Saturday, December 03, 2011

...because everybody is obsessed with Latin America

There is always a discussion on where to invest, how to capture a trend. Whereas people try to figure out what companies are about to become more prosperous big enterprises deal with a question what economies are more attractive for investments. Nowadays more and more people tend to think that Latin America is by far the fastest growing market in the world.

Countries like Mexico, Brazil, Argentina and Chile have been growing in the past 20 years so that investors started to put their money to those markets. In addition, big multibrand companies like General Electric, Siemens, Nissan, Halliburton increased their operations there. This year, however, everyone who invested in region's indexes lost money. International investors suffered even more because currencies dropped down against the dollar. Overall, 36,6 billion dollars were taken out of Latin America markets this year.

On the other hand, these countries rapidly grow their middle class. According to the governor of the state of Rio de Janeiro, almost 40 million people in Brazil are middle class. If we look at the income level situation in Brazil ten years ago, there was almost no middle class there. This change has a huge impact on the economy because people want to spend more. So now there is another issue related to deficit. Demand outnumbered supply and, of course, many companies want to satisfy people's needs in exchange of their money.

Now many investors have trouble with figuring out whether or not to invest in Latin America economies because there are too many contradicting factors coming into play. Although Argentina and Brazil suffer from increasing inflation their GDPs doubled in the last ten years. Moreover, an export impact of those countries constantly helps them to become richer. Obviously, there are certain risks related to economic instability in these markets, but this is an opposite sight of a coin when it comes to emerging markets.

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