5 Latin American Economies to Watch in 2017
25 May 2017
In economics, as in life, everything comes and goes. In 2016 commodity prices were down and most Latin American currencies depreciated. Now, less forex volatility and more reasonable commodity prices have led many to hope for a more promising future.
However, other factors have entered the equation; for example, US President Donald Trump’s relations with Mexico brought uncertainty in the first months of the year, while further south, Venezuela’s crisis continues to grow.
Despite the headlines, there is also room for optimism: Brazil, Latin America’s largest economy, seems to have started recovering from its worst-ever recession.
Indeed, a number of economies have shown positive performances of late and are inviting investment this year. Here's my selection of the top five to watch in 2017:
1-Mexico: Today’s regional economic power
As Brazil says goodbye to a period of economic unrest, Mexico holds the position of regional leader. The country has successfully overcome the uncertainty surrounding the arrival of President Trump to the White House, at least so far. With NAFTA yet to be revised, trade between the two countries reached a peak in March. The latest OBG report on the country, released in April, identifies key sectors and markets Mexico must steer to in order to diversify and achieve better growth rates, while reducing its exposure to the US economy. At the domestic level, Mexico continues to liberalise key sectors through reforms, which imply a social and economic challenge in the short term. The central bank, meanwhile, is doing commendable work to control inflation.
2-Peru: Transparency welcomes investment
In the past two years, private investment declined considerably in Peru. The new government of Pedro Pablo Kuczynski seemed determined to change that, although the last scraps from the corruption scandal engulfing Odebrecht Peru and the dramatic effects of the El Niño Costero floods have diminished the country’s optimism in the last few months. However, Peru is today considered one of the region’s stars, thanks to higher transparency and a clearer course for the public sector. This optimism was shown in OBG’s Business Barometer: Peru CEO Survey, published in early February. Opportunities continue to arise in mining, tourism and agriculture, and Peru maintains its position as having the best gastronomy in the world (please visit the restaurants Fiesta, Central or Amaz when in Lima, and let me know how that went).
Read The Report: Peru 2016 (2017 Report coming Summer 2017)
3-Colombia: Peace dividend
Colombia has made a peace deal with FARC forces after five decades of violence and lots of controversy. Challenges were both institutional and economic: public revenue dropped due to falling oil prices, the peso remained at critical levels and inflation rose. On the bright side, a weak peso helped bring more foreigners to the country. This year has started with the aim of getting back on track: the central bank of Colombia is bringing down interest rates and inflation levels look to be under control, which is allowing consumption to rebound. The peace agreement should pay off in 2017-18, and translate into a greater economic dynamism. In the coming days, The Report: Colombia 2017 will explain these forces in detail.
Read The Report: Colombia 2016 (2017 Report coming Summer 2017)
4-Argentina: Back in focus
After the crisis of the 1990s and an era of private investor mistrust of former President Cristina Elisabet Fernández de Kirchner, few bet that Argentina would be a country to look at in the medium term. However, the victory of Mauricio Macri in the presidential elections has promptly revived interest in the austral country. US, Spanish and Brazilian companies lead the rankings of recent investment in Argentina, which still faces enormous challenges locally, including exorbitant levels of inflation and a society reluctant to the proposed set of reforms. The mission of the Macri government is difficult, but business opportunities emerge every day as economic liberalism is again guaranteed. Oxford Business Group has just opened an office in Buenos Aires and will keep you posted on economic opportunities that arise.
The Report: Argentina 2018 (will be available in 2018)
5. T&T: Caribbean oil and gas hub?
In the boom years, the twin-island country of Trinidad and Tobago recorded remarkable growth, particularly thanks to its huge natural gas reserves. In recent years, with the fall in the price of the commodity, T&T has experienced recession, and now seeks to diversify both its industries and export markets. In recent months, major oil and gas discoveries have been made in nearby Guyana, and exploratory drilling is being conducted in Suriname. With the return of more stable commodity prices, T&T aims to resume its path of economic growth in 2017-18. To achieve this, the local energy sector is working to shape the country as a logistics hub for the Caribbean hydrocarbons industry.
The Report: Trinidad & Tobago 2016 (2017 Report coming Summer 2017)