Latin American and Argentina
Development: opportunities and
challenges
2008 Presentation
For the University of North
Florida
Professors
R. Feeney and M. Rossi
Austral University, Argentina
Some facts about Latin America

44 countries
 550 million people live in this region
(50% more than the US, 8% of world population)

It produces 7% of the world GDP
(one third of the US)

Its territory is 21 million square kms
(double than de US)


Major world provider of soja, copper, sugar,
beef, etc. and many other raw materials
25 uninterrupted years of democratic regimes
in most of the countries
Evolution of World GDP per Capita 1950-2003) (PPP)
Evolution of the world GDP per Capita (PPP) 1950-2003
30000
US, Can,
NZ, Au
25000
Western
Europe
GDP per Capita
20000
15000
10000
World
LA
5000
Africa
0
1950
1973
1998
2003
Years
Latin America
Africa
Western Europe
US, Canada, Au, NZ
Asia
World
World Capita GDP by Region
In 1990 US International dollars
(Maddison, 2006)
1950
1973
1998
2003
Growth
1950 to
2003
Latin
America
2504
4513
5 837
5786
131%
1.59%
Africa
890
1 410
1444
1549
74%
1.05%
Western
Europe
4578
11 417
18 137
19,912
334%
2.81%
US, Canada,
Au, NZ
9268
16 179
25 767
28 039
202%
2.11%
717
1719
3547
4434
518%
3.49%
2113
4091
5729
6516
208%
2.14%
Region/
Year
Asia
World
Annual
Growth
GDP Per Capita Annual % Growth Rate
(Maddison, 2006 and 2007)
1913–50
1950–73
1973–98
1999-2003
Latin
America
1.43
2.52
0.99
0
United
States
1.61
2.45
1.99
1.6
Japan
0.89
8.05
2.34
0.5
Western
Europe
0.76
4.08
1.78
3.7
Africa
1.02
2.07
0.01
1.4
World
0.91
2.93
1.33
2.6
GDP Per Capita Growth Rate
(Maddison, 2006, p. 153, 2007)
1950-73
1973-80
1980-90
1990-99
1980-99
1999-2003
Argentina
2.06
0.48
-2.33
3.38
0.33
-0.22
Brazil
3.73
4.26
- 0.54
1.07
0.47
0.06
Chile
1.26
1.72
1.10
4.47
2.68
1.86
Mexico
3.17
3.80
-0.31
1.16
0.38
0.06
Total
Latin
America
2.52
2.57
-0.68
1.36
0.28
0
Latin American Nations
Ranked by Gross Domestic Product
(GDP- (PPP)) in 2006 Millions of International Dollars, CIA
World Rank
Nation
GDP (PPP) in millions
US dollar
10
Brazil
1,838,000
12
Mexico
1,353,000
22
Argentina
621,100
29
Colombia
378,808
44
Chile
212,733
52
Venezuela
193,331
48
Peru
185,110
70
Ecuador
64,779
90
Uruguay
37,885
96
Paraguay
31,014
102
Bolivia
27,892
GDP per capita (PPP) 2005, CIA
Rank in world
Country
GDP
per capita
50
Argentina
14,109
56
Chile
12,983
60
Mexico
10,600
65
Uruguay
10,028
68
Brazil
$9,108
81
Colombia
7,565
96
Venezuela
6,186
97
Peru
5,983
99
Ecuador
5,816
107
Paraguay
4,555
125
Bolivia
2,817
Inflation
Annual average compound
(Maddison, 2006, p. 153, 1999-2007 author’s estimate)
1950-73
1973-94
1994-98
1999-2007
Argentina
26.8
258.4
1.3
7.7
Brazil
28.4
268.5
19.4
7.1
Chile
48.1
71.8
6.7
3.77
Mexico
5.6
37.6
26.4
7.38
Average main
Latin America
countries
27.2
159.1
13.5
6.48
Poverty Line
(lowest to highest) Source: CIA World Factbook[5
Year of
estimate
Country
Population below
poverty line (%)
2005
Chile
18.2
2006
Argentina
26.9
2006
Uruguay
27.37
2005
Brazil
31
2005
Paraguay
32
2005
Venezuela
37.9
2006
Ecuador
38.5
2006
Mexico
38.6
2005
Colombia
49.2
2004
Peru
53.1
2004
Bolivia
64
Unemployment Rate
(lowest to highest) Source: CIA World Factbook
Rank in world
Country
Unemployment rate
(%)
80
Peru
7.20
89
Bolivia
7.80
90
Chile
7.80
100
Argentina
8.70
103
Venezuela
8.90
108
Paraguay
9.40
110
Brazil
9.60
120
Ecuador
10.60
122
Uruguay
10.80
124
Colombia
11.10
A key Variable: the Socio-Economic
Conditions in Latin America
Bo
liv i
a
30
Ha
i ti
60
Pe
ru
Gu
ate
ma
la
Pa
na
ma
Ch
i le
Pa
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ua
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Br
az
il
Co
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bia
ara
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a
Ec
ua
do
r
Ve
ne
zu
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Ur
ug
ua
y
Me
x ic
o
C
os
Do
ta
mi
Ric
nic
a
an
Re
pu
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Sa
l va
do
r
Ar
ge
nt i
na
Ho
nd
u ra
s
Nic
Income Eqaulity Index
equality[12]
Gini index
IncomeIncome
Inequality
in Latin
America
70
Latin America
50
40
USA
20
10
0
Central Questions about
Latin America

