From the financial meltdown in the 1980s, widely referred to as the 'lost decade' in Latin America, and the 1994 Mexican peso crunch, more commonly known as the 'tequila crisis', to the Argentinian crisis of 1999 (which goes without a catchy nickname of any significance), investing in Latin America over the past 30 years has been an often fraught experience. It was certainly an adventurous time for Corporación Andina de Fomento (CAF), the Latin American development bank, which has a loan portfolio in excess of $13bn and serves as a multilateral financing platform for its 18 membership countries and 14 private banks.

Enrique Garcia, CAF's president since 1991, closely observed each of these Latin American crises, but unsurprisingly, rather than looking backwards, he is more excited about the region's current predicament. Mr Garcia says that, despite its bumpy past, Latin America is finally on the right track.


“Public debts are under control and the economy [is growing] despite the dire situation elsewhere. Times have never been as good for South America as they are now,” he says, speaking to fDi Magazine at Canning House, a London-based foundation that focuses on Latin American-UK relations.

Eastern shift

The past few years also represent the first time in modern history that Latin America's economic growth has been fuelled by Asian, and not us, investors. For that reason, Mr Garcia admits that of late he has found himself conducting business talks in Beijing more often than in New York.

“The Chinese economy is growing so rapidly that it needs more and more raw materials. Copper, oil, you name it. South America has it all,” says Mr Garcia. And he has found that Chinese investors will go where others are more hesitant. Regardless of an international image of a country or its muddy politics, wherever business can be done, the Chinese will do it.

Yet Mr Garcia strikes a cautionary note. Chinese investors still prefer a 'dig and send' approach towards South America, rather than establishing a diversified portfolio of investments. “The Chinese should invest in sectors in which they have a competitive advantage. Having a presence in many sectors, not just commodities, is the best way to be perceived by Latin American countries as a good partner,” he says.

Fast money, slow changes

As a case in point, Brazil, the largest economy in Latin America, has recorded a 17-fold increase of trade volume with China between 2002 and 2011. Yet, a mere 15% of export revenues comes from sales of manufactured goods, with the sale of raw materials from Brazil to China comprising a large part of the more the $12bn trade surplus.

“Chinese investors should take into account that Latin America has a big internal market and that there are so many opportunities here,” says Mr Garcia.

Things are changing, albeit slowly. According to greenfield investment monitor fDi Markets, automotives, communications and industrial machinery were among the leading sectors for Chinese investments into Latin America in 2011. Still, although these figures offer a glimmer of hope, the increased activity of Chinese investors is mostly a result of countries such as Argentina and Brazil introducing trade protection measures on goods such as cards and handsets, in order to protect the domestic market.

“If the Chinese have to provide the investments... they do. But they are not as active as they could be,” says Mr Garcia.

Significantly, as fDi Markets data shows, 60% of all Chinese investments into South America between 2007 and 2011 were located in Brazil. Mr Garcia admits that the Brazilian market is one of the most promising in Latin America, but also points out that ignoring other countries in the region, even if these markets are much smaller than Brazil, is a mistake.

“Investors should look at the whole region instead of focusing only on the big markets,” says Mr Garcia. “Things are going well right now. But in order to keep up with developed countries, South America has to retain a 6% economic growth. And smaller countries in Latin America should try harder to promote their assets in order to attract investments.”