Bet on the hare, not the turtle: why Latin America, not China, is the world's most exciting market opportunity ... in the short term.

Author:Price, John
Position:THE CONTRARIAN
 
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China may be the market of the future, but Latin America is the market of today. Demographics, economic policy and competition levels all favor Latin America as the market of choice for global companies in search of growth.

In the end, it wilL be China, not Latin America, that prevails as the world's largest economy. China, both culturally and politically, thinks long term by investing in its competitiveness, starting with education and infrastructure. Chinas climb in the world competitiveness rankings in recent years contrasts the fall of most Latin American countries over the same period, including Chile, Peru, Colombia, Mexico and Brazil.

Yet, present global conditions are kind to Latin America. Surging global demand (starting in China) for commodities favors Latin America, home to more than a quarter of the world's mining investment, 10 percent of its oil reserves and close to 45 percent of the globe's arable land. Latin bourses, dominated by its resource companies, have led global equity growth since 2003, when measured in dollars.

With few exceptions, Latin American countries have taken an orthodox approach to managing their trade surpluses, enabling export and FDI earnings to strengthen currencies and recapitalize banking, unleashing historic consumption levels. In 2010, private consumption in Latin America was measured at $3.1 trillion, versus $2.2 trillion in China. Some predict that China will need until 2016 to outpace Latin American private consumption levels and even longer to overtake on consumer spending. In 2010, the average Latin American consumed more than three times the average Chinese citizen. Latin America boasts three times more than China the number of households earning above $15,000, considered the threshold at which families begin purchasing global brands.

Thanks to Latin America's distorted income distribution, it has six times more households than China earning above $75,000 per annum.

Part of China's impressive story is owed to a demographic zenith it is currently experiencing, with more than 72 percent of its population of working age (15-64). Over the last 20 years, that statistic has grown from a level of 65 percent as the single-child policy reshaped household structures. Going forward, Chinas population will rapidly age, bringing new burdens to households. China's future growth will rely on the challenging task of integrating its rural masses into the urban economy. By contrast...

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