Why Latin America has not improved more
rapidly after all?

Why being rich in natural resources yet it is
relative poor?

The relationship of the US with Latin America

Is Latin America ready for change, especially
for regional free trade (FTAA)?

Is the business environment the same across
Latin America?
Business Realities in Latin
America the hard way…

Significant differences by country and by region

More than economics, institutional capacity is critical

..and accountability and transparency

..and also, the Rule of Law

National cultures vs Corporate cultures

Is NAFTA-Mexico a good example?…well
North American Free Trade
Agreement –2006 Results








2006 Total Value $868 billion
Increase in the last 5 years by 32%
Trade with Canada equals $533
billion, increase by 15%
Trade with Mexico equals $335
billion increase by 60%
Trade with Canada and Mexico
accounts for almost 45% of the
total U.S. trade
U.S. corporations seeking to
export to EU through Mexico
2005 Security and prosperity
agenda (logistics, logistics, and
logistics)
Data: U.S. Dept. of Commerce and U.S. Trade
Authority Office
Brazil and Mercosur, or how
Americas trade is difficult

Brazil control on trade in South
America

strong internal fiscal control
(conservative members of cabinet)

strong control of currency volatility

strong attraction of foreign direct
investment

strong opposition to U.S. subsidies

strong opposition to free trade USA
style

Production of ethanol
Argentina Basic Briefing



Population 2008:
41,000,000
Capital (population):
Buenos Aires
(12,000,000)
Life expectancy at birth:
76.32,
Male: 72.6
Female: 80.24
 Total surface
2,766,891 km²
Where we come from?
Rosario:
The Center of the Agribusiness Production Area in Argentina
Rosario
a precios constantes de 1993
Argentina’s GDP 1993-2007
Argentina GDP 1993-2007in millions of pesos de 1993
serie desestacionalizada
in constant prices of 1993 pesos
Hundred of
millions
Hundred
of mil onesofde $
pesos
370.0
350.0
330.0
310.0
290.0
270.0
250.0
trimestre
III-07
I-07
I-06
2005
III-06
III-05
I-05
2000 2002 2004
III-04
I-04
III-03
I-03
III-02
I-02
III-01
I-01
III-00
I-00
III-99
I-99
1998
III-98
I-98
I-97
III-97
1995
III-96
I-96
III-95
I-95
III-94
I-93
III-93
210.0
1993
I-94
230.0
2007
Year
Argentina GDP 1993-2007
Argentina’s
GDP 1993-2007
in constant prices of 1993 pesos
Thousand of Millions of
Pesos
Constant 1993 Pesos
Unseasonal series
350.0
Arg Vice-Pres
resigns X/2000
2004-2007
Recovery
330.0
Devaluation of
the Real I/99
310.0
290.0
1989-1990
Hyperinflation
III/2001
Finance
Secretaries
(2) Resign
External
Credit
CutVII/01
270.0
250.0
230.0
210.0
I-93
II-93
III-93
IVI-94
II-94
III-94
IVI-95
II-95
III-95
IVI-96
II-96
III-96
IVI-97
II-97
III-97
IVI-98
II-98
III-98
IVI-99
II-99
III-99
IVI-00
II-00
III-00
IVI-01
II-01
III-01
IVI-02
II-02
III-02
IVI-03
II-03
III-03
IVI-04
II-04
III-04
IVI-05
II-05
III-05
IVI-06
II-06
III-06
XII/01
Financial Bolt
1993
1995
1998
2000
2002
2004
2006
By now (2007) Argentina’s per capita GDP is higher
than the pre-crisis level
The Horror Story:
Inflation in Argentina (INDEC)
Year
Total Acumulative
Inflation Index 19702005
Inflation Index
5 Years Accumulative
1970
1
