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Latin America Geoeconomics


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The Latin American map is changing dramatically. Bet E Wolff (executive director of BEWNETWORK, a study and work abroad agency with headquarters in Buenos Aires, Argentina) helped the ICEF Latin America Workshop attendees better understand it through her recent presentation.

With the slow waning of the great commodity boom, Ms Wolff argues that the future economic growth of Latin America will have to come from productivity, investment and efficiency. This presentation presents some examples from Chile, Peru, Colombia, Brazil, Argentina, Mexico, and Uruguay.

Ms Wolff is also featured in ICEF Monitor's recent Market snapshot on Argentina. As the second largest country in South America, Argentina is both a good source of international students and an attractive study abroad destination. It has a long tradition of higher education, but debate about how to structure and maintain that system is central to the country’s turbulent politics.

For the Argentina market report, please see For more industry news, market intelligence, research and commentary for international student recruitment please visit, subscribe for free daily or weekly updates, and follow us on Twitter

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Latin America Geoeconomics

  1. 1. Bet E. Wolff BEWNETWORK Buenos Aires, Argentina 1
  2. 2. World Today 2  The world’s financial markets have been marked by contradictions throughout 2013. Inflation has dropped, but government bonds have suffered. Risk appetites have revived but emerging markets have underperformed.  Fear of conflict in the Middle East has been a regular source of market worry over the past ten years, although the worst nightmare, a great disruption of oil supplies, has yet to be realized.  America’s economy seems to be strengthening and Europe is edging out of recession even as the numbers from the BRIC countries (Brazil, Russia, India and China) disappoint.
  3. 3. Chile Peru Colombia Mexico 3
  4. 4. Free Trade and Economic Integration Concieved 2007 Born in 2012 The four nations of the Pacific Alliance represent about 36% of Latin America GDP, and if counted as a single country they would be the ninth largest economy in the world with a nominal GDP of more than US$2 trillion, surpassing India. According to the World Trade Organization, the countries of the Pacific Alliance together exported about US$445 billion in 2010, almost 60% more than what the Mercosur exported in the same year. 4
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  7. 7. Joint Embassies Integrated Stock Markets  Costa Rica received approval to become a permanent member (upgrading from "observer-candidate status) from all founding members to join the Pacific Alliance after signing a free trade agreement with Colombia during the VII Pacific Allianz Summit in Cali, Colombia on May 22, 2013.  Canada has free trade agreements with both Mexico and Chile, and is negotiating free trade agreements with Colombia and Peru. Canada has received approval to become a permanent member but the Government of Canada has yet to upgrade its observer status to observer-candidate, as it is still determining whether or not to become a member. DANGER.  Panama has expressed interest in joining the Pacific Alliance.  U.S. Vice President Joe Biden expressed that the United States was willing to join the Pacific Alliance as an observer on May 23rd. 7
  8. 8. And Education, Sir??? 8 Chile is the world's top copper producer and its fast-growing economy is seen as fertile ground for investors. But it is also plagued by vast income inequality and a costly education system that many say is unfair. Students want the rich to pay more, and reform of the education system that would put the state back in control of the mostly privatized public universities.
  9. 9. x9mbvkXxS-TeFg&v=Pj3-UXYmCAU#t=10 9 The panel also discussed the bloc’s future obstacles, a point that Alicia Bárcena returned to, emphasizing the need for integration beyond the trade of goods and services among members, as is the case with the Atlantic Arc Commission. For the Alliance, she noted, it is fundamental to understand the “productive profile” of each country, such as the institutional demands of investment, and deepening development in aspects like science, technology, education, and innovation.
  10. 10. 10 Debate 2 Inflation Currency Exchange
  11. 11. 11 Los presidentes de Estados Unidos y de Chile han evidenciado este martes su interés común por el desarrollo y la integración comercial transpacífica. Ambos mandatarios han coincidido en la necesidad de impulsar el Acuerdo de Asociación Económica Transpacífico (TPP), una iniciativa que se convertiría en la zona de libre comercio más grande del mundo. Tras la reunión en la Casa Blanca, Obama ha elogiado el modelo económico impulsado por la Alianza del Pacífico, integrada por este país, México, Perú y Colombia, a los que se unirá Costa Rica. “El presidente ha mostrado admiración por la Alianza del Pacífico, una organización joven que en sus pocos meses de vida ha dado muchos frutos y ha despertado el interés de muchos países del mundo”
  12. 12. Peruvian Boom Balloon 12 Even if growth has slowed from the 2010 high of 8.8 percent, as demand from China weakens, Peru remains among the fastest-growing economies in Latin America, with consumption and investment the key drivers. Still, much of the economy remains informal and untaxed. The strengthening sol, trading at its strongest level in 16 years, could hurt manufacturers and non-commodity exporters. The central bank has purchased a record $13 billion so far this year in its attempts to keep the national currency from appreciating too rapidly. The Central Bank is to raise reserve requirements this month amid fears the credit boom could spin out of control. Peruvian economists fear the rising number of dollar-denominated loans could leave borrowers vulnerable if the exchange rate turns against them.
