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1. Do you think Latinamerica is a good place to invest in the near future? Why? What are in your opinion the main risks investors could face?
2. Mention as much trends as you can identify according to the information provided by the videos/graphics/texts
3. In your opinion what are the most similar/different patterns when comparing Latinamerica and Europe?
4. What are the most/less dynamic countries?

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What is triggering the rise of left-wing politics in Latin America?

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Latin American firms develop new products less frequently than their counterparts in other developing regions. In fact, in Ecuador, Jamaica, Mexico and Venezuela this rate of product development is less than half than that of Thailand or Macedonia. Consequently, this lack of innovation harms competitivity and slows growth and rebounds on quality job creation - a significant development challenge, especially in Central America.

Possible reasons are four-fold:

Human capital: Science and technology graduates and engineers are at a premium in Latin America and it's a scarcity that has a direct effect on innovation. In fact, Scup co-founder Daniel Heise admitted he has been trying to fill ten positions for around a year, but with little success. Closely related to the quality of education, the report recognizes this will be a major challenge for the region.

Intellectual property: With separate laws governing copyright in every country, ensuring intellectual property rights can be a significant bureaucratic undertaking for the region's entrepreneurs. The complicated panorama lends less protection to the product creators, deterring much needed investment for new product research and development.

Risk taking: No-one likes to fail, but in Latin America a deep cultural shame of failure is hindering innovation by dissuading entrepreneurs from taking risks. This is evident as much in individual reticence at a business level as in the low levels of investment in research and development, especially from the private sector.

Logistics: Modernizing ports, transport, and customs can add a competitive edge to products from the region. Currently, poor public services, communication links and transport infrastructure are adding to the obstacles to boosting production capacity in the region.

Quality job creation
Launching the report in Miami, De la Torre proposed that size isn't always the best marker for growth potential and quality job creation. In fact, 'multinational' firms based in Latin America far less dynamic than their offices outside of Latin America and the region's 'multilatina' companies are also suffering from an innovation deficit.

Instead, it is more helpful to consider businesses, whether they be small, medium or large, in terms of their age. In all cases, younger firms far outshone more established ones in terms of job creation. The key, therefore, is to identify early on which startups have the most potential and the support their growth through start up programs, subsidies, business expansion support programs or policy as necessary.

Entrepreneurs are key actors in turning low productivity around to create quality jobs and lasting economic benefit for the region. Consequently the report recommends establishing an economic environment which enables them to innovate and compete, thereby reducing the grip of monopolies, increasing productivity and diversifying the business environment.

"It is about building an innovative entrepreneurial class in which top-notch firms-firms that export goods, services, and even capital-no longer look tepid in contrast to entrepreneurial superstars elsewhere," the report concludes.

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organization of eastern caribbean states

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Latin America: Entrepreneurs' lack of innovation curbs creation of quality jobs

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Latin American firms develop new products less frequently than their counterparts in other developing regions. In fact, in Ecuador, Jamaica, Mexico and Venezuela this rate of product development is less than half than that of Thailand or Macedonia.

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Most of the regions we'll write about in our Year Ahead series do not have a continent-wide overarching theme, and instead the themes of risk are generally country specific.

There are some similarities between countries in different regions. For example, the leaders of historic powers like Russia, Turkey, India and China, harkening back to a time when their respective countries were more economically and militarily dominant, and leveraging that point for political gains. But for the most part, it's hard to define all of Asia with one brush.

Yet, Latin America (LATAM) is slightly different in this regard as we have observed, and anticipate, that we will continue to witness left-leaning candidates secure the top leadership post.

The reason for this trend is that countries in LATAM, like many others, engaged in fiscal stimulus to mitigate pandemic-related headwinds. While these helped fuel growth in 2021, they did not address pending issues related to economic inequality. Now, as growth slows, deficits remain wide and inflation picks up, these challenges are even more acute - leading to discontent amongst voters.

