International Trade and Investment Law

Seven Reasons to Consider South America in Your Business Expansion Plans

1. Strong presence of established democracies and the rule of law

In the 1980s South American countries made a full return to democracy after twenty years under military rule.

2. Economic growth and stability

South American countries have had unprecedented economic expansion fuelled by exports of natural resources and agricultural products and by strong domestic consumption. [1] In Brazil, Chile, Colombia, Peru and Uruguay in particular, GDP growth has been accompanied by economic stability through monetary and fiscal measures aimed at taming inflation and maintaining sustainable growth. These five countries have also received the lion’s share of capital inflow to the region as a result of the positive investment climate brought about by economic prosperity and of policies supportive of foreign direct investment. Having withstood the 2008 financial crisis relatively unscathed, Brazil, Chile, Colombia, Peru and Uruguay grew at an average rate of 6.5 per cent in 2010 and 5.5 per cent in 2011. [2]

South America’s GDP reached US$ 4.3 trillion in 2011. [3] Brazil accounts for 59.1 percent of this total, followed by Argentina (10.5 percent), Venezuela (8.3 percent), Colombia (8.2 percent), Chile (5.7 percent) and Peru (4.3 percent).

3. Free Trade Agreements

Canada has Free Trade Agreements (FTAs) with Chile, Peru and Colombia. Canada has also initiated talks with “Mercosur,” the trade bloc comprising Argentina, Brazil, Paraguay and Uruguay, for a future FTA.

4. Large domestic markets with vibrant consumer culture

With a combined population of 396 million people, South America’s growing consumer market represents a substantial opportunity for Canadian companies. Over the past decade social inclusion policies have reduced poverty and inequality while stimulating domestic consumption. In Brazil alone, which accounts for about half of South America’s population, 40 million people have joined the ranks of the middle class in the last ten years. [4]

5. Home of one of the world’s largest food exporters and of some of the largest mineral producers in the world

Brazil is the world’s leading exporter of beef, chicken, sugar, orange juice and ethanol, and second largest exporter of soy, bauxite and iron ore. Chile is the world’s largest copper producer. The region also has significant deposits of gold, silver, nickel, oil and natural gas.

6. Increasingly important source of foreign direct investment

As South American countries open up their economies to foreign competition and increase their participation in global production, local companies need to pursue business opportunities abroad if they want to remain competitive and grow. [5] As a result, South America has become a growing source of outward foreign direct investment. Argentina, Brazil and Chile have been at the forefront of this new trend. To date, Brazil has been the only South American country with foreign direct investments in Canada, predominantly in the natural resources sector.

Canada has a lot to offer South American companies: low business costs and corporate taxes, highly skilled and educated workers, solid financial institutions and favourable investment climate.

7. Active participation in the multilateral trading system

Brazil and Chile are amongst the 23 founding members of the 1948 General Agreement on Tariffs and Trade (GATT), the predecessor to the World Trade Organization (WTO). Peru and Uruguay joined the GATT in the 1950s, and Argentina in the late 1960s. These countries have had a long history of active participation in multilateral trade negotiations. Today all South American countries are members of the WTO.

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