  13. 13. Mercosur Summit - 2005 13
  14. 14. Cuando los hermanos se pelean, los devoran LOS DE AFUERA Brazil’s respected daily Valor Economico reported last week that Brazilian President Dilma Rousseff recently had a “very hard” private exchange with Argentine President Cristina Fernández de Kirchner over bilateral trade and investment issues. And Uruguayan President José Mujica, who has complained of Argentina’s protectionist measures, was caught on tape last month saying, without realizing that a microphone was on, that the Argentine president is “worse” than her husband, the late President Néstor Kirchner. While trade among Mercosur countries declines, Pacific Alliance presidents agreed in Cali to eliminate tariffs on 90 percent of their products, and to reach a deal by June 30 for adding duty-free treatment for the remaining 10 percent. The Pacific Alliance agreement goes beyond traditional free trade deals by including trade in services, investments and government purchases. It also includes plans to increase student exchanges, validate university degrees among member countries, and open joint embassies and trade offices abroad. Sergio Diaz Granados, the Colombian trade minister, told me that the group opened a joint trade office in Istanbul, Turkey, this month, and that it will start sharing embassies in Ghana, Morocco, Vietnam, Singapore and other countries later this year. Overall, one of the main goals of the Pacific Alliance, all of whom already have free trade agreements with each other and with the United States, will be to create a joint platform with efficient supply chains from which to export to Asia. Meantime, Brazil, Argentina, Venezuela and their neighbors keep pursuing inward-looking policies that may have produced economic growth during the commodity boom years of the past decade, but that are likely to lead to continued stagnation and greater poverty in coming years, as commodity prices level out. 14
  15. 15. 15 How much for education?
  16. 16. Mercosur – Trade or Politics MERCOSUR, the "Common Market of the South," is an economic and political agreement among Argentina, Brazil, Paraguay (which is currently suspended), and Uruguay to promote the free movement of goods, services and people among member states. Mercosur's primary interest has been eliminating obstacles to regional trade, such as high tariffs and income inequalities. Yet experts say Mercosur has become somewhat paralyzed in recent years, with its members divided over whether the organization should remain focused on regional trade or whether it should add political affairs to its mandate. In July 2012, Venezuela was admitted to the trade bloc as its fifth full member with complete access to the common market and voting rights, a move that some analysts say will primarily benefit Argentina and Brazil and further politicize the organization. The creation of a regional customs union in 2008, the Union of South American Nations (UNASUR), also has raised questions about Mercosur's utility. Moreover, Paraguay's 2012 suspension from the bloc has added fresh concerns about the bloc's future. 16
  17. 17. 17 Brasil versus the Pacific Alliance
  18. 18. Uruguay - Chivito or Panqueque  Señaló que en los últimos días "han surgido argumentos falaces sobre imposibilidades normativas de integrar esta Alianza", las que opinó "son en realidad reparos más ideológicos que técnicos", por lo que "Uruguay puede integrarse perfectamente a este bloque comercial sin afectar su estatuto mercosuriano".  "Uruguay, con la actual integración de la Alianza del Pacífico, podría generar una zona de libre comercio con esos cuatro países (México, Chile, Colombia y Perú), requisito para la incorporación plena", añadió.  En el plano comercial, dijo que en 2010 los países de la Alianza del Pacífico exportaron 60% más que el Mercosur y que es un espacio comercial que el Uruguay debe abrir.  "El tercer plano conceptual a considerar es el político", dijo Larrañaga, para quien Uruguay "no puede permanecer ajeno a ningún esfuerzo de integración, y menos aun, a los que se muestran exitosos".  "El interés nacional tiene que poder más que los prejuicios ideológicos. Frente a la indiferencia de Brasil, los arrebatos de Argentina, Uruguay necesita ampliar su horizonte, sin necesidad de divorciarse del Mercosur, pero incorporándonos a un proceso de integración que le generará a la región complementariedad y equilibrio". 18
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  20. 20. 20 Brazil Furious with Argentina Brazil has virtually frozen political and economic relations with Argentina following serious discrepancies that were confirmed during the recent summit of presidents Cristina Fernandez with Dilma Rousseff who cut short the originally scheduled two-day visit to Buenos Aires. Brazil’s main disappointments with Argentina include the surge of authorized imports from China, 8%, while Brazilian imports were frozen down 17% in the same period. The lack of an agreement on the auto-parts controversy: Argentina insists in a surplus in the bilateral relation in this item, to which Brazil was willing to listen. But contrary to promises there have been no Argentine proposals but rather suggestions for an extension of the current questioned regime. The lack of understanding for the Vale potassium project, as originally has been promised. The manipulation of the tender process to build two huge dams in Santa Cruz which left out Brazilian corporations and were handed to two businessmen very closely linked to the Kirchner family. The macroeconomic policy implemented by Argentina and the handling of the foreign exchange issue, which limits Brazilian investments. Apparently in 2012 the volume of Brazilian investments in Argentina was down seven billion dollars because of these problems and the overall uncertainty of the situation in South America’s second largest economy.
