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AMG hosts forum with former South American presidents

As part of AMG National Trust Bank’s continual assessment of capital market opportunities worldwide, we recently hosted a forum with Alejandro Toledo, former president of Peru, and Fernando de la Rúa, former president of Argentina. The candidness with which they spoke and answered questions was revealing and highlighted the challenges and opportunities for investing in South America.

For example:

  • Argentina continues to have issues with inflation and a government trending towards socialism.
  • Peru is like a young teenager. It has huge potential, but growing out of its adolescence can be awkward and full of missteps. However, its basic resources will allow it to grow and be prosperous.

Toledo explained that part of Peru’s struggle was a “curse of abundance.” An economy built primarily on exporting natural resources without equal regard to improving human capital cannot be stable or thrive in the way a more diverse economy can. Successful investors understand this and direct their investment accordingly. Chinese investment in Peru and other developing countries has been particularly insightful in understanding this issue.

However, China is not the only country investing in South America, and the environment has become quite competitive. U.S. multi-national companies are also well aware of the need to improve human capital as they invest within developing and emerging markets. They have the advantage in innovation and technology, but China has significant monetary resources and can afford to be quite aggressive.

Over the next decade we will continue to see developing and emerging countries benefit from China’s insatiable demand for resources to sustain its economic growth. The real question is if these countries can break the curse and diversify and grow their economies so they can survive should China falter or reach productive capacity.