Thus, leaders promising societal change, left-leaning economic policies and constitutional revisions are finding favor. The challenge, though, is when these leaders come to power, can they deliver on their campaign promises of increased spending and taxes on the rich? If not, we could potentially then see a rise in political violence due to voter angst, as well as a challenging business and regulatory environment and additive headwinds to economic growth.

Chile: Left-Leaning Leader Rises Out of Nation-Wide Protests

Chile Risk Events in 2022

The Background and the Story

Chile has had a strong growth story, evolving into one of Latin America's most advanced, wealthy economies due to a series of economic reforms introduced in the 1970s and '80s. These led to:

A significant increase in GDP

Reduced inflation

Supported higher per capita income

Lower unemployment

However, they also resulted in rising inequality as Chile has a high GINI coefficient over 50.

Due to this level in equality, Chile endured protests in 2019 due to an increase in subway fares. Demonstrators demanded a new constitution as many felt the existing one was unfair and "illegitimate," given it was drafted under the dictatorship of Augusto Pinochet in the 1980s. The process of writing a new constitution is underway.

Chile also recently held a presidential election, which resulted in left-leaning Gabriel Boric defeating the right-leaning Jose Antonio Kast.

At 35 years old, Boric is a young, educated lawyer who is arguably the most leftist politician to win in Chile since Salvador Allende in the 1970s. He participated and led the mass demonstrations in 2019 and 2020 and advocates:

Increasing government revenue to GDP from 20% to 28%

Replacing the private pension system with a state-managed system

Shortening the work week

Increasing minimum wage

Creating universal health care

Addressing environmental concerns within the mining sector

Granted, many of these policies will likely slow the economy too.

Boric's win should not have come as a surprise given that Chilean's have a fairly negative perception of:

Urban economic conditions

Their governing institutions

Leadership

The business sector

Per our model, Chile earns a score of 8.0, 9.0, 10.0 and 7.5 on these metrics, respectively. So, not only are citizens concerned about the economic conditions in urban centers, they have (until now) had a low opinion of their leadership's ability to address these economic issues.

The overriding risk to monitor is the interaction between president-elect Boric and Congress given that Congress is divided, and thus Boric may need to moderate his proposals to obtain approval. But against this, even moderated versions of his policies could create economic distortions.

For example, the fiscal deficit widened from 2.9% of GDP in 2019 to 6% in 2021. While the economy rebounded through 2021, it is poised to slow to 2% to 3% growth in 2022. Against this, Boric is advocating for:

A dent in exports could undermine the goal of higher revenue and impact the flow of private investments, which could further slow growth. In addition, Boric's support for shortening the work week and increasing the bargaining power of unions could affect the business climate and productivity, which would be another headwind for growth.

Failure to advance these goals could spur voter discontent and lead to additional protests. So, the era of Chilean protests may not be over just yet. However, securing these policies could slow the economy and further deteriorate voters' assessment of their personal economic conditions. Boric's ultimate cushion though is the fact that Chile has relatively low debt levels, which means he could spend his way to popularity in the short run.

Separately, there is a strong probability that the new constitution will enshrine more social rights, advocate for improved environmental standards, which could naturally require additional government spending in future years. This could also incentivize greater government oversight and/or regulation of the natural resources sector, and in some cases support outright nationalization, such as lithium mining.

Overall, we anticipate wider fiscal deficits in the coming year. But this will be largely offset by Chile's low debt-to-GDP, which is around 35%. This would shield the country from a significant deterioration in its sovereign outlook. So, the political environment may not significantly impact Chile's sovereign health. Dollar reserves should hold up as FDI and capital flows offset the small current account deficit. However, draconian policies aimed at mining could hinder FDI flows, which could then cause reserves to fall and weaken the current significantly - but we see this as a lower-probability event. Changes to the mining sector could, however, impact production and export availability.

Mexico: Amlo, The Big-Government Fiscal Hawk, Remains Popular

Mexico Risk Events in 2022

The Background and the Story

President Andres Manual Lopez Obrador (AMLO) came to power in 2018 as an anti-establishment left-leaning candidate. His policy priorities have included expanding state participation in the energy sector, and reducing corruption, and keeping the fiscal deficit contained, which is notable given his otherwise left-leaning policy agenda.

