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Latin American studies programs still teach their students about the anti-"Gringo" policies of Latin American governments, particularly in the realm of direct foreign investment. While avoiding the temptation to ridicule outdated academic thought, the fact remains that Latin American governments have taken an about face on the issue of foreign direct investment over the last decade. 

One can pontificate on the swinging pendulum of ideology that has swept the region to the "right", but those who live and work in Latin America understand that the catalyst of change was always money, or rather, a lack thereof. 

The major economies of the region, Brazil, Argentina, and Mexico, are stable and growing, but also saturated with business supplier competition -- most companies are chasing the same 500-1000 large clients in each country. As most sectors continue to consolidate, the list of large clients will shrink even further. Future growth must therefore come from small and mid-sized enterprises (SMEs), that oft-ignored segment of the B2B market.

SMEs can be roughly divided into three sub-categories: micro, small and medium. Mexico's statistical department, INEGI, uses Table 1 to size Mexican firms.

With few exceptions, Latin American governments and their trading partners are locked in a collective state of denial over a dirty secret. A complex array of illegal trade arrangements, untaxed transactions, and patent violating industries combine to form a substantial black market. This underground activity represents anywhere from 15% to 50% of GDP, depending on the country involved.

Private industry is frustrated by the apparent paralysis of many Latin American governments in cracking down on black markets. Local manufacturers are not protected against competition from foreign products that escape import tariffs and value-added taxes. The VAT alone reaches as high as 20% in some markets. Local retailers, paying top dollar for premium real estate, find themselves losing business to street vendors whose only fixed costs are relatively minor payoffs to corrupt government officials.

Little press attention has been given to the 1999 floating of the Brazilian, Chilean and Colombian currencies. Add these to Mexico’s Peso, which floated in 1995 and the result is that 69% of the region’s economy is measured by floating currencies. If we also consider that Argentina’s currency is pegged to the US dollar, Panama’s is dollarized and Ecuador has announced its desire to dollarized, then a total of 87% of the region’s currencies (based on GDP weighting) are either at the mercy of the market or that of an autonomous currency board. More important, the governments of these countries, at least in theory, no longer can manipulate the value of their currencies. Thus, today’s political incumbents have been stripped of a powerful weapon, traditionally used to delay necessary devaluations or artificially boost purchasing power in advance of elections.