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Discussing taxes in relation to a Limited Liability Company (LLC) in the United States involves understanding the different structures and tax obligations surrounding such entities.
In this post we explore the consequences of Russia's invasion of Ukraine on Latin American economies: inflation, supply crisis, protectionism, etc. An opportunity for investors wishing to do business in the USA, let's take a look.
The war between Russia and Ukraine has caused various impacts on economies around the world. According to the International Monetary Fund's (IMF) latest World Economic Outlook report, global growth is projected to slow from an estimated 6.1% in 2021 to 3.6% in 2022 and 2023. This is, the report says, 0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January.
Likewise, war-induced commodity price increases and widening price pressures on world stock markets, the report says, have resulted in inflation projections for 2022 of 8.7% in emerging market and developing economies: 2.8 percentage points above what was projected in January of this year.
The consequences of the war, explains the IMF, can be seen on three fronts. First, high prices for commodities such as food and energy will push inflation even higher.
Second, economies will have to cope with the trade crisis that is already affecting supply chains and remittances. As well as a historic increase in refugees, which, by May 25, 2022, already numbered 6.5 million Ukrainians who have fled their nation following Russia's invasion.
Thirdly, there is concern about the confidence of companies in emerging economies and the uncertainty of investors who have their assets in economies such as Latin America. This, says the report, is tightening financial conditions, possibly leading to capital outflows.
If we analyze the industrial sectors most affected, we will see that Russia and Ukraine have been important producers of raw materials. "While famine directly threatens Ukraine, the consequences of this war will spread around the world. Russia and Ukraine together export about 30% of the world's wheat," said World Food Program (WFP) Executive Director David Beasley.
On the latter, wheat prices have reached historic highs. According to the Food and Agriculture Organization of the United Nations, international wheat prices rose for the fourth consecutive month, with an increase of 5.6% in May, to an average of 56.2% above last year's value and just 11% below the record reached in March 2008.
Another consequence has been the escalation of world oil and natural gas prices. According to the Statista portal, the United States was the world's leading oil producer in 2020, with a production of approximately 16.5 million barrels per day. Russia and Saudi Arabia ranked second and third, respectively, both with more than nine million barrels per day.
This means that Russia produces 10% of the planet's oil. That is why any geopolitical movement affects the global crude oil market. On some occasions, it must be said, for the better, as some Latin American countries have benefited: according to information from DANE and DIAN, in April 2022, crude oil exports in Colombia were US $5,421.6 million, presenting an increase of 82.2% in relation to April 2021; this result was mainly due to the growth of 165.6% in external sales of the fuel group.
Another side of the coin is, for example, the phenomenon that the World Food Program is enduring, since according to a report, recently published by this entity, it warns that the costs of its global operations seem to increase by US $29 million per month. This, the organization explains, could mean a disaster for millions, since 2022, the organization had warned, would be a year of catastrophic hunger, with 44 million people in 38 countries on the brink of famine, among other things, because Ukraine had become, in the last ten years, a supplier of foodstuffs such as sunflower oil and wheat.
What was happening economically before February 24 when the conflict in Ukraine escalated? What are the economic predictions for the region? According to an IMF report, Latin American countries had experienced an economic rebound in 2021, a result of the economic opening and return to normalcy after the contentions that the world experienced with Covid - 19, however, according to this same report, for 2022 and 2023, the projections are not very encouraging.
Below is the table of GDP growth projections for the region:
Bill Maloney, the World Bank's chief economist for Latin America and the Caribbean, stated that "inflation is a disease that must be cured quickly and measures must be taken before it results in a deeper disease".
Does this crisis present an opportunity for business expansion to the U.S.? One of the best indicators to answer that question is the Gross Domestic Product. According to the Statista portal, in 2020, the U.S. GDP reached approximately $20.9 trillion, almost $500 billion lower than the previous year's GDP. A crisis that was overcome in 2021, and until 2026, the portal predicts, there will be a GDP growth to reach almost 30,000 trillion dollars.
One of the best opportunities to invest in the United States is real estate, the U.S. stock market, index funds, buying antiques and starting companies.
Some important facts: According to the ICEX portal, the United States is, like other developed economies, a service economy, with the tertiary sector accounting for 80% of GDP. The industrial sector accounts for 19%, while the agricultural sector contributes only 0.9%.
According to the Bureau of Economic Analysis (BEA), in 2021, private service-producing industries led GDP growth, increasing by 6.6%; private goods-producing industries increased by 5.1% and the government sector increased by 1.5%. Overall, 19 of 22 industry groups contributed to the increase. Within the private goods-producing industries, the main contributor to the increase was durable goods manufacturing (led by motor vehicles, bodies and trailers, and parts, as well as computer and electronic products).
Another important piece of information is the contributions to the percentage change in real GDP by industry group. These were, for 2021, finance and insurance, contributing 0.77%; professional, scientific and technical services 0.71%; information: 0.71%; durable goods manufacturing: 0.54%, and the list goes on.
The United States does appear to be a solid economy for Latin American businessmen. The newspaper El País, headlined: The United States will grow 5.7% in 2021, the highest rate since 1984.
Some time ago we wrote an entry about 5 successful Latin Americans with businesses in the North American country.