Since AMLO took office in 2018, support of leadership has grown over time reaching 60% approval and scoring a 5.5 in our model, which is arguably the strongest amongst the major economies in LATAM. He's leveraged his popularity to consolidate his position within his party (Morena) and the broader electorate. During the mid-term elections in June 2021, Morena held onto its majority status in both houses of Congress, secured 11 of the 15 state governorships and controlled most of the state congresses. Granted the party lost its supermajority in the lower house, but this was still a notable development given that the opposition united against him and Morena during the elections.

Beyond politics, AMLO's tenor has been marked by slowing economic growth, but surprisingly, contained fiscal deficits. Even though AMLO has supported an increased role of state-owned enterprises but surprisingly contained fiscal deficits. Even though AMLO has supported an increased role of state-owned enterprises with additive financial support, this has not led to an overall expansion of government spending. More so, while there are concerns about the weakening of institutions under AMLO, the central bank (BANXICO) has maintained a hawkish bent in light of elevated inflation.

AMLO will continue to pursue policies that enhance state participation in the economy, which could discourage private investment and weigh on the economy. In 2022, there will be a vote on a constitutional amendment to reform the energy sector by expanding the state-owned utility, CFE's participation in generation from 38% to 54% and prioritizing government-owned sources of power generation. The reform would also eliminate the power self-supply scheme, forcing companies to purchase power directly from CFE, which would impact the mining sector through higher operating expenses. Furthermore, the changes could undermine investor interest in the renewables sector cutting off a key driver of economic growth.

Accordingly, AMLO's policies could hinder economic expansion. More so, given his focus on fiscal prudence, we anticipate fiscal deficits to remain contained, which is a positive for sovereign health, but will also stymie economic growth as government capital expenditure will be missing. Forecasts point towards the GDP expanding by 4.0% in the coming year, which could fall to 2.0% thereafter. More so, Banxico's hawkish stance will help contain inflation, but could be another headwind for growth via tighter credit conditions. Granted, higher rates in Mexico could incentivize capital flows as investors are attracted to higher yields and a strengthening Mexico peso in light of Banxico's posture.

AMLO's term will end in 2024 and in the run-up, we anticipate he will look to establish a hand-selected successor who can take over thereafter, and who he can indirectly control when they become president. To further this effort, we expect AMLO to potentially hold a referendum election in the coming year to showcase his standing with the voters, but also as a sign of strength to his own party. A referendum would appear to signal Mexico's democratic strength, but in reality, will be used by AMLO to consolidate power and undermine his party's internal democracy.

It's in light of a potential run-off with Lula that Bolsonaro will focus even more on subsidies, benefits and increased government expenditure abandoning his right-leaning credentials in the coming year. In fact, Bolsonaro's cash-transfer program, Auxilio Brasil, replaced Bolsa Familia, which was first introduced by Lula. This in turn means that fiscal conditions could continue to deteriorate in the coming year and undermine gains made early in Bolsonaro's term when he implemented the long-sought pension reform. The fiscal deficit could widen back out towards 7% of GDP, far higher than it was during Lula's term. Accordingly, this could keep the debt to GDP elevated at around 90%. Although additive spending should be growth additive, projections indicate that the economy will likely expand at just 2% in the coming years, indicating that much of the government spending will go towards subsidies and welfare, rather than growth inducing capital expenditure, like infrastructure.

Inflation is also expected to remain elevated. We flagged nearly 18 months ago that Brazil would be one of the first countries to raise interest rates after slashing them due to the pandemic. And true to our forecast, the Central Bank of Brazil raised the benchmark SELIC rate from 2% to 2.7% in March 2021. It then continued to tighten monetary conditions with the SELIC reaching 9.25% at the start of 2022. This makes the Central Bank of Brazil one of the most hawkish central banks in the world. But despite the rate increases, inflation continues to hover close to 10% indicating that more tightening could be on the way.

