South America: The two faces of growth

Latin America is once more under the spotlight. Low interest rates and high prices of raw materials sustain an Asian type growth rate. Capital is flowing in and the continent just recorded three consecutive years of growth; something not seen there for half a century. Nonetheless, these impressive results hide an extremely difficult social and political context with persisting poverty and strengthening of the popular attraction against globalization.

Let's have a closer look at Asia, which weaves close connections with the South American continent. Notably China, absorbing huge quantities of bean sprouts, iron, copper, petrol and gas, diversifies its raw materials supply sources and thus sustains its growth. By vastly exporting its wealth, South America is flooded with liquidity. Up until now everything has been fine, but this new economic deal demands that we spend some time on it as it shows some unbalanced relationships. Indeed, China having its eye set on raw materials invests in infrastructures aiming at their extraction.
Thus, it weakens the local industrial development in gearing the production towards the primary sector and a strengthening market for its important industrial production.

What will happen to the South American production structure in the years to come? For instance, Brazil, the most industrialised country in the region, has started to come under serious competition in fields such as the automobile industry or civil aviation. Continuous Chinese expansion represents, amongst other things, a real threat in terms of delocalisation. Mexico already paid the price, with over 300 factories moving to China where labour is 4 times cheaper.

The shy participation in international trade for the South American countries (1.8% of the World gross national income), when compared to the giant Asian share (eight times more), makes these risks all the more present.

Despite the fact that these trends are merely perceived in the background, they say much as to the medium-term stakes that the South American continent will be confronted with. The weak industrial specialisation of the continent could fall to pieces when confronted with the massive Asian competition.

Confronted with this danger, the South Americans would do well to direct their capital towards strengthening the productive industrial framework, towards a dynamic of progress, employment creation and competitiveness of existing companies. The Westerners have, in that matter, a key role to play in bringing the vital technical support for the success of this orientation.
Thus, business and objectives... will follow!

Article Source: http://www.debtfinancearticles.com.

About the Author:
Managing director of Pro-businessplus Ltd, international management company, headquarters situated in Ireland with offices in USA, United Kingdom, Hong Kong, France and Luxembourg , website: www.pro-businessplus.com.