There are over 8,000 miles separating Dubai and Latin America but distance has proven to be no obstacle when it comes to forging close links between the emirate and its far flung South American friends.
Latin America has quickly become a market of strategic importance to Dubai and a corner of the globe which Dubai Chamber of Commerce and Industry continues to explore as it steps up its efforts to strengthen ties with key public and private sector stakeholders across the fast-growing region.
Hamad Buamim, President and CEO of Dubai Chamber of Commerce and Industry, says: “Latin America is an economic powerhouse, which offers a great deal of trade and investment potential for companies in Dubai. As it stands, Dubai’s trade relations with the region have been growing steadily in recent years, with the number of Latin American companies registered with the Dubai Chamber more than doubling.”
Proof, if any were needed, of the burgeoning bilateral relations comes in the fact that the organisation opened its first regional office in Brazil in 2017 and plans are in place to open two more offices in Panama and Argentina in 2018.
Buamim, says: “The opening of a regional office in Brazil has proven quite effective in helping us develop strong relationships with key stakeholders in Latin America, build new bridges between our business communities, and attract foreign companies to Dubai.”
“Our Latin America strategy supports our efforts to promote Dubai as a global business hub, and by doing so, we hope to attract more Latin American companies to set up in Dubai. At the same time, the strategy falls in line with the objectives of the Dubai Plan 2021 and the emirate’s diversification plans,” Buamim adds.
It was no coincidence that the first regional office was opened in Brazil, which is Dubai’s biggest trade partner in Latin America. In the first nine months of 2017, non-oil trade between the two sides reached AED5.3bn ($1.44bn). Brazil is also one of the world’s largest exporters of halal meat – with further potential to export more halal products to the UAE and surrounding markets.
Mexico is Dubai’s second largest trade partner in the region, with AED2.6bn ($700m) in bilateral non-oil trade during the same period. Buamim says: “Brazil, Mexico and Peru already enjoy strong economic ties with Dubai, while other countries such as Argentina, Colombia, Panama, Costa Rica and Paraguay have been identified as target markets where we aim to expand the scope of bilateral trade and investment in the future.”
Latin American countries are very resource rich and many of them like Brazil, Argentina and Paraguay are leading agricultural exporters. Dubai offers the right level of expertise and investment to fill market gaps in Latin America, and fuel regional economic growth. Dubai companies can offer strong expertise in logistics, infrastructure, tourism and hospitality to Latin American businesses.
A further area of importance is financial technology (fintech) which, according to a new report commissioned by the Chamber, will play a key role in boosting productivity in Latin America and the Caribbean (LAC), thus attracting investment to the region.
The report highlights that investment in automation and infrastructure will be needed to boost current productivity levels across the region, particularly within the services sectors, and improve overall competitiveness.
Buamim says that financial technology, in particular, stands out as one of the most disruptive and effective emerging technologies, considering the diverse range of services it can support, as well as its key role in developing the regional economy.
“Innovative technologies such as fintech offer a great deal of growth potential for Latin American countries, while they can position the region as an attractive investment hub,” he says.
Fintech is expected to gain more market share within the financial services sector. Banking concentration in large markets such as Brazil remains very high, the report says, noting that not much has been done to improve services and offer lower rates to consumers.
The report also describes environmental conditions in Latin America and the Caribbean as “conducive to renewable energy production, specifically solar and wind power,” noting that financing for such projects remains an obstacle.
Nevertheless, investments in Latin America’s clean power market jumped 65 per cent to $17.2bn last year, much higher than the global average of three percent, according to Bloomberg New Energy Finance. That compares to a 26 percent decline in Europe and less than one percent growth in the US.
Costa Rica is leading the way as the greenest country in the region after becoming the first Latin American country to run entirely on renewable energy for more than 250 days. Many parts of Mexico, Brazil and Chile have strong irradiation levels for solar power generation, while Argentina and Brazil have wind resources that achieve higher-than-average capacity factors for wind power generation.
