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Healthcare, agriculture and food, and financial services and fintech are key growth sectors in Latin America that offer potential for strengthening links with the countries of the GCC in the post-pandemic era, according to a new Economist Impact report sponsored by the Dubai Chamber of Commerce and Industry.

As companies around the world, including those in the GCC, seek to diversify their supplier base, Latin American companies are positioning themselves as the go-to alternatives – particularly in sectors that are primed for growth and in which the region has a competitive advantage, according to the report titled Cultivating Ties: Deepening Trade and Investment between Latin America and the GCC.

Following a contraction of 7 per cent in 2020 as Covid-19 wreaked havoc, cut demand and disrupted supply chains globally, Latin American economies recovered in 2021, with GPD growth of 6.5 per cent. Growth of 2.4 per cent is expected in 2022 constrained by continued Covid-19 volatility, high unemployment and poverty, and restrictive monetary and fiscal policies to curb inflation and high public indebtedness.

The executives surveyed described how they had optimised operations during the pandemic by diversifying their own supplier base (42 per cent), negotiating better terms with suppliers (34 per cent) and establishing better communications practices with suppliers and other stakeholders (33 per cent).

Of the 200 executives surveyed, 97 per cent said they expected revenue increases in healthcare in 2022. LatAm’s current participation in the global Covid-19 vaccine value chain is promising, building on Brazil’s extensive experience in producing vaccines and antivirals for diseases. However, better contract enforcement and more predictable economic policies are required to realise the sector’s growth potential and capture external demand, the report says.

In food and agriculture, 97 per cent of those surveyed also said they expected revenue increases this year. Latin America is a global powerhouse in this sector and the world’s largest net exporter of food. Weak infrastructure – including unreliable electricity supplies and transport infrastructure – is identified as the top impediment to future growth.

Already a dynamic region for fintech, the pandemic outbreak caused a further boom as customers were unable to access bricks-and-mortar branches, and 87 per cent of the executives surveyed expect revenue expansion in 2022. Major challenges for the sector are cyberattacks and data breaches, and future growth will rely on improved digital connectivity.

Prior to 2020, bilateral trade between the two regions had been growing with imports from LatAm into the GCC jumping to $17.2 billion in 2019 from $9.6 billion in 2016. Imports were mainly of primary goods such as gold, meat, iron ore, cereals, sugar and coffee. Brazil accounts for the largest share of GCC imports from LatAm (42 per cent) derived from its status as the largest producer and exporter of halal meat to the world. Among the top exports from the GCC are fertilisers, plastic polymers, aluminium, ammonia and oil. However, the total value of exports remained relatively low at about $2.5 billion to $3.5 billion a year between 2016 and 2020.

The report argues that while LatAm may have recovered from the initial shock of the pandemic, its long-term economic success will depend on achieving higher and more diversified exports and increasing inward foreign investment. The report sees continued opportunities for LatAm to export food to the GCC, and the GCC’s wealth a potential source for LatAm firms in need of foreign capital. Indeed, 28 per cent of executives surveyed said they were interested in securing investments from the GCC region compared with the 5 per cent who are currently engaging with the region for investments.

In addition to financing options, ease of doing business and low trade barriers are other reasons cited by executives for the GCC’s appealing.

Finally, the report notes the potential for GCC and LatAm to become knowledge partners. The GCC has an excellent track record of executing large-scale infrastructure projects across the transport, electricity and telecoms sectors and there is scope here for LatAm to learn about best practices regarding project planning and implementation. Conversely, LatAm could offer insights into the development of the GCCs food, pharmaceuticals and fintech sectors.

Facts and figures
Percentage of imports from LatAm of GCC’s total imports in 2020

Percentage of LatAm exports to GCC out of total exports in 2020.

LatAM GDP grown in 2021.

LatAm GDP contraction in 2020

LatAm expected growth in 2022

Number of fintech companies established in LatAm in 2021

$41.5 billion
Market capitalization of Nubank, a Brazil-headquartered neobank.

$4 billion
Investment from GCC to LatAm between 2016 and 2021. Of which, 77% from UAE and 22% from Saudi Arabia.