Business Development Opportunities and Market Entry Challenges in Latin America

Business Development Opportunities and Market Entry Challenges in Latin America

Luis Rodrigo Asturias (Universidad Rafael Landivar, Guatemala)
DOI: 10.4018/978-1-4666-8820-9.ch012
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Abstract

Considering Latin American economies have introduced various forms of attaining combat the economic crisis mostly through short-term policies based on credit incentive and increased public expenditure in order to revive the same; however, a long-term strategy where inclusive and sustainable growth which can be clearly discerned through innovation can play a key role prioritizing necessary. Thus in the course of this chapter create an analysis of the benefits of innovation and technological development taking into account the current state in Latin America and the possible scenarios in which technology serves as an important tool for economic and social development which translates into basic cornerstone for business and growth enhancer.
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Macroeconomic Considerations In Latin America

As a starting point for analyzing potential business opportunities in the Latin American region is necessary to take into account macroeconomic basic variables to create a clear picture of the situation in the region is where macroeconomic variables thus demonstrating the strengths, weaknesses, opportunities and economic threats in the region. Therefore the GDP of the Latin American and Caribbean region grew by 1.1% in 2014, its slowest rate of expansion since 2009. Considerable differences were observed between countries, with the sluggish regional rate largely determined by slow or negative growth in some of the largest economies: Argentina (-0.2%), the Bolivarian Republic of Venezuela (-3.0%), Brazil (0.2%) and Mexico (2.1%).The median GDP growth rate for the region was 2.8%, broadly in line with the 2013 figure. (2014, World Bank)

The region’s fastest-growing economies were the Dominican Republic and Panama (6.0% in both cases), followed by the Plurinational State of Bolivia (5.2%), Colombia (4.8%) and Nicaragua (4.5%). Argentina, the Bolivarian Republic of Venezuela and Saint Lucia contracted by 0.2%, 3.0% and 1.4%, respectively, while the other economies grew at rates ranging from 0.5% to 4%.

In South America posted economic expansion of 0.7% (as against 2.8% in 2013), while Central America (including the Spanish-speaking Caribbean and Haiti) expanded by 3.7% (4.0% in 2013). The Mexican economy grew by 2.1% in 2014, compared with 1.1% in 2013. The English- and Dutch-speaking Caribbean likewise saw growth accelerate on previous years, reaching 1.9% in 2014.

One significant consequence of low economic growth was weak job creation, leading to a sharper-than-expected 0.4 percentage point fall in the urban employment rate. However, despite weak job creation, the urban open unemployment rate edged down from 6.2% to 6.0%. Until 2012, declining unemployment reflected a faster rise in employment than in participation, but since 2013 participation has fallen more heavily than employment. The labour performance of the region’s countries was rather mixed. The regional outcome was determined by similar trends posted in Argentina, Brazil and Mexico, while a variety of results were observed in the other countries.

Although job creation has been weak —especially in wage employment— the labour market situation remains relatively benign. The open unemployment rate is at historically low levels, while other positive aspects include a widespread fall in the hourly underemployment rate, as well as real wage increases (measured at 1.3% according the weighted average of 10 countries, or 1.7% by the simple average of those countries.

Meanwhile the hydrocarbon exporters —Bolivarian Republic of Venezuela, Colombia, Ecuador and Plurinational State of Bolivia— also saw a significant decline (-4.6%) in their terms of trade. However, the countries that export agroindustrial products, Argentina, Paraguay and Uruguay, posted a smaller term-of-trade loss, at -0.4%, than the subregion overall. The Central American countries recorded a 1.1% terms-oftrade gain, thanks to higher prices for some of their export products and lower prices for energy imports. Terms of trade for the Caribbean food- and fuel- importing countries (that is, the Caribbean not including Trinidad and Tobago) are set to post a stable gain of 0.1%. Despite the large share of manufactures in its export structure, Mexico’s terms of trade were down by 2.4%, similarly to the figure for the region overall, owing to the steep price drops for its export commodities (gold, silver, steel and oil).

Mexico regained its position as the second largest recipient of FDI in the region, with total inflows of US$ 38.286 billion, over double the amount received the year before. Mexico thus ranked behind Brazil, which received US$ 64.046 billion in FDI, 2% down on 2012 but ahead of Chile, which received US$ 20.258 billion, 29% less than in 2012.

By sector, services received the highest proportion of FDI inflows in 2013, with 38%, followed by manufacturing (36%) and natural resources (26%). However, these averages mask large differences between countries and subregions. Natural resources capture over 50% of FDI inflows in several countries, and as much as 70% in the Plurinational State of Bolivia. In fact, in South America (not including Brazil), natural resources receive more FDI than services, and manufacturing only small amounts. Inward FDI flows (left scale) Inward FDI flows as a percentage of GDP (right scale) Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures and estimates at 8 May 2014.

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