What you need to know before trading with South America

A country report on South America has been published for export-focused businesses by trade credit insurer Atradius.

With information hailed as key to building solid foundations for export growth, the latest country report by Atradius provides an update on the political and economic backdrop of five main South American markets. Atradius assesses the risk rating for each market as well as comparing key indicators from GDP growth, inflation and unemployment to private consumption, industrial production and export rates. Atradius economists have ranked Chile as the lowest risk South American country within the report with a ‘moderate to low’ trading risk and ‘positive’ outlook. Peru and Columbia are ranked ‘moderate to low’ risk with a ‘stable’ outlook and Brazil is considered a ‘moderate’ risk with ‘positive’ outlook. At the higher end of the scale, Argentina is rated as being ‘moderate to high’ risk with a ‘stable’ outlook.

Highlights:

  • Argentina: The economy has avoided default for the time being but this has led to deepening austerity measures and economic contraction. Political uncertainty is high due to the presidential election later this year, which could mark the end of current economic adjustment policies. Agriculture and food are the strongest performing industries with a ‘good’ performance outlook. The outlook for chemicals, paper and services is ranked as ‘fair’.
  • Brazil: The new administration has set out an ambitious reform agenda to boost the economy while economic rebound is set to continue. Business insolvencies are expected to decrease 5% in 2019, albeit on elevated levels compared to pre-crisis years. Financial services and food are rated with a ‘good’ performance outlook with agriculture, chemicals, paper and services rated as ‘fair’.
  • Chile: Political stability remains high in Chile and the business environment continues to be one of the best in the region as the government continues to stimulate foreign investment and the economy’s shock resistance remains strong. Atradius has rated the automotive, chemicals and food sectors as having a ‘good’ performance outlook while the outlooks for agriculture, electronics, financial services, paper and services are ranked as ‘fair’.
  • Colombia: The economy is forecast to grow circa 3% in 2019 and 2020, driven by higher oil prices, improved investments and greater consumptions. The external economic position remains solid with significant economic progress. However, there are still high rates of poverty in rural areas. Automotive has the most positive outlook, ranked as ‘excellent’ by Atradius, with agriculture, construction, consumer durables, electronics, financial services and food all rated ‘good’. Most other industries are described as having a ‘fair’ outlook.
  • Peru: GDP is growing, sustained by higher commodity prices and robust domestic demand alongside an increase in private consumption and elevated confidence. To sustain growth, structural reforms need to continue. The construction and food sectors have a ‘good’ performance outlook while the agriculture, automotive, chemicals, consumer durables, electronics, financial services, machines, paper and services sectors have a ‘fair’ outlook.

James Burgess, Atradius’ regional manager for London and the South East, said: “With a more connected global network, export activity need not be constrained by geography and businesses are increasingly looking further to expand into new markets. South America has some prime opportunities for exporters due to its size, purchasing power and growing emerging markets. However, diligent research is essential to building strong foundations for successful trade. Astute businesses can work with their broker and trade credit insurer to help identify the best opportunities and mitigate risk, forming an effective trade partnership to achieve growth.”