Why South America should be considered a Preferred Investment Destination
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GTSA principal Geoffrey McRae has lived and owned real estate in South America since 2003, so he has his own views of its opportunities and risks. He founded the real estate group under the Gateway to South America brand covering Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, so he has seen the benefits and challenges of operating in each country and market.
In his opinion, business success in the region relies on the ability to understand the countries’ histories, their business customs and learn of the unique advantages and disadvantages each one has. A graveyard of failed foreign companies ignored this advice and tried to implant a foreign model into the region without any adaption. An example is Chileterra and Fonterra dairy units in Chile and New Zealand Farm Systems in Uruguay, but there are 100s of others. Most came in undercapitalised with a Conquistador attitude to a business trying to implant systems and production methods unsuited to local conditions.
However, look at some of South America’s most successful home-grown companies. You will see that they have adopted American and European technology ideas and adapted them to local conditions. Mercadolibre is a perfect example; they have successfully combined e-commerce with local customs to create a flourishing business. This shows that with the right combination of innovation, knowledge and adaptation, it can succeed in any market -even as complex as South America.
Let’s look at the advantages over other investment destinations, such as Europe and the United States.
The People: South Americans are, in general, warm, family-loving people who want to get ahead and welcome foreigners who respect their customs.
Religious harmony: Most South America is Catholic, so there is no religious conflict. This means that people of all faiths can live together peacefully and invest their money without fear of discrimination or conflict as they present no threat to the status quo.
Most of the population has a blended European heritage, so they have a shared history of being born of immigrants. More than a few have European Passports, ensuring they can move freely between countries.
The average age in South America is considerably lower than in other regions, giving them a vitality often lost in the West due to their aging populations. This much younger population is also generally very well-educated, with many universities offering high-quality courses in business and finance.
Contrary to Hollywood’s movies, most workers are hard-working and honest. The region’s reputation for corruption is often overblown and can be attributed to the common sense approach when dealing with business matters. At a retail level, corruption is practically unnoticeable, and investors can rest assured that their money will be safe.
The latest farming technology is available and used extensively in South American agricultural and pastoral farming. In fact, animal genetics have advanced to such a level that they now export them, whereas in the past, they imported them – making it an even more attractive option for those wishing to invest in this sector.
Now let’s look at the negatives.
Politics :
Here the regions differ considerably.
Argentina:
After an early history of being the shining economic star of the continent, being the bread basket for Europe for decades, Argentina fell under the spell of Peronism, which destroyed its economy for 70-plus years and only now seems to be ready for a change. ( elections in October will confirm if I am right or not). Why did it take so long to seek change? The easy answer is that it suited the ruling elite and large businesses who, over time, corrupted Peronism’s original ideals and became supper rich. Having a large proportion of the population in poverty and dependent on the government became a successful model for continued power and is now copied by many Western countries.
Brazil:
Brazil has a long and varied history of politics from its early days as a Portuguese colony. From the colonial period to the present day, the country has seen a variety of governments and leaders, each with their own distinct approach to politics. During the colonial period, Brazil was ruled by a viceroy appointed by the Portuguese Crown. Following independence in 1822, the country saw a period of monarchy before becoming a republic in 1889.
The 20th century was a tumultuous time for Brazilian politics, with several military dictatorships ruling from 1964 to 1985. This period saw numerous human rights abuses, including forced disappearances and torture, economic inequality and poverty. Following the transition to democracy in 1985, Brazil has seen several democratic governments elected through free and fair elections.
Today, Brazil is a presidential republic with an elected president who serves as both head of state and head of government. The government is divided into three branches – executive, legislative and judicial – that work together to ensure the functioning of the state. Political power is shared between the federal government and state governments. Brazil has an active political life, with numerous parties competing for dominance in national and state elections. In recent years, Brazil’s political landscape has been marked by corruption scandals involving high-ranking politicians from all parties. The current president Luiz Inácio Lula da Silva, is a perfect example.
