Latin America is getting safer

Colombia, which is gradually inching toward a peace deal with the guerrilla armies that have battled the government since the 1960s, has seen a massive reduction in the homicide rate. The same has long been true in Peru, which defeated its terrorists in the 1990s, and Nicaragua, which has healed the wounds of its civil war to become the safest country in Central America. Of course, it takes time to convince international audiences, and the popularity of sensationalist drug lord films and television series definitely doesn’t help. But as outdated perceptions of cruel dictators battling violent rebels are replaced by the reality of Latin America’s generally peaceful societies, it will help attract increasing international visitors.

“Nicaragua has healed the wounds of its civil war to become the safest country in Central America”

Clearly, some Latin American countries have a severe crime problem – Venezuela, El Salvador, Guatemala and Honduras are the most egregious examples. But, except in Venezuela, where the government is losing control of crime like it has lost control of everything else, violence isn’t necessarily a barrier to tourism. Don’t get me wrong, El Salvador, Guatemala and Honduras have terrible security problems, but the first two are far safer than they were during the 1980s when they were being ripped apart by civil war. Moreover, from a brutally cynical investor’s perspective, the violence in these countries tends to be restricted to poor people living in the sprawling urban ghettos. That’s a tragedy for those societies but not impacting tourists visiting the main attractions, which tend to be very safe. That reality is reflected in Central America’s improving tourist numbers. In Central America, international arrivals rose 7% in 2015 to exceed 10 million for the first time. Panama led this growth with a 21% increase in arrivals. Belize welcomed 6% more arrivals, Costa Rica and Honduras 5%, El Salvador and Nicaragua 4%, and Guatemala 1%.

Better connectivity

Another structural factor in Latin American tourism’s favour is the region’s improving transport connectivity. Latin America’s poor infrastructure has long been one of the major hurdles to improving economic productivity in the area. But thanks to the decade-long commodity boom from 2003, which boosted most Latin American countries’ macroeconomic situation, recent years have seen a massive upsurge in road transport infrastructure. Tens of billions of dollars have been invested in roads, tunnels and bridges that have improved land travel within and between Latin American countries. The transformation in Ecuador, Colombia, Peru, Nicaragua and Panama has been awe-inspiring. The benefits of the improvements are twofold: on the one hand, it makes it easier for regional travellers to visit neighbouring countries; on the other, it boosts the attractiveness of Latin America to those coming from further afield, as they can see more sites during their stay. For example, improvements in the Ecuadorian road network mean that it’s now possible for a tourist travelling by car to eat breakfast in the Amazon jungle, drive to the Andean highlands for lunch and then enjoy the sunset on the Pacific Coast as they eat their dinner.

The other significant change has been in the sky, where Latin America’s lumbering aviation oligopoly is steadily facing new competition. An old system of protected, inefficient national airlines was swept aside by a wave of liberalisation that has seen Latin American carriers emerge as world leaders. For example, Panama’s Copa, Colombia’s Avianca, Brazil’s Gol, Mexico’s Aeromexico and Chile’s Latam are globally competitive airlines that offer Latin American customers the types of prices and frequencies we’ve long taken for granted in the UK. Indeed Latam, formed by a merger between Chilean and Brazilian competitors, is now the world’s largest airline.

“Latin America are growing at 4.8% per year, making it one of the world’s fastest-growing air traffic regions”

In addition to these giants, another positive trend is the emergence of low-cost carriers. Until recently, just Mexico, Colombia and Brazil benefited from budget airlines, and now they are spreading out across the region. There is nothing revolutionary in this – these types of airlines are common worldwide – it’s just that Latin America is starting to benefit from it now. The International Air Transport Association (IATA) estimates that airline passenger numbers in Latin America are growing at 4.8% per year, making it one of the world’s fastest-growing air traffic regions. Aircraft maker Boeing is even more optimistic about the future, pencilling in a 5.8% growth per year over the next few decades. Investors should always regard long-term statistics with a healthy dose of scepticism, but the investment is already being made in new airports to cope with the extra traffic. Argentina, Chile, Mexico, Brazil, Ecuador, Costa Rica and Colombia are just some Latin American countries currently working on significant new airports.

A version of this article first appeared in MoneyWeek

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