Where does this leave the economy? Higher interest rates, a weaker sovereign outlook and Bolsonaro trying to out-left the left to win the election could take its toll on the economy. As noted, growth is expected to remain subdued despite the higher spending. Although debt levels will likely remain elevated, investor interest should ensure that Brazil receives adequate capital flows to fund its debt. More so, once it's evident that Brazilian real rates are indeed positive (the difference between the SELIC rate and inflation), the Brazilian real may start to gain its footing and begin to appreciate (another reason debt should be financed). While this could help moderate inflation, it could also serve to hinder Brazil's non-oil export potential.

Against this though, and in light of ours and analyst predictions for oil prices (discussed next), crude oil exports should ensure that Brazil's current account remains manageable, helping keep dollar reserves stable, while providing stable royalties for the sovereign. Thus, despite Brazil's past history of capital controls, we are not too worried about currency inconvertibility related risks given the strong dollar reserves position, which account for over a year of imports.

As noted, we do not expect oil prices to fall sharply, but also do not expect the emergence of an oil super cycle in 2022. OPEC+ production increases could outstrip demand in 2022, at least in the first half, thus prohibiting oil from surging, while ensuring that prices remain moderate. For Brazil, this means (again) the current account to remain manageable while names like Petrobras have healthy top-line revenue generation supporting the company's ongoing de-leveraging program. However, this also means that Brazilian sovereign and Petrobras will likely not witness outsize benefits that would otherwise come from significantly higher oil prices.

The one major risk to monitor on this front is if Bolsonaro attempts to force Petrobras to reduce domestic oil prices for election purposes.

Colombia: Protests Against Duque Pave the Way for a Potential Left-Wing Government

Colombia Risk Events in 2022

The Background and the Story

Colombia has a history of mass public mobilization. In 2019, there were protests led by labor unions and university students demanding improvements in:

Sentiments cooled with the onset of COVID-19 but ramped up again in 2021 when both urban and rural communities united against President Ivan Duque's administration. Many consider the intensity of the protests the worst seen in over 40 years.

The 2021 protests stemmed from a proposal to raise the value-added tax (VAT) on public service for middle and upper-income households. Duque withdrew the reform after a few days, but the populous was already agitated by social inequality and police brutality, both of which were exacerbated by the impact of the pandemic on Colombia's most vulnerable communities.

According to the World Bank, Colombia is the second most unequal country after Brazil. There are strong economic, ethnic, and geographic barriers to education and employment, making social mobility one of the lowest within the OECD member states.

In our model, education scored a 7.5 with just over 50% of people agreeing that their children are learning and growing., while personal economic confidence has a score of 7.0. Granted, Colombia fares well on other indicators, like:

More so, Duque's administration is not too popular at the moment. Based on our models, support of leadership earns a score of 8.5, while confidence in governing institutions is at a very low 10.0.

Presidential elections will take place in the coming year, and Duque cannot run again. This opens the field to numerous potential candidates, but given the protests of 2021, it's likely that Colombia could go the way of Chile and Peru by electing a left-leaning candidate. If this materializes, we can anticipate a shift towards expanded government interventionism and regulatory changes while increasing anti-business sentiment. Government spending would most likely increase coupled with hostility towards the oil and mining industries, which could impact currency stability and drive private investment out. Even before then, Duque will likely not be able to implement policy changes, including fiscal reforms.

Similar to other LATAM countries, economic growth is expected to slow in 2022 by nearly half of the 2021 growth figure, falling below 4%, which would still be a moderate figure given Colombia's level of development. Meanwhile, fiscal deficits are expected to remain wide as the government attempts to shore up growth via additive government spending, while not raising taxes given the recent protests. This in turn implies that the sovereign outlook could deteriorate with debt levels approaching 70% of GDP. Furthermore, rising inflation and a weak labor market pose challenges, which could continue to add depreciating pressure against the peso. However, we are not too concerned about FX conditions, or currency convertibility related issues, as FX reserves stand at above $50 billion providing for upwards of 10 months of import coverage.

