The First Emerging Market

A fascinating 16-page special report in The Economist (September 11 issue) takes a look at the two-century-long roller coaster ride mixing of exaggerated optimism mixed with long periods of disappointment. Noting that Latin America was the original “emerging market” long before the term was even invented, by the first centennial celebrations of independence—100 years ago in 1910—Argentina was already one of the ten wealthiest countries in the world and the Mexican government hosted lavish banquets for guest from around the world.

In 1750, per capita income in the United States and Latin America was just about equal. By 1820, the US per capita was double Latin America and is now about five times that of its southern neighbors.

The story goes into some of the reasons for the hemispheric split including that the 18th century struggle for independence in all of the key countries except Brazil was much longer, costlier and bloodier than in the United States. Looking back, politicians and academics have offered other theories for the failure to develop including the difficult geography, weak institutions, and meddling by outside governments and businesses, mostly from the U.S. The Economist predicts those days are in the past and this will be the “Latin American decade.”

From what we’re hearing from the multinational clients we work with, most seem to agree with significant attention and investment flowing to the countries following policies which embrace globalization: Brazil and Mexico and to a lesser extent, Chile, and now Peru and Colombia as well. Certainly with Latin America poised to post an economic growth rate in 2010 surpassing both the U.S. and most of Western Europe, the decade is certainly off to a strong start in fulfilling that prophecy of the “Latin American Decade.”