Latin America: A continent gears up for growth | Business| Economy and finance news from a German perspective | DW | 26.04.2013
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Latin America: A continent gears up for growth

At the World Economic Forum in Lima, policy makers and entrepreneurs have debated the future of Latin America. They discussed ways of continuing a success story that ought to bring more prosperity to the continent.

Lima's San Isidora business district is full of shiny skyscrapers. Out on the streets, people with dark suits are rushing to their next appointments, the obligatory cup of latte macchiato in their hands. Were it not for the shoeshine boys cleaning your shoes for a song, you'd think you were New York or London. But it's present-day Latin America we're talking about.

Internationally renowned real-estate broker Engel und Völkers has a big office in Lima. On offer are posh apartments - with potential buyers coming from Panama, Colombia, China, or Europe.

Peru's development from a poorhouse to one of the region's fastest-growing nations is one of Latin America's big success stories. "The middle class is growing, the country is safe and a lot is being invested in education, says the managing director of the German-Peruvian Chamber of Trade and Commerce, Jörg Zehnle. He's lived in Lima for eight years. Peru's development is really breath-taking, he claims.

"And we're not just talking about the capital," he adds. "When moving about in Peru, you see building work going on everywhere, and the country's infrastructure is being improved."

Rapid growth

This year alone, the economy is poised to expand by almost 7 percent. Lured by the raw materials boom, investors are pouring in for infrastructure and modern technology projects. Peruvian President Ollanta Humala has been trying to combine the free market economy with social aspects. He's vowed to combat poverty, and relies on unfettered markets, while supporting social projects. Peru now has a ministry for social affairs, and a national task force is busy spotting weaknesses in the social system and suggesting remedies.

"We have to understand that we can only develop further, if our economy continues to grow and if the yields from that growth are distributed in a fair manner," the president said in his opening address to the regional World Economic Forum of Latin America (WEF). "We call that social inclusion."

WEF founder Schwab together with the presidents of Panama, Peru and Mexico Photo: DW/Henrik Böhme.

The Lima forum provided a platform to look for ways to ensure sustainable growth

A social issue

Humala feels honored that Peru has been picked as the venue for that high-profile gathering and views it as a sign of recognition for his work.

"You bring together economic development and social progress," WEF founder Klaus Schwab said in praising the president. "You strengthen society and at the same time Peru is attractive to investors - you really are one of the big reformers in Latin America."

Despite the progress made so far, one third of all Peruvians are still considered poor, particularly those living in rural areas. Gross domestic product (GDP) tripled over the past 10 years, with the inflation rate hovering a little over 2 percent.

WEF spirit of optimism

Peru is only one of many positive examples in Latin America. The whole continent appears to be on a streak, and that was reflected in the debates at the Lima forum. Over 600 company chiefs, government representatives and NGO members discussed the growing importance of the region. While Europe as a whole looks set to just escape recession, the World Bank expects Latin American economies to grow by 4 percent on aggregate. But what do you need to do to make the advances sustainable and prevent a steep decline tomorrow?

"As far as Costa Rica is concerned, we've actively backed the country's integration in the global value chain," the nation's Trade Minister, Anabel Gonzales, told Deutsche Welle. Gonzales is considered a contender for the post of WTO secretary-general. The eloquent minister used the stage in Lima to make her positions clear. She wants her country to move away from a low-wage location to a place with demanding production cycles and highly skilled workers.

Better education required

Mexico's Finance Minister Luis Videgaray (L) and Peru's Finance Minister Luis Miguel Castilla REUTERS/Enrique Castro-Mendivil

The finance ministers of Mexico and Peru were among the high-ranking guests at the WEF

A lot remains to be done. There are about 150 million people between 15 and 29 years of age in Latin America. Every third US investor in the region bemoans the lack of suitable workers. Some companies have been experimenting with a dual path education system modeled on Germany. The German-Peruvian Chamber of Trade and Commerce in Lima recently advised the government about the model, which combines classroom learning with training on the shop floor.

Investors wanted

"It's a good time to come to Latin America, said Mexican President Enrique Pena Nieto, another reformer in Latin America. Mexico has been investing in future-oriented industries and is on the lookout for more investors from Europe.

When the WEF participants leave Lima, they can see with their own eyes what successful cooperation is all about. The Lima airport is run by the German Fraport operator after massive investments on the ground. The modern terminal sports attractive stores and passengers have only short walks to get to their flights. Last year, the Aeropuerto Internacional Jorge Chavez even received the "World Travel Award."

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