Rising Continent
Over the past month, Latin America has seen two high-profile nationalizations of Spanish-owned companies. In Argentina, Cristina Kirchner announced the expropriation of a majority stake in her country’s biggest oil firm, YPF. A few weeks later, Bolivia’s Evo Morales seized TDE, which operates most of his nation’s electricity lines. To a casual observer of regional affairs, the decisions by Morales and Kirchner might appear to suggest that Latin America is still characterized by destructive economic populism.
But look closer: The economic policies of Argentina and Bolivia are notable mainly for being so out of sync with the more responsible, pro-market policies embraced by regional heavyweights such as Brazil, Chile, Colombia, Mexico, and Peru. (Those five countries generate a large majority of the economic output in Latin America and the Caribbean.) The most influential Latin American leader of the past decade was not Venezuelan autocrat Hugo Chávez, but rather Lula da Silva of Brazil, whose centrist policy formula has been emulated in countries across the hemisphere. Lula belongs to a left-wing party, but he governed like a pragmatist keen on maintaining economic stability and attracting foreign investment. The same could be said of current or recent presidents in Chile (Michelle Bachelet), El Salvador (Mauricio Funes), Panama (Martín Torrijos), Peru (Ollanta Humala), and Uruguay (Tabaré Vázquez and José Mujica). Even Sandinista boss Daniel Ortega, a Chávez disciple when it comes to eroding democracy, has tried to promote a strong business climate in Nicaragua.
“Stock markets in much of the world may have suffered a lost decade, but there was much to gain by investing in Latin America,” the New York Times noted last month. “A vigorous and persistent economic and political renaissance, especially in Brazil, produced annualized returns of 17.1 percent for funds that focus on the region during the 10 years through March, including a 13.3 percent return in the first quarter of this year.”
Indeed, Latin America has never enjoyed better economic management than it does today. The obvious exceptions — Argentina, Bolivia, Ecuador, Venezuela — merely confirm how much the rest of the region has progressed. Latin America has always been rich in minerals and natural resources, but its commodity wealth never translated into broadly shared prosperity or solid economic fundamentals. Now that is finally changing. From 2002 to 2010, the regional poverty rate dropped by 28 percent, according to the United Nations Development Program. (By contrast, the same rate had increased by 20 percent during the 1980s, and it had fallen by only 9 percent between 1990 and 2002.) By 2011, per capita income in Latin America was 57 percent greater than it had been a decade earlier, and the regional unemployment rate was at its lowest level in 21 years. Most remarkably, perhaps, “A region which had become a byword for financial instability mostly sailed through the recent recession,” as Michael Reid of The Economist has written.
No wonder so many people are bullish on Latin America: Countries with massive amounts of raw materials have achieved the economic and financial stability that long eluded them. Last year, the president of the Inter-American Development Bank, Luis Alberto Moreno, published a book titled The Decade of Latin America and the Caribbean. China has been flooding the region with investment, and India is starting to catch up. According to the Congressional Research Service, U.S. trade with Latin America grew at a faster rate (82 percent) than U.S. trade with Asia (72 percent) between 1998 and 2009. Looking ahead, Brazil will benefit enormously from its recent discovery of enormous new offshore oil deposits; Colombia has been included in the CIVETS bloc of emerging-market economies; and Panama is in the process of completing a $5.25 billion expansion of its famous canal, which has been described as a “game changer.”
Now for the bad news: Latin America’s overall competitiveness is still hampered by inefficient tax codes, cumbersome regulations, shoddy infrastructure, poor education systems, rampant corruption, and high crime rates. Many countries are still way too dependent on commodities, which tends to increase economic and fiscal volatility. Goldman Sachs economist Alberto Ramos put it well last year: “This definitely could be the Latin American decade — if policymakers seize the opportunity to adopt longstanding structural reforms geared to increase productivity, diversify the economic base, and boost real GDP growth.”
In other words, the region has great potential, but nothing is guaranteed. Thus far in the 21st century, economic and political reformers have been winning key ideological battles in most of the major Latin American countries. (Chávez and his fellow leftist autocrats are, thankfully, outliers.) But the region is still lagging on critical reforms, and the global economy gets more competitive every day. Now is the time for bold, far-reaching leadership.
You can read this article in Spanish here.
Will Latin America make the changes necessary to achieve its full economic potential? In a word, no. Latin America has been enamored of socialist/communist/fascist thinking that has driven the PIIGS economies over the cliff. They’ve learned their lessons well at the feet of the masters of corruption and failure. They will no more make the best use of their natural resources and human potential than any other area in the grip of totalitarian ideologies.
My own take is that countries like Brazil are doing this essentially with smoke and mirrors, by almost brutally increasing their populations and taking out these resources. Were the same thing done in America, it would be an order of magnitude more efficient and more productive.
