South America has perhaps seen the worst of times already. Both Chile and Uruguay have become First World Nations. Ecuador and Colombia are not far behind, the latter having left behind as a receding memory its severe social problems from decades past. Paraguay has sustained an expansion exceeding 7% calculated annual growth rate for over 40 years. Peru is forecast to grow nearly as fast as has Paraguay. Bolivia has nowhere to go but up. Argentina, historically dependable to have a crisis once every decade or so, has perhaps finally turned the corner with its election of a business-friendly leader. In like manner, even hyper-inflating Venezuela should be viewed as nearing an absolute bottom. It appears that Brazil is also on the cusp of important political changes that can certainly bring better times.
Thus, it appears that wealthy investors in the northern hemisphere would be wise to view South American investments as opportunities not only for growth but also as means of geographically diversifying their holdings. While it is simple enough to put money into Latin America mutual funds with shares that trade in New York or London or Singapore, such investments do not carry the benefits of geographical diversification that the most astute investors presently seek. Should one’s home government overstep its authority, and encroach upon an investor’s economic freedom, shares in such mutual funds can easily be frozen. By contrast, direct investment into South America’s growing enterprises offers the opportunity to physically separate a portion of one’s assets away from the home governments that might encroach upon one’s economic freedoms. Simultaneouly, such investments are often off the radar of even the local central banks within South America.
Ironically, investors in the northern hemisphere have historically regarded South American investments as risky, subject to a plethora of troublesome threats. Times, however, do change. It now appears that the threats are in the northern hemisphere: shares of Chinese stocks being frozen, Japanese bank accounts being confiscated, bonds being taken from travelers on European trains, U.S. citizens being subject to FATCA regulations that essentially prevent geographical diversification, etc. Moving forward, many investors in the northern hemisphere will come to realize that it is their half of the globe that is socio-politically unstable, and that they should therefore have significant assets below the equator.