Business operations and strategies in South America

¶ … Business in South America

Business Prospects in South America

South America can be considered as a continuously developing market for Western companies. In certain Central and South American countries, population's incomes are increasing, and so is consumption. The workforce in South America is becoming more and more specialized in certain areas, providing quality employees in all areas, not just manufacturing and production.

However, this region has always been characterized by certain political matters that kept investors away from South American countries. Oil is probably the most important asset that can be exploited in these regions. But oil companies have found themselves in dangerous situations in South America because of guerilla groups, for example, that tried to use this situation in their advantage in the battle with governments.

The situation seems to change for the better, as some countries in South America present smaller risks for investors. One of these countries is Chile, which is considered as "the freest economy in Latin America" (HKTD, 2008). Chile has the highest per capita GDP, combined with the lowest inflation rate in South America. The country provides a stable macroeconomic environment and stable business prospects for any investors.

As mentioned above, most international reports show that the political instability in South America seems to slow down. Even more, "anti-business populism appears to be waning in Latin America, some experts say" (Latin Business Chronicle, 2008). Experts also consider that Paraguay is the only country in South America where populism will continue to spread, as expected. In the rest of the regions, people seem to have understood the importance of economic development, and also the fact that economic developed can only be sustained with the help of foreign investors.

The reason behind experts' opinion relies on the fact that Chavez' constitutional reform proposition was rejected. This situation influenced populists in Venezuela, Bolivia, and Ecuador, which diminished their power in the region. Chavez' constitutional reform proposition was rejected by referendum, showing that the citizens of Venezuela desire a market-based democracy. In such conditions, it is only a matter of time until this democracy will be installed in the region.

The GDP in South America is expected to continue its ascending direction, reaching a 4.3% growth rate this year (Latin Business Chronicle, 2008). Inflation is expected to remain relatively constant in the next period of time. In certain regions in South America inflation is expected to decrease.

Given the conditions mentioned above, it is clear that South America will develop into investors' favorite destinations. The most important advantages of the region consist in: political stability in most regions, economic stability, government policies, and economic growth.

However, investors should think very carefully how much they are willing to invest in South America. The most important challenges in the region consist in: currency fluctuations, language barriers, and distance, which can cause significantly increased costs. Also, the political environment continues to be a problem in certain regions of South America. Regarding oil business prospects, the industry is expected to continue to be subjected to political pressure, given the national importance of this resource.