Is South America The New Europe For The Expat Community?

As the financial and economic situation in Europe continues to turn downwards many people are now looking to other areas of the world where perhaps the economic impact of the worldwide recession has not been as severe. One such area seems to be South America with some people even suggesting that South America may be the new Europe for the expat community.

History

Historically Europe has always been the "less risky" investment arena and has attracted billions upon billions of dollars from investors around the world. However, over the last couple of years we have seen an ongoing demise of the euro and the Eurozone and there are still major concerns as to whether Eurozone members have done enough to save the currency.

On the other hand, the situation in South America is very different with many countries having gone through political turmoil and economic turmoil 10 years ago and now apparently ready for significant growth in the short, medium and longer term. However, on balance, and looking at the history of the two regions, there is still a significant risk attached to South America even if some people would have you believe otherwise. Then again, at this moment in time you could argue that Europe is the more risky investment market?

Inflation

Inflation has been a problem around the world for many years now and indeed many countries in South America have regularly reported double-digit inflation which has decimated economies. However, over the last few years we have seen inflation in areas such as Brazil coming more under control and becoming "more acceptable" which has obviously attracted the attention of investors.

On the flip side of the coin, inflation in Europe continues to squeeze higher and with limited or no economic growth expected in the short term the actual real spending power of consumers and businesses is on the wane. Unless governments within Europe are able to rein in the rate of inflation there may well be significant problems ahead.

Economic growth

Economic growth in Europe has effectively come to a standstill and indeed many experts believe we will move towards a double dip recession in 2012. The situation in South America is very different with the vast majority of countries in the region having reported recent economic growth. While figures for 2012 have been downgraded recently they are still significantly higher than those for their European counterparts. It will be interesting to see whether investors do move significant amounts of money from Europe to South America in the short to medium term.

Interest rates

The interest rate situation across Europe is dire with many governments already having reduced rates to minimal levels to try and release liquidity for investment into their economies. Again, the situation in South America is very different with interest rates significantly higher thereby giving local governments more ammunition to combat any potential economic slowdown if, as expected, the worldwide economy comes under more pressure.

Conclusion

Those who have regularly assumed that Europe is stronger and safer than any other area of the world will have had their confidence shaken to their boots over the last few years. Whether or not South America is the answer with regards to the expat market and investors remains to be seen but there is no doubt that progress has been made while many European countries are going backwards.