Latin America must diversify beyond commodities to expand regional trade | World Finance


N Gabriel Tolchinsky: When we look at Latin
America and the opportunities in the region, we first need to focus on the top three economies. Brazil, after a very significant recession
in 2015 and 2016, had very little growth in 2017 and 2018, because of the political uncertainty.
With the election behind us, and a bit more of a pro-market approach out of this government,
we think Brazil could actually be poised for growth. And interestingly, we don’t think we are dealing
with a banking sector able to deal with an increase in credit demand if we start seeing
genuine economic growth out of the country. We’re expecting around a 2.5 percent growth
for 2018; if that were to be the case, Bladex expects to do some very good business there. Mexico is going through a period of uncertainty,
because the new administration needs to prove that it’s not going to deviate from what the
world has believed to be established policy over the last 20 years. Two specific things we were going to be following:
the project to build an airport outside of Mexico City, and the continuation
of the energy reforms. So far, the airport construction was essentially stopped, and
the energy reforms – what we’re hearing out of the country has not been encouraging.
For the time being, we’re not curtailing our exposure. But we’re going to be monitoring
that very closely. Argentina has gone through a significant crisis
of confidence in 2018, that the country is trying to deal with, with the establishment
of an IMF programme and a more austere policy with respect to expenditures and the curtailment
of fiscal deficits on a go-forward basis. The problem with that is that a diminished
expectation for economic growth in the country will result in some political uncertainty. That said, there are some good opportunities
in the Argentine private sector, because companies have been able to deal with macro uncertainties
for quite a while, and they are prepared to endure such volatility. As such, we believe
that there is some business to be done there as well. From a trade perspective, Latin America continues
to be very much a commodities story. Under a more stable commodity price environment,
trade in Latin America could grow about six percent per annum, which is below what it
used to be during the commodity price bubble, but still very respectable to provide for
a basis of overall solid economic growth. It’s really up to the individual countries
in the region to be able to take advantage of that, and be able to do the type of long-term
investments it needs, in order to diversify its economies beyond commodities – and have
more of an industrial and knowledge base, so it can provide value to the world economy. Thanks for watching. Bladex is celebrating
40 years of supporting trade in Latin America – tap now to watch the video about the work
they do, or learn more at bladex.com. And please subscribe for the latest international
business insights from worldfinance.com

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