Chile:
Chile has a long history of political upheaval and change. From the country’s independence in 1810 to the tumultuous years of the dictatorship of Augusto Pinochet, Chilean politics has been marked by social unrest and protest movements. During the 19th century, Chile was in constant political flux, with the country’s government changing hands between conservative and liberal factions multiple times. This contentious period of Chilean history included several civil wars and ultimately culminated in the election of José Manuel Balmaceda as president in 1886.
In the early 20th century, Chile saw relative domestic stability, only to be interrupted by World War II and its aftermath. After the war ended, there was a brief period of democratic rule before General Augusto Pinochet seized power in 1973 with the help of the American CIA. Pinochet restructured the economy, eliminating much of the corruption and the communist influence from Russia and was seen as modernising Chile. Pinochet’s government, however, was marred by human rights abuses and political repression until his rule ended in 1990 with the return to democratic elections.
Since then, Chilean politics has been characterized by a multiparty system including conservative and left-wing parties. In 2014, Chile elected its first female left-wing president—Michelle Bachelet—in a landslide victory representing a significant shift in the nation’s politics with a lurch to the left. Miguel Juan Sebastián Piñera Echenique, born 1 December 1949, was a Chilean billionaire businessman and politician who served as president of Chile from 2010 to 2014 and again from 2018 to 2022. He made Chile one of the most pro-business economies in South America. However, more recently elected Gabriel Boric Font born 11 February 1986) assumed office on 11 March 2022. He studied law at the University of Chile but did not graduate. Boric gained recognition as a radical student leader, serving as the President of the University of Chile Student Federation from 2011 to 2012 and becoming a prominent figure in the 2011–2013 Chilean student protests. Since his rise to Presidency, his political support has collapsed, and he has become a dead duck president unable to pass any of his radical policies.
Paraguay:
Paraguay has a long and complex history of politics, beginning with its formation as a unified nation in 1811. The country has seen democratic and authoritarian rule, with a particularly turbulent period in the 20th century. Paraguay was ruled by a series of dictators from 1954 to 1989 when democracy was restored. Since then, the country has experienced relative stability and progress, though allegations of corruption and election irregularities have existed. Paraguay is currently led by President Mario Abdo Benítez, elected in 2018. The country is divided into 17 departments, each headed by an elected governor. Paraguay is a constitutional republic with a multi-party system, and the two major political parties are the Colorado Party and the Liberal Party. The Congress of Paraguay is bicameral and consists of a Chamber of Deputies and a Senate. Paraguayans enjoy freedom of speech and press and are committed to upholding human rights. It is seen by many as the opportunity that Uruguay was 15 years ago.
Peru:
Peru has a rich and varied history, with a long rule by ancient Incan and pre-Incan civilizations. This was followed by the Spanish conquest in the 16th century, a colonial-era that lasted until Peru declared independence in 1821. In the modern era, Peru has faced many political challenges, with a period of military rule from 1968 to 1980 followed by several democratic governments and then the authoritarian rule of Alberto Fujimori in the 1990s. The country is now governed by a democratic system, with elections held every five years for the President and Congress. In recent years, Peru has seen an increase in economic growth and has experienced relative political stability. The country is also increasingly active internationally, recently joining the Pacific Alliance of Latin American countries.
Uruguay:
Uruguay has a rich and interesting history of politics. Starting with the birth of its independence as a nation in 1828, Uruguay has experienced many political changes over the years. The country’s first president, Fructuoso Rivera, was chosen through an open election in 1830. During his term, he declared a new constitution that gave Uruguayans greater civil rights and freedom of speech. This new constitution also abolished slavery and established a form of representative democracy.
In the following decades, Uruguay experienced several different periods of political instability. From 1918-1933, the country was ruled by a military dictatorship. During this time, citizens were deprived of fundamental rights and freedoms, and the economy suffered greatly. In 1933, elections were held again, and a new government was formed under the leadership of President Gabriel Terra. This period saw some improvements in economic growth and civil liberties for Uruguayans.
The next several decades saw further political changes as various factions rose to power in Uruguay. In 1973, the right-wing military forces launched a coup d’état that resulted in more than 15 years of authoritarian rule. Human rights violations were rampant during this time, and left-wing radicals were persecuted. In 1985, free elections were once again held in Uruguay and democracy was restored to the country.
