Blog posts tagged by tag: Latin America
As we know, Latin America is the most unequal region in the world. This lack of equality that characterizes the region is undoubtedly a major barrier to its economic development. Why is it so difficult for Latin America to reduce inequality in a sustained way?
A sometimes overlooked region, the Central America and Caribbean economy is very important to the global economy. There is quite a bit going on in the region at the moment, including public unrest, corruption scandals and yet robust economic growth in many of the region’s economies. To get a better idea of what is happening in the Central America economy currently and how it looks for the foreseeable future, we asked some of our economists responsible for the region to give us an update. Here are their responses:
Historically, Latin America has relied heavily on raw materials, and price swings have set the pace of the region's economic cycles. However, from a fiscal point of view, its dependence on non-renewable natural resources, such as hydrocarbons and minerals, decreased notably between 2010 and 2016. This is the conclusion of the report Revenue Statistics in Latin America and the Caribbean 2018, produced by a group of international organizations.
eCommerce in Latin America is booming, and with the number of people using the internet and social media growing by the day, there is plenty of opportunity for companies selling online, also known as “eRetailers”. In fact, online sales are expected to grow 19% in the next five years – well above the global average of 11% – and are foreseen doubling in value to $118 billion in 2021. Two of the three fastest-growing eCommerce markets in the world are in Latin America: Colombia and Argentina.
Despite these impressive statistics, eRetailers face many challenges in Latin America, including online payment security, low banking services usage among citizens, and serious logistics issues, according to Patricia Galina of IEBS. The World Bank highlights some key areas where Latin America lags behind other regions as “lack of adequate roads and railways and port and airport efficiency”. It also cites corruption and cumbersome customs as major concerns. Lower purchasing power and tricky government regulations present yet another major roadblock. In addition, there are challenges related to trade and financial structures, such as the aforementioned banking penetration rates, along with low levels of confidence in electronic payment systems and lack of free flow of data. Analysts believe that companies must find a way to overcome these barriers to realize their full potential in this very promising market.
These are turbulent times for international trade. The massive economic crisis that unfolded in 2008 has not only intensified political tensions within several countries but has also had an impact on an international scale, which is being reflected in, among other things, a shifting global trade map. The resurgence of nationalism has prompted various countries to dust off the flags of trade protectionism, led mainly by the government of Donald Trump in the United States and Teresa May in the United Kingdom.
Just as trade protectionism is being highly debated, globalization is not dying down and new business opportunities are arising, which is quite intersting for countries in Latin America. In early March, 11 countries signed the Trans-Pacific Partnership Agreement (TTP 11) in Santiago, Chile. This agreement, in which Canada, Mexico, Chile, Peru, Japan, Vietnam, Malaysia, Singapore, Brunei, Australia and New Zealand are participating, will eliminate between 65% to 100% of tariffs among member countries over time.
Between 2002 and 2015, the proportion of Latin Americans over 65 with access to some type of pension increased from 53.6% to 70.8%. This increase was mainly due to the expansion of non-contributory pension systems. That said, despite the considerable progress of recent years, inequality in access to benefits within pension systems is huge, and almost a third of the Latin American population does not have access to any type of pension.
by Francisco Rodríguez, Chief Economist at Torino Capital LLC
Most parties in Venezuela’s main opposition coalition, the Democratic Unity Roundtable (MUD), have decided to sit out the country’s May elections, according to public statements issued by some of the parties as well as the announcement made by MUD spokesperson Angel Oropeza on February 21, in which he said that they could not participate in a “fraudulent, illegitimate” presidential election unless electoral conditions change. 
Although Oropeza said that all parties that are part of the MUD signed the statement, more moderate sectors of the opposition appear likely to participate. At the present moment, the most probable scenario appears to be one in which President Nicolás Maduro will face an independent candidate supported by some minority parties, with the MUD calling on its supporters to abstain in the elections.
In this scenario, President Maduro will be facing an opposition field that will be split between abstentionists and those favoring participation. This is certainly one of the most favorable settings that the government could have hoped for and raises the possibility that Maduro could be re-elected for a second six-year term without overtly manipulating the vote count. On the other hand, we argue that given the results of recent opinion polls, there is also a significant probability that Maduro could lose the election on these terms.
In this discussion, we begin by exploring the rationale for the decisions taken by key actors and then go on to map the potential scenarios that could arise from the electoral results.
Newly-elected Chilean President Sebastian Piñera faces a myriad of challenges - economic and otherwise
Chile’s economy is gradually picking up after a prolonged period of subdued growth brought on by lower copper prices and stagnant investment. Business and consumer confidence have risen sharply in recent months, there are incipient signs of a turnaround in the construction sector and prices for copper are now back near multi-year highs. Against this macroeconomic backdrop, center-right candidate Sebastian Piñera is set to be sworn in as Chile’s new president on 11 March, having previously governed the country from 2010 to 2014. He has pledged to boost the country’s competitiveness, stoke growth and alter some of Michelle Bachelet’s key reforms—notably the reform of the tax system.
The challenges facing the incoming government are, however, considerable. Fiscal room for maneuver will be constrained by the not-insignificant structural budget deficit. Furthermore, the parliament is fractured, and lingering weaknesses in education, health and infrastructure must be tackled if Chile is to truly become a developed country—an often-stated aim of Piñera.
To discuss the country’s economic situation in more detail, we spoke to Alejandro Fernández Beros, Chief Economist at Gemines.
While it may be widely known that Latin America is the most unequal region in the world, what’s not so well known is that an enormous economic disparity exists between the different regions within Latin America. For example, it would take the Chocó region, the poorest area in Colombia, 200 years to reach Bogotá’s per capita income levels, according to an OECD study on Colombia published in 2015. In Latin America, individuals’ incomes in the various intermediate administrative divisions—department, province, state or region—are nine times higher in the richest than they are in the poorest.
In recent decades, China’s impact on global growth has showed no signs of waning; this was especially evident in the years following the global financial crisis. In fact, the country's influence on Latin America is growing stronger by the year, and this is due primarily to three main factors.
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