Latin American economy
Latin America as a region has multiple nation-states, with varying levels of economic complexity. The Latin American economy is an export-based economy consisting of individual countries in the geographical regions of North America, Central America, South America, and the Caribbean. The socioeconomic patterns of what is now called Latin America were set in the colonial era when the region was controlled by the Spanish and Portuguese empires. Up until independence in the early nineteenth century, colonial Latin American regional economies thrived and worked things out. Many parts of the region had favorable factor endowments of deposits of precious metals, mainly silver, or tropical climatic conditions and locations near coasts that allowed for the development of cane sugar plantations. In the nineteenth century following independence, many economies of Latin America declined.[1][2] In the late nineteenth century, much of Latin America was integrated into the world economy as an exporter of commodities. Foreign capital investment, construction of infrastructure, such as railroads, growth in the labor sector with immigration from abroad, strengthening of institutions, and expansion of education aided industrial growth and economic expansion.[3] A number of regions have thriving economies, but "poverty and inequality have been deeply rooted in Latin American societies since the early colonial era."[4]
As of 2021, the population of Latin America is 656 million people[5] and the total gross domestic product of Latin America in 2019 was US$5.1 trillion. The main exports from Latin America are agricultural products and natural resources such as copper, iron, and petroleum. In 2016, the Latin American economy contracted 0.8% after a stagnant 2015.[6] Morgan Stanley suggests that this drop in economic activity is a combination of low commodity prices, capital flight, and volatility in local currency markets.[7] The International Monetary Fund suggests that external conditions influencing Latin America have worsened in the period from 2010 to 2016, but will show growth in 2017.[8]
Historically, Latin America has been an export-based, with silver and sugar being the motors of the colonial economy. The region remains a major source of raw materials and minerals.[9] Over time, Latin American countries have focused on efforts to integrate their products into global markets.[9] Latin America's economy is composed of two main economic sectors: agriculture and mining. Latin America has large areas of land that are rich in minerals and other raw materials.[9] Also, the tropical and temperate climates of Latin America makes it ideal for growing a variety of agricultural products.[9]
Infrastructure in Latin America has been classified as sub-par compared to economies with similar income levels.[10] There is room to grow and some countries have already taken the initiative to form partnerships with the private sector to increase infrastructure spending.[11] The main economies of Latin America are Brazil, Argentina, Colombia, Mexico, and Chile. These economies have been given positive outlooks for 2017 by Morgan Stanley.[7] The Latin American economy is largely based on commodity exports, therefore, the global price of commodities has a significant effect on the growth of Latin American economies. Because of its strong growth potential and wealth of natural resources, Latin America has attracted foreign investment from the United States and Europe.
Grape plantation in Argentina. Argentina and Chile are among the 10 largest grape and wine producers in the world and Brazil among the 20 largest.
Salmon farming in Chile. One third of all salmon sold in the world comes from the country.
Steel-maker CSN, in Volta Redonda. Brazil is one of the 10 largest steel producers in the world; Mexico is one of the 15 largest and Argentina one of the 30 largest
Klabin industrial complex, in Ortigueira. Brazil is the second largest pulp producer and the eighth largest paper producer in the world
Portico of the Democrata men's shoe factory, in Franca. Brazil is the fourth largest shoe manufacturer in the world.
Hering, in Santa Catarina, Brazil. The country has one of the 5 largest textile industries in the world
Mercedes-Benz plant in São Paulo. Mexico and Brazil are among the 10 largest vehicle manufacturers in the world and Argentina among the 30 largest.
Copper mine in Chile. Latin America produces more than half of the world's copper
Colombian emerald. The country is the largest producer of emeralds in the world, and Brazil is one of the largest producers
Copacabana Palace, the best hotel in South America, in Rio de Janeiro. Tourism brings important currencies to the continent.
Sunflower plantation in Argentina. The country is the world's third largest producer of sunflower seed.
Chilean cherries. Chile is one of the top 5 producers of sweet cherries in the world.
Chilean kiwi. The country is one of the 10 largest kiwi producers in the world.
Pineapple in Veracruz, Mexico. Latin America produces 35% of the world's pineapple.
Regional risks[edit]
Currency risks[edit]
Over the past five years, dollar-based investors in Latin America have experienced losses driven by a depreciation of local exchange rates.[144] Looking forward to 2017, several factors suggest that current exchange rates will provide positive tailwinds to dollar-based investors over the next several years.:[144]