The 3 C's in Latin America

The Three Emerging Cs

In

Latin America

(Chile, Colombia and Costa Rica)

ABSTRACT

In the era of globalization, new important players have emerged in the international arena as countries in the developing world are integrating the global economy. This new world trend has also impacted Latin America by propelling nations to economic growth and development. Countries such as Brazil, Mexico and Argentina have been for years labeled as the biggest economies in Latin America. Meanwhile, smaller economies in the region have been overshadowed by these three economic giants and struggled to increase their share in the global economy.

Although Brazil has being widely recognized to be amongst the biggest emerging market in the world, and lately the Mexican and Argentinean economies have shown signs of continuous growth, second tier Latin American economies are making their way through the shadows of these three regional economic powers. As in contrast with other smaller economies in the region, countries such as: Chile, Colombia and Costa Rica, (The Three Cs) have been experiencing years of sustainable economic growth and increasing presence in the global economy by pursuing economies policies that foster exports, and invites foreign investment. The main purpose of this paper is to compare the Chilean, Colombian and Costa Rican economies and identify the best emerging market to perform business. In addition, it would also examine economic factors that can influence investment decisions, outcomes and profitability among the Three Cs.

The Three Cs

Background

-Chile-

In a region that has been afflicted by years of underdevelopment, political turmoil and poverty, the emergence of small economies, such as the Three Cs, can represent a sign of hope for development in Latin America. As an example, often many economists have called the Chilean economic success as the miracle of Latin America and a model that should be emulated in the region. Since the return of democracy in 1990, Chile has experienced sustainable economic growth, as well as political stability, which has attracted foreign investment. In 2005, the total foreign direct investment (FDI) in Chile amounted for $7.1 billion, which represented an increase of $2.5 billions from 2003. One of the main reasons for the increase FDI has been attributed the country's international image, as one of the most trusted markets for investment in Latin America and the 20th least corrupted country in world.

In order to understand the Chilean economy, it is important to analyze the country's economic indexes. With a population of 16 million of people, a Gross National Income (GNI) $111.4 billion, GNI Purchasing Power Parity (PPP) $6,980, Gross Domestic Product (GDP) of $145.2 billion and a GDP PPP of $212.6 billion of US dollars, the Chilean economy is fifth largest economy in the hemisphere. Further, Chile has a GDP per capita of $8,864 and a GDP PPP per capita of $12,983 US dollars and one of the highest living standards among Latin American countries. All these good economic indexes are a direct result of a strong economy, which is driven by exports, low inflation rates and raise wages.

-Costa Rica-

Similar to Chilean economic success, Costa Rica also is widely recognized to be amongst the most appealing and trusted countries to do business in Latin America. The country has experienced years of political stability and also sound economic growth, which has open the door for increasing exports and foreign investment. If we analyze the economic indexes from the country, we can identify that the Costa Rican economy has experienced a GPD Real growth between 6-8% each year since 1997, situating the country amongst the faster growing economies in the region. In 2006, the country's GNI amounted for $21.9 billion, GNI PPP $4,990, GDP $21.3 billion and GDP PPP $51.0 billion of US dollars, which is considerably high for a country with only 4.1 million of people. Although Costa Rica is a much smaller country by economic standards and population than Chile, Colombia or many other Latin America countries, it has a GDP per capita of $4,858 and a GDP PPP per capita of $11,606 of US dollars, which is the second highest in the region. The country is world known for its eco-tourism, which yearly attracts almost 300,000 tourists from all over the globe. In regards to FDI, the country received in 2005, $861 million in FDI, which was mainly directed towards its tourism and agricultural sector. Although tourism is the most profitable sector of the country's economy, in recent years Costa Rica has increase exports of agricultural products, electronic components and textiles, mainly as a result of trading partnerships with the United States and China.

-Colombia-

In the past three years the Colombian economy has shown signs of recovery after being in a recession for more than a decade. Although the country still submerged in an arm conflict that has lasted for more than five decades, Colombia has implemented policies that are aimed to restore trust in foreign investor and the business sector of the country. Last year, the country's economy reported a GDP real growth of 6.8% that represented a 1.3% increase from 2005, a GNI $124.8 billion, GNI PPP $2,700, GDP $135.0 billion and a GDP PPP $198.4 billion of US dollars, which situates Colombia among the six largest economies in the region. Furthermore, the country GDP per capita is consider to be in $2,888 and the GDP PPP per capita $8,091 of US dollars, which is relatively low for a nation of 45 million of people. In addition, Colombia in 2006 received $3.1 billion in FDI, which was mainly directed towards its agricultural, energy, and mining sector. The economic growth experienced by the country in recent years can be directly attributed to the positive market reaction to the enactment of governmental economic reforms, surge in mineral exploitation and high profits from its coffee and oil exports.

Comparison of the Three C's

Although the Three Cs have shown sings of economic growths and have embraced policies to promote exports and foreign investment, there are important economic differences among them that can influence the investment decision of a company or individual. For example, one of the first steps to take into account before choosing any of the Three Cs for investment purposes is their market size. If we compare the GNI of each country and list them by the largest to the smallest, we