Trinidad provides gateway to Latin American markets
The Rio de Janeiro port in Brazil is a symbol of that country's steady inward investment over the last few years. Trinidad and Tobago's strategic location makes it an ideal place to serve Brazil and much of Latin America
Latin America has become an increasingly attractive destination for foreign direct investment (FDI), thanks to its economic growth and stability, according to a new report by the Economist Intelligence Unit (EIU), and Trinidad and Tobago is well placed to host investment in the region because of its geographical proximity as well as growing trade links with South America, in addition to a stable government and economy.
FDI inflows into Latin America rose by a dramatic 27% in 2011 to reach $150 billion, according to UNCTAD’s 2012 World Investment Report. Foreign companies continue to be drawn by the region’s high economic growth rates, expanding consumer markets, and abundant natural resources. The stock of FDI in the region now stands at $750 billion, proof of the economic transformation that has taken place over the past 15 years.
Latin American growth driven by political and economic stability and a growing middle class
Despite the onset of the global financial crisis in 2007, GDP growth in Latin America has averaged 4% for the past four years. The region has largely overcome the political instability of the 1980s and deregulation in the 1990s; macroeconomic policies aimed at controlling inflation and reducing debt, coupled with more open markets through trade diversification, have also helped to achieve a measure of prosperity.
Latin America is home to 600 million people, many with rapidly increasing purchasing power. Trinidad is conveniently situated between the region’s two largest players, Brazil and Mexico, which account for 60% of the region’s GDP. Both these countries are looking at relatively stable growth rates over the next five years, says the EIU report entitled Latin America as an FDI Hotspot.
Latin America’s consumer markets are expanding rapidly due to a very young population. In Brazil, the median age is under 30, and growing urbanisation across the region is adding to demand as millions of people are lifted out of poverty to create a new generation of middle-class consumers. In Brazil alone, nearly 50 million people have moved into the middle classes in the past eight years.
Trinidad is well placed to provide a base for foreign investors serving Latin America
As mentioned above, Trinidad is geographically well located to serve the wider Latin American market. The country is less than 10 miles from the South American continent at its closest point.
The time difference to potential clients in Latin America is no more than two hours to Mexico to the west and Brazil to the east.
Flight times to many Latin American cities are also manageable. Such connections are an advantage for offshore operations and help companies serving Latin America from a Trinidadian base to provide timely quality services to their clients.
Another important factor is that the Trinidadian population has a strong cultural affinity with its southern neighbours and there are many Spanish and Portuguese speakers among its rich cultural mix. Geographical proximity and cultural ties have helped the country develop a strong position within the Caribbean and Central American trading environment.
Trinidad has historically been a commodity-based, export-oriented economy due to its energy and manufacturing industries, exporting extensively to its nearby Latin American neighbours.
Foreign investors in Trinidad will be well placed to benefit from growing trade links
Trinidad’s export activities have resulted in various agreements and linkages with different countries to strengthen economic and commercial ties. These relations serve as a foundation to develop market pipelines and capacity building initiatives as our country is seeking to boost its trade with Latin America. The government actively promotes trade and investment, and acts as a facilitator to foster joint ventures.
The EIU report states that Latin America has already benefited from growing trade links. Inter-region trade has increased nine-fold in the past two decades and foreign investors in Trinidad will be well placed to take advantage of these growing linkages. Brazil, Colombia, and Guyana already rank within Trinidad’s top 10 trade partners, according to Eurostat data, and CARICOM member states have trade agreements with Colombia and Venezuela.
A key pillar of the government’s Medium-Term Policy Framework to 2014 is to further develop relations with partners in the CARICOM and the Association of Caribbean States (ACS). Government will continue to support efforts to strengthen CARICOM’s framework, including the establishment of a single Caribbean market. The regional market is seen as an extended domestic market and there will be a concerted effort to promote and deepen business opportunities between Trinidad and CARICOM member states.
Under the principles of the single market, the right of establishment, as well as the free movement of people, capital, services, and goods is permitted among member states. The single economy, which provides for harmonization of economic, investment, fiscal, and monetary policies, is expected to be fully implemented by 2015.
Trinidad is an easier and more secure business centre
One of many challenges of partnering with Latin American companies is the widespread inefficiency in the region’s business environment. The EIU report mentions possible stumbling blocks such as changing regulations, including tax rates and requirements, as well as local content needs.
Trinidad has a favourable climate and a relatively stable political and social system, as well as financial and economic regulatory framework, all of which offer more security to businesses, along with a professional and educated civil service.
According to the 2012 Doing Business report by the International Bank for Reconstruction and Development, Trinidad ranks 68 for ease of doing business against a Latin American average of 95. It scores particularly well when it comes to protecting investors (ranked 24th) and offers clear advantages as a base for Latin American operations.