In these early days of 2018, it is sad and ironic that just as Latin America is reemerging from a prolonged period of recession and sluggish growth, its most important trading and investment partner, the United States, is looking inward and embracing economic nationalism.
The importance of U.S. commerce with the Americas cannot be overstated. U.S. producers export three times more to Latin America than to China. Central and South America (excluding Mexico) purchase 50 percent more U.S. goods than do the Chinese. In total trade, Latin America accounts for approximately 25 percent of total U.S. trade, and the United States runs a surplus of more than $2 trillion with the region. As for foreign direct investment, 73 percent of the total (($170 billion) comes from the United States.
So, how will our neighbors to the South likely fare in 2018? We can expect a recovery, albeit a modest one, in 2018. Growing confidence among the private sector, accommodative financial conditions, rising commodity prices and overall improvement in the global economy will usher in 2.4 percent growth in 2018 and 2.7 percent in 2019.
While macroeconomic projections are important, it is the microeconomic outlook and performance — based on individuals’ and firms’ decisions on resource allocations — that offer a more accurate indication of how business — is likely to fare in 2018.
In that regard, there are three drivers that merit careful watching in the new year:
Digitization: The digital revolution is having a transformative impact on how people interact, make purchases, bank and spend leisure time, and how companies do business and how government performs services such as e-procurement. There are almost 400 million Internet users, and by 2019 the user penetration rate is expected to jump to 61 percent. Latin America has the highest daily mobile Internet usage in the world. Social media is oneo fthe most popular onlin activities, with Google Sites and Facebook dominating. E-commerce is sweeping the region with over 150 million digital buyers spending $85 billion at major sites such as MercadoLibre and B2B Digital. Digitization is affecting the public sector, as well. The Colombian government’s Vive Digital is fostering a national digital ecosystem benefitting farmers, students and women-led households. In Chile, ChileAtiende provides a platform for accessing procedures, services and benefits provided by the State.
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