Latin America – A Region In Flux The Latin America region has been taken for granted by most manufacturers over the last five years. Business has been good, national economies have been growing, construction markets have been active and machines have been selling. Overall U.S.-Latin trade is up 13.7 percent, driven both by U.S. imports and exports to the region. The combined GDP (gross domestic product) of Latin America is a US$2.8 trillion, according to the latest World Economic Outlook released April 2006. The top three economies – Brazil, Mexico and Argentina – accounted for a huge 73.5 percent of this total GDP. However, there has been a slow undercurrent of activity that will soon swell to create very noticeable changes in the next several years. Major elections in Central and South America have slowed economic growth in Mexico, Peru, and Colombia. Even though these elections and their outcome appear favorable to the U.S., there are still other domestic pressures that will necessitate caution. Venezuela’s President Chavez has been saber-rattling for years and this country has been referred to as the “new” Cuba. Elections in December of this year could de-stabilize Latin America’s political and economic landscape. Venezuela joined the Mercosur Trade Group, but there is controversy over whether it will hinder or help the group. Chavez may use the group to promote his brand of politics rather than use it to foster economic development. Mercosur accounts for nearly 75 percent of South America’s GDP. Bolivia, Paraguay and Uruguay – three underappreciated countries – have moved in the direction of having socialist governments and, along with several other countries, are making a move back to nationalization of public utilities and mining operations. Private investments there are declining. Recent new free trade agreements between the U.S. and Peru (U.S.-Peru TPA), and the U.S. and Central America (U.S.-CAFTA-DR) show promise, but are not in effect yet. U.S.-Peru TPA still has to pass legislative implementation and U.S.-CAFTA-DR is being gradually rolled-out country by country, so each country can make sufficient progress to complete its commitments under the agreement. The general outlook for the balance of 2006, and even into the first quarter of 2007, is still optimistic. But caution should be the watchword. |
 |