KPMG Nearshoring survey: Which Latin American countries are more attractive for investment?

45% of respondents think the opportunity for M&A in the region has never been greater. But they are not blind to the risks, with 35% saying it has never?been?riskier. In recent years, large multinational companies have chosen to relocate their manufacturing centers to locations closer to their product's target markets, known as "nearshoring."

#Mexico leads #Brazil as the most attractive country for M&A in Latin America, with 79% of respondents rating it as an attractive place to do business, compared with Brazil's 69%. #CostaRica ranks third with 54%. This is significant because Brazil has traditionally led as the most attractive nation for M&A.

Respondents expect technology to see the most M&A activity in the next two years, followed by financial services, energy, agriculture then?manufacturing.

With the arrival of the pandemic, this trend became a great opportunity to attract investments to Latin American countries. According to an analysis by the Inter-American Development Bank (IDB), Costa Rica has the potential to increase its exports to the United States by an additional $1.5 billion each year thanks to this trend.

For this reason, in the 50th delivery of the #Dataserie, we focused on the most attractive countries for investment in the Latin American region, based on a survey conducted by the global firm KPMG called "In an uncertain world, Latam M&A is on the rise” published in June of this year.

To calculate the investment attractiveness, the firm surveyed over 400 business leaders who have been involved in $50 million investments in the past five years or have provided advice on these activities during the same period in 14 different countries.

The survey was conducted between March and April 2023, and the number of investors who indicated a country was "simply attractive" and those who indicated a country was "very attractive" were considered separately. In the Dataserie, KPMG shows both percentages separately and also combine them, just as the research firm does.

According to the information published by KPMG, Mexico ranks first in the region, with a total of 79%: where 46% consider it attractive and 33% consider it very attractive. In second place, Brazil, with 40% attractiveness and 29% very attractiveness, totaling 69%. Costa Rica occupies the third place, with a total of 54%. 37% of the respondents consider this country a good place for companies to invest, while 17% consider it very attractive. ?

The opportunities for M&A in Latin America are plentiful, and successful execution of these transactions relies heavily on having deep expertise of local cultures, customs and regulations that can otherwise take investors by surprise," says Jean-Pierre Trouillot, partner and Latin America Deal Advisory & Strategy leader at KPMG U.S. "A lack of this knowledge can certainly present some risks. But with the right due diligence and good governance, the rewards can be?significant."

The report suggests that Costa Rica is attractive to investors due to its leadership in environmental issues, in addition to the legal security it offers. In fact, the study highlights Costa Rica's position as a "surprise" since it surpasses countries with more advanced economies such as Chile (53%), Colombia (51%), and Peru (47%). ?

Costa Rica is ranked below Chile and ties with Colombia in the "very attractive" category. If only this information were considered, Costa Rica would tie for fourth place with Colombia. ?

In Central America, the countries closest to Costa Rica are Panama and Honduras, in the ninth and tenth place overall, respectively, with 43% and 41%. This puts them behind Argentina, a country experiencing high levels of economic uncertainty. ?

Nicaragua ranks last in Central America, with 33% of surveyed investors. However, this country surpasses Bolivia by three percentage points, as the latter stands at 30%. Venezuela occupies the last place on the list, which has been experiencing a political and economic crisis for several years. ?

Only 26% of respondents consider that country attractive for positioning their investments, and 9% consider it "very attractive." In total, 36% of companies and investors claimed to be attracted to the growth in specific sectors in Latin America. ?

Source - journalist Alejandro Duran, La Nación de Costa Rica. (6/19/2023)

KPMG: https://kpmg.com/xx/en/home/insights/2023/06/kpmg-2023-m-and-a-in-latam-survey.html