Latin America beyond peak trade

A UBS Wealth Management Chief Investment Office White Paper

Under current global conditions, Latin America is unlikely to be able to export its way to economic development as it did for the better part of the 2000s. The region needs to look for and nurture domestic sources of future growth. Its demographics are favorable and the region is spending more than emerging market peers in fields like healthcare and education - but all this has yet to translate into better outcomes.

Projected working age population growth 2015-2025

Working age population includes individuals between 15 and 65 years of age

Latin America

Developed world

Human development rank

The lower the index level, the higher the human development

Productivity in Latin America should be supported by strengthening institutions, friendlier business conditions, and a relatively positive environment for entrepreneurship and innovation by developing world standards. However, the region will take time to tackle its headwinds, in particular its large informal economy and numerous public safety issues. It also has poor levels of savings and investment that account for its shallow domestic capital markets. As a result, the region has insufficient, inefficient, and poor-quality infrastructure that has turned into a broader economic Achilles heel.

Control of corruption score

Index ranges from -2.5 (weak) to 2.5 (strong)

Quality of infrastructure

Overall quality of infrastructure (7 is best). Regional aggregates are GDP weighted

Latin America

Developed world

From an investment perspective, Latin American financial assets have done better than those in most other countries in the past 20 years. The end of hyperinflation and policy shifts to inflation-targeting and floating exchange rate regimes have helped foster growth and reduce vulnerabilities. The focus on low inflation and fiscal prudence should continue in years to come. The development of Latin America's financial industry should result in greater opportunities to diversify and obtain attractive returns.

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