Overall, the political undertones imply that Colombia's sovereign outlook could deteriorate in the coming year(s), at least numerically, as fiscal reforms are largely off the table.

Peru: Marxist Leaders' Win Does Not Ease Voter Concerns with Governing Institutions

Peru Risk Events in 2022

The Background and the Story

Peru has had a fast-growing free-market economy that has decreased poverty levels significantly. Yet, it has been plagued by corruption scandals and public dissatisfaction with the pandemic overwhelming an

already unequal health system.

The economy shrank by 11% in 2020 while the official poverty rate rose from 20% to 30%. This fueled rage against the political establishment, which played a role in left-leaning Castillo's victory.

President Pedro Castillo was elected in July 2021 as a candidate from Peru Libre (Free Peru, far-left party) after a highly contested election against his opponent, Keiko Fujimori. He is considered the least-experienced president to be elected as a former schoolteacher and union leader with roots in rural Peru who had not held political office. Free Peru is essentially a Marxist-Leninist party, which is run by Vladimir Cerron, creating two power centers within the party, and thus creating internal fissures.

Castillo was impeached in 2021 but was not removed from office. In Peru, it is very easy to impeach a president and it is a tool that is frequently employed. In fact, it was used four times in the past three years. At the moment, Castillo's approval ratings are at a dismal 25%. He's lost ground among his base of rural and poor voters, has been accused of corruption and may not even make it through his full term. This has clearly had an impact on people's perceptions of confidence in their governing institutions, which earns a score of 10.0 in our model.

Although the failed impeachment motion in 2021 provides some relief, it may only be temporary if Castillo's approval ratings continue to fall, which would increase the chances of additional impeachment attempts in 2022. This, coupled with challenges within Castillo's own party, could give rise to political instability and uncertainty in the coming year. This could therefore undermine Castillo's campaign pledge to re-write the constitution. In some ways, this could be beneficial as it would deter attempts to change Peru's free-market system and help the business environment given Castillo's previous pledge to nationalize the business sector.

Essentially, Peru could continue to face political challenges and policy paralysis. This in turn could mean that Peru will have a "status quo economy." By that, we mean where growth is low but steady. In fact, it's forecasted to be 4.5% for the next few years. And the country could see low and contained fiscal deficits, manageable debt levels, and a slightly positive current account given Peru's export of natural resources.

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Latin America Trends 2022 | The Hartford's Global Specialty Insights Center

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Most of the regions we'll write about in our Year Ahead series do not have a continent-wide overarching theme, and instead the themes of risk are generally country specific. There are some similarities between countries in different regions.

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How can Latin America move beyond populism?

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Beatriz Sanchez, Head Latin America at Julius Baer, prefers to see opportunities where others see challenges: "I can't think of a better region and of a more diverse group of peoples, of ideas, of cultures and of social, economic and political activities to stay on top of. So it's really exciting."

Latin America is a very diverse region, culturally, economically. So how would you describe its economic strength?
Beatriz Sanchez: Latin America's economic strength is really its people. It's the energy that its people bring to everyday life, to the future. It's the energy they bring to change by really looking at where they are today and where they need to be in the future. We have seen many examples of that, as more and more women are being educated and graduating from primary, secondary and tertiary schools, as the labour force becomes much more active in new technologies, as more and more start-ups emerge in Latin America.

And what about the challenges?
Clearly, there is still a large disparity of income. And clearly we need to continue to work on that income disparity, but the awareness of it has become a lot more acute. It remains to be seen what the political changes we are seeing in many countries will ultimately bring - in Mexico, for instance. But in Brazil, in Chile, and even in Argentina, which is going through so many problems economically, there is a sense that things need to be different, that young people need to get much more involved and that a dynamic economy, one that is focused on the future, on new technology, and on smart cities and smart energy use is really the way of the future.

