Panel
Crosscurrents in Latin American Business
Milken InstituteKate Ambrose, Angelica Fuentes, Eduardo Lins Enrique, Luis Valdez, Luis Carlos Villegas
- Long-term investment strategy in Latin America is shifting from short-term gains to sustained stakes in healthcare, education, consumer goods, infrastructure, and real estate, with the suprapopulist cycle expected to conclude within two years.
- The Pacific Alliance is projected to create a $3 trillion GDP market of 250 million people, with stock markets in Mexico, Colombia, Peru, and Chile scheduled for integration in the second semester.
- A common infrastructure fund will connect the Andes to Southern California via hydropower and integrate Pacific ports with Chinese and Indian cargoes, while Brazil's 2014 World Cup and 2016 Olympics aim to improve telecommunications, roads, transport, and airports despite potential delays.
- The middle class has grown by 50% to 30% of the region over the last decade and is expected to expand further as women, comprising 73% of the 25-to-65 age demographic, enter the economy and generate small businesses with a multiplier effect.
- Technology sectors are predicted to face no crisis for five years, with 700 million cell phones and 200 million internet users driving a revolution as 30% of the population gains first access via $80 low-cost Android, Google, and Firefox smartphones.
- Global private equity firms like KKR and General Atlantic will continue investing in information technology, which accounts for 40% of deals, driven by mobile, e-commerce, and internet infrastructure growth, while entrepreneurship programs similar to Startup Chile expand in Brazil and Mexico.
- Investors are advised to focus on low-inflation, high-GDP growth quadrants like Colombia, Peru, and Chile, while exercising caution regarding Argentina's near-zero growth and unreliable inflation data, as Brazil remains in economic "penalty box" for one to one-and-a-half years.
- Rapid middle-class expansion from 10% to 50-60% in 15 years creates pressure on political institutions and public services, necessitating delivery changes for health, education, and security while governments face the temptation to expand state power rather than support private business.
- Political stability varies regionally, with the Pacific side (Mexico, Chile, Peru, Colombia) offering more stability for long-term planning, whereas Venezuela and Argentina are currently isolated but expected to eventually align with positive regional policies.
- Specific national challenges include Mexico's property ownership legal security issues, Argentina's public safety threats from relocated drug cartels, and new cocaine production in Bolivia affecting regional security, while Colombia's security improvements support 5% to 6% growth.
- Social trends include a shift toward transparency and accountability, with Brazil demonstrating political maturity through elections and corruption trials rather than military intervention, though a "hiato" is predicted for the end of the year.
- Economic risks include approximately 20, 15, or 25 million Latin Americans slipping back below the poverty line and a potential minor recession in Brazil during 2015-2016 if inflation control fails, possibly leading to a candidate change involving Lula.
- Business strategy requires localizing products rather than testing U.S. Hispanic market ideas in South America, with a growing belief in building pan-regional companies despite language barriers between Spanish and Portuguese, though self-sufficiency in U.S. energy may impact Latin American stability.
- Long-term confidence remains high regarding innovation and entrepreneurship, with predictions of significant results over 10 to 20 years, contingent on resolving citizen inequality in health, education, infrastructure, and transport to preserve social stability.