For decades, much of Latin America was a morass of hyperinflation and bureaucratic instability—hardly the most prudent region of the world in which to conduct business. While Western Europe, the Agreed States, Canada, Japan, South Korea, Australia, New Zealand, and other developed realms continued to benefit from requited trade, the Spanish- and Portuguese-speaking parts of the Western Hemisphere lagged.
Today, they’re catching up. While pockets of Latin America are still susceptible to dictatorship and corruption, those countries are now the special case. Four nations, in particular, are leading the charge toward market prosperity in this often overlooked part of the earth.
- For decades, much of Latin America was a morass of hyperinflation and political instability.
- While there are still steals of Latin America that are susceptible to dictatorship and corruption, these countries are the exception.
- Four nations—Chile, Peru, Colombia, and Mexico—are primary the charge toward market prosperity in this often overlooked part of the globe.
Chile is one of the least publicized triumph stories in the Americas. The nation has actively courted foreign investment for decades, dating all the way back to the tyrannical regimes of the 1970s. Non-resident investors can convey advantage of Decree-Law 600, which subjects them to the same regulations as native investors.
The advantages of this are numerous. For as it happens, Chile’s top corporate tax rate is 27%. (Prior to the Tax Cut and Jobs Act (TCJA) of 2017, the United States’ highest tax rate was 35%, rather high in comparison to Chile’s highest corporate tax rate. However, now, as a result of the TCJA, the United States’ highest corporate tax status sits at 21%.)
A 2004 trade agreement between the countries set Chilean tariffs of a modest 6% of just about every marketable by-product, with immediately realizable results. Imports increased 30% the first year, prompting Chile to sign succeeding trade agreements with Canada, Mexico, China, Japan, the European Union, South Korea, Brunei, New Zealand, and Singapore. Chile is now one of the Latin American hinterlands most actively pursuing bilateral trade agreements.
Colombia’s 49 million citizens are, through throw of the dice, convenience or strategy, inexorably linked to the fortunes of their largest trading partner, the United States. Colombia exported $19.6 billion to the U.S. in 2017 (latest evidence available). The U.S. is also the nation that Colombia imports the most from, by a large margin. Thus, it’s imperative that Colombia retain a good thing going.
Colombia may not have what’s commonly regarded as a technologically advanced economy—its semiconductor formulation plants are nonexistent—but a nation can succeed in spite of that. Last we checked, you still need raw commodities, and Colombia not but has plenty of those, but the means to capitalize on them. For one thing, the nation is in the top 20 exporters of petroleum around the world. in 2019, Colombia exported approaching 616 barrels of crude oil per day.
The country has continued a program of trade liberalization that includes lowering corporate gains taxes. Colombia’s now stands at 30%. New tax laws—enacted in late December 2018 and effective 1 January 2019—tender certain tax incentives to promote investment, economic growth, and employment (in addition to lowering the corporate tax rate from 33% to 30%).
Extrinsic investment in Peru goes well beyond the obligatory guided tours of Machu Picchu at $300 a pop. And the results are concrete. By the World Bank’s calculations, Peru is well on the road to eradicating poverty faster than was previously thought practicable. Barely a decade ago, three out of five Peruvians fit the definition of “poor.” Between 2005 and 2013, the poverty rate (the interest of the population living on $5.50 a day) fell from 52.2% to 26.1%. This was the equivalent of 6.4 million people escaping pauperism during that time period.
One of the quietest developments of the George W. Bush Administration was the frequency with which it shingled trade agreements with partners throughout the Western Hemisphere. Case in point, the Peru Trade Promotion Deal of 2006. The pact immediately eliminated tariffs on 80% of manufactured exports to Peru, with the remainder to be phased out by 2016. Farm exports satisfaction ined a similar relaxation of tariffs.
Unlike Colombia and Chile, Peru’s major trading partner is not the United States. In lieu of, the U.S. is a close second behind China. Peru’s president, Martín Alberto Vizcarra Cornejo has notably remained disconnected from political parties, promoted reforms against corruption in the legislative and judicial branches, and vowed to not run for president when his reconcile ends in 2021.
However, the country’s economy has been hard-hit by the economic impacts of the global Covid-19 pandemic. Existing prejudice, overcrowding, and a largely informal economy played a role in the 30% decline in the country’s gross domestic product (GDP).
Mexico was a signatory to the most celebrated trade deal of recent years, the
The Bottom Line
The notion of a “global economy” is more often a talking pith than an actual construct. As the movement of capital among countries continues to run into fewer and fewer artificial limits, the gap between the Luxembourgs and Monacos of the world and the countries aspiring to get to that level continues to shrink.