Since then, Uruguay has been one of Latin America’s most successful democracies, with high political stability. The current president is Luis Lacalle Pou, who was elected in 2019 after receiving nearly 50% of the popular vote. He leads the country through difficult economic times caused by low commodity prices and a severe drought. Nevertheless, he remains committed to promoting democracy and protecting civil liberties in Uruguay.
America’s Interference in South American Politics and their Economies
American interference in the economies of South America has a long history stretching back to the 18th century. Throughout the 19th and 20th centuries, the US used various methods to influence and shape economic policies in Latin American countries. In the early 1800s, US merchants began establishing trading posts in the Caribbean, while in the mid-1800s, US investment in Latin American infrastructure projects increased. This was accompanied by a shift in US foreign policy towards a more interventionist stance in Latin America.
The United States has also been accused of exerting its influence through economic aid packages. In the early 20th century, US-funded loans were used to support the construction of railways and other infrastructure projects in Latin America. During the Cold War, economic aid packages were used to prop up authoritarian regimes that were friendly to the US-backed government in Washington. In recent years, US-backed loans have supported neoliberal economic policies such as privatization and deregulation to allow American companies to dominate.
Aside from economic aid packages, the US has employed more direct interference methods such as military intervention and covert operations. 1964, for example, the US orchestrated a military coup in Brazil to oust President Joao Goulart. More recently, there have been allegations that the US was involved in an attempted coup against Venezuelan President Hugo Chavez in 2002. Chile, of course, had its left-wing president killed by a CIA-backed coup that installed the Pinochet dictatorship.
Overall, American interference in South American economies has profoundly impacted political and economic developments in Latin America in the past. The legacy of this interference continues to reverberate throughout the region today as many countries struggle with poverty and inequality due to ill-thought-out reforms implemented by successive US-backed governments, with regime change and political pressure still continuing under more recent interpretations of the Munro doctrine. As the rising world superpower today, China has an increasing influence in trade and politics, filling the gap of the US’s fading power.
Buying Real Estate requires local knowledge to avoid disappointment
The Latin American real estate market can be daunting for new foreign investors. With its highly fragmented and informal nature, it can be challenging to navigate the complexities of the market without professional guidance. Investors can easily make costly mistakes without proper knowledge and find themselves in difficult financial situations. Investors need to research and consult with a qualified real estate professional to ensure they make informed, smart decisions when considering an investment in Latin America. With the right guidance and research, the potential rewards of investing in Latin America’s real estate market can be great.
Conclusion
South America is an increasingly attractive option for foreign investors looking to expand their business operations from an increasingly unstable Europe and the United States. With a population of over 400 million people, the region boasts a diverse and growing consumer market with a wide range of investment opportunities. The continent’s numerous natural resources, including oil, gas, gold, and copper, are also attractive to investors looking to exploit the region’s potential. In addition, many countries in South America have recently implemented economic reforms that make it easier for foreign investors to do business there, such as reducing taxes, making it easier to obtain permits, and liberalizing trade restrictions. Furthermore, the continent’s strong economic growth over the last decade has made it an even more attractive investment destination. To top it off, many countries in South America still have relatively low labour costs compared to other parts of the world, which can help keep production costs down for businesses operating there. These factors combine to make South America one of the best opportunities for foreign investors today.
Looking for advice on where to start?
Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.
The Gateway Team – When You are Serious About Property
www.gatewaytosouthamerica.com
About Geoffrey W W McRae
With a highly distinguished career spanning more than three decades across five different countries, New Zealander Geoffrey McRae has established himself as a leading authority on South American real estate, agricultural, and commercial matters. As the founder of Gateway to South America – a real estate consulting group specialising in six South American countries – Geoffrey has developed a reputation for discretion, expertise, and experience that has seen him represent some of the most prestigious clients in the region. His deep knowledge and experience of South American markets have placed him at the forefront of the industry and given him the opportunity to guide and advise with confidence and surety. His long and successful career – which continues to evolve and expand daily – is a testament to his talent, tenacity, and ambition.
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