Business Dynamics in Latin America

Strategy Briefing

About This Report

Aug 2018

Latin America has potential as an investment destination but still suffers from weak public institutions which are holding back the region’s growth opportunities. Despite the challenges, the region is emerging as a tech-hub, drawing attention from Spain and China. Chile and Mexico stand out as strong performers, while Brazil gradually recovers from its economic downturn, although a difficult tax system and corruption hinder the Brazilian business environment.

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Business Dynamics in Latin America

Market-friendly reforms but challenges persist

The region is in a transitory state, gradually adopting market-friendly reforms after a long duration of protectionist policies. In the absence of strong public institutions, this has led to economic, social and political challenges such as inequality, social unrest and political instability. Furthermore, reliance on the volatile commodities market has added to the challenges.

Chile and Mexico are strong performers

Chile boasts a stable business environment, better quality labour force and low tax rate. Mexico has one of the lowest wage rates globally and this coupled with its relatively stable business environment and proximity to the USA make it a potential contender to China in the face of the latter’s rising wages. However, a big question for Mexico relates to the future of the North American Free Trade Agreement (NAFTA).

Venezuela is facing one of the worst crises

Venezuela has been strongly hit by political and economic adversities – among the worst not only in the region’s history but globally too, following a drop in oil prices on which it heavily relies, leading to hyperinflation and economic and political downturn.

Growing interest from Spain and China

China is investing in the region’s infrastructure as well as importing commodities. There is also a renewed interest from Spain, which can potentially offset the potential lack of trade with the USA.

An emerging tech-hub

Latin America is a rising tech-hub thanks to a range of successful tech start-ups known as “technolatinas”. However, the regions suffers from a major skills gap on account of neglected academic institutions.

Introduction

Scope
Key findings

Operating Environment

Chile and Mexico have strongest business environments
Government institutions suffer from authoritarian political past
Lower share of the global financial system
Higher tax rates compared to regional peers in Asia Pacific

Labour Landscape

Latin America has the highest unemployment rate regionally
Investments from Spain and China to help keep unemployment down
Lack of adequate skills a major concern in Latin America
Mexican low wages make it an alternative to China

Education Landscape

High adult literacy rates but lack of investment causes stagnation
Academic attainment concentrated in secondary education
Limited growth in engineering points towards a growing skills gap

Infrastructure Landscape

Latin America emerging as a tech-hub home to Technolatinas
Landline revenues drop as callers shift to the internet for communication
Lack of adequate physical infrastructure a growing concern

Country Snapshots

Argentina: regulatory efficiency and workforce size
Argentina: employment and business freedom landscape
Bolivia: regulatory efficiency and workforce size
Bolivia: employment and business freedom landscape
Brazil: regulatory efficiency and workforce size
Brazil: employment and business freedom landscape
Chile: regulatory efficiency and workforce size
Chile: employment and business freedom landscape
Colombia: regulatory efficiency and workforce size
Colombia: employment and business freedom landscape
Costa Rica: regulatory efficiency and workforce size
Costa Rica: employment and business freedom landscape
Dominican Republic: regulatory efficiency and workforce size
Dominican Republic: employment and business freedom landscape
Ecuador: regulatory efficiency and workforce size
Ecuador: employment and business freedom landscape
Guatemala: regulatory efficiency and workforce size
Guatemala: employment and business freedom landscape
Mexico: regulatory efficiency and workforce size
Mexico: employment and business freedom landscape
Peru: regulatory efficiency and workforce size
Peru: employment and business freedom landscape
Uruguay: regulatory efficiency and workforce size
Uruguay: employment and business freedom landscape
Venezuela: regulatory efficiency and workforce size
Venezuela: employment and business freedom landscape