What is happening in South America?

It has been some years since South America has come out of the lethargic state imposed by the recurring ups and downs that are so typical in the majority of the countries of the region.

Mapa Sudamérica – Ilustración The Economist

Except for Chile, which living up to its reputation as “the Switzerland of South America” has been the steadiest country over the years, boasting an overall continuity that has gone beyond the different political orientations in the last three decades; a military dictatorship, the Concertación (Coalition) administrations (Alwyn, Frei, Lagos, and Bachelet), and the Alliance of current President Piñera; the rest of the countries have gone through ups and downs that have curbed growth and development opportunities.

But now things have changed and, although the crisis unleashed in some European countries somehow affects the region, favorable winds seem to keep blowing.

Hugo Chávez – Foto AP

Save for two of the major economies in the region, Venezuela and Argentina, where vindicatory actions and claims about the past are used to embark on new epic quests for liberation that only hinder the possibility of leveraging resources and creating genuine growth, and with an inflationary scenario that significantly undermines the purchasing power of the population, the other countries seem eager to capitalize on a cycle that is extending longer than expected .

Brazil, Peru, and Colombia, with their own peculiarities, are at the forefront of the trend that Chile adopted a long time ago regarding the design of long-term policies that send out unequivocal stability signals to the markets. To everyone’s surprise, Paraguay is also emerging. Encouraged by the agricultural sector and along with Uruguay and Brazil, it has started to fill a gap in beef production, which for a long time has been neglected by Argentina, historically the world’s main prime quality beef producer.

In recent years, hotel investments have mushroomed in the region offering huge opportunities thanks to a combination of factors that look spectacular when assessing market possibilities: growing economies with low unemployment rates, thousands of people with higher levels of consumption, opportunities in different industry segments, more and more business and leisure travelers, with supply that is usually very much below current demand levels and with growth projections that highlight the need for new investments.

In this scenario, Asunción (Paraguay) and Santa Cruz de la Sierra (Bolivia), where no international hotel chains are yet operating, are coming out of their lethargy and are ready to meet the growing demand with several projects in the pipeline.

Dilma Rousseff – Foto Wilton Junior

Of course, Brazil is the region’s star; but all that glitters is not gold. The big chains and many groups of investors have long been investing time and money, but have been unable to close deals or not in the scope and amount expected in an economy like Brazil’s, a BRIC member.

Three major players are attracting increased attention and dominate the market; Accor, Atlántica, and BHG. Accor is a forerunner and concentrates the largest number of properties/rooms under its umbrella, followed by Atlántica. However, a fairly recent player has become increasingly relevant – BHG, which has even shown the call to move forward to other markets in the region.

In Peru, despite some initial uneasiness about Humala’s assuming the presidency, things have changed very rapidly. Shortly after his arrival at the Presidential Palace, the uncertainties and misgivings harbored about the course of the economy disappeared, thus boosting the robust pace of Peru’s economic growth.

Ricardo Santos y Alvaro Uribe – Foto AFP

Colombia continues its reconstruction process, has succeeded in leaving behind the nightmare of kidnapping by guerrillas, and has become a new attraction for investors. The national slogan “The risk is wanting to stay” has successfully expressed the work undertaken by the administration of president Uribe and continues with the current president, Santos.

Dave Sidmonds – The Economist

Despite the special conditions already described, Argentina and Brazil rank first in the number of foreign tourist arrivals, with over five million a year. These numbers together with the countries’ attractions offer interesting prospects in terms of their capacity to absorb greater supply. However, the special conditions of an economy suffering from rising inflation, having problems to import goods and services and to freely purchase and transfer foreign currency are chasing away foreign investors.

Punta del Este, silueta nocturna – Imágen skyscrapercity.com

Finally, Uruguay, which after Chile certainly is the region’s second steadiest and most predictable country, offers interesting investment opportunities in the hotel, tourism, and second home property segments, despite its small-scale markets. Montevideo, an important financial center, and Punta del Este, increasingly renowned as a sophisticated seaside resort like Cannes in Europe or the Hamptons in the US, are the gateways to foreign investments, which see them not only as a safe haven for their money but also as a good second home destination for most of the year.

Peter Schrank – The Economist

Apart from each country’s features in a multifaceted region, South America’s opportunities are countless and are comprised under the umbrella of economies that continue to expand despite the uncertainty caused by the deep European crisis.

 
Arturo Garcia Rosa
June 16, 2012

South America E-News – Junio 2012 – www.hvssouthamerica.com/e-sur/editorial_eng/arturosletter-eng.html