It is a bubble and it will burst. When? Who knows. There are signs India’s own miracle is a sham and electrical brown-outs already a reality for factories while other parts of the country are just starting to enjoy even having electricity and pulling water out of well using 2,000 years old means of a cow and cup system.
If Brazil were America, many more would have been brought up to the middle class. But people still live in sad shanty towns and crime is endemic in much of Brazil. Much of that new middle class will fall as fast as it rose. And it’s still new. Even 10 years ago, something like a Kmart-style store was a relatively new thing in Rio de Janeiro. Get in and get out, because it will pop. And when it does those millions in shanty towns might have their own version of an Arab Spring.
Bolivia, shackled by incompetence, has already had their own slow-motion indigenous version and they have become radicalized to the West by their perception of that West as Crusader analogues, but invoking the Conquistadors instead. Expect more Marxist policies from them and Venezuela as well.
There is not equivalent in Brazil but when push comes to shove it will be rich against poor and black against white, almost one in the same thing there anyway. People don’t like living right next to conspicuous wealth without being able to indulge in it. Sometimes this is conveyed by the simple means of access to the internet or cable TV. People have eyes and they start asking “why.” This may have been the true genesis of the Arab Spring – access to information.
If Brazil has developed some analogue to American exceptionalism, which I don’t believe it has, it will rise a long time.
Another example that when countries choose capitalism over socialism (let alone communism, as in Cuba), those countries tend to do well economically. After all, if you can even convince a guy like Daniel Ortega to flirt with capitalism, then you know things are bad for the communists and socialists in South and Central America. The best weapon we have against communism and socialism is to maintain a vibrant economy in the United States. Hold us up as a role model on what is possible if you embrace capitalism. Pity Obama doesn’t see it that way, a man who is doing everything in his power to emulate the failed socialist states in Europe, and destroying our economy in the process.
Caudillismo triumphs all L.A. eco-orders.
When I was at SAIS in the Sixties, a mid-career DoS student said in passing: “Latin America is the land of the future, and always will be.” Clearly old then, but the gentleman had a number of years of direct experience.
Latin American was my one of specialty areas, and nothing, has disabused me of that belief over the years. Most simply, the place looks as its does because that is how the locals want it. That, of course, is the basis of any national sovereignty: interesting subject.
Again the problems are cultural, not genetic, so could be cured. I doubt any place wants to bother. There will be improvement, but it will be like Brazil: islets of development, on a sea of favelas.
Very good, there! “Denver Bob” mere flesh and blood rationalization hath not revealed this to thee, but something more.
The SA nations are just barely coming out of tribal backwardness—watch some Brazilian movies, noticing the scenes, the backgrounds, and the way in which they develop the plot.
And then watch some of that coming from Mexico, . . . and the world of difference!
And equally of course for the USA as easily—whether in “Fast and Furious” or in deceased voter fraud—our own corruption spoils this place as its does, largely because our leaders are drawn right from our own people—they, being the only possible basis of national sovereignty and policy, . . .
Bob,
You’re atypical ignorant Anglo. You don’t understand Latin culture and have a bigoted world view. Theer are Latin countries liek Chile, Colombia, Panama and Costa Rica who are advancing economically. 400 years ago Your beloved England was dump, rose up and and is rapidly turning into a dump again. History moves ina cycle, but your too much of an inbred bigot to realize that.
No. The roots of Latin American economic failure run far deeper than one might expect. Carroll Quigley, in the course of his examination of the failure of most Latin American / South American nations-states, delivered an astonishing analysis of what he believed to be the root cause of these failures in the first edition (1966) of his renowned Tragedy and Hope. Here, in almost an aside, he defines what he calls the “Pakistani-Peruvian axis” – a combination of Asian despotism and Arabic outlook (key word, that – outlook), both of which have their roots in Bronze Age antiquity, that pervade what Quigley calls the shattered cultures that dwell on its axis from Pakistan to the mountains of South America. This analysis makes an appalling sense out the cultural train-wrecks that persist to this day from the Arabic East, through the southern Mediterranean and Spain to South America – and also through corporate boardrooms in Paris, London and New York. Here’s the opening paragraph of Quigley’s analysis:
If his analysis is correct – and I believe that it is largely so – it provides the perfect framework for the triumph of the greatest evil of modernity – the will to power as the dominating and driving force of those who would exterminate most of the worlds population and rule the remainder of humanity like cattle.
I fear for our civilization.
