As we enter 2019, commodity prices are holding firm, newly elected governments have pro-investor policies, the US economy should grow above 2% and maintain a reasonably low-interest rates environment, and the recently signed USMCA (yet to be ratified by the US government) that will replace NAFTA, bold well for a stronger performance in Latin America. Business confidence has reached levels not seen in the region since 2012.
GDP growth is expected to climb to 2.3%-2.8% in 2019 from 1.7% in 2018 (excluding Venezuela), which will make 2019 the third year of economic growth after the 2014 & 2015 recessions. Main contributors to this improvement are Brazil, the largest economy, with a GDP growth of 2.4% from 1.4%, and Argentina, the third largest economy, that should show somewhat of a flat year against the -2.4% decline which was a drag for the region in 2018. Chile, Colombia, Mexico and Perú, all the countries belonging to the Pacific Alliance, should continue their steady growth between 2% to 4%.
The newly elected presidents from the two largest economy, the liberal Jair Bolsonaro in Brazil and the more progressive Andres Manuel Lopez Obrador (AMLO) in México, will face socio-political issues---polarize political environment, public violence and insecurity, impunity to the law, and inequality---that are not unfamiliar in emerging economies but which not properly tackled could bring risk to the otherwise positive regional outlook.
The good news on the economic front has also a positive impact on IT vendors as well, especially since Latin America is a major consumption of foreign technology. In addition, some IT sectors should experience a growth spurt as a result of business trends and government regulations. We present two below:
- The well-known trends such as a young population, the high internet usage, and mobile devices, coupled with current inefficient delivery of services, are driving companies and governments to improve their processes and introduce new B-C services, being the financial, retail, telco, and airlines sectors leading the introduction of these new disruptive offerings. This scenario will have positive ramification across many IT industries like DevSecOps, Cloud, and software that ensures friction-less systems of engagement.
- Well publicized security breaches in countries like Brazil, Chile and México, and new regulations related to security of the financial transactions and personal information (Law #13,709 in Brazil and Circular 007 in Colombia) are bringing an intense focus on how to secure critical digital assets. IT security companies should thrive in this environment.
2019 is looking to be a good year for Latin America, indeed!
- Economic Commission for Latin America and the Caribbean ( ECLAC)
- American market Intelligence
- Focus Economics
- Centro de Estudios Latinoamericanos