The countries of Latin America are preparing to face different challenges in 2024. The region will have to deal with an economic deceleration and the growing cost of debt. The Economic Commission for Lain America (Cepal) has warned about the complexity of the global macroeconomic situation.
However, that challenging context also presents opportunities for businesses to expand internationally, if they can exploit the competitive advantages of the region and new business dynamics to expand into new markets.
Forecasts for the major economies of Latin America show a challenging landscape for the coming year.
Brazil, as the biggest economy in the region, faces a slow down, with growth predicted by the OECD to be 1.8% in 2024 compared to 3% in 2023.
The government of Brazil will come under pressure to hit its target of zero deficit. In response, the government plans to introduce tax reforms to simplify the current complicated tax system which has been in place for more than thirty years.
With inflation under control, it is expected that the Central Bank of Brazil with continue to cut interest rates, which had previously reached significantly high levels of up to 13.75%. That may lead to a less fraught relationship between the monetary authority and the Brazilian government in 2024.
For businesses that are looking to expand into Latin America, Brazil is an attractive market with the potential for considerable growth. However, it is important to bear in mind the current economic context and carry out an in-depth analysis before making any decisions.
The current situation in Mexico presents a number of infrastructure challenges. The country is seeking to capitalise on its proximity to the United States for so-called nearshoring. Although growth is projected to be 3.5% in 2024, political uncertainty arising from upcoming elections and tensions in the United States present additional challenges.
In particular, Mexico’s principal challenges include the need to invest in infrastructure, especially in areas such as water and energy, and making full use of the competitive advantages arising from its association with the United States.
Political uncertainty will be an important factor in Mexico, with presidential elections in June and possible tensions in the run-up to the presidential elections in the United States in November. Those events may generate additional economic and political uncertainly for Mexico.
So far as the economy of Argentina is concerned, new President Javier Milei faces a difficult situation with annual inflation at 160.9%. His shock plan includes a sharp fiscal adjustment and price liberalisation with the aim of achieving macroeconomic stability and reaching financial equilibrium in 2024.
To achieve balanced finances in 2024 will require a primary surplus equal to at least 2% of GDP. He will also have to deal with the problem of the large accumulated liabilities of the Central Bank and seek a further agreement with the International Monetary Find, to which Argentina owes $46 billion.
Despite the challenges, international expansion may be an opportunity for businesses in Argentina that are seeking to diversity their sources of revenue and reach new markets. However, it is crucial to be aware of the country’s difficult economic situation and the risks presented by Milei’’s shock plan.
Colombia, Chile and Peru: to return to growth
Colombia starts 2024 with control of inflation, lowering interest rates and restarting the economy as its principal challenges. GDP is expected to grow by 1.4%, with gradual recovery and more marked improvement in the second half.
Capital investment, which fell 9.3% this year, is expected to continue to show signs of weakness in 2024, albeit gradual improvement is expected. The Bank of the Republic has maintained restrictive monetary policy to control inflation, which reached a year-on-year rate of 10.15% in November.
In Chile, where inflation continues to be under control, the principal challenges in 2024 will be to return to economic growth. To address the situation, an Economic Growth Cabinet has been formed, tasked with promoting both public and private investment projects, with a focus on strategic industries such as mining and construction.
According to OECD forecasts, the Chilean economy will record nil growth this year, principally due to the weakness of internal demand. However, GDP is expected to grow by 1.8% in 2024.
The principal challenge for Peru will be to maintain fiscal discipline after closing 2023 in recession. According to Rosa Bueno, President of the Lima Chamber of Commerce (LCC), the first step in 2024 is to carry out political reforms, because current political noise and instability are hindering the generation of the confidence required to reactivate the economy. In addition to those challenges, Peru must also overcome its economic recession.
Those economic challenges, different in each country, reflect the complexity of the situation that Latin America faces in its search for stability and growth in 2024.
In an economic landscape marked by challenges and opportunities, internal expansion is a key strategy for businesses to drive growth and diversification. By expanding into new markets, businesses can reach new customers, increase revenue and strengthen their international competitiveness.
However, the process of internationalisation can be complex and requires careful planning, specialist knowledge and access to financial resources. In that context, Banco Sabadell positions itself as a strategic partner for businesses that want to take a step into new markets.
Remember that Banco Sabadell has at its disposal a team of specialists to help you navigate the complexity of international expansion and clear up any uncertainty. And at Sabadell Go Export, our centre for internationalisation resources, you can find the information you need and the best partners for the whole process of internationalisation.
If you have any questions or queries, remember that we are available 24/7 on 902 323 000, at info@bancosabadell.com and on social media (Twitter, Facebook and Instagram).