It is IMPOSSIBLE for Argentina to have a healthy country if Argentinians’ health is being destroyed! Argentina’s leaders must make it a top priority to PROTECT the health of their people! Argentina was once world famous for their HEALTHY, fantastic beef. No longer. Argentina’s wonderful, healthy meat has been replaced with health-destroying genetically modified soy. What a great tragedy for Argentina and the world.
mercola.com: The Toxin So Dangerous It’s Causing Catastrophic Birth Defects
Roundup Ready soy is now being cultivated on a massive scale across the globe, along with the exponentially increasing use of the herbicide Roundup. Monsanto’s “Roundup Ready” soy beans are genetically modified to survive otherwise lethal doses of glyphosate, the active ingredient in the company’s herbicide Roundup.
It’s a win-win for Monsanto. But it’s a loss for just about everyone else.
One of the countries most affected by genetically engineered soy is Argentina, whose population is being sickened by massive spraying of herbicides across the country’s Pampas (the country’s “fertile plain”).
Argentina’s Pampas used to be dotted with dairy and vegetable farms, but now, large-scale soybean monoculture blankets most of their cultivated land, making them especially susceptible to the damaging effects of genetically engineered soy. The impact can be better appreciated by considering the following statistics:
Soy is the main income source for landowners and the state—soybeans are considered a “gold mine” by Argentinians; soy exports generate 16,000 million dollars a year
The area cultivated with soy has reached 19 million hectares, representing 56 percent of Argentina’s cultivated land
98 percent of Argentina’s soybean production is genetically modified.
190 million liters of glyphosate (the active agent in Roundup) are sprayed in Argentina annually, which is leading to not only illness among the population but to widespread deforestation, as trees are among the victims these herbicides leave in their wake of destruction.
Soya burgers are a staple of today’s Argentinian diet. Argentinian children were consuming so much genetically engineered soy that they began developing breasts from the estrogenic effects, before authorities stepped in with warnings. Studies also strongly suggest that the glyphosate that these crops are doused with can cause cancer and birth deformities; both of which are occurring at increasing rates in areas where spraying is done. Sterility and miscarriages are also increasing. Experts warn that in 10 to 15 years, rates of cancer, infertility and endocrine dysfunction could reach catastrophic levels in Argentina. But few people are listening.
“It’s Food for Today, Hunger and Cancer for Tomorrow
http://articles.mercola.com/sites/articles/archive/2012/05/13/ge-food-cause-birth-defects.aspx?e_cid=20120513_SNL_Art_1
That reads like something out of Atlas Shrugged. It’s not a novel any more – it’s a documentary.
The above are documented FACTS! The suffering is enormous.
I am happy for those that are coming out of poverty in Latin America.
Really the battle in Latin America is not that much different from here. In both societies we struggle against the entrechned power of government.
In both societies we suffer from crony capitalists, excess regulation, and govenment bloat. In Latin America it takes the form of low level corruption. Here it takes the form of higher taxes. In our case it is much more predictable.
But make no mistake, we are all fighting the same battle — against the power of the state.
El otro sendero by De Soto about the economy of Peru is one of my favorite books.
I welcome all allies in the fight for free markets, free people.
I could only see the likes of Breitbart pulling that speech off in “reconquered” Southern California! Hear Hear!
People have the wrong idea about Mexican Americans.
They are are just sitting there in their barrios and churches waiting for Republicans to ask for their vote.
If they paid me, I would do it.
The populist progressive Peronista movement destroyed Argentina and it took 40 years to recover. The populist Kirchners have repeated it again. In exchange for union votes from the ‘middle class’ and common man, Peron and teh Kirchners pandered to unions. Any jobs were then set aside for unions and members only, with generous benefits, healthcare and pensions.
In order to pay for the rising costs, gov then took over and nationalized foreign companies. The excuse is always that the companies and top 1%ers are taking the country’s national resources. Therefore, it should belong to all citizens. Once the gov takes over running the businesses, they all fail. The remaining business fled. Taxes were raised to pay for the expensive contracts to best friends and cronies. The raised taxes actually brought in less revenues. Unemployment was/is blamed on evil corporations, the rich, the banks and foreigners.
The skyrocketing debt and deficit spending quickly crushed the country. Argentina found a negative export and less cash flow when the products were too expensive due to the higher labor costs and taxes. Gov then took over private lands and business in order to fund more deficit spending. The banks were then nationalized and private pensions, retirements, savings, bank accounts were controlled or taken by the gov.
The bills could not be paid so more money was printed. Hyperinflation kicked in, Argentina was unable to pay its foreign debt nor even its own operating expenses.
Thankfully, when we lived there, we were paid in U.S. dollars.
The Kirchners repeat the dismal failure of Peron and the people will pay for it dearly.
Argentina is a remarkably rich country with great hard working people …if only the progressives would get out of the way. Our current admin has much to learn from the history of Argentina.