Call for Investors: Don’t Be Afraid of Politics in Latin America

Opening a business outside the United States for the first time can be difficult. For senior executives and business owners, this could mean either a major achievement or the loss of a lot of money and credibility; it could turn into a lifetime achievement or a big failure. Success abroad depends on several factors, such as company law, availability of human capital, financial services (including access to capital and bank accounts), taxes and fiscal responsibilities, among others .

Today we will focus on the dual role of Latin American governments as regulators and active seekers of foreign direct investment (FDI). Should private investors and business owners be sure that their money will be safe? With this question in mind, let’s review some Latin American countries.

Brazil

Brazil is the largest economy in Latin America and ranks ninth in the world. It is led by President Jair Bolsonaro, a former army general who calls his ideology centre-right and who once said that “the free market is the mother of freedom”. Brazil closed 2021 with a GDP of US$1.6 trillion. At the end of February 2022, its unemployment rate reached 11.2% and its FDI flows amounted to 46.4 billion dollars.

Some of the biggest mergers and acquisitions in Brazil reflect the confidence of regional investors in the country’s ability to receive FDI safely

Brazil is a friendly country for international investors. He recently announced more mining concessions that will result in a long-term investment of US$4.4 billion; in an attempt to control inflation, the authorities have reduced customs duties on certain food products to zero; and there is a move to privatize Petrobras, the country’s largest state-owned company, which reported more than $8 billion in profits in the first quarter of 2022.

Some of the biggest mergers and acquisitions in Brazil reflect regional investors’ confidence in the country’s ability to safely receive FDI. FEMSA, the number one Coca-Cola bottling company in Latin America, recently bought a Brazilian distributor for $111 million. On top of that, Carlos Slim (the 13th richest man in the world and the richest in the region) has recently invested over US$3 billion; his telecommunications company, Claro, bought 22% of the mobile assets of a local telecommunications operator.

That said, it is quite conclusive that Brazil is open to international capital and foreign companies.

Mexico

Mexico is led by centre-left Andres Manuel Lopez Obrador (known as AMLO). Although his political alignment may scare some, he understands that a capitalist system is necessary to create jobs for Mexico’s 126 million people. As proof of his understanding, his administration is currently negotiating a free trade agreement with the United Kingdom, a major trading partner from which Mexico receives around US$8 billion in FDI.

With an estimated GDP of US$1.2 trillion, the country is the second largest economy in Latin America. The two main drivers of its growth are the automotive and petrochemical industries.

Despite its internal problems, Mexico is home to manufacturing facilities for three of America’s biggest auto brands: General Motors, Ford and Chrysler, which have operated in the country for several years. In other words, you can be sure that the political landscape will not work against your business if you decide to open a store in the country.

Mexico’s relationship with the United States goes back a long way. Due to its geographical proximity, no one should be surprised that the United States is Mexico’s main trading partner. The two countries – alongside Canada – have signed a new free trade agreement which has been in effect since July 2020 and will remain active for at least 16 years. The new legal framework opens opportunities to start exploring the local market.

Despite its internal problems, Mexico is home to manufacturing facilities for three of America’s biggest auto brands

Additionally, companies such as Walmart, Amazon, and Apple — the top three on the Fortune 500 list — rack up more than $1 billion in revenue each year from their operations on Mexican soil. Their cases clearly show that Mexico is a safe destination to open a business.

Dominican Republic

The Caribbean country is led by President Luis Abinader, a right-winger who studied financial engineering at Harvard. One of his campaign promises was to make the Dominican Republic a closer trading partner of the United States. Prior to his first 100 days in office, his government signed a cooperation agreement with the United States, which granted DR access to approximately $2 billion in funds to finance projects related to tourism, infrastructure and tourism. energy, the main economic engines of the country.

DR is going through a golden age of economic growth. Over the past 20 years, the country’s GDP has grown at an average annual rate of 5.3%, and International Monetary Fund (IMF) projections put it at $109 billion by 2021. With a population of 10 million inhabitants, its unemployment rate is quite high. low (5%) due to the $27 billion in FDI received over the past decade. One of its best bets for attracting foreign capital has been the development of free trade zones. It holds 75, where more than 700 companies around the world are currently operating.

The Dominican Republic is going through a golden age of economic growth

One of the R&D success stories is energy giant AES. Founded in Virginia, AES has a large production plant in the country, from where it supplies fuel to local and international customers. In the banking sector, Scotiabank has been present in the Dominican Republic since 1920. It now has 74 branches in the territory, which underlines the feeling of security in the country for foreign capital.

As you can see, many Latin American countries are ready to attract, respect and protect foreign investment. You can be sure that the political landscape will not interfere with your business goals. Success will only depend on your strategy and management skills.