SOUTH AMERICA | FEATURE
The trials of South America GLOBAL TRADER’s Latin America correspondent Gabriela Castro-Fontoura analyses current opportunities for UK businesses in the economically troubled continent of South America
South America is no stranger to the global economic downturn British exporters are currently battling against. What makes the downturn even harder to come to terms with in Latin America is that the region experienced over ten years of sustained economic growth, where regional growth reached nearly six per cent and where individual country growth reached impressive double-digit figures. British companies exporting to South America will now face a very different continent from the buoyant one they heard about, or exported to, not that long ago. Countries like Brazil, Venezuela and Argentina are even in recession and former “miracle” stories like those of Colombia and Chile look a lot less exciting right now. The continent is also experiencing political instability, particularly in Brazil, and the zika virus scare hasn’t helped its global positioning as a region.
Brazil isn’t easy to deal with at best of times, so you can imagine it’s rather tricky there right now. Those already in the market for many years will know that they’ll have to navigate the choppy waters but they’ll also know Brazil is too big to ignore. You just need to resources to sustain an expansion into this country that opens and shuts to the world, and to individual businesses, in some cyclical and sometimes inexplicable ways. While the country steals all the regional headlines, remember that people still consume, roads are still being built and money is still being invested. There’s a lot of uncertainty, but if you can handle the uncertainty, if you have the cash and the team to back your perseverance, this is probably not the time to quit Brazil. There’s light at the end of the tunnel, with the IMF expecting the country to be out of recession next year. One not for the faint hearted, definitely. Not for the fainthearted either is Venezuela, but let’s not compare it with Brazil. Venezuela is a different country and its current political situation is much more delicate. While Brazilians are feeling the pinch, Venezuelans are going through the unimaginable to even find the most basic goods every day, from toilet paper to life-saving medicines. Except for some notable exceptions, I would not advise companies to look at doing business with Venezuela right now, because risk is just too high. Argentina is a different story altogether. Ten years of “Kirchnerism” (the period where Néstor Kirchner and his wife Cristina Fernández occupied the country’s Presidency, which lasted from 2003 to 2015) have now come to an end. During those years, Argentina became a very difficult country for UK exporters for many reasons ranging from protectionism (huge import duties and all sorts of hidden barriers including import licenses and bureaucratic delays) to a re-ignition of the Falklands debate.
Caracas
So should British exporters be concerned? Are there still opportunities in South America? How should British companies go about exporting to a region that seems to keep promising but not always delivering? The first thing we must take into account is that Latin America is far from homogeneous. It’s a region of twenty countries that can’t necessarily be lumped all together. Even the three countries in recession I mentioned before, need to be treated differently. Take Brazil, for example. Bigger than the whole of Europe and now in the middle of a political upheaval that has severely affected businesses, Brazil is the country we’re all talking about just now. 122
Now we have Mauricio Macri, a pro-business leader, as the new President, and things are looking much brighter. The change was evident within weeks, and this is the time to look at Argentina again with different eyes. Don’t expect change to happen overnight, but Argentina is re-emerging as a key global player again. Watch out for those Argentine competitors than now are freer to look for export opportunities, though! Remember that Argentina, even with
British companies exporting to South America will now face a very different continent from the buoyant one they heard about, or exported to, not that long ago