Latin America has seen a drastic departure from business as usual. Many countries are dealing with monumental policy shifts that alter how their economies function, which of course have ripple effects on surrounding countries. Larger societal issues, such as immigration, can also have significant effects on the fundamentals of national economies.
With more than 325 World Trade Centers (WTCs) in 90+ countries around the world — and more than 40 in Latin America alone — understanding commercial trends in this region will help investors and business professionals stay ahead of the curve globally. Here are four prevailing trends to keep in mind.
1. Fewer U.S. partnerships but intensification of oil and green energy development
Relations between Latin American countries and the U.S. have been upended as of late. Several factors such as U.S. tax reform, and changes in trade policy — including the dissolution of the North American Free Trade Agreement and the emergence of the United States-Mexico-Canada trade agreement — have led to fewer U.S. mergers and acquisitions in the region. As a result, new players such as China have supplanted America as a go-to partner for land, energy and development ventures.
One exception: large oil companies are exploring drilling in the less-constricted oilfields of Argentina, Brazil, and Mexico. Additionally, at the same time, much of Latin America is turning toward clean energy sources as oil prices surge, and severe air pollution plagues many urban areas. One harbinger of things to come includes the work being done in major economies like Brazil and Chile to develop wind, solar, and geothermal energy sources and applications. Other investments like those being made in hydroelectric power in Paraguay also point to the growing importance of sustainability in the region, and the seriousness of countries to develop this capacity.
2. More investment in education and startup culture
Latin American countries are working diligently to increase enrollment in K-12 schools and higher education. Although they face many obstacles, such as students living in rural areas and the technology gap, the statistics are ripe for change. To help address these challenges, local and international companies are busy developing education software for the Latin American market.
In Brazil, for example, private-university enrollment has more than doubled since 2005. In January 2018, 4.76 million students were enrolled in private universities in Brazil, which amounted to 72.7 percent throughout the country. Better educational offerings like these will provide Latin American workers much-needed skills to catapult into higher-wage jobs, and to help the region realize its upward potential.
Finally, high-tech jobs are so desirable that many countries have been actively sponsoring startup ventures and environments. In fact, Chile is home to “Chilecon Valley,” with entrepreneurs from 79 countries. Panama City, Panama, now considered the most expensive city in Latin America, has also welcomed investors and innovators from around the world.
3. An increase in manufacturing partnerships
Companies in countries throughout Latin America are also getting serious about working together to produce goods. Historically, this has not always been the case. New intergovernmental agreements, however, are helping to lower transaction costs and increase manufacturing opportunities, which helps encourage cross-border cooperation.
Specifically, in 2018 the Pacific Trade Alliance — which is made up of Chile, Colombia, Mexico, and Peru — started planning for a free trade agreement with Mercosur, the South American trade block of Argentina, Brazil, Paraguay, and Uruguay. Together these regional blocks have a combined population of nearly half a billion people, and represent 90 percent of Latin American GDP.
In other indications of global engagement, Colombia joined Chile and Mexico in the Paris-based Organization for Economic Cooperation and Development (OECD). The OECD promotes policies that allow intergovernmental cooperation. It is estimated that blending the 33 existing trade agreements in Latin America and the Caribbean could add $11 billion in annual trade flows.
4. Marketing to a new middle class
Businesses throughout the region are changing their marketing strategies to sell goods and services to a growing middle class. As they do so, they are working hand-in-hand with national governments to moderate inflation and prevent negative implications of trade negotiations.
Due to some recent developments and stumbling blocks, it is unclear how quickly this trend will take hold across the region. However, even given the challenges, it is clear that the growing power of consumers in the region will force both local and international companies to refocus how they market and sell, which is itself an indication of changes on the horizon.
Many of these business trends for Latin America are interlinked and dependent upon each individual country. As the region manages through various civil conflicts and economic crises, these countries will become better equipped to grow collectively and support one another. Opportunity is knocking in the region not only for businesses, but for the collective gain of the individual countries involved.