BY CHRONICLE STAFF
Latin Business Chronicle: How do you view the business outlook for Latin America in 2007?
Jose Antonio Rios, international president and chief administrative officer, Global Crossing, USA: In general,
Peter Cardinal, executive vice president for Latin America, Scotiabank: I view the business outlook quite positively, particularly in the countries in which we operate. In
Rui da Costa, managing director for Latin America and Caribbean, HP: In 2007 it will be another good year. I think from an economic perspective, Latin America will continue to have an average of between 3 and 5 percent GDP growth. The IT market in Latin America in general grows [twice as much as] GDP, so we're looking at between 7 and 10 percent growth. So we are very optimistic. Some countries with changes in government that might create temporary adjustments, but nothing that will have a major impact overall.
Peter Rösler, deputy general manager, Ibero-Amerika Verein, Germany: My business outlook for Latin America in 2007 is definitely optimistic. I expect a growth rate between 4 and 5 percent. Business opportunities for German companies will likewise be very good. Why? Even countries marked by state interventionist policies offer good business [opportunities] because of high export revenues for oil and other products. Latin America as a whole profits from high commodity prices as a result of rising demand, above all in Asia. The economies show a steady performance even in countries with acute political tensions on the domestic front. This used to be quite different in the past when political instability very often brought about deep economic crisis. One could even say that today Latin America's economies are disconnected from internal political developments. And also, in the last two-three years, German FDI increased by roughly a quarter, so stocks are now at a historical record level of approximately US$60 billions.
Beatrice Rangel, managing director and president, AMLA Consulting: It largely depends on where in
Stephen Wong, regional director for the Americas, Hong Kong Trade Development Council: Insofar as Latin trade with
Latin Business Chronicle: What are the key challenges facing business in Latin America in 2007?
Rios: Political uncertainty will remain a key challenge for doing business in
Cardinal: In the countries in which we operate, we see the main challenges, not so much in the political climate, but more in the global and
Wong: The major barriers in
Rangel: The greatest challenges will emerge from two strategic sectors: telecomms and minerals. In the former, one can hear the grass growing. Technology has evolved in favor of wireless solution carriers and against incumbents. With most telecom markets in the region approaching saturation ( defined as every one who can afford ICT is already served) market expansion can only come through extension of services to medium-low and low-income segments as well as rural areas. But alas!! These market segments can ill afford the price tag. Wireless solution carriers with Wi-Fi based technology platforms have a cost structure that can make communications and connectivity affordable for them. With the recent approval of WiMax standards one can see a shake-up in the sector by late 2007. With respect to mineral extraction, most foreign investors in
Rösler: One of the key challenges for all of Latin America is strengthening legal certainty, especially as far as private sector activities are concerned, as legal uncertainty [continues] at a high level in many Latin American countries. State interventionist policies in some countries tend to worsen conditions, especially in the following sectors: public utilities, oil and gas as well as mining. So in these countries there will hardly be any FDI in these sectors. But this [does] obviously not refer to trade that will keep on growing. Another problem is the continuous devaluation of the US dollar against many Latin American currencies. This makes life difficult also for foreign companies with manufacturing activities in these countries. And last, but not least, one must not forget that state intervention often aims at improving income distribution. As we all know, Latin America is the world’s region with the most unjust income distribution. So the other key challenge is to improve overall living conditions and reduce poverty. Poverty is the enemy of political stability; it makes populism thrive.
Latin Business Chronicle: What will be the key benefits for business in Latin America in 2007?
Da Costa: From a macro perspective, a lot of stability in terms of different government elections. Normally the first year of a government is positive change in general. Second, countries with strong exports will do well, especially [with] China and India continuing to drive a lot of demand.
Cardinal: The Latin economies are characterized by emerging financial markets and this has attracted considerable foreign investment not only by Scotiabank but also by other large global and international institutions. The regulatory environment is more rigorous, forcing all players to play by the same rules and strengthening the sector, so we don't foresee the potential economic meltdowns which have occurred in some of these countries in the past. An expanding financial sector is positive for these countries as it will provide access to a larger percentage of the population to banking services, and in so doing allow these people to be more economically active as for example in growing micro and small business, purchasing of cars and houses, all of which augurs well for these developing economies.
Wong: The Latin economies are quite stable and the leadership in several Latin countries are seen to be practizing "free and fair trade" and this is progressing slowing and smoothly.
Rios: The key benefit for business in the region is
Rangel: The benefits include CAFTA and the great leap forward of
Rösler: The key benefits for business in Latin America will be growing export revenues and domestic consumption, an industrial sector strengthened by 2006 and 2007 imports of machines and industrial equipment, growing private investment, more balanced national finances, higher public expenditures and investments, huge foreign currency reserves accrued recently, decreasing interest and inflation rates, and lower foreign debt burdens. All this will combine to create additional business opportunities and increase the attractiveness of the region for its foreign business partners. I am, however, rather doubtful about the prospects of further FTAs between Latin America on the one side and the European Union or the US on the other side because of recent election results in the US and the growing inflexibility of the enlarged EU.
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