Will Latin America be the Next Engine for Global Economic Growth?

Traditionally, the United States has been the economic engine of growth for the world. Over the course of The Great Recession, however, it was supplanted by China. During The Great Recession, the Chinese economy posted double digit growth rates that did much to ameliorate the impact of the dire conditions in the United States and Europe. The years ahead could feature Latin American as the force behind global growth.

If there is a period for look to this to happen it will be in the 2014-2016 time span, when Brazil hosts both the World Cup and the Summer Olympics.
Just as the People’s Republic of China utilized the Beijing Olympics in 2008 to present itself to the world as a leader, Brazil can be expected to this very, very soon.

Even though economic growth is off in Brazil, it is still the leader of Latin America. In Brazil, there are about 200 million consumers contributing to an economy of $2.5 trillion. With the sixth-largest economy in the world, Brazil is also home to such major companies as AMBEV (NYSE: ABV), a beverage company; Petroleo Brasilerio (NYSE: PBR), a “Big Oil’ firm; and Vale SA (NYSE: VALE), a major industrial metals and minerals concern.

Companhia de Bebidas das Américas (AMBEV)

Stock performance over the last 8 years:

But Brazil will not be the only Latin American country working to take economic growth higher. Mexico, Peru and Chile are also developing into powers. While Argentina and Venezuela have been set been set back due to its government, it is inevitable that the country will recover as the region is moving forward.

Like Brazil, these other Latin American companies have a wide array of powerhouse companies. Ecopetrol (NYSE: ECO) is a Columbian oil and natural gas entity with a market capitalization rate of well over $100 billion. By contrast, Occidental Petroleum (NYSE: OXY), a major oil company based in California, only has a market capitalization of around $60 billion. Banco Santander (NYSE: SAN), a bank in Chile, has a market capitalization of close to $70 billion. The market capitalization for Credit Suisse (NYSE: CS), a major Swiss bank, is under $30 billion.

While past performance may not always be an accurate indicator for future actions, over the last decade, Latin America has posted very bullish figures. Since 2003, more than 70 million Latin Americans have risen out of poverty. Incomes have increased by about one-third. Over the next five years, economic growth is projected to rise another one-third.

That economic growth will be crucial for both the United States and China. Trade between the United States and Latin America is growing. According to a recent study, air traffic between Latin America and the United States is expected to grow the most in the years ahead. China is Brazil’s largest trading partner. With Latin America so important to be China and the United States, its growth will be crucial for leading economic demand around the world in the years ahead.