1
1975
20
20
1980
2 830
142
4 139 214
1462
7 320 092 666
1768
1995
17 872 101 933 529
2441
2000
179 465 027 176
1004
2005
27 361 668 003 207
152
1985prices:
2005
27 thousand
billions times 1970
1990
Inflation in Argentina (INDEC)
Year
Annual Inflation
1996
0.2
1997
0.5
1998
0.9
1999
-1.2
2000
-0.9
2001
-1.1
2002
2 5.9
2003
13.4
2004
4.4
2005
9.6
2006
10.9
2007
8.5
Pegged currency
Recession
Devaluation
Recovery with
increasing
inflation pressure
Balance of Non-Financial Public Sector,
in Argentina 1995 - 2006
From Deficit to Suplus
Balance of Non-Financial Public Sector,
in Argentina 1995 - 2006
Argentina´s Central Bank International Reserves
assets (Dec 1991- Dec 2006)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
31/12/1991 31/12/1995 31/12/1999 30/06/2002 30/06/2003 30/06/2004 30/06/2005 31/06/2006
Argentina’s Central Bank Reserves
2003-2007
International Reserves of the Argentine Central Bank in American Dollars 2003-2007
50 000 million
U$ dollars
50000
45000
40000
Reserve
35000
30000
25000
20000
15000
10.000
mill
10000
US dollars
5000
Years
International Reserves of the Argentine Central Bank in American Dollars
03/11/2007
2007
03/09/2007
03/07/2007
03/05/2007
03/03/2007
03/01/2007
03/11/2006
2006
03/09/2006
03/07/2006
03/05/2006
03/03/2006
03/01/2006
03/11/2005
2005
03/09/2005
03/07/2005
03/05/2005
03/03/2005
03/01/2005
03/11/2004
2004
03/09/2004
03/07/2004
03/05/2004
03/03/2004
03/01/2004
03/11/2003
2003
03/09/2003
03/07/2003
03/05/2003
03/03/2003
03/01/2003
0
Argentina’s Total Foreign Debt
Millions USD
Argentina's Total External Debt
107 Billion
USD=
55% /ARG GDP
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dic-04 Dic-05
International Commerce
Argentina´s Unemployement Rate
Infrastructure and Investment:
Public and Private Investment 1993-2006
in millions of 1993 pesos
Inestment in Argentina 1993-2006
80000
70000
60000
50000
40000
30000
20000
10000
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
Public Investment Private Investment TOTAL
2002
2003
2004
2005
2006
Infrastructure and Investment:
Public and Private Investment 1993-2006
in millions of 1993 pesos
Industrial activity
Industry was growing year by year, after the 2001
crisis
Currency
The last years were characterized by a relative high
peso-dollar real exchange rate
Exports
Exports are mostly based on commodities with low
value added
Complejos oleaginosos
Complejos petrolero petroquímicos
Complejo automotriz
10%
19%
21%
Internal environment
Domestic demand feels strong and sustained
Threats
After many years of sustained demand, the industry
is close to full capacity
Energy demand is climbing to a maximum, without
enough investment to expand the offer
Threats
Domestic energy prices were kept artificially low
(electricity, natural gas, gasoline, etc.) creating an
adverse scenario for private investment in those
areas
Inflation: growing fast, being not recognized by
official indexes
Emerging Markets
Emerging markets grew aggressively in 2007
Emerging Markets
Merval index vs. DJI
Since Argentine domestic markets are mostly driven
by food commodities’ prices, there is a good
perspective for sustain
Summary of Argentina’s Macro
Situation
+