  21. 21. MERCOSUR REACTION TO THE PACIFIC ALLIANCE President of Bolivia Evo Morales said at the Foro de São Paulo in 2013 that the Pacific Alliance was a geopolitical scheme by the United States to oppose the progressive, lef- wing governments of Brazil, Argentina, Uruguay, Bolivia, Venezuela and Ecuador, and that these governments viewed the Alliance as being created to counterweight Mercosur. Morales also claimed one of the main goals of the Alliance was the privatization of natural resources, such as water and energy. Government leaders such as Marco Aurelio Garcia declared the Alliance "irrelevant". The former President of Brazil, Lula da Silva, declared that the Alliance was trying to bring back the Washington Consensus in South America. In the final meeting of Foro de São Paulo the Alliance was defined as an "interventive and anti-leftness approach to attack the sovereignty of South American nations. 21
  22. 22. Argentina versus Uruguay  Uruguay fearing the wrath of Cristina Fernandez denies authorization to expand pulp mill capacity.  The Uruguayan government fearful of Argentine President Cristina Fernandez’s reaction will not authorize the local UPM pulp mill to expand its production capacity from 1 million to 1.3 million tons annually, in the short term, according to company and government sources. 22
  23. 23. LAN, AR – Argentina vs Chile  Chile’s Foreign Minister Alfredo Moreno was on stage on Monday to reply to President Cristina Fernández who on Sunday ironically tweeted: “Can anyone imagine if Aerolíneas Argentinas (Argentina flag carrier) had been my company and when I was elected president I had sold it, instead of being a recovered state airline?”  ”In Chile, the president and the lawmakers are democratically elected, with total transparency over their backgrounds, their patrimony and interests,” the Foreign Minister said, according to El Mercurio. “Once elected, the president and all high officials must abide by the rules of transparency and present their affidavits,” he added. 23
  24. 24. PARAGUAY versus VENEZUELA 24 If you fall from your bike, power will make you conquer.
  25. 25. 25 Crime Rate Debate 4 One Day they Came for Me
  26. 26. Argentina – The Land of the Pots and Pans 26 Dead Cow Bounce Occasionally, beat-down stocks experience a brief recovery in share price. “Even a dead cat will bounce if dropped from high up” goes the typically gruesome Wall Street quip. A similar process appears to be playing out on a national scale in Argentina. Fernandez’s ability to rule by decree may well have ended when the results of the August election came in. Yet there is no end in sight to 30% inflation, which is driving a demand for dollars that increases the odds of a currency crisis as the peso weakens, and Argentina draws down its reserve of greenbacks. Meanwhile Argentina’s key commodities, wheat and soybeans, are declining in price. Argentina’s economy could enter recession next year.
  27. 27. Brazil and Argentina Tango 27
  28. 28. 28 Ever since Brazil, Argentina, Paraguay and Uruguay formed the Mercosur customs union in 1991, free-trade buffs have worried about whether the Southern Cone might become a protectionist fortress. This fear has been further fueled by a recent World Bank study by Alexander Yeats, principal economist for the bank’s International Trade Division, contending that a significant amount of the increased trade within Mercosur is a result of trade diverted from more efficient non-Mercosur producers to less-efficient producers within the bloc. The region is in desperate need of greater market openness; a Mercosur fortress would lead to a less competitive region. Economic liberty is the only known path to growing productivity, prosperity and good-paying jobs. Thus all trade liberalization, like all tax cuts, should be applauded. What I Say, What I Do
  29. 29. 29 Massive Protests in Brazil • Justice • Public Transport • Public Education • High Inflation • Police Brutality • Public Health • Corruption • Excessive Taxation • Embezzlement
  30. 30. Crisis or Opportunity  The CHEESE moves very quickly, be always on the alert. Another Tsunami may come.  The PACIFIC Alliance could be a nice MARKETING TRICK or not.  If CHINA grows steadily, the PACIFIC ALLIANCE will boom.  The MERCOSUR is in poor shape. No good changes are expected for the next three to five years. Populism does not like foreign languages.  Diversife, do not put all your eggs in the same basket. Search for the emergents.  Hire professionals. MBA´s, or the likes. A teacher is a teacher.  Agents sell. A store is not the same as a distributor. If you have big wishes, settle locally.  Size is important, and not all that shines is gold. Canada and US seem to be smiling to the Pacific. Cuba is changing.  Go by the numbers. Follow up. Curves make it all attractive. No maths, no business.  Color is vital; black, Amex Black, is the ultimate choice. In Spanish: billetera mata galán.  Finally, it´s the economy. Make it a unique experience. No belt language training. The End 30