Let's talk about investment cultures. Where do you see the differences, where the similarities across Latin America?
If we focus on the similarities first, Latin American businessmen and entrepreneurs in general have taken a lot of risks with their businesses in their countries. They have had to deal with devaluation, expropriation, inflation and sometimes even hyperinflation, as well as radical changes in government policy. So there is a lot of uncertainty, a lot of risk and volatility already inherent in their local businesses. Which explains why they tend to be much more conservative when it comes to their 'sleep-well money' - the money they save for the family, for the next generations. They tend to be much more fixed-income oriented. And while it may seem a bit counter-intuitive to diversify and invest in your own country's assets, they feel comfortable with their own country risk because they know it. They also tend to be very US dollar-based because of the geographic importance of the United States.

And the differences?
The differences lie in the extent to which the different entrepreneurs invest in their countries. Obviously, in countries like Mexico or Brazil, where you have a much deeper local market, a much better regulated market, and more options either in the equity market or in the fixed-income or short-term debt market, entrepreneurs tend to invest much more locally. In countries with a more limited scope - Argentina and Peru, for instance - they tend to invest more outside of their countries.

Having said that, I think today it's really no longer about what I invest in my country of residence and what I invest outside. It's about an asset allocation strategy. Where are the best opportunities, where are the best valuations and how can I diversify my liquid assets to minimise risk and to get myself a return that's attractive.

Where do you see the most promising investment opportunities in Latin America?
There are tremendous opportunities in many areas. Take Brazil, for instance: there are huge opportunities in private equity and venture capital, especially in the education space and in disruptive technologies such as FinTech. In Mexico as well, you have lots of biotech and nanotechnology pockets. In a country like Chile, real estate continues to be a very interesting investment. In general, I see new technologies, smart technologies and real estate continuing to be leading factors. And then, of course, you have the traditional investments that Latin Americans always invest in, which is their local fixed-income markets and equity markets.

Tell us about your daily challenges as head of such a diverse and changing region.
That's funny. I never really look at it as challenges. I look at it as opportunities. Every time there is a change, every time there is an uncertainty, it's really an opportunity to deliver advice and content and to forge a closer relationship with our clients and even with our colleagues. For me the important thing is to always be on top of what is going on in our countries, what is going on politically, economically, socially. What are the concerns of our clients, what is their day-to-day life like, and how can we inject ourselves into that day-to-day life - and the decisions they need to take - and add value. I can't think of a better region and of a more diverse group of peoples, of ideas, of cultures and of social, economic and political activities to stay on top of. So it's really exciting.

How much does your Cuban background help you in getting your daily work done?
Oh, it's essential. Having been born in Cuba, which was such a force in Latin America during the late 1960s, 1970s, 1980s - and even today if you look at what is going on in Venezuela and Nicaragua, etc. - it really drives me to better understand what the socioeconomic impacts of change can be. And it also allows me to be a neutral player, because I am not Mexican, I'm not Venezuelan, I'm not Colombian. I'm really something a bit more international, and so people tend to feel more comfortable opening up and asking certain questions or maybe going in certain directions than if I had a nationality too close to their home market.

Is there a common denominator in doing business in Latin America?
Entrepreneurs, they really don't want to waste time. They want to talk to individuals who are informed, who can give them a new angle, a new perspective, and who give them content that they can really use and which helps either their local business or their international diversification. Entrepreneurs also want access. They want access to ideas, to other entrepreneurs, to investment opportunities and to intelligence. They want access to whatever they can't get on their own. The role that we, Julius Baer, as private wealth advisers need to play is to make sure that we understand our clients - especially those very sophisticated entrepreneurs - and their needs very well, and then see what access we can provide them, whether its external or internal, to really make a difference in their decision-making.

What can we do to attract these entrepreneurs, or what does attract them to Julius Baer?
What attracts these entrepreneurs and these sophisticated investors to Julius Baer are various things. I sincerely believe that being a full-fledged, pure-play private wealth manager, where all our resources, all our investments and all our energies go into private wealth management, is very important. The absence of conflicts of interest is something that entrepreneurs and clients feel very comfortable about. But I also think it's our platform, it's our content, it's our know-how. It's really taking a stand on things like the next generation. The type of activities we're doing around mobility, smart cities, disruptive technologies. That's really the way of the future. If we continue to accompany our clients to that future, we will be able to attract them as well as the next generation of clients. That forward-looking, almost pioneering spirit is a very important element of our DNA, and we must not lose it.
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The economic strength of Latin America? Its people

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Beatriz Sanchez, Head Latin America at Julius Baer, prefers to see opportunities where others see challenges: "I can't think of a better region and of a more diverse group of peoples, of ideas, of cultures and of social, economic and political activities to stay on top of. So it's really exciting."

