Enhanced connectivity stokes massive growth opportunities, finds Frost & Sullivan's Visionary Innovation team
SAO PAULO, April 4, 2017 /PRNewswire/ -- Having survived years of economic turbulence, Latin America is gradually shaking off its dependence on external forces like global commodity and oil prices. The stabilization of commodity markets has coincided with a rise in consumerism in Latin America, along with accelerated growth of economies such as Peru and Chile. In the next decade, the continent will witness a huge growth in digital inclusion, urbanization, middle and affluent classes and cities will have significant contribution to the economic pie. Additionally, declining dependency ratio, advancement of renewable energy capacity and high adoption of disruptive business models like sharing models will restore Latin America's status as a "next-generation continent."
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Latin America has a significant demographic advantage over regions such as the Middle East, Africa and emerging Europe, and will play a key role in attracting global investment. By 2025:
- More than 70% of the population (489.6 million) will belong to the middle class, which will result in a change in consumption trends and increase in discretionary expenditures.
- The middle class will account for more than 57% of the total consumer spending growth.
- Latin America will have the largest working age population, which will account for 61% of its total population.
- More than 82% of the population will live in cities, making it the most urbanized region in the world.
- Cities will propel Latin America's growth, with six Mega Cities accounting for more than 38% of the continent's gross domestic product (GDP).
- LATAM will have one in two women of working age in the labor force.
- The services sector will contribute to almost 65% of the GDP and employ more than 60% of the total workforce.
- Emerging economies such as Panama, Costa Rica and the Dominican Republic will have the highest growth rates in the region.
Mega Trends in LATAM, Forecast to 2025, a part of Frost & Sullivan's Visionary Innovation (Mega Trends) Growth Partnership Subscription, finds that new governments in Latin America are expected to change previous economic paradigms marked by over-regulation, import substitution and state intervention. They will, instead, foster a favorable investment environment by creating an open market characterized by price stability, privatization, deregulation and fiscal discipline.
"A significant economy accelerator is the increasing level of mobile connectivity, availability and penetration, making Latin America the second-fastest growing region globally in terms of number of mobile phone lines," said Renato Pasquini, Frost & Sullivan Digital Transformation Consulting and Research Director. "This enhanced connectivity and relevance of Internet of Things will create opportunities for small- and medium-sized enterprises as well as verticals such as ecommerce, smart factories, digital healthcare and digital governance," added Frost & Sullivan Visionary Innovation Senior Research Analyst Malabika Mandal.
"The interest of the healthcare industry in information technology solutions has experienced a constant development. With current budget constraints and a growing focus on prevention, primary health care should gain prominence and reach sustainability thanks to mobile health and telemedicine technologies. The Brazilian mhealth segment is expected to reach $1.4 billion by 2020, with a focus on applications and devices that can revolutionize the market," explained Rita Ragazzi, Frost & Sullivan Transformational Health Research Manager.
Latin America's economic revival is not only a result of the steady growth of emerging economies and the region's strong service sector, but also China's substantial investment aid. Some of the significant current and future include:
- As uncertainty over the Trans Pacific Partnership (TPP) looms, Pacific-facing countries like Chile, Colombia and Peru are expected to strengthen the Pacific Alliance for intra-trade and promote trade with China and Russia through new Free Trade Agreements (FTAs).
- Chinese investment in Latin America had more than doubled from $10 billion in 2014 to $29 billion in 2015, whereas US investments have decreased over the past four years.
- China will invest $250 billion in the region over the next 10 years.
- While TPP fades, China takes this opportunity to develop the Regional Comprehensive Economic Partnership (RCEP) and the Free Trade Area of the Asia-Pacific (FTAAP) with Latin American countries.
"Furthermore, accommodative monetary policies, coupled with record low bond yields within G3 countries, have turned investors towards risky asset classes and opportunities in developing economies such as Latin America," concluded Mandal. "The declining long bear commodities market, ubiquitous mobile connectivity, a booming middle class and China's investments could make Latin America a $7.3 trillion economy by 2025."
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Mega Trends in LATAM, Forecast to 2025
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