Publish in Analysis - Wednesday, December 16, 2015
Mauricio Macri, the pro-business mayor of Buenos Aires, became president of Argentina on December 10, 2015, boosting optimism among local and foreign investors. (Photo: Argentina President's Office)
The best news in Latin America business in 2015.
BY LATINVEX EDITORS
The best events in Latin American business this year, according to Latinvex editors.
#1 Argentina Election
The change of government in Argentina radically changes the outlook for both the country and Latin America.
President Mauricio Macri has vowed to reverse the investor-hostile policies of his predecessor Cristina Kirchner, who governed for eight years, leaving a dismal legacy of high inflation (Latin America’s second- highest), economic slowdown and low local and foreign investment.
He has named a top-notch team of ministers and other aides and promises to bring back professionalism after the many and frequent antics of Kirchner and her ministers.
Macri has stated that his priority is to reach an agreement with the holdouts from the 2004 debt restructuring and to reduce inflation.
To achieve the former, he has already started reaching out through the US court appointed mediator. A solution is expected to be reached relatively quickly, since Argentina’s public finances desperately need new financing. In fact, Macri has already secured up to $8 billion in credits from foreign banks based on that a solution with the holdouts will be reached.
To achieve the latter, he has brought back Graciela Bevacqua, the well-respected former head of inflation data at the official statistics agency Indec in the same position. She had been fired by then-President Nestor Kirchner in 2007 after he intervened to manipulate the data. She is assembling a team that will create the first reliable inflation statistics, probably in three months. Indec will also revise its GDP and export data, which has also been questioned. Meanwhile, the Macri government is also looking at making Indec an autonomous agency, to avoid the kind of meddling that Kirchner did in the future.
#2 Venezuela Elections
The unexpected congressional election victory for Venezuela’s opposition boosts hopes that the country will at the very least stop the economic freefall of recent years. The opposition has secured a supermajority on the next session, which starts in January 2016, and can now pass laws and in 2017 initiate a referendum to oust President Nicolas Maduro.
Among key measures the opposition has pledged are curtailing the central bank’s ability to print money (thus reducing the highest inflation in Latin America and the world) and reversing nationalizations of companies (which led to wide mismanagement and losses).
While it is still uncertain to what degree they will succeed since Maduro appears to continue his unique combination of ideological dogmatism and sheer incompetence, there is hope that at the very least they will be able to divide the ruling Chavista coalition and reach agreements with more pragmatic Chavistas to make some progress.
#3 Telecom M&As
While Latin America saw a mixed year in mergers and acquisitions, one sector stood out: Telecommunications. AT&T paid $4.3 billion to acquire Mexican cellphone operator Iusacell (for $2.5 billion) and Nextel Mexico (for $1.9 billion) while Liberty Global acquired Cable & Wireless for $5.3 billion.
The AT&T purchases make it a strong rival to Mexico-based America Movil (and its cell phone unit Telcel, which dominates the Mexican mobile market). AT&T may even expand throughout Latin America, marking a return after the company pulled out of the region.
The Liberty purchase marks its biggest entry yet into Latin America and the Caribbean, where it had previously had a limited presence (mainly Chile and Puerto Rico).
#4 Cuba-US Thaw
The easing of relations with Cuba is promising to provide more opportunities for US businesses, although it is still limited, in part due to the US embargo still in place and in part due to Cuban laws that remain protectionist (Cuba ranks as the most repressed economy in Latin America, according to the Heritage Foundation).
In the meantime, a series of symbolic actions are taking place, including more direct flights, more official US business visits (at national, state and local level) and renewal of direct postal service.
#5 Panama and Dominican Macro Results
Panama and the Dominican Republic lead the way in macro economic performance in Latin America, with high economic growth and low inflation. In a sense, they are the opposite of basket cases Venezuela and Argentina, according to a Latinvex analysis.
While Latin America as a whole is expected to decline by 0.3 percent this year (its worst result since the 2009 global crisis), the GDP of Panama will likely expand by 6 percent, while that of the Dominican Republic should grow by 5.5percent, according to estimates from the International Monetary Fund. That makes them the growth winners in Latin America.
Next year, the IMF predicts a 0.8 percent increase for Latin America and a 6.3 percent expansion for Panama and 4.5 percent for the Dominican Republic, again the best in Latin America.
Meanwhile, while Latin America’s average inflation will likely reach 11.2 percent this year, the rates of Panama and the Dominican Republic should hit 1 and 1.1 percent, respectively.
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