Problem:
Commodity prices have dictated growth in South America in the last decade. Many countries export natural resources, such as oil and iron ore, to economies like China and North America for manufacturing and processing. Foreign direct investment is pouring into South America at record paces, further increasing consumer and investor confidence.
Venezuela has averaged 4.6 percent economic growth since 2005, and Chile has averaged 4 percent, being the world leader in copper mining. In a staggering example of economic growth, Argentina averaged 7 percent growth due to soy and other farm exports since 2005. Although business is booming in Latin American countries, the ease of doing business in the fastest growing economies are ranked 39 for Chile, 41 for Peru, and 42 for Columbia out of the 180 countries measured.
Many governments in Latin America are in the process of transitioning from socialist to capitalist or even from capitalist back to socialist. Because of this, some countries have very high investment risks because the governments do not or will not support certain business ventures. Many governments are in the process of transitioning businesses from capitalist to nationalized in an effort to protect them from foreigners. Some examples include the nationalization of pension plans and energy resources.
Reference:
1. Winter, B. (January 12, 2012). Analysis: In Latin America, business climate is king again. Retrieved from
https://www.reuters.com/article/2012/01/12/us-latinamerica-economy-idUSTRE80B13320120112