Sound economic policies helped some countries weather economic crisis well, continue pattern of strong growth
By Peter A. Buxbaum, AJOTUnited States exporters already engage in a substantial level of business with many countries on Latin America. The continued growth of these economies, combined with closer political and commercial ties with the United States, could provide significant new opportunities for American exporters.
Mexico, Brazil, and Colombia, for example, three of the largest countries in the region, absorbed $165 billion in U.S. exports of goods and services in 2009 and represented the second, tenth, and 23rd largest export markets, respectively, for U.S. manufactured goods last year.
Brazil, Latin America’s largest economy with a gross domestic product of $1.6 trillion, is recognized as one of the key large developing markets globally and one that is likely to be recognized as a full-fledged developed country within the next few years. Experts forecast a 6-percent expansion of the Brazilian economy in 2010 and an average of over 4.5 percent annually over the next five years. The economy grew an average of 3.5 percent a year from 2005 to 2009, according to the International Monetary Fund. The Brazilian economy has benefited from low interest rates and robust government spending.
“We are engaging with Brazil in an intense way and the Brazilians are intent on engagement and in improving its commercial relationship with the United States,” said Thomas Shannon, the U.S. ambassador to Brazil, at the recent annual conference of the Export-Import Bank of the United States in Washington.
“A few years ago doors in Brazil were closed in our face,” added John McAdams, senior vice president of ExIm Bank. “They told us were not competitive. Today, we are warmly received in Brazil, Colombia, and Mexico. They are looking to buy U.S. products. The door is open to us.”
Brazil’s economy is highly globalized, noted Shannon, and today is the world’s biggest exporter of sugar, coffee, ethanol, beef, poultry, tobacco and orange juice. “In addition to building export markets,” he said, “Brazil has also built an important domestic market that has helped it weather the economic storms experienced and experience positive economic growth rates. Increasing consumer credit and access to banks combined with the lowest prime interest rate in history make the country a good environment in which to do business.”
The same is true of other markets in the region, according to Nicholas Lloreda, a former trade official of the Colombian government and currently on attorney with Sidley Austin law firm in Washington. “They used to say that when the United States sneezes, Latin America catches cold,” he said “This time this is not true in many Latin American countries. They were well prepared when the economic crisis hit.”
Lloreda attributes this phenomenon to the implementation of sounds economic policies by governments in such countries as Mexico, Brazil, Colombia, and Peru. “These governments have kept inflation low and have managed budget deficits well,” he said.
Underlying the increases in Brazilian domestic consumption has been what Shannon termed a “social revolution. “Historically, Brazil has been seen as one of most unequal economies in the Western Hemisphere in terms of income distribution,” he said. “There are still some problems in that area, but at the same time, political stability, economic policy, and success in social policy has produced a dramatic increase in the middle class.”
Out of total population of 180 million people, half are now considered to be middle class, according to Shannon.” This segment is growing dramatically,” he said. “Under current growth rates, the poverty rate will be reduced to 8 percent by 2015. In other words, Brazil will it be on cusp of becoming a developed, middle class country.”
As a result of Brazil’s continuing levels of economic growth, consumer spending patterns are shifting. “Businesses are looking more at the money th