What will Mauricio Macri’s election mean for Latin America? Argentina holds the dubious distinction of being the only first world country to BECOME a third world country in modern history. Yes, as most emerging countries are gaining ground in the world, Argentina has practically gone from “first to worst”. In the early 1900s the country was one of the world’s ten richest. From 1871 to 1914, it enjoyed the fastest annual GDP growth rate in the world. Today the country is home to some shocking rankings: it has a more corrupt government than Niger and has a lower per capita GDP than Equitoreal Guinea. There are numerous reasons for Argentina’s economic collapse over the last century, but two of the major ones are insecure property rights and protectionist trade policies that have been a trademark of the far-left Justicialist Party which has had a stranglehold on the country since its founder, military officer Juan Domingo Peron, first came to power in 1943.
Big government corruption
One frighteningly recent memory of this economic failure is what Argentinians refer to as “el corralito”, in which the government froze all bank accounts in 2001 for 90 days, and subsequently devalued the country’s currency, in effect draining people of their savings and leaving thousands homeless and jobless. When people say these sorts of events would never happen in the Western world or in developed countries, I point them to the example of what has become of Argentina. Outgoing president Cristina Fernández de Kirchner’s reign has been marred with corruption, from embezzlement and bribery to being accused of murders of political opponents. When it comes to governance, Kirchner doubled the size of the state, nationalized industries and increased taxes and inflation astronomically. Unfortunately, this behavior is not only symbolic of the Justicialist Party in Argentina, but of the type of government that has become all too common across Latin America. Evo Morales in Bolivia and the late Hugo Chavez of Venezuela are two notorious Latin American leaders that are well known in the outside world for their dictatorial tendencies. Both rose to power with promises to redistribute wealth to the country’s poor and then have done all they can to consolidate their own wealth and power while dismantling their countries’ economies. While these two leaders are the ones that have gotten the most press coverage, they are members of a larger “pink tide” of often corrupt socialist governance that has overtaken a large portion of Latin America since the 1990s. This is the reason that the election of Mauricio Macri, a successful businessman, in a country where the ruling leftist party controls 80% of the media, is not just a big deal for Argentina, but for the entire Latin American world.
Macri’s election: A new hope for Argentina
Macri will become only the third non-Peronist leader in Argentina since the end of military rule in 1983. Macri himself decided to enter politics after being kidnapped by corrupt police officers seeking a ransom payment. After leaving his job in industry, he served two terms as mayor of Buenos Aires. He’s already vowed to unwind currency controls and reduce export tariffs in Argentina, immediately encouraging international trade, and will revamp economic data manipulated by Fernandez’s government. Whether Macri’s presidency will bring immediate economic change to Argentina remains to be seen, but what’s more important is the shift that this election signals for the continent in general. We believe that Latin America has enormous potential for investors, often in spite of its countries’ governments, whether it’s buying real estate in Mexico, launching a startup in Colombia or Chile or investing in farmland in Paraguay or Brazil. Argentina now, too, has the potential to be a great investment, with the third-largest shale reserves in the world, a highly educated workforce, and growing opportunities in the local economy as more people will have the chance to move from poverty to the middle class. If more countries in this resource-rich region begin shifting to market-driven, economically liberalized policies, the opportunities will only grow.
Opportunities for investment
Colombia’s recent resurgence is one that can serve as a model for the rest of the continent. Coming from a recent history distinguished by drug cartels and armed conflict, the country has achieved stability and passed economic reforms in the last decade, becoming the fastest-growing Latin American country, as well as the second freest in Latin America. With free trade zones, duty-free importation of machinery, and other business-friendly incentives, the country has successfully put its past behind it and investment is now pouring in from across the world. Which is why, when it comes to investments, Colombia is now my favorite out of all Latin American economies. What has been done in Colombia can be done elsewhere. Rather than being engulfed by a pink tide of socialism, countries in this region of the world are now are presented with the opportunity to compete with each other for business and, in turn, become more responsive to global investors. Colombia’s rise and Argentina’s potential resurgence are just the beginning. The choice is yours to take advantage of this opportunity now. If you’re ready to start investing offshore — whether it be in Argentina, another Latin American country, or somewhere else — let us know and we can help you establish a plan to go where you’re treated best and where you will have the most success.