. Taking risks that do not comply with legal and accounting laws could be detrimental to your business. We would advise you to seek professional support when incorporating a business in Latin America because you will save time and money doing so.
If you are interested in doing business in Latin America, you can ask Biz Latin Hub for advice, as we offer back-office services to foreign companies incorporating and doing business in Latin America. With a presence in Mexico, Panama, Belize, Ecuador, Colombia, Peru, Chile, Brazil, and Argentina, we can assist you anywhere that you want to get your investment going in Latin America. Contact Craig at [email protected] to see how we can help you!
Watch this video to learn more about how we help our clients do business in Latin America: