1.0 Introduction
Research and thought process for this book were developed between 2015 and the first quarter of 2017. At the time of writing, the global economy remains in transition since the Global Financial Crisis (GFC) of 2008, and political changes are happening in key countries that can have a direct influence on South America. Indeed, there are certain aspects of the global economy that have always influenced the economies of the countries under study here, namely the state of the US economy and the commodities market. Additionally, the increased integration of China to the global scene is a relatively new added factor as the slowdown in manufacturing in China means a reduction in the demand for the regionās raw materials. Furthermore, many South American governments are building large debts to the Asian giant (Table 1.1), which adds to the regionās vulnerability to the latterās current slower but more sustainable pace of growth.
High levels of debt do not bode well with this new reality of slow growth, particularly since many South American countries enjoyed the windfalls of the regional boom of 2009ā2011. The good years were spent in building and implementing large social programmes funded by the states (Murray and Clapham, 2015), but little was set aside to create a buffer for the bad years. The new wave of more liberal governments are therefore trapped in unsustainable programmes which are very unpopular to dismantle and very difficult to approve through the respective congresses. As this chapter will demonstrate, the regional economic hierarchy of countries is also undergoing a reshuffle in alignment with political changes briefly described earlier in the introduction, and the winners are those whose policymakers are most quick to respond to the new worldās reality of slow growth and low commodity demand.
In South America as in the rest of the world, the state of the economy and key market fundamentals have a significant impact on real estate. However, the peaks and troughs of an economic cycle can be balanced out over the lifetime of a long-term investment such as property, while other short-term investments such as equities can carry greater volatility in South America than in more stable developed economies.
Looking at key social and economic indicators, this chapter provides the basis of the present volume and defines the economic and real estate market framework that will be used to explain the particularities of South America. The framework presented will enable the reader to understand real estate market analysis as a whole and its application to each country under study. In order to build this analytical framework, internal and external indicators affecting the property market have been used and explained. Thus, the indicators will include a combination of macro and microeconomic factors as well as fundamental real estate market variables. Using the latest data from reliable open source databanks (World Bank, United Nations, IMF, etc.), Section 1.1 starts by presenting the comparative statistics in relation to demographics, population growth and migration for each country, placing them in context with two advanced economies: UK and the US.
Table 1.1 South Americaās debt to China
| Country | Amount |
|
| Venezuela | USD 62.2 billion |
| Brazil | USD 36.8 billion |
| Argentina | USD 15.3 billion |
| Bolivia | USD 3.5 billion |
| Peru | USD 50 million |
The next section (1.2) presents the economic drivers of the region including: GDP, unemployment data, and urban growth. This will help to complete the wider picture of the level of development and urbanisation of countries. After a selection of the most important economies, the following section (1.3) brings crucial market data such as interest rates, inflation, wages, consumer spending as well as general supply and demand statistics. Section 1.4 looks at the planning system and legal framework while the final section (1.5) brings the conclusion and evaluates and divides the countries according to the importance of their real estate markets in a global context (mature South American markets) and according to their possibilities (emerging South American markets).
