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31 March 20227 minute read

Economic drivers in Latin America: Key industry sectors and the rise of SESG

Overshadowed by the pandemic, Latin America’s GDP growth results closed 2020 at nearly – 8%, while global GDP growth results closed at – 5%. The growth forecast for 2021 is at 4.1%, relying on the vaccination efforts across Latin America countries to combat COVID-19, as well as the many relief packages launched by the world’s biggest economies to help emerging economies.

Looking ahead to 2030, the size of Latin American economies is expected to be at USD9.2 trillion, and these economies are forecast to take a more prominent position in the world from a geopolitical point of view, particularly if they can enact necessary economic reforms.

Much of the Latin American economy has been tethered to the global commodity cycle for many decades, and we must recognize that this will persist if Latin American countries can competitively maintain the same pace – or even overperform – Asia Pacific countries.

We are of the view, however, that business growth in Latin America will be led by digitally driven sectors, which will be the fastest growing segments over the next five years, followed closely by the infrastructure and construction, life sciences and healthcare, and cannabis sectors.

Not surprisingly, US-listed Special-Purpose Acquisition Company (SPACs) packages that were launched this year in relation to Latin America primarily invest in disruptive technologies, including artificial intelligence, IoT, robotics, cloud technologies, mobile communications, and similar technology-based companies. In 2021, the total amount of SPACs for this purpose has already reached nearly USD1 billion (a figure which would have been utterly inconceivable just a year ago).

Potential areas of growth in Latin America

Media, sports and entertainment is an example of a digitally driven industry that will grow exponentially across Latin America in the near term. Unique challenges or advantages for media, sports and entertainment companies arise from the fact, for example, that consumers now tend to devote their entertainment time to video gaming and livestreaming services – virtualized sporting events and livestreaming will not become an artifact of the pandemic only. Also, demand will rise for content that is more social and has more potential to augment – or at least compete with – traditional video content. One ramification of this trend is that studio productions and live entertainment will need to reboot and return to business differently than “doing business as usual.”

Another aspect of business expansion across Latin America may be seen in the global cannabis market, which today is valued at USD150 billion and is forecast to grow rapidly, reaching a value of USD272 billion by 2028. the Brazilian cannabis sector is projected to exceed the global growth rate over the ten years to 2030, being valued at USD45 billion. The same trend also applies to Colombia and Uruguay, which are already among the most prominent countries for Latin American businesses operating in the cannabis sector.

The infrastructure and construction sector is also fertile ground for Latin American countries to strengthen after GDP growth gains over the ten years to 2030 – and here we are not simply referring to basic infrastructure projects (eg sanitation) but to infrastructure projects aiming to strengthen transboundary linkages throughout the region, improving and extending vital services like road and railroad networks and developing clean and renewable energy. To illustrate, the Investment Partnerships Program in Brazil is projecting from a strategic point of view to expand infrastructure projects relating to the transportation chain and growing urbanization in the next two years. This trend has also been supported by the Brazilian Development Bank, which has been repositioningitself with business-oriented strategies aiming to increase the range of institutional investors both nationally and internationally in the long-term financing of infrastructure projects to help foster the Brazilian economy.

It is understood that pandemics are now a constant threat to humanity due to globalization. The life sciences and healthcare industry will play an increasingly important role in the global economy, now alongside technology, based on a philosophy of patient access and (as seen in the current developments around COVID-19 vaccines) readiness to collaborate with business competitors in service of the greater good (eg digital health IPOs and SPAC deals for health innovation already raised USD8.5 billion only in Q1 2021). This trend encompasses a broad range of issues, such as transparency in access to clinical trials, the ethical use of data, and affordability of access.

SESG strategy

Latin American companies need to work through difficult questions about the course of the pandemic, the time and money available to consumers and B2B partners, and the growing array of options competing for their attention. The lifecycle of products, and the challenges to “business as usual” by Sustainability, Environmental, Social, and Governance (SESG) strategies, all while taking into account the use of AI (eg machine learning, deep learning), automation, robotics, and other disruptive technologies will all play an important role in the near future.

Industry-wide SESG strategies are now a major topic of conversation. The number of investment funds and entities taking SESG into account has grown rapidly across Latin America since the beginning of this decade and is expected to continue rising in the years to come. Businesses increasingly incorporate SESG into their missions and operations to ensure business continuity in uncertain times. A mounting body of evidence suggests that investments in companies with strong SESG performance outpace investments into businesses that do not address their material SESG impacts. These companies also tend to have lower capital costs and enjoy an advantage in attracting and retaining top talent.

Regulators around the globe are also turning their focus to SESG (eg the PRI (Principles for Responsible Investment) launched at the New York Stock Exchange in 2005 with 100 signatories, today it has more than 7,000). 

And this trend is no different for Latin America countries, where SESG initiatives have been at the forefront of the regulatory and legislative push toward SESG, especially when it comes to climate change and net-zero emissions – for example, we may point to the global relevance of Brazil’s environmental policies related to the preservation of Amazônia.

Still, using Brazil as an example of focus on SESG initiatives, boards of life sciences and healthcare companies are already aware of the impact of their manufacturing, production and supply chain processes, which includes considerations of global sourcing schemes; how raw materials are sourced; how products are designed, manufactured, packaged, sold, reused or recycled, either under a wholesale or retail regime; how waste and hazardous materials are treated; and how to manage wider environmental and social impacts – putting all this in the context of an evolving regulatory landscape and a growing need to translate SESG authenticity in the industry.

Of course, the myriad of legal issues that SESG faces in the region is wide ranging but the process of incorporating SESG into business practices is still in its early days. We believe much more development is to come, but even today the implementation of SESG strategies shows how the strongest players operating across Latin America are addressing SESG risks and distinguishing themselves from the less agile pack.

Early indications already suggest that several key regulatory and legislative changes, as well as industry-level initiatives on SESG, will emerge even more strongly across the Latin America region in the near future – as soon as the next three years.

Prudent businesses must understand it as fast as they can to be well prepared for these rapidly coming changes – and, definitely, the less agile pack will end up challenged when SESG becomes a sound reality.


This article describes the current thinking at Campos Mello Advogados on these topics and should not be viewed as a legal opinion.

Campos Mello Advogados is a Brazilian law firm which has worked in cooperation with DLA Piper LLP across the globe since 2010.

INFO Authors

  • Fabio P. Campos Mello, Managing Partner
  • Bruna B. Rocha, Senior Associate, CMA Life Sciences & Healthcare’s Sector Group and member of CMA’s ESG Task Force