Germany among the worst performers in trade and investment in Latin America: LADW calls for a change of course

LADW-Chairman Andreas Renschler: “We should increase our commitment and talk to, rather than past, each other.”

“CEO Agenda” study for economic cooperation with Latin America presented by LADW and McKinsey

Mr Renschler re-elected as Chairman of the Latin America Committee of German Business

“German companies have to become much more committed to Latin America if they don‘t want to lose out,” warned Andreas Renschler, Chairman of the Latin America Committee of German Business (LADW), on the occasion of the Latin America-Caribbean Conference held by the Federal Foreign Office in Berlin. On Tuesday, the LADW and McKinsey & Company presented the “CEO Agenda” study on economic cooperation with Latin America.

This survey concludes that Germany , formerly one of the largest investors in Latin America, is now one of the worst performers by OECD comparison. Mr Renschler, Chairman of the LADW since 2015, was re-elected to his post until 2021 at the General Meeting. He is a member of the Group Board of Management of Volkswagen AG and CEO of TRATON GROUP.

According to the “CEO Agenda”, Latin America accounts for less than three percent of German international investment, putting it almost three quarters beneath the OECD average. “Given growing protectionist trade practices worldwide, it is hard to understand why Germany, as an exporting nation, pays Latin America so little attention as an economic partner,” Mr Renschler said, continuing to remark that Chinese and US companies have indeed recognised its importance; China and the USA have pursued a consistent policy of expansion in the region: while German exports to the region have risen by an annual average of just under three percent to 38 billion US dollars over the past decade, US exports increased by almost five percent to 392 billion US dollars and Chinese exports rose by almost ten percent to 130 billion US dollars over the same period.

In the light of this trend, the “CEO Agenda” urges a change of course towards more intensive economic cooperation, productivity being a source of great potential. The contribution made by increased productivity to economic growth in the region has only been 22 percent since 2017 – a quarter of its contribution in Asia and one of the lowest in the world.

“Latin America wishes to and must become more productive. German companies can make a decisive contribution in this field,” said Mr Renschler: due to demographic change and the decline of the working population, Latin America is threatened by a 40 percent decline in annual economic growth by 2030. This could be offset by increased productivity.

“According to our analysis, this is particularly true of the fields of mechanical engineering, agriculture, healthcare, transportation, mining, oil and gas, and energy,” stated Cornelius Baur, Managing Partner (Germany) at McKinsey & Company.

But the success of the German economy in Latin America also requires political commitment on both sides of the Atlantic. “We need a long-term strategy coordinated with the German government, clear and fair competitive conditions, an improved education system in the region, and targeted support for pilot projects in such fields as digitisation, mobility and the Internet of Things,” urged Mr Renschler.

The LADW has been facilitating an exchange between politics and business in Germany and Latin America since 2015, initiating and tailoring approaches to bilateral cooperation in order to effect change and shape the future.

Mr Renschler stressed: “It is important to conduct ongoing dialogue with elected institutions. Those who wants to change something must talk to, rather than past, each other.”

About the CEO Agenda for Economic Cooperation with Latin America

With this agenda, LADW and McKinsey & Company offer decision-makers from politics and business a contemporary and factual basis for discussion and thereby contribute to the generation of sustainable perspectives for German and Latin American cooperation. The CEO Agenda was developed by McKinsey & Company for the LADW and its principle findings are summarised in a publication.