The Secondary Markets of Latin America Take Center Stage.

Secondary cities are frequently a non-starter for many investors and enterprises unfamiliar with rising Latin American countries. Many corporations prefer to play it safe and stay in the largest and most established markets whether starting a business or investing in a real estate development, infrastructure project, or other asset. However, those who look underneath the surface will notice that secondary markets are abundant with potential profits, but Latin America's largest cities are becoming increasingly overcrowded and pricey. for sale in qatar

Latin America is the world's most urbanized region, with approximately 80% of the population (and growing) residing in cities. In Latin America, about 260 million people live in cities, with another 60 million expected by 2025. The reasons are straightforward: improved public services, health care, connection, and, most significantly, job possibilities. This is unsurprising given the enormous difference between the region's most modern cities and the vast, poor hinterland.

"Because these cities aren't obvious investment destinations, they'll have to work more..."

However, there have been significant changes in the previous two decades in terms of where urban migration occurs. Much of the urban growth in Latin America's main megacities during the 1980s and 1990s was focused on So Paulo, Rio de Janeiro, Mexico City, Bogotá, Buenos Aires, and Caracas. However, as recent reports from the McKinsey Global Institute and the United Nations show, migration to the major cities (particularly those with populations above 5 million) is declining, while movement to secondary cities is speeding up. According to McKinsey, secondary and mid-sized cities will account for almost 40% of regional GDP growth in Latin America by 2025. In the recent few decades, the GDP of So Paulo and Rio has fallen from above the national average to below it. Meanwhile, 45 Mexican mid-sized cities have outperformed Mexico City.

What is the source of this trend? Diseconomies of scale are occurring in the largest cities, according to McKinsey. Their inability to accommodate fast rising populations has resulted in terrible traffic congestion, air pollution, and overworked police forces that are unable to curb crime and violence. 

Overburdening regulatory frameworks hamper innovation and grassroots company growth, playing into the interests of monopolies and other well-connected and established businesses. Megacities in emerging countries are frequently unable to provide adequate meaningful work for their ever-increasing populations as a result of these challenges.

Many issues arise as a result of jurisdictional ambiguity. Megacities' unrestrained growth has engulfed suburban towns, posing bureaucratic challenges in delivering public amenities. With the city expanding into its suburbs, municipalities are frequently unable to determine who is responsible for providing utilities to peripheral shantytowns, who will clean up the river that forms the city's outer boundary, or who will finance the final leg of Transmilenio so that it reaches the airport.

Megacities, to be sure, are doing incredible things to overcome these obstacles. However, because secondary markets are smaller and have more nimble bureaucracies and less saturated consumer markets, they are copying similar concepts and, in many cases, doing so better and quicker. Because these cities are not obvious investment destinations, they must work harder to attract investment; as a result, several have established pro-investment organizations to assist new businesses in negotiating administrative processes, identifying their target market, and employing people. Many colleges in secondary markets are able to be more hands-on and effective in helping to solve actual urban difficulties because there is less interference between the academic, public, and corporate sectors.

Companies looking to establish themselves in emerging markets can profit from lower operational expenses in secondary markets. Utilities are frequently cheaper because providers aren't as overworked as they are in megacities. Traffic is significantly easier to manage, resulting in a decreased time cost for inhabitants. In secondary markets, property can be purchased or leased for 15 to 50 percent less; prime offices in Medelln rent for USD$20 to $25 per square meter per month, while equivalent structures in Bogotá cost USD$40 to 45 per square meter per month.

The following are some examples of Latin American secondary markets that have been proactive in attracting investment and supporting indigenous company clusters:

Tecnologico de Monterrey, a technology cluster in Monterrey, Mexico, has grown into a world-class institution. The campus has spread across the country, connecting universities with more than 80 IT companies. It's one of the reasons Monterrey has the lowest percentage of people living in poverty in Mexico, and why its per capita GDP grew 40 percent faster than the national average between 1999 and 2009.

Guadalajara, Mexico is known as "Mexico's Silicon Valley" due to the influx of IT companies following the adoption of the North American Free Trade Agreement. It is now a Latin American high-tech manufacturing center.

Vacationers who rush to the beaches frequently ignore San José, Costa Rica. Businesses, on the other hand, stand to benefit greatly from the city's extensive Free Trade regime, which provides tax breaks for high-value-added activities such as manufacturing, services, and scientific research. San Jose is home to key operational centres for companies like Intel and HP. It also helps that the beaches are close by.

Thanks to a holistic approach to urban redevelopment that includes new lower-middle income housing, downtown reinvestment, elevators in hilly shantytowns, a network of libraries and parks, and a business incubator cluster adjacent to the University of Antioquia, Medelln, Colombia has earned respect from municipal leaders all over the world.

Cali, Colombia is emerging as a leader in medical education and Pan-American athletic events in Latin America. The Mio, which is based on the Transmilenio in Bogotá, is considered one of Latin America's most efficient public transportation systems.

Bucaramanga, Colombia is a rapidly rising metropolis at the heart of the country's oil and gas industry. It has the most educated population and the lowest unemployment rate in the country.

Due to its tiny population, Quito, Ecuador is frequently overlooked in favor of its larger Andean neighbors, Lima and Bogotá. Ecuador's burgeoning capital, on the other hand, has a growing middle class, strong security, beautiful parks, and world-class mountaineering and climbing within easy reach.

Valparaiso/Via del Mar, Chile is a metropolitan region that consists of two of Chile's most prominent cities and is noted for providing a great quality of life. It is located 70 kilometers west of Santiago on the Pacific Ocean. Its thriving economy is built on a thriving port and logistics sector.

Curitiba, Brazil, is noted for its forward-thinking urban planning and the world's first Bus Rapid Transit system, which is currently being imitated across the globe. Public transportation accounts for around 54% of all journeys (about 2.4 million passengers a day).

Florianopolis, Brazil is one of the country's burgeoning IT clusters, and it frequently rates as one of Latin America's greatest places to live. It is recognized as Brazil's Silicon Valley and is a popular vacation location.

Of course, not everything in Latin America's secondary markets is as pleasant as it appears. Because these locations aren't as well-established, there is considerable risk, and corporations will need to conduct more due diligence. Finding local suppliers, as well as an office or storefront to operate in, may be more difficult due to a limited supply and availability of space. However, decision-makers should keep in mind that the more established markets formerly posed a comparable danger, and those who got in early were able to profit from the opportunity.