MANUFACTURING IN ARGENTINA, BRAZIL, AND CHILE
Challenges and Opportunities
Over the last few decades South America has been a focus of enormous hopes and great disappointments for private equity investors. Yet to the surprise of many forecasters and analysts, Argentina, Brazil and Chile have emerged rapidly from the recent period of economic stress. Overall growth has regained momentum, and trade in particular has revived sharply. Foreign direct investment has increased dramatically, and the resurgence is most evident in manufacturing businesses.
Growth returns to South America
The ABC economies are now reviving: they have attracted the biggest increases in FDI of any in South America. Argentina’s inward FDI flow increased by 125 percent in 2004, while Brazil increased by 79 percent and Chile increased by 73 percent. The revival has been underpinned by more competitive exchange rates and the worldwide boom in demand for commodities, which the ABC countries export.
Policy attitudes have also changed. Import substitution and industrial subsidization have given way to more open attitudes to inward investment: as the former Economy Minister of Chile Mr Jorge Rodriguez puts it: “We don’t have an industrial policy any more. We believe it is growth that will bring investment, not incentives.”