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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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 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 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.
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.
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.