The perception Korea once held of Latin America—of lazy workers and inefficient governments—has drastically changed today. From an entire floor dedicated to South Korean music, cuisine and clothes at a mall in Peru, to the first Korean Cultural Center in Argentina, to the United States Ambassador to Costa Rica singing and dancing to Psy’s Gangnam style, South Korea’s presence and influence in Latin America is growing. The small Asian nation has quietly but successfully flooded Latin American markets.
However, this engagement has not been mutual—Latin American governments have yet to realize that they could lose out if they do not reciprocate.
The question then is not how or when this happened, but rather why many Latin American countries have remained unenthusiastic about South Korea, a country that only 30 years ago was torn by civil war and poverty-stricken. A Korea Economic Institute of America report highlights what could attract Latin America to engage more proactively with the country, including South Korea’s capacity to counterbalance China’s hegemony. South Korea does not want to be the third Asian player in Latin America, after Xi and Abe.
Latin American stock markets plunged on Monday registering the worst numbers since February 2010. The Morgan Stanley Capital International (MSCI) Latin America—an index to measure equity market performance in emerging markets in the region—dropped 5.52 percent partly over concerns of the financial situation in the United States and Europe.
The downgrade from AAA to AA+ announced by Standard & Poor’s on Friday after the close of trading impacted the markets in Brazil, Chile, Colombia, Mexico, and Peru—the countries covered by the MSCI Latin America. Brazil’s Bovespa, the most dynamic market, lost 8.08 percent, the lowest since October 2008, amid international concern as well as domestic uncertainty over inflation and interest rates and a possible slowdown in consumer credit. Companies such as Petrobras (oil) and Vale (iron ore), two Brazilian giants, lost market value for up to 42 billion real ($26.5 billion).
Replying to suggestions that Brazil’s dominance as an emerging market is at stake, President Dilma Rousseff has said the country’s “fundamentals justified confidence in its prospects. Brazil’s foreign exchange reserves today are nearly $350 billion, up 80 percent since the global financial crisis in 2008.”
The Bolsa de Valores de Lima (BVL) dropped 7.09 percent, followed by Chile’s IPSA with 6.92 percent and Mexico’s Bolsa Mexicana de Valores (MBV), which fell 5.88 percent. While Colombia’s Bolsa de Valores (BVC) registered a decrease of 4.11 percent—and the 35 largest companies faced a market value decrease of 19.5 billion pesos ($10.7 million)—Argentina’s Merval suffered the most, plummeting 10.73 percent.
According to Nick Chamie, from RBC Capital Markets in Toronto, “Friday’s downgrade, along with recent weakness in the U.S. economic data and the ongoing European sovereign debt crisis, highlight the external risks currently facing emerging markets.”