Handing business a compass to navigate Latin America's complex political and economic landscape

In the ever-changing landscape of Latin America, doing business comes with its fair share of risks and challenges. Keeping up with fast-paced political, economic and social shifts can be a daunting task for many of the region’s private companies, multilateral entities and nonprofit organizations, and senior leaders require reliable, fact-based information and accurate strategic insights to help them make intelligent decisions.

Alumnus Ricardo Puente ’93, a partner at Jones Day law firm, knows this well. In his current role, Puente advises multinational companies on protecting their investments and navigating the complexities of operating throughout Latin America. According to him, “Having accurate political, economic and social risk data is key to optimal investment decision-making, legal structuring and dispute resolution.”

Recognizing the need for accurate and reliable information, the Adam Smith Center for Economic Freedom at FIU launched a new research initiative this year to independently assess the risks facing the region’s countries. The goal: to equip decision-makers with practical, unbiased data that is essential to all those leading organizations operating in Latin America. The work aims to connect academia with the business community, policymakers and nonprofit organizations by providing cutting-edge, academically rigorous research based on practical information obtained from experts on the ground in each country.

Known as the Country Risk Index and Analysis, the initiative has two components: A country and regional analysis, published every four months, and a comprehensive annual country risk index. The country and regional analysis tracks critical issues systematically and continuously, providing a regular snapshot of the current landscape and highlighting potential risk trends. Meanwhile, the country risk index will provide a more in-depth analysis when it is released each year.

Puente attended the roundtable discussion organized at FIU to discuss the first study’s results and sees this initiative as a unique opportunity to discuss the dynamic and evolving topic of risk and business decision-making in Latin America. “The Adam Smith Center’s efforts to conduct meaningful research and connect academia with government and business leaders in Latin America is highly valuable, providing insights for anyone directing or advising companies doing business in the region,” Puente shared.

During the study’s initial phase from January to April 2024, data were collected through a survey and in-depth interviews with subject matter experts in five countries: Argentina, Brazil, Chile, Colombia and Mexico. The initiative’s first results paint a cautionary picture. Every country studied fell into the “Warning” category for overall risk, signaling that both local and international stakeholders need to pay close attention to the region.

While each Latin American country faces its unique set of challenges, three major issues stand out across the board: The pervasive presence of organized crime, rising crime levels and deepening political polarization. These factors significantly influence the region’s overall risk environment and pose multiple threats to stability and investment.

Notably, despite these concerns, relatively few experts stated they would not recommend investing in their respective countries and were never the majority. All countries reflected a similar 20- to 30-point gap between expert opinions on whether to invest, with those in favor of investment uniformly higher. Despite its current challenges, this indicates an at least cautiously optimistic outlook throughout the region.

The center has begun research for the second Country Risk Index and Analysis. The goal is to expand the research into various other countries around the world. Its findings will not only present the political, economic and social risks for the period studied but also build on the initial country and regional analysis to track the key trends identified. Additionally, the upcoming findings will help reveal risk patterns, determine whether certain issues are becoming more or less significant to the region’s risk profile and uncover any emerging risks that were not present during the initial study.