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The rise of Latin America
Peter Kopa, Prague, 13.3.2024
https://thinktanklatam.org/latin-america-between-usa-and-china-is-marking-a-huge-competition/
Preliminary comment
It is high time for Latin America to become aware of its enormous importance in the global economic and political arena. As long as this region does not unite its forces to be able to stand its ground before the three hegemonic powers, it is in danger of atomizing its energies in local conflicts. It is to be hoped that a free and open economy will lay the foundations for greater integration, without compromising the sovereignty of each state. And it is important for each nation to pursue a pluralistic policy in terms of official foreign investment, in order to counterbalance Chinese communist pressure to gain more political influence by all means.
https://www.youtube.com/watch?v=q-tKH61nb7s
World leadership in raw materials
Latin America south of the Rio Grande, which is the border between Mexico and the USA, is expanding its leading position in the world’s raw materials and energy markets: it already occupies a preeminent position in certain products. Nearly half of the world’s lithium reserves are in South America. In addition, Chile and Argentina, Brazil, Mexico and Ecuador are also expanding production of this raw material. Peru and Chile supply 40% of the world’s copper demand. Fifteen percent of the world’s oil and gas reserves are located in this region. Brazil and the Guianas, and possibly soon Argentina, will also be massively increasing their exports.
Latin American farmers supply almost half of the agricultural products traded on the world market for food production. Last year, Latin America was visited more than ever before by European officials and business enterprises, in order to contract purchases or implement investments. Visits by European heads of state and delegations were constant. For the first time in eight years, an EU-Latin America summit was held and a series of intergovernmental consultations were held. The EU signed a free trade agreement with Chile and is about to do so with Mexico. European governments have long been striving to conclude an agreement with Mercosur, but so far without results.
https://thinktanklatam.org/situacion-de-latinoamerica-en-2023/
Unfortunately, Europe is late to react to the growing strategic importance of Latin America, where China and the USA have been intensifying their relations in the Latin American region for years. For their part, the wealthy Middle Eastern states are also becoming important investors and trading partners in this region. Even India and other Asian countries want to expand their relations here as well. Latin America consumes only a small part of its own production. It has an area similar to that of China and the United States combined. However, with 650 million inhabitants, it has only about one third of the population of the two superpowers mentioned.
Far away from hotspots and wars
But there is also another new reason for Latin America’s growing attractiveness: the region benefits from its relative stability in an unstable and crisis-ridden world. While there are tensions between countries, the region has not had a single war for a hundred years. Moreover, it is far from the current and potential hotspots of conflict in Europe, the Middle East and the Far East. This makes Latin America more attractive than China for companies wishing to relocate their production to safer regions. The key words are decoupling and offshoring. Mexico and Central America are already benefiting from this trend. U.S. companies are no longer investing in China, but building their new factories closer to their own markets.
The trend of global companies relocating their factories to Latin America has only just begun. This is also due to the continent’s sustainable energy regime: nowhere else in the world is an average of 60% of electricity generated from renewable energy sources, and sustainability continues to grow. In 2023, Brazil generated 93% of its electricity from renewable energy sources such as hydro, wind, solar and biomass. Electricity in countries such as Uruguay, Paraguay and Costa Rica is generated almost exclusively from sustainable sources.
Main advantages of the region
Latam Investor experts succinctly summarize the continent’s advantages in a global comparison: Latin America is more peaceful than Eastern Europe, less corrupt than Africa and more democratic than Asia. However, there are risks to its development. At present, these are China, unstable politics and organized crime.
China has become the most important sales market for Latin American exporters and the largest investor in many countries in the region. Under a Trump administration, the US could attempt to pressure Latin America, particularly Mexico and Central America. For example, the future U.S. government could impose unfair sanctions on Latin American countries that receive Chinese investment or conduct much of their trade with China.
Tensions between citizens and the state
Democracies in the region have proven resilient in the last electoral cycle. However, elected governments are finding it difficult to implement their programs and thus fulfill the voters’ mandate: social protests, divided and paralyzed parliaments are holding back executives in Argentina Chile, Peru, Colombia – and possibly soon in Brazil and Argentina.
Authoritarian regimes in Venezuela, Cuba and Nicaragua are getting the worst results in terms of crisis management: Latin America is experiencing a historic emigration from these three countries to other Latin American countries.
Organized crime around drug trafficking is what is holding back progress the most. Drug gangs are increasingly challenging states. It is increasingly difficult to contain their power. The costs to society rise as insecurity grows. Although only about 8% of the world’s population lives in Latin America, a third of the world’s murders take place in this area of the world, mainly within criminal spheres of action.
Source: NZZ Zuerich.
