Which Americas Economies Will Grow Fastest in Next 5 Years?
- Catalina Osorio
- Dec 9, 2013
- 3 min read
In this post we pose a basic question of interest to investors and business leaders looking for growth opportunities in the coming years: which countries in the Americas are expected to grow the fastest over the next five years?
Many observers, knowing that the United States is only recently beginning to grow again, might guess it is a neighbor to the south. Perhaps Brazil, which has earned a growing presence on the world stage that only stands to increase when it hosts the World Cup this year and the summer Olympics in 2016, or maybe even Chile, which has for years shown significant growth powered in large part by its strength in mining and exports of its fine wines.
But while Brazil and Chile -- and in fact most Latin American countries -- are projected to continue to grow at fairly solid rates through 2018, they will likely be outpaced by the clear South American leader, Peru, with a compounded annual growth rate of 5.63% over the next five years and the Central American nation of Panama with a growth rate of almost 6.86% over that same period. See International Manetary Fund database of worldwide GDP projections here.
Here is a sample of average GDP growth projections through 2018 for some leading economies in the Americas:
- Panama: 6.45%
- Peru: 5.79%
- Chile: 4.50%
- Colombia: 4.42%
- Brazil: 3.19%
- Mexico: 3.55%
- United States: 3.17%
While many factors contribute to robust growth prospects in Peru and Panama, a common factor appears to be these countries’ efforts to spur foreign investment and trade through international free trade agreements.
Peru, dubbed “Latin America’s Economic Performer” by the IMF, appears intent on being the gold standard in terms of free trade. A recent study performed by Nextant on behalf of a client seeking to invest in Peru revealed that the country has signed no less than 8 free trade pacts in the last 10 years alone! Peru’s openness to foreign trade has paid dividends in terms of both increasing the amount of foreign direct investment (FDI) and diversifying its trading partners, particularly in its mining, services, and hydrocarbons industries. The 2009 Free Trade Agreement between Peru and China significantly increased trade between those countries, catapulting China ahead of the US as Peru’s largest economic partner and contributing to Peru’s second place ranking in terms of FDI growth in the region in 2013, growing at a rate of 27% year over year (behind only Venezuela which benefits from huge foreign investment in its vast oil reserves).
Panama too, apparently taking Peru’s lead, has recently increased its efforts to open free trade with more nations. In 2012, it entered into a free trade agreement with the US, and it has also recently signed treaties with Canada, the European Union, and Colombia. This trend will continue in 2014 with the signing of a free trade pact with Mexico that is currently being negotiated. see here
For more information on Peru and Panama and why they represent interesting targets for companies seeking regional expansion, we recommend the country analyses presented by the World Bank here and here and the IMF here and here
Finally, we note that GDP growth in any single year may be affected by a range of factors that may not provide a good indicator of ongoing investment opportunities, which explains why we look at IMF's 5 year average growth projections. Paraguay is a good example. That countryy (one of the smallest economies in the region) grew a whopping 13% in 2013 due to anomalous circumstances in certain sectors, but projections are that its overall growth will be less than 5% in each of the next five years, See here for an excellent NY Times article on Paraguay's "boom."
For a printable PDF version, click here
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Andres Snaider is a founding partner of Nextant, a consulting firm specializing in assisting companies expand their businesses in international markets, with a strong focus on Latin America. With a degree in law and experience working as an international attorney and businessman, Mr. Snaider has advised clients on a range of commercial matters and investments across the Americas. He is a graduate of the Harvard Law School and currently lives and works in Boulder, Colorado.
Email Andres at : asnaider@nextant.com
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Nextant has extensive experience in assisting leading clients through its Market Expansion and Business Optimization services. For more information on how Nextant can assist your company in socializing a market entry and initiating sales, please visit our website at http://www.nextant.com
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