Randall Castillo Ortega discusses trends shaping Latin America’s economy
Global social trends have repeatedly been affected by factors that are no stranger to citizens and are part of the daily life of the majority of the population. In addition to regulatory measures, the COVID-19 pandemic and the recession are permanently altering the political, economic and social course of Latin America. This creates a new landscape that must be considered to improve their well-being and that of their families. Randall Castillo OrtegaLatin American trade specialist, explains the evolution of the market.
World Bank data shows that the COVID-19 pandemic left 4.7 million people in the Caribbean and Latin America vulnerable or poor in 2020. In the two years since the virus spread, power purchasing has dropped considerably. This has led to a series of structural inequalities, which manifest themselves in high levels of informality as well as social protection.
A report by the Economic Commission for Latin America and the Caribbean (ECLAC) indicates that the crisis caused by the pandemic will lead to a decline of 12 years in Latin America in terms of poverty and 20 in terms of extreme poverty. The ILO also highlights the worrying fact that informal employment accounts for 70% of net job creation in many countries in the region.
Domestic consumption is also a key determinant of economic growth. Castillo explains: “Due to various disruptive events that have occurred between 2020 and 2022, it is likely that significant challenges will be evident in terms of momentum. This is mainly due to the decline in purchasing power in the region.
According to the Inter-American Development Bank, urgent measures can be taken to mitigate this phenomenon. These include policies to promote formalization, increase equity in social security and pension systems, and financial sustainability in education and health.
This trend will continue to be a major player in the coming years. Latin American countries have aligned themselves with the UN Global Compact and the Sustainable Development Goals (SDGs). They turned to a greener and more sustainable economy, focused on the environment and those who live there.
According to the Global Commission on the Economy and Climate, bold and effective climate action can generate $26 trillion in economic benefits over the next 30 years. The Inter-American Development Bank and the International Labor Organization (ILO) show that decarbonization can create 15 million jobs and increase economic growth by more than 1% per year by 2030.
This vision will undoubtedly present significant challenges for the business sector and the need to transform its processes. These measures could require significant changes in their business strategies. However, these are opportunities for the development and application of new technologies that will help businesses remain viable and sustainable.
Companies are forced to transform their activities by the fourth industrial revolution. The speed of change and new expectations will force them to take risks and venture into areas that exceed their current performance.
This transformation in Latin America has been slower than in other regions, but it will continue to accelerate over the next few years to ensure the region’s competitiveness. Some examples that illustrate this trend are the growing relationship between industries such as health and food, energy production and transmission with household appliances, and the world of sport with insurance.
Latin America is the region that saw the strongest growth in the number of broadband users in 2020, despite the disruptions caused by the pandemic. It is also the region that has been the protagonist of capital financing rounds for startups over the past two years, with an average participation of 40%.
This suggests that there is still a lot of potential in the area. “While this potential was initially concentrated in large economies such as Argentina, Brazil and Mexico,” Castillo adds, “some smaller countries, such as Uruguay, stand out as being the most exporters of software services per capita. “.
It is becoming increasingly important to understand the signals of the international environment, taking into account the impact of economic behavior, cyberattacks, the effects of climate change, social inequalities, movements of non-compliance and the effects on the environment.
The conflict between Russia and Ukraine has economic and financial implications that could translate into a deterioration in perception and an increase in inflationary pressures. This could lead to an economic slowdown.
Although Russia is not a significant player in the region as a trading partner (according to Trade Map data up to 2020, exports and imports generally account for less than 2% respectively), the indirect effects of the war will have an impact on regional economies. Indeed, the sanctions against Russia have an impact on the international price of raw materials and supply chains, which would lead to higher prices for goods and services related to the food and energy sectors.
About Randall Castillo Ortega
Randall Castillo Ortega has been involved in the financial space virtually his entire professional career. In addition to founding the financial loan company RACO, he is also an avid outdoorsman and, along with his family, is a big supporter of the community. He regularly participates in community ceremonies and events organized to create a better environment for children and families.
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