The next decade belongs to Latin AmericaFor the past decade, decision-makers in major banks and multinational companies have been focusing their attention on one of the hottest "growth frontiers": emerging markets.
During much of the 1980's the prospects in most emerging countries were quite bleak: the debt crisis, inflation and domestic political turbulence.
Then a number of "economic miracles" began to pop up, drawing attention to specifically Southeast Asia, the Indian subcontinent, Eastern Europe and toward the end of the 80's, Latin America.
Latin America struggled with the heavy burdens of the debt crisis, hyperinflation, recession and the transition from authoritarian to democratic governments. Most analysts call the 80's Latin America's "Lost Decade." Most governments in the area came to the realization that they were gradually becoming irrelevant to the investment decisions of major international players and that they would slowly but surely lose ground to Asia and Eastern Europe in the competition for capital and employment opportunities. The region's trade with the rest of the world increased but at a slower pace than in countries at similar stages of their development. Latin America largely remained an exporter of primary goods. In fact, beside the popping off of just particular industry sectors and multinational companies, Latin America never saw a bullrun as a continent.
After lagging behind big players like India and China during the Era of Markets (1989–2019), where there was a remarkable increase in global economic interconnectedness and rapid adoption of digital technologies, now it's time to shine for Latin America and to catch up to OECD economies.
The next decade is expected to be a transformative period for Latin America with many countries experiencing rapid growth and development.
Economic Growth : Latin America's economic growth is expected to continue, driven by a combination of factors such as increased trade, investment, and infrastructure development. The region's large and growing middle class is also driving consumer spending and demand for goods and services.
Regional Integration : Latin America is also expected to strengthen its regional integration, with initiatives such as the Pacific Alliance and the Mercosur bloc aiming to promote trade and cooperation among member states. This will help to increase economic competitiveness and attract foreign investment.
Demographic Dividend : Latin America is experiencing a demographic dividend, with a large and growing population of young people entering the workforce. This will provide a significant boost to economic growth and innovation, as well as help to address social and economic challenges.
Innovation and Technology : Latin America is also expected to become a hub for innovation and technology, with many countries investing in digital infrastructure and innovation hubs. This will help to drive economic growth and create new opportunities for entrepreneurship and job creation.
Emerging countries now represent the clear majority of the world's population. Their growth prospects range from 4 to 5% per year in Latin America, 6 to 7% in East Asia and up to 10% in China. These are typically two to three times the expected growth rates of developed countries.
In all of these countries, growth will invariably entail the expansion of new middle classes, with outsized needs for consumer durables, housing and mobility.
The MSCI Emerging Markets Latin America Index e.g. captures large and mid cap representation across 5 emerging markets countries in Latin America. This index is one of the most trusted measures of how these stock markets in the region are performing. However, all the constituent countries do not have a proportional representation in the index. The country weights in the MSCI Emerging Markets Latin America Index are mostly Brazil 46.6%, Mexico 36.51%, Chile 9.79%, Colombia 4.17% and Peru 2.93% with sectors like materials, energy, consumer staples, common services and financials.
Looking at the Index from a technical macro standpoint we can see clearly almost 20 years of an (Wyckoff) accumulation period (with the launch in 1990 probably even longer) and sideways movement resulting in a kind of created bull flag signaling a continuous coming-in of buyers and losing steam of sellers.
Furthermore the monthly RSI is printing higher lows and higher highs which is an indicator for a steady uptrend and positive momentum shift towards the upside.
No doubt, Latin America is gonna flourish the next decade(s) marking a significant transformation, with the region poised to emerge as a major player on the global stage.
