Bitcoin has been the subject of much controversy. The US and China have had different reactions. But, there are potentially more exciting options for this currency. The Wall Street Journal wrote a week-old article about the evident divide in Latin America. The Pacific countries with more direct access to the Atlantic have more command-oriented economies, while those with more Pacific exposure, aside from Nicaragua and Ecuador, have more market-oriented countries.
Latin America is now a continent with global attention due to stifled European growth. The Asia-Pacific region has also been welcome into the global economic discussion. Latin America will see alternative currencies. Each side will experience a different impact. Bitcoin is likely to be combined with Latin American growth. In the end, as well as cryptocurrencies (including Bitcoin), Latin American entrepreneurs will have the opportunity to compete with global businesses.
These countries have economies that are more tied to national interests. Cuba is the country with the most extreme economy run by a state, and it has a Communist government that has made some concessions towards economic liberalization. Venezuela, which is in the middle of a socioeconomic und political crisis, is arguably the second-most extreme state run economy.
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Argentina has been subject to a lot of instability and command-oriented financial events. President Cristina Fernandez de Kirchner is responsible for price controls, drama surrounding possession of Falkland Island, inflation at 26%, police strikes and the nationalization YPF. Brazil is not one to be trusted. There are still many red tapes and taxes that are higher than those of its peer countries.
Notable Market-Oriented Countries in Latin America
Mexico’s efforts to grow and attract business are not only limited to Mexico City. Guadalajara has also been highlighted as a potential growth destination in the tech and digital space, just like Bogota, Colombia’s established economic capital, and Medellin, which is home to a younger, more digitally-focused force. Mexico is currently the 14th-largest economy. It is also growing. Mexico continues to be plagued by drug cartels, as there is still demand for drugs at the northern border. Ciudad Juarez suffers from cartel-induced violence.
FARC still exists in Colombia. However, Colombia is clearly winning the fight after President Uribe has left office. FARC is now more restricted to Colombia’s jungle regions. FARC is currently involved in active peace talks. Colombia’s economy is still growing in all areas, including agriculture, energy, finance and tourism.
Belize is actively seeking Americans to buy real estate in the country, promoting their beautiful beaches, tax policies, English fluency, and attractive taxes. Belize has a lot of work ahead of it and needs to overcome the stigmas.
The Heritage Foundation rates Chile as the #1 Latin American country for economic freedom. Chile has a trade surplus and a central banks policy rate at 4.5%. This makes Chile attractive for foreign investors. The Chilean Peso could be traded to gain access to carry trade, which allows you to trade against countries/economic zone with very low interest rates (e.g. the United States, European Union, Japan). Chile has low inflation and policies that are beneficial not only to copper exports but also to other exports in order maintain the surplus. Morgan Stanley anticipates Chile, Peru, Colombia, Mexico and Mexico to increase on average 4.25% between 2014 and 2015.
These countries are not facing looting or fighting over toilet paper.
Bitcoin’s Impact On State-Oriented Economies
All of these state-oriented economic systems have currency controls. Argentina and Venezuela are notorious for their price controls. Brazil’s government influence in the economic system is due to its excess influence, possible corruption and inflationary worries. Entrepreneurs, investors, ordinary people, and others will be looking for solutions in the marketplace. These state-oriented economy are known for rationing and red tape as well high costs and possible surveillance. Bitcoin and cryptocurrencies can meet the needs for many who have internet access.
However, competing globally in countries with more restrictive borders has its negative consequences. The internet and the ability of transacting in an untraceable way in a global marketplace will provide citizens with competitive pricing to ensure they receive the goods or services they need. Venezuelans won’t have to use debased currency to purchase toilet paper. They can buy toilet papers from other countries. Venezuelans will have the chance to be entrepreneurs while still in Venezuela, to help finance their ventures and possibly escape to Colombia. Venezuelans use the internet more than 26% per day. Venezuela has not yet blocked the internet. Bitcoin purchases are far safer than Bolivar.
Bitcoin usage can help to end the government’s tight grip on economy. The private currency renders the government ineffective. With cryptocurrency usage becoming viral, there will be less tax revenue to collect and a population that is more financially secure than ever (you could buy anything on Silk Road), as also decreased influence and enforcement from politicians and enforcers. This can be applied to Venezuelalite in Argentina which is an economic with lots of potential.
Brazilian companies could see increased exposure abroad and overcome the unusual sovereign currency issue. This could help to boost the economy. The World Cup in 2014, and the Olympics in 2016, will increase pressure on Brazil’s economy to grow. Brazilian firms looking to do international business will find it easier to do business with foreign customers due to lower transaction costs, currency proficiency, and nationality. Due to the large influx in tourists and businessmen to Rio de Janeiro, and Sao Paulo with Bitcoin and other cryptocurrencies, there will be no need to convert currencies or engage in secure transactions. Brazil may not be as command-oriented and self-reliant as Argentina, but their global ambitions and aspirations will push them to abandon past tendencies.
Bitcoin and its competition offer greater freedom, privacy, monetary safety, entrepreneurship opportunities, transactional security, and anonymity for the state-oriented economy. It could lead to a shift in Venezuelan governance, just like how social media was responsible for the Arab Spring’s birth. Many of the problems facing Venezuela are economic in nature, and the black market offers an obvious solution. It is safer to keep assets in a digital wallet on the cloud than in a bank licensed by Venezuelan authorities.
The role of Bitcoin for Economic Growth in the Pacific Countries
Entrepreneurship, as mentioned in the previous section, is on a lower scale than what might be found in Colombia and Mexico, Chile, Peru, or Chile. Colombia and Mexico both boast cities that aim to be global digital players. Lower transaction and exchange fees will make it easier for European, Canadian, and American businesses to come to the United States. PayPal and Credit Cards have transaction fees that are levied on international transactions.
Latin American outsourcing can grow because call centers, design firms and independent contractors will be able bid competitively as they currently do. They will also be able, with Bitcoin and other cryptocurrencies, to accept Bitcoin. This will increase business. It’s not a fad. It’s about making transactions simpler and less expensive. There will be less barriers to purchasing the product, and this will allow Latin American businesses to be more global. Venture Capital growth can be made possible by lowering the barriers.
Bitcoin will increase international trade and help to boost economic growth. These countries reap different benefits as stability is not a priority. However, these countries have an insatiable desire for growth. The benefits of adopting cryptocurrency in these nations include entrepreneurship, global competition, reduced transaction fees, transactional safety, competitive bidding, economic development and changing perceptions. A Medellin-based startup can compete with a Toronto firm and an Indianapolis firm for a contract. The major benefit is to eliminate any barriers to nationality and allow you to focus only on the services offered and the associated costs.
Consumers also benefit from these countries because they have greater purchasing power as some items are less expensive in their country than in the foreign market. Emigrants and expatriates can send money quickly, easily, and securely to their relatives back home. This can help local economies.
Bitcoin and other crypto currencies help make the world smaller. This is similar to the way that air travel and the internet, telecommunications, social media, and telecommuting have made the world smaller. Bitcoin and other cryptocurrencies encourage globalization. Latin America is eager for that chance and will use it to expand its market share.