Miami economist Manuel Lasaga has tracked the tumultuous trajectory of Latin American economies — and their growing influence on Miami — for 35 years.
Before co-founding in 1993 Miami-based Strategic Information Analysis Inc., an international consulting firm where he serves as president, Lasaga was an international economist at Citibank in New York and at Southeast Bank in Miami.
The Cuban American also teaches international finance for Florida International University’s MBA program and is a consultant to the World Bank.
Lasaga sat down with the Miami Herald’s Business Monday to share his insights on the Miami region and then responded to emailed questions.
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Q: What do you see ahead for Miami-Dade’s job and business outlook for 2015?
A: I think the business outlook for 2015 is very positive. Miami-Dade has been benefiting from strong tailwinds in the national economy. The U.S. economy has been gaining momentum since the second quarter of 2014 with a strong showing in the third. I think this will carry into 2015 with 3.5 percent growth.
Consumer spending has fueled the expansion, helped by an increase in jobs and a big year-end bonus in the form of a deep cut in oil prices. This is what I call a late expansion-cycle rally that will also help to lift the economies in Latin America and the Caribbean with a moderate upturn in 2015 as well as provide some relief to Europe and Asia, possibly by the second half of the year.
Employment growth in Miami-Dade will continue to outperform the state and the nation. In fact, in 2014 the county surpassed the number of jobs that had been lost during the last recession.
The most dynamic segment of our local economy will be construction, which will have a positive spill-over effect on other construction-related industries. Retail trade should post healthy growth in areas such as vehicles sales, food and beverage stores, electronic goods stores, home improvement and furnishings, and general department stores.
Professional services will gather momentum, particularly architects and engineers, IT services, and management consulting services. Healthcare services will improve, as more employed people can afford insurance including [for] elective procedures.
One area that should experience a welcomed turnaround next year is international trade, thanks to the upturn in Latin America and the Caribbean.
There are always risks, and in this case I think an increase in interest rates could put a damper on growth in the more interest rate-sensitive sectors. I think there is broad consensus that interest rates will rise. The Fed is likely to gradually raise short-term interest rates during the second half of 2015; however, how it will play out is the key question.
A stronger economy combined with a possible surge in oil prices in 2015 could pressure inflation and lead financial markets to push medium to long-term interest rates faster and higher than what the Fed may be hoping for.
Q: What sectors are most promising for job growth in Miami over the mid to longer term?
A: Miami’s business and economic future depends on its competitive advantages, mainly its location, attractions such as sun and beaches, and cultural events, diverse demographics, and solid infrastructure for trade.
International business is possibly the largest component, accounting for 35 to 45 percent of Miami’s economy. This includes international tourism, merchandise trade, financial and professional services, healthcare and business services.
I think this will continue to grow in importance, thanks to Miami’s strategic location and the cluster of services it already provides. This will benefit jobs in leisure and hospitality, wholesale trade, transportation, financial activities, professional and business services and healthcare.
I expect Miami will regain its prominent role as a leading regional financial center. The U.S. will continue to be a magnet for flight-to-quality, and Miami’s financial center is well situated to capture growing wealth from around the globe.
There are some promising areas, such as IT applications and services and biotech, which can broaden our technology base and can also strengthen our competitive advantages in financial, professional, business and healthcare services. The success of these inroads depends on the role of our research universities in acting as incubators of new technologies.
Q: Do you think Miami businesses will capitalize on the warming of relations with Cuba?
A: A warming of relations with Cuba appears to be a diplomatic step, which by itself would not have a significant short-term impact on U.S.-Cuba business opportunities.
The opening up of the Cuban market requires extensive changes — a change in the mind-set of Cubans and a sense of stability that would attract investors, a very difficult and time-consuming process, as painfully demonstrated by almost all economies that have gone through a similar transition.
A move to a democratic type of government, the passing of new laws that protect private property, and a revamping of the financial system are just a few of the first real steps necessary to attract investments and trade with Cuba.
Full membership in the IMF and the World Bank would send a positive signal as to the Cuban government’s commitment to reforms.
On the other hand, because of a large Cuban-American community in the United States, there is likely to be some limited investments from individuals who have friends and relatives in Cuba that could facilitate new business ventures.
Q: Do you expect the flow of foreign investment into Miami from Latin America and Europe to continue at the same brisk levels seen in recent years? Why is Miami such a magnet for foreign investment?
A: Foreign investors are attracted to Miami because of its international character, a pleasing lifestyle for residential property and a global trade network to tap into and expand their international business.
I think we will see healthy growth in foreign investment into Miami real estate, but not as strong as the recent inflows, since they were in large part driven by real bargains in Miami’s real estate market. For example, condos were estimated to have fallen about 60 percent in value during the real estate market turmoil in 2007 to 2009.
With interest rates on bank deposits near zero, foreign investors found a more lucrative opportunity in our real estate market. Many of these investors were already familiar with Miami’s real estate because they had traveled here as visitors.
Foreign investment is also attracted to Miami because of its role as a gateway for trade between the U.S. and other parts of the world with Latin America and the Caribbean region. Miami is also a gateway for businesses from South America and the Caribbean. The number of businesses from the region that have established a foothold in the U.S. market through a presence — an office, a logistics center, and production facilities in Miami — continues to increase.
Q: You’ve said that South Florida’s huge visitor industry brings an added benefit of showcasing the region to potential future investors. Can you elaborate on that?
A: Whether for business or pleasure, return visitors to Miami who really like the area may eventually make an investment in a residential property for their use or as an income-producing investment. Those who become more familiar with what Miami has to offer may develop an interest in starting a business or buying an existing one, possibly in the same line of business that they are involved in in their home country.
Q: Is Miami over-banked?
A: It is hard to say, since there is a wide diversity of banks. There are very large banks and small community banks. Some have a strictly local market orientation; others have an active international customer base. But based on the growing number of branches, the market seems to be moderately over-banked.
If we look at earnings, banks in Miami-Dade on average have lower profitability ratios than banks elsewhere in Florida and the United States, which could be an indication of market saturation. This is in part explained by higher operational expenses at smaller banks that haven’t been able to take advantage of economies of scale.
Smaller banks could also benefit from greater use of IT applications that are more customer-friendly, such as online banking in order to compete more effectively with the large national banks.
Background: Born in Havana, Cuba. Came to the United States in 1961, and after about a year in Reno, Nevada, moved to the Washington, D.C., area, where he grew up.
Education: Ph.D and master’s degree in economics, University of Pennsylvania. Bachelor’s degree in economics, University of Maryland.
Current professional activities: President and co-founder of Strategic Information Analysis Inc. (www.StratInfo.com) in Miami; consultant to the World Bank; clinical professor, department of finance, Florida International University.
Leadership activities: Baptist Hospital of Miami board of directors, 1993-present. Miami Dade College, School of Business advisory committee, 2004-present.
Family: Married to Margarita Du Quesne Lasaga; they have two married daughters: Vivian, who is expecting her first child in May, and Cristina.
Reading: “Thinking, Fast and Slow” by Daniel Kahneman.