Strong short term growth
Good Fiscal performance
Positive foreign trade
exchange
Foreign debt reduction
Higher employment
↓
↓
↓
↓
↓
↓
↓
↓
Still a risky country
Potential Inflationary risk
Strongly dependent on
commodity prices
Poverty: 30% of the population
has serious problems
Weak capital and financial
system
Low competitiveness in many
industries
Weak Infrastructure
Low foreign Investment
Business Environment
Since Argentine domestic markets are mostly driven
by food commodities’ prices, there is a good
perspective for sustained consumption, at least for
the next 5 years
If a global recession occurs, Argentina should not
have problems due to:



Historical high level of reserves
The Banking sector is totally recovered from the 2001 crisis
The sovereign debt was restructured
Next short-term challenges for
companies in Argentina
Inflation pressures: both internal and external
Labor costs: unions do not follow official indexes
Energy costs: will tend to reach international prices
In such an environment, companies should be more
competitive improving productivity and value added
Brazil Basic Briefing

Population 2005:
175,468,575
 Capital (population):
Brasilia (1,600,000)
 Life expectancy at
birth: male 58.96
years, female 67.73
years (2001 est.)
 Physicians per 1000
people: 1.47
 Rural/urban
population ratio: 21/79
 GDP per capita:
 U $9,100
Brazil Economic development
based in central economy

Foreign investment






1998-1999 first country in
the world
2004-2005 third place
after Mexico and China
Crisis of Confidence
Crash of Stocks
3% increase in base
rate since October 14
Leading MERCOSUR
Chile Basic Briefing

Population 2005:
16,598,074



Capital
(population):
Santiago de Chile
City (6,000,000
metropolitan)
Life expectancy at
birth: 76.96
male 73.69 years,
female 80.40 years
(2001 est.)
Total surface:
756,950 km²
Chile’s Economic Miracle
(chart in terms of GDP per capita)
Chile’s
per
capita
GDP
Average LA
GDP per cap
GDP in constant value
Evolution
of in
Chile'
GDP 1973-1998
Evolution of Chile’s
GDP
25s Year
(in US constant dollars
200000
Chile multiplied its
GDP by 3 in 25 years
150000
100000
50000
0
1973
1990
Year
1998
Competitivity and Innovation
in Latinamerican countries
Source: World Economic Forum 2005
Competitivity Ranking and Technological Innovation
Latinamerican countries 2005
Competitivity
Technological
Innovation
Chile
23
35
Uruguay
54
63
Mexico
55
57
El Salvador
56
70
Colombia
57
74
Costa Rica
64
56
Brasil
65
50
Peru
68
75
Argentina
72
59
Country
Mexico Basic Briefing






Population 2005:
105,879,171
Capital (population):
Mexico City
(18,000,000)
Life expectancy at
birth: male 69.73
years, female 74.93
years (2001 est.)
Physicians per 1000
people: 1.73/1,000
Rural/urban population
ratio: 26/74
GDP per capita:
$10,600 (2005)
Mexico Economic Development
based in open economy since1988





GATT
Open Economy, export
oriented and Foreign
investment
NAFTA
Interdependence, Rules of
Origin and National Content
Free Trade Agreements (14)
European Union, Central
America, Chile, Israel,
Japan, S. Korea, and
Australia.
What is the future Latin American
economic scenario?
a.
b.
c.
d.
e.
Speed of second
generation reforms
From internal producing
and consuming market to
an international, regional
and global economy
US is a regional leader in
the marketplace and that is
not going to change
Rule of law, accountability
and transparency
Paradox of social
inequality (human capital
investments)
Working force development requires
to add International Education and
Skills (+)

Working Knowledge in:





Language skills –
functional level
Culture at the exchange
level
Political, economic, and
social systems.
National cultures
Corporate cultures
abroad