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LIMA, May 19th, 2015 - Back in the 1980's, trade ties for Latin America and the Caribbean were very similar to those of East Asia -- thin and focused on a single key player in the North, United States and Japan, respectively. Today, East Asia's trade network is much denser and productive, crisscrossing among its countries and extending to the north. In contrast, Latin America's remains narrow and dominated by the United States, followed at a very distant second by Brazil.

The World Bank's latest flagship report for the region, "Latin America and the Rising South: Changing World, Changing Priorities" launched here today, provides an in-depth look at these global connections in trade and finance, and a sober assessment of their promise and trials for the region.

The global economic landscape has experienced tectonic shifts that have left the old north-south hierarchy behind. In the past four decades, the gross domestic product (GDP) of the South doubled to about 40 percent of the world's total, the share of global trade from the South also doubled to 51 percent and its share of global capital inflows nearly tripled to 50 percent. Within a decade the expectation is that the share of the developing world in global GDP will be higher (55 percent) than that of the North.

"The rise of the South has left a noticeable mark upon the world economy. But this unquestionable impact conceals important differences among the countries of the South," said Augusto de la Torre, World Bank Chief Economist for the region."The differences between the wealth of connections from Asia, compared to those of Latin America, suggest that our region is still not benefitting from the virtuous circle created by integrating more with your neighbors and then with the world."

The report finds, for instance, that between 2000 and 2012, the South's share of global manufacture exports increased from 32 to 48 percent but most it due to China. In fact, China's share increased by more than 10 percentage points while the share of the other top 20 manufacture exporters from the South - which include Brazil and Chile - increased by only 8 percent in total. What's more, for some countries in the South, including Mexico, it actually decreased.

Also significant is the fact that East Asian countries participate much more actively in cross-country production networks, known as Global Value Chains (GVCs), than most Latin American countries. In fact, the report finds that Latin American countries tend to integrate to GVCs only at the beginning -as exporters of raw materials- or at the end - as manufacturers of final goods - and not in the middle, a "sweet spot" that provides the most potential growth gains.

"The initial force from the global South's emergence -- and in particularly the China-led commodity boom -- brought tremendous economic and social gains to Latin America. Today, however, as that force wanes, it is more pressing for Latin American countries to become better players in this transformed landscape," said De la Torre. "What we have learned so far is that it is not enough to have global trade or to receive foreign direct investment. There is more to be done to take full advantage of that trade and investment."

More precisely, Latin America and the Caribbean will need to find ways to improve its human and physical capital as well as its technological capacity and business environment. To that end, the report points to three policy areas for policymakers to consider in this transformed global environment that calls for a rethinking of priorities:

Allowing economic flexibility in labor and capital reallocations so that labor and capital can find their way into the most productive sectors.

Learning through international trade and investment so that the region does not underutilize its cross-border commercial and financial connections with neighbors and other partners.

Raising saving rates to help enhance trade diversification by reducing overvalued currency that makes exports less competitive.

All these crucial reforms, the report concludes, will require deft political leadership. But it argues that this irreversible change in the global economy is a unique opportunity for Latin America to unleash its growth potential once and for all.

For more information on the World Bank's work in Latin America and the Caribbean: www.worldbank.org/lac

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Be updated via Twitter: https://www.twitter.com/BancoMundialLAC

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World Bank: The Trade Challenge for Latin America and the Caribbean

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LIMA, May 19th, 2015 - Back in the 1980's, trade ties for Latin America and the Caribbean were very similar to those of East Asia -- thin and focused on a single key player in the North, United States and Japan, respectively.