What is the best Latin American country to invest in?

What is the best Latin American country to invest in?

Brazil dominates Latin America with nearly a third of foreign direct investment dollars. However, what about about Argentina?

Let’s take a look at Argentina Vs. Brazil.

An analysis of the relationship of the two stock markets.

As the top two largest economic entities in South America, Brazil and Argentina contribute more than 60% of total GDP in South America in 2021 with 49.3% and 13.8% respectively. 

The above graph shows the movements of stock market indexes of Argentina (ARGT) and Brazil (EWZ) for the past two years.

Despite the stock market crash in August 2019 caused by the unexpected result of the presidential election in Argentina, the general movements of ART and EWZ are highly correlated. The result should not be surprising due to the adjacent location and dominant positions of these two countries.

Taking a close look at the composition of GDP and export of these two South American countries. Moreover, we could find more similarities. Agriculture contributes to around 6% of GDP in Argentina and Brazil; industry contributes to 23% and 18% of GDP in Argentina and Brazil respectively; service contributes to 55% and 63% of GDP in Argentina and Brazil respectively. Therefore, the main compositions of both countries’ GDP are not only overlapped, but with similar percentage of share as well. 

Furthermore, soybean products are one of the most important export products for both countries in 2020. With 13.4% for Brazil export and 26% for Argentina.

As figures below demonstrated, in 2020, Argentina and Brazil share largest import and export trading partners in Asia, North America, and Europe as China, United States, and Germany for imports originating from Europe and Netherlands for export destinations in Europe (Figure 1 and Figure 2). As we analyzed in the previous article that China is the most important trading partner of Brazil around the world, Argentina and Brazil are definitely each others’ most important trading partner in South America. From the import and export percentage, we could conclude that the economic influence from Brazil to Argentina is most significant for Argentina’s economy.

Figure 1 Imports origin, Argentina on the left, Brazil on the right
Figure 2 Exports destination, Argentina on the left, Brazil on the right

Brazil and Argentina, the two giants in South America, have grown together for the past decades and have great achievements as emerging countries. However, their tight bonding and future development are facing challenges from inside and outside. Such as the global pandemic, the influence of China in South America. And the problem inside Mercosur trade bloc. Lastly, it’s no doubt that these two countries will still work closely together and look for a way out through these challenges.

Credit: Yahoo Finance, Statista, OEC

Written by Ziqi Wang

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What is the best Latin American country to invest in?