Dubai Chamber studies highlight Latin America’s investment potential
On the occasion of the high profile UAE official delegation visit to Latin America, headed by H.H. Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice-President and Prime Minister and Ruler of Dubai, the Dubai Chamber of Commerce and Industry issued four studies compiled by the Economist Intelligence Unit (EIU) on Mexico, Brazil, Chile and Argentina.
Coming as part of Dubai Chamber’s initiative of highlighting and exploring upcoming economies of the world for its members, the studies focus on important areas of investment potential for UAE businesses while providing a clear guideline for the country’s investors to make the best of these opportunities.
H.E. Hamad Buamim, President and CEO, Dubai Chamber, stated that these studies which are in line with the Chamber’s new strategy of enhancing the competitiveness of Dubai businesses in the overseas markets while stimulating the economic growth of the emirate, has launched iDubai market intelligence unit as one of the pillars of the strategy which provides stakeholders with statistical studies and reports on local, regional and global markets and their investment potential.
H.E. Buamim further stressed that these studies with their facts and figures help investors to make sound investment decisions in these promising markets while they also contribute to enhancing the competitiveness of Dubai and the UAE businesses to plan a successful strategy to explore and enter new markets.
The President and CEO of Dubai Chamber also informed about the Chamber’s plans to open a representative office in the Brazilian capital Sao Paulo to provide a gateway to UAE investors to enter the Latin American market which he said promises ample investment opportunities for the country’s investors.
According to the report, UAE imports from Mexico were over three times bigger than exports in 2013 as the planned reforms will increase competition in major and improve infrastructure and education as a result of which Mexico’s structural-growth rate could rise from under 3.5% to 4.5% per annum.
The study states that the services sector accounted for 62% of the GDP of Mexico in 2013, followed by the manufacturing sector (18%) and oil and gas (8%), and construction (8%) and agriculture and fisheries (3%), indicating that the presence of an extensive network of free trade agreements with over 50 countries make it easier for the country to trade with most parts of the world with access to over 70% of global GDP.
The study adds that the leading exports of Mexico during the year 2012 were manufactured goods (82%) as automotive formed a major component of manufactured exports, followed by oil (14%) and agricultural products (3%), while the export markets were US taking on 78% of Mexican exports, followed by Canada (3%), Spain (2%) and China (2%). The vehicles 21.6 % of the manufacturing sector, and 18.9% of Mexico s exports in the year 2012.
Also the expected growth of the Mexican economy in 2014 comes from its developing consumer market, diversity of its economy, optimistic outlook for FDIs, and an improving business environment ensured by the commitment of the Mexican government to increase investments are factors enhancing the strength of the Mexican economy and luring investments to the country, the report adds.
It further states that UAE imports from Mexico overshadowed exports in 2013 and valued at US$479 million as almost half of these imports (US$230m) were trucks, for the transport of goods, machinery parts (US$52m), organic chemicals (US$50m) and electrical equipment (US$49m) are also significant.
The UAE exports to Mexico totalled US$143 million. About two-thirds (US$94m) of these exports consisted of aluminium. The remainder is spread thinly over a number of product categories, the largest being machinery (US$12m), iron and steel (US$8m) and plastics (US$6m).
The study reveals that Mexico attracted two-thirds of the FDIs in the manufacturing sector during the period 2003-13, to the value of USD 35.2 billion in 2013 while Mexico City alone attracted over 400 investment projects during the period 2003-2013.
In its assessment of Mexico’s business environment, the report ranks the country 32nd out of 85 countries in comparison to the UAE’s 23rd rank for its attractiveness of doing business as Mexico finds its macroeconomic environment, foreign trade and exchange control and FDI policy as very good, while its financing, labour market, market opportunities, infrastructure as good. Its tax regime and private-enterprise policy, are rated as moderate.
In its outlook for 2014-18, the report states that key sectors like retail will witness a volume growth of 4% per annum. It also states that private sector investment in the energy sector is expected by USD40 billion to USD50 billion annually while a US$300 billion infrastructure plan to 2018 encompasses highways, railways, telecoms infrastructure and port upgrades.
In the area of telecommunications, the government expects recent reforms to expand the market from US$35 billion to US$55 billion by 2018 as foreign investors will no longer be limited to a 49% stake in broadcast services while a solid regulatory environment and sizeable credit growth potential is forecasted for the financial services and the automotive manufacturing sectors.
Another study on Brazil commissioned by Dubai Chamber and compiled by the Economist Intelligence Unit (EIU), states that trade and consumer goods companies which stand to benefit from an increasing middle class are the leading drivers of the country’s economic growth.
Figures quoted in the report on UAE’s trade with Brazil state that the emirates imports from Brazil were over US$2.5 billion in 2013 and consisted of raw sugarcane (US$452 million), refined sugar (US$409 million) and meat (US$605 million), mainly poultry. Iron ore (US$257 million) is also significant while gold also accounted for US$108 million of imports in 2013, up sharply from US$50 million in 2012.
Also, UAE exports to Brazil totalled US$611 million in 2013 out of which US$430 million worth of exports consisted of petroleum oils (not crude), fertilizers (US$49 million) and ships and boats (US$49 million) were also prominent. Trade was around 20% of GDP in 2012.
The study highlights that Brazil has attracted about half of the foreign direct investment in South America during the years 2012 to 2013. The rate of FDIs averaged at USD53 billion over the past five years and was concentrated in the sectors of manufacturing and services which absorbed 86 % of total inflows to Brazil. The total inward FDI is expected to reach USD70 billion by 2018.
Sao Paulo attracted the greatest share of foreign direct investment during the period 2003-2013 with over 800 investment projects, followed by the city of Rio de Janeiro which had more than 200 investment projects.
The report ranks Brazil 45th out of 85 countries assessed for their attractiveness of doing business in comparison to the 23rd rank received by the UAE as it finds its macroeconomic environment, financing foreign trade and exchange control and FDI policy as good, while its tax regime, private-enterprise policy, market opportunities, infrastructure and labour market moderate.
In its key sector review, the study focuses on infrastructure, energy, retail and agriculture and banking. The National Integrated Logistics Plan (PNLI) concessions programme for logistics infrastructure (roads, ports, airports and railways) aims to lift overall spending on infrastructure (including electricity, telecommunications and sanitation) from a total of US$184 billion in 2008-11 to US$257 billion in 2013-16.
Brazil is the world’s 10th largest consumer of energy and will be a top-10 oil exporter by 2025. Investment in energy is expected to be around US$485 billion up to 2021. Over 65% will go into upstream and downstream oil and gas, while 25% will go on electricity generation and transmission. Higher employment and incomes, plus greater credit access, led to a consumption boom up to 2012 as annual retail-sales growth will average 4-5.5% in 2014-18 in real terms.
Focusing on agriculture and banking, the report states that the government thinks the large agribusiness industry could grow by around 4% in 2014, to US$416 billion. They will invest US$60 billion in 2014 through capital investment and credit which doubled 56.5% of GDP in the decade to end-2013, but will now slow owing to tighter monetary conditions and an unwinding of household debt (currently 44% of annual income).