Further proof of Latin America’s commitment to tackling climate change is found in Brazil, where $7.1bn was invested in renewables in 2015, demonstrating its high potential to transit to a low-carbon economy. While Chile is proudly leading solar energy with the implementation of the biggest photovoltaics plant (El Romero) in the region that has the capacity to produce energy for 240,000 Chilean homes – non-conventional renewable energy sources, which now account for 17 percent of Chile’s energy grid and are expected to reach 70 percent by 2050.
Buamim explains: “Reforms taking place in the region have the potential to drive private investment in the regional energy sector, revealing a strong consensus in the market that 2018 will be a better year than 2017 for LAC countries.”
New business opportunities are emerging in the wake of Latin America’s economic rebound and Dubai’s role in supporting the region’s ambitions. The strongest economic recovery is expected in Argentina thanks to various reform efforts and a healthy global backdrop, and Brazil is expected to benefit from lower interest rates and a recovering labour market. This is whetting the appetite of foreign investors and companies who are watching the respective economies accelerate at a great pace.
Latin Focus Consensus analysts see regional GDP growing 2.4 percent in 2018. While, in 2019, growth is seen rising modestly to 2.7 percent.
There are certainly plenty of reasons for optimism. However, possible barriers to a lucrative future for Latin American countries include key political elections in three key markets this year – Mexico, Brazil and Colombia – and public dissatisfaction with mainstream political parties contributing to market uncertainty.
On the other hand, trade relations between Latin America and the UAE continue to strengthen, supported by high-level visits of government and business leaders from both sides. In 2017 alone, the Chamber organised and led trade missions to Brazil, Paraguay, Argentina, Colombia, Costa Rica and Panama, that were joined by UAE businessmen.
Bilateral trade between the UAE and Mexico has increased an astounding 473 percent over the last ten years, from $90m in 2006 to $519m in 2016. According to Mexico’s Ministry of Economy, the UAE is Mexico’s principal trading partner in the Arab world, and the UAE’s second most significant trading partner in Latin America, behind only Brazil.
And last year, Paraguay and Costa Rica announced plans to open commercial representative offices in the UAE, which will aim to boost trade and investment flows, as the emirate is increasingly viewed as a global gateway providing easy access to markets across the GCC, Africa and Asia.
“These are all encouraging signs that highlight the strong interest and commitment from both sides to expand economic cooperation,” says Buamim, while stressing that Argentina and Paraguay can “greatly benefit” by cooperating with the UAE on food security. Panama shares many synergies with Dubai as a leading logistics and trade hub, and Costa Rica’s tourism sector offers attractive investment opportunities.
There is an argument to suggest that relations between Latin America and Dubai have never been better, with the expansion of direct flights connecting the two regions being one of most important factors that will build bridges and foster economic cooperation in the future.
Earlier this month, Emirates announced plans to launch a new, five times a week service from Dubai to Santiago International Airport (SCL), via the Brazilian city of Sao Paulo, starting in July. The new service will see Emirates fly an additional five times a week to Sao Paulo, complementing the airline’s existing daily A380 flight. Emirates will now fly 12 times a week to Sao Paulo.
And Buamim is confident that Dubai’s moves into Latin America, with its vast resources and more than half a billion people, will cusher in a new area of cooperation that will bring about mutual benefits and economic growth in the future.
When: February 27-28
Where: Atlantis The Palm, The Palm Jumeirah
What’s on the agenda at the Global Business Forum on Latin America
Bearing the theme “Connect – Collaborate – Grow”, the second edition of the Global Business Forum on Latin America will take place on February 27-28, 2018.
Organised by Dubai Chamber, the event will provide a unique opportunity to listen to global thought leaders engage in inspirational, thought-provoking and future-focused dialogues that shape the future of governments and business, while showcasing Dubai’s potential as a global gateway for Latin American companies.
Several high-level attendees will be participating in this year’s forum, including Juan Carlos Varela Rodríguez, President of Panama; Vicente Fox, President of Centro Fox and Former President of Mexico; and Cesar Gaviria, and former President of Colombia, along with several ministers, officials, entrepreneurs and experts from Latin America, the GCC and beyond.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.