In Conversation with Brennan & Partners
26th November 2021
Economic resilience, a favourable geopolitical position, and an abundance of opportunities were among the main takeaways from “Doing Business in Latin America”, the fourth “In Conversation With” event hosted by Brennan & Partners, in partnership with the Commonwealth Enterprise and Investment Council.
The discussion convened 78 participants from across Europe, Latin America and the wider Commonwealth as an expert panel of guests discussed the region’s economic, social and growth forecast.
Speakers included Dr José Antonio Meade Kuribreña (Senior Advisor, Brennan & Partners; Member of the Board of Directors, HSBC Holdings); Ana Paula Vescovi (Chief Economist, Santander Brazil); Lord Marland (Chairman, CWEIC); and Luis Enrique García (Senior Advisor, Brennan & Partners; former Executive Director, Development Bank of Latin America – CAF).
The session was moderated by Financial Times’ Latin America Editor Michael Stott, with introductory remarks from Alexander Brennan (CEO, Brennan & Partners), Samantha Cohen (CEO, CWEIC) and Sir Hugo Swire (Chairman, International Advisory Board, Brennan & Partners; Deputy Chairman, CWEIC), who also closed the discussion.
Themes that emerged included:
>> Economic potential – while Latin America has underperformed over the past few decades relative to both its potential and previous performance, it is inaccurate to consider the region anything other than one of high potential. Pre-pandemic Gross Domestic Product (GDP) was estimated to be £6tn, twice that of the UK, and its GDP per capita was only slightly lower than China’s at £9,000. Low productivity growth, a skills gap, and lack of technology to exploit natural resources has led to underinvestment which has hampered development. With increasing domestic and foreign investment, a thriving technology market, and regulatory changes, the region can increasingly realise its potential.
>> Favourable geopolitical position – in contrast to other high-potential regions, Latin America is largely absent of armed conflict, terrorism and political instability. This makes it an opportune environment for long-term sustainable investment. Its ability to access a variety of markets makes it an even more attractive prospect. Geographically and culturally close to the USA with whom it shares time zones, it is a gateway to the Asia-Pacific and to the rest of the Americas, facilitating direct access to the Caribbean tourism market. Few regions globally combine stability with breadth of market and sectoral access.
>> Sector diversity – Mexico remains an economic powerhouse within Latin America, contributing over half of the exports of the entire region. Yet it is not just the traditional automobile and manufacturing sectors that are driving exports. Across the region, from Mexico through to Brazil, Ecuador and beyond other industries are expanding. Technology is rapidly becoming a sector of vital importance, and with skills gaps reducing other sectors such as agriculture, aerospace, fintech, medical components and healthcare, fintech and retail are benefiting from an increasingly skilled and ambitious workforce.
>> COVID-19 recovery – although one of the hardest hit regions by the COVID-19 pandemic, Latin America is well on its way to recovery. The Brazilian Government aims to have its citizens fully vaccinated by year end. Export capacity has proven highly resilient, with Mexico exporting more today than at pre-pandemic levels. Finance, technology, and energy have all experienced pandemic-inspired accelerations over the past 24 months and are showing little sign of slowing down.
>> Regulatory environment – Governments have been investing in favourable regulatory frameworks and commercial conditions across the region for some time. Brazil is undergoing its second major wave of reforms since re-democratisation began in the 1980s. A policy of fiscal consolidation has led to a private capital market that has doubled since 2017 and continues to enjoy double digit growth in 2021. The central bank’s fast payments system ‘Pix’ has inspired growth further, enabling retail and hospitality in particular to benefit from instant payments in real-time, opening up new opportunities for businesses and consumers.
>> Investing for the future – with so much potential across so many markets and sectors, and with such an abundance of resources, the region presents undeniable – and significant – investment opportunities. Despite having a high concentration of commodities and natural resources, regional growth is constrained by a lack of investment into infrastructure, technology, and limited internal financial capital. Chile, Argentina and Bolivia all have significant reserves of lithium, a key component in industry and technology, but these have remained largely untapped due to a lack of viable investment. A long-term perspective enables investors to mitigate against currency risks, with key areas such as energy, infrastructure, skills and technology all likely to prosper from foreign investment.
>> Window of opportunity – a lack of awareness regarding the opportunity presented by Latin America, particularly within the UK, was noted by the panel. Over the past decade, China has been investing heavily across Latin America, initially through the Chinese government but more recently $100bn has been invested by Chinese development banks in strategic sectors such as electricity, energy and infrastructure. British investment in region has been limited, but post-Brexit British businesses should consider the opportunity presented by a geopolitically stable region with an economy 30% greater than India’s.