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Despite an unprecedented political crisis and a clear slowdown in economic growth, Peru has improved its competitiveness, according to IMD. Here capital Lima. (Photo: Peru Environment Ministry)
Thursday, June 16, 2022
Trade Talk

Competitiveness: Brazil, Chile Worsen


Summit of the Americas, ad spending, Chile uncertainty.

 

BY LATINVEX STAFF

 

Brazil, Chile and Colombia worsened their competitiveness the past year, while Peru and Argentina improved, according to the latest competitiveness ranking from Swiss-based business school IMD. Mexico remained the same.

  

Among 63 economies worldwide, Brazil now ranks in 59th place, down two spots from last year. Chile and Colombia each fell one spot, to 45 and 57, respectively.

 

Peru jumped four spots to 54th place, while Argentina moved up one spot to 62nd place. The improvement in Peru came despite an unprecedented political crisis and a clear slowdown in economic growth.

 

Venezuela remains the laggard both in Latin America and globally, ranking last on the IMD ranking.

 

SUMMIT OF THE AMERICAS DISAPPOINTS


The Summit of the Americas held in Los Angeles received widespread criticism for not providing any significant agreements.

 

“The Ninth Summit of the Americas, which was hosted in Los Angeles, ended without marking any major break throughs,” BCP Securities Chief Economist Walter Molano said in a recent client note. “Besides establishing a commitment to develop a common framework for immigration and the introduction of a resolution to support near-shoring and reshoring, the summit was mainly a dud. The immigration framework was non-binding and subject to negotiations, which means that nothing was decided. The near-shoring and re-shoring was coldly received by regional leaders, given that most of the countries are enjoying the largess of Chinese Foreign Direct Investment (FDI). Therefore, there was no interest in annoying Beijing. More importantly, the summit was better known by the absences of leaders who refused to attend if all the countries of the region were not invited. The absence of Cuba, Venezuela and Nicaragua created a sense of solidarity that only served to divide the guests from the host. For his part, President Joe Biden appeared to be distracted, focusing on the drama of the January 6th Committee. In sum, the event was a wasted opportunity to show U.S. leadership in its own backyard, and it confirmed the historical lack of concern that Washington has for Latin America.”

LATIN AMERICA AD SPENDING OUTLOOK

Advertising expenditure in Latin America is expected to to grow by 8 percent this year, Zenith estimates. That’s the same as the projections for worldwide spending.

 

Latin America will outgrow Asia Pacific, Western Europe and the Middle East North Africa region.

 

FITCH: CHILE UNCERTAINTY CONTINUES

Chile's proposed new constitution omits some of the most radical ideas generated in the Constituent Assembly, but it does not fully clarify how new provisions would affect the business environment or the functioning of government, Fitch Ratings says. Uncertainty could also persist over how effectively the process of constitutional reform provides an institutional channel to address social tensions, especially if the proposal is rejected by the electorate.

The proposal was formally presented on May 16. Harmonization, whereby the text is consolidated (the proposal runs to nearly 500 articles) and checked for internal consistency, and the drafting of a preamble and transitional articles that would govern the switch from the existing constitution, will precede a popular referendum on adopting the proposal, scheduled for September 4.

The debate around a new constitution has touched on areas that can affect sovereign creditworthiness via their institutional and/or policy implications. These include the form of government and powers of, and checks and balances between, its different branches; property rights; and mandated social rights with possible significant fiscal implications.

“The proposal has not eliminated uncertainty in these areas,” Fitch warns. “Many of the articles that we think would have had the most negative impact on the business environment have been rejected, because the proposals of Constituent Assembly committees approved by a majority vote failed to achieve the two-thirds majority needed at the plenary stage. But a fuller understanding of how key new provisions will operate will depend on implementing legislation; some may be subject to legal challenges; and a fall in popular support for the Assembly's work makes adoption less certain.”

For example, a proposal for nationalizing parts of the mining sector was not included in the proposed constitution, but the provision in the existing constitution for compensating owners of expropriated assets at market prices would be replaced by a mechanism whereby Congress sets a 'just' price. Environmental protections could increase costs or legal risks to mining companies, deterring investment.

 


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