Risk management in Latin America: pluralistic approaches applied to Brazil, Mexico, and Chile

Abstract: The paper analyzes controversies about Latin America situations. Those coun- tries have political successes on international markets but their economy is still suffering about an over specialisation in raw material, a lack of competitiveness in industrial sectors, and sharp income inequalities which involves non inclusive development. In the first part, the monetary risk will be studied in analysing the particular role of the real exchange rate for these countries specialised in raw materials. In the second part, the trade risks will be analysed for three countries in Latin America: Brazil, Mexico, and Chile. The analysis com- putes the consequences of industrial policies in Latin America on the values of the income elasticity and price elasticity within their international trade. In the third, the financial risks will be studied through the free movement of capital assets settled since 1990 around the world. The question will be the efficiency of FDI inflows in Latin America in order to modernize industrial sectors, and decrease the original sin situations which involve default crises in Latin America.

Keywords : Foreign Direct Investment (FDI), income elasticity, Latin America, original sin theory, price elasticity, real exchange rate.

Jel Classification : F14, F32, F34.

DOI: https://doi.org/10.18559/RIELF.2019.2.1