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Thomas Friedman sold a lot of books arguing that the world is flat thanks to globalization. But the reality of doing business in the post-bailout Americas may be more truly that the world is upside down.

Increasingly, the countries of the Americas that look the most fiscally responsible are those south of the Rio Grande, once a wild frontier of defaults, currency crises, and political and social unrest.

The real trouble now is north of that storied river, where governments are struggling with the cost of rescuing their economies, the demographics are grim and the growth numbers in the United States look troubling no matter what positive spin the optimists find. (Take yesterday's news that Americans, unemployed and homeless may they be, raided their dismal savings to go shopping last month. Please.)

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In Latin America, meanwhile, something truly remarkable is happening. The World Bank points to it and the Caribbean as the parts of the world that withstood the crisis better than almost any other, thanks to "sound macroeconomic fundamentals."

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Go ahead, chuckle at the idea of saying that about a region that gave the world Brady bonds, but the figures are indisputable. According to Moody's, while "median debt to GDP rose almost 30 percentage points during the crisis among advanced industrial countries, and more than 20 points in the emerging European sovereigns, the numbers for Latin American sovereigns barely budged, rising only four percentage points."

What's more, the region's net external debt is shrinking, reducing the odds of future crises caused by flights of foreign investment.

Even Argentina, which seems an obvious exception given its recent tribulations, now boasts a debt-to-GDP level that is below those of Canada and the U.S.





No surprise then that credit ratings have been rising, led by Chile, Mexico and Brazil. That tells only part of the story. The governments are in better shape, but so in many cases are the citizens. Middle classes are growing, meaning that the countries are becoming self-sustaining as domestic demand supplants exports as a source of expansion.

The implications of this shift in the financial dynamic of the Americas are huge. Increasingly, Latin America will be the lenders of the money the U.S. and Canada are borrowing. Decision making will shift south, and so will potential profits, especially for the few Canadian companies that had the foresight to look beyond Texas for opportunity.

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For emerging markets as a whole, "2009 was a seminal year - the baton got passed," said Nick Chamie, global head of emerging market research at RBC Dominion Securities.

This won't be a seamless transition. That new power structure is not necessarily going to sit well with politicians in places like Washington.

For proof, witness the trouble that members of the U.S. Congress have being nice to China, their country's biggest creditor. Imagine treating your banker the way Congress wants to treat Beijing. Now imagine what the conversation about your mortgage renewal would be like.

The conflict caused by the transition will create noise, but it should not obscure the drumbeat of the real story. For Canadian companies that invested in Latin America, this will be a time to reap the returns of decisions made when it was less clear that the region would be a success.

The fact is, however, that the list of companies that had made that farsighted decision is very short. What direct investment there is, is mainly still in mining or oil and gas extraction. These are good opportunities, and a natural fit for Canadian companies with the expertise, but they also perpetuate the old notions of emerging markets as places to get raw materials.

When you get to Canadian entities investing in Latin America to take advantage of domestic growth and spending, it's hard to come up with too many names.

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There's Bank of Nova Scotia, with its long history in the region. Finning International sells mining and construction equipment in countries such as Peru and Bolivia. There is the Ontario Teachers' Pension Plan with its Chilean water system assets, and Canada Pension Plan Investment Board with its Chilean electrical grid stake and Brazilian shopping malls.

There are certainly a few more, but the dismal aggregate numbers on trade suggest the list isn't a lot longer.

Take Brazil, the B in the BRIC we all hear so much about as the likely engine of world growth. Canadian companies have about $8.8-billion invested directly in Brazil, about the same as they do in Texas, according to government figures. Brazil was Canada's 12th-largest export market in 2008, even though Brazil is the eighth-largest economy in the world with a GDP surpassing $1.6-trillion. Canada exports much more to Texas (with a state economy of about $1.2-trillion).

Scotiabank expects Brazil to grow 5 per cent next year, while RBC predicts 6 per cent. Mexico should grow more than 4 per cent. Across the Rio Grande in Texas, the state government expects the economy to grow 2.6 per cent, with the consensus forecast for the U.S. as a whole at 3 per cent.

"Policy makers are now, on a global basis, realizing there's a major handoff taking place," said RBC's Mr. Chamie.

When will Canadian executives?

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