South America the New China?

Not all business opportunities are found in Asia. An ever growing number of investors are looking south, betting on growing economies and other opportunities in countries such as Brazil, Chile, and Mexico.

In the insurance sector, Travelers increased its stake in J. Malucelli in 2012, and became the majority interest holder in the property casualty business of the joint venture three years later, in 2015.

Commenting in 2012 on the joint venture with J. Malucelli was Alan Schnitzer, Travelers’ Vice Chairman and head of Financial, Professional & International Insurance.

“The venture continues to be the market leader in the surety insurance business in Brazil, with a market share of approximately 30 percent. In addition, we are making good progress on our early efforts to expand beyond the surety business into the growing property and casualty market.”

The renewable energy market is also expanding into South America. The excellent wind and solar natural resources found in much of the continent makes this a tempting area for expansion. Recently Enel Green Power signed a 25-year contract for electric power with Empresa Nacional de Electricidad in Chile. The deal, which is estimated to be worth as much as $3.5 billion, will support the construction of a solar-power plant, wind farm, and a geothermal facility.

Potential for growth in the more traditional energy sector in Mexico has also been expanding, especially since Mexico’s President Enrique Peña Nieto pushed through a change in his country’s constitution in 2013. The constitutional amendment allowed private and foreign companies to explore for and produce oil and gas there for the first time in 80 years.

As of July 15, 2015, those first international investors finally began their venture into Mexican oil, whose reserves could be, according to the Financial Times, “as big as the proven reserves of Kuwait.” The FT estimates the oil potential in Mexico could be as large as 107.5 billion barrels, saying that “The country is viewed as one of the dwindling number of opportunities to add substantial reserves to portfolios after several years when the oil majors have struggled to make big discoveries.”

In the coming years, as growth opportunities continue to develop south of the border, South America can certainly become the new China.

About James Cannon

James Cannon is an experienced hedge fund analyst. He has served on the advisory boards for various different Fortune 500 companies as well as serving as an adjunct professor of finance. James Cannon has written for a variety of Financial Magazines both on and off line. Contact James at james[at]