A Perspective on Globalization: European Crisis to Latin American Investments

Posted on March 09, 2013

Since 2009, the Eurozone has been facing a fast paced and dramatic economic breakdown. As a result of the long economic struggles, several European countries have been badly influenced. Greece has a huge national debt and Spain’s market crashed due to long term loans and bankruptcy of some important companies (both have led to the highest unemployment rates in the last 20 years). Even countries like Portugal and Italy are now deemed as economically unstable. However, among all the well-known theories and reasons tackling the causes and consequences of the Eurozone crisis, it would be interesting to analyze how the outbreak of the current crisis has brought real challenges and opportunities to the worldwide economic situation to take up.

On the other side of the globe – contrary to the situation in Europe – the Latin America region is experiencing a period of expansion and stability. As a brief overview of the current situation in the region, the economies of Latin America and the Caribbean grew by 3.1% last year and the unemployment rate fell to 6.4% in 2012. Despite ongoing social and economic issues in Latin America and the fact that it still is the most economically unequal region in the world, its macroeconomic policies and free trade commerce agreements continue to thrive.

As a consequence of the economic uprising in the global context, Europe is undoubtedly “playing its trump card” in favor of the Latin America market, especially regarding development of investment plans in the private sector. According to the Economic Commission for Latin America and the Caribbean, foreign direct investment reached $173.361 million in 2012, which is around 6.7% higher than in 2011. In this regard, Europe is today considered to be the second most important foreign investor in Latin America, only after the United States.

Although the Eurozone’s future is still unpredictable and the economic crisis seems to be more than a temporary trend, the situation raised many questions regarding worldwide economic integration. Foreign investments used to be perceived as a risk, particularly regarding Latin America emerging and unstable economies, well known for the richness of natural resources but also for difficult political and social conditions. Ironically, the reason for undertaking “financial risk” of investing in Latin America today is the current market crisis.

Potential threat of an economic disintegration has resulted in the necessity for countries to explore new alternatives and new routes for economic recovery, finding a way to, until now overlooked parts of the world. Would this initiative be perceived as a step forward to the real integration of the global economies? And does this scenario put the basis of the genuine globalization process? These questions should be answered in the following years – stay tuned.