1. LatinAmerica stretches from north of Mexico to the southernmost tip of southAmerica. They are majority Spanish speaking countries while some have Portugueseand Dutch. The three major countries of Latin America are Mexico, Brazil andArgentina.
MEXICOMexicois one of the emerging countries most open to foreign direct investment. Mexicois the world’s fifteenth largest FDI recipient. FDI flow to the countryfluctuate strongly depending on the arrival and departure of largeinternational consortium. Foreign direct investment plays an important role in globalizedeconomy, especially trade oriented ones like Mexico. FDI is paramount to Mexicobecause of the ‘maquiladora’ sector or manufacturing plants that manufacturegoods for export. These manufactured exports are pivotal to Mexico’s positionin the global trade. With free trade agreements signed with around 40countries, Mexico is one of the most trade liberalized economy in the world.
More than 90% of Mexican trade flows under free trade agreements. As an exampleof their market strength, when considering U.S. imports of textiles andapparel, Mexico ranks as the third largest supplier behind Vietnam and India. Inrecent years, Mexico’s competitiveness has suffered from the rise of organisedcrime called cartels system, most heard about is the Sinaloa cartel and lack ofreforms in the energy sector and tax regulations.
Corruption andadministrative inefficiency have also been a major factor.Mexico’s strongpoints include:- With labour costs at par with Asia based manufacturing and a strategiclocation between North and South America, Mexico is the next best thing forthose looking to enter or expand their supply chains in the Americas market.- The Government is positively oriented towards foreign investment (economicreform efforts, new investment opportunities, etc.).- Young, skilled workforce.- abundance of natural resources allowingfor the development of all types of industrial sector at competitive rates. Mexico’s weak points include:- Despite growth in the bankingsector, interest rates are high for SMEs. – Mexico’s economic stability is highly tied to the U.
S. economy.- Violence involving criminal organisations presents a risk in parts of Mexico- Some sectors are reserved exclusively for the Mexican State or Mexicannationals.- The large size of the country may present some distribution or supply chain challenges. BRAZILBrazilis the largest recipient of FDI in Latin America and the eighth largestrecipient worldwide. The major investors of Brazil are the United States, Spainand Belgium.
Major sectors that attract FDI are finance, beverages, oil & gasand telecommunications. The plan of rebate launched by the Government is attractinginvestors. The investment norms in Brazil are liberal that allow foreigninvestors to have a majority share in the creation of their venture.Brazil’s strengthsinclude:- Extensive raw materials, a large pool of workers at all levels of expertise,a large domestic market and a diversified economy.- Trade and manufacturing sector presents an investment opportunity due to weakcurrency that makes Brazilian products cheaper for foreign buyers.- Crackdown on corruption and crony capitalism could benefit investment in thelong term. Brazil’s weaknesses include:- Despite being open to world trade, several barriers cripple trade.
– Foreign investments are restricted.- Foreign investors have encountered obstacles with regulation framework. ARGENTINAArgentinaranks fifth amongst the South American countries in terms of FDI influx. The maininvestors in Argentina are the United States, Spain and theNetherlands.
Argentina has untapped natural resource and its workforce is competitive.Foreign investors can invest in all sectors of the economy on equal footingwith national investors. The current investment rules are liberal and investorfriendly. Argentina’s strongpoints include:- The country is copious with natural resources.- A middle class with strong purchasing power.
– Educated and skilled population.- Government is oriented towards pro-market reforms. Argentina’s weakpoints include: – A fragile and undercapitalisedbanking sector.- Insufficient power and energy – High rate of inflation.- Vulnerable financial market.