The Latin American economy: another lost opportunity?

Posted on March 29, 2012 By Emilio C. Sanchez Latin America

The big numbers of the Latin American economy are striking. In contrast with the complicated situation of the European economy and the United States’ timid steps toward economic recovery, the Latin American economy is enjoying enviable boom times.

Mexico is an especially noteworthy example because, despite the bloody narcotic trafficking war, which takes the lives of thousands of Mexicans each year, its economy is growing by leaps and bounds.

There is no doubt that the region emerged from the global financial crisis stronger than it was before. Brazil is a driving force in the Latin American economy, and the Andean countries—with the exception of Venezuela—along with Chile and Argentina, are growing and consuming at a rapid pace.

Read related: Brazil’s economy overtakes the UK

Economic success story or train wreck?

The great question is whether the new Latin American economy is a success story or whether we are on the verge of an economic train wreck. That question was the subject of discussion at a seminar held last weekend in Miami with Andres Oppenheimer of the Miami Herald, Jose Luis Valderrama, president of Hispanic Group, Luis Pineda, president of Ausbanc, and myself.

Oppenheimer pointed out the danger of the Chinese economy running out of steam and immediately affecting Latin American economic growth. On top of that are the problems of lack of regional integration, rampant corruption and stagnant education.

To me, the big unknown is whether Latin America will be able to use this period of economic growth to solve its major structural problems or whether it will remain unresolved.

Will Latin America come out of this decade stronger as a whole?

Will it be the Latin American economy, with Brazil at the lead, countering China’s tremendous power? Or will we be left with another lost opportunity?

We are still very far from seeing a prosperous, fairer, stable Latin America, with a strengthened democracy and solid structures capable of addressing global challenges.

My pessimism can be reduced to one sentence: “I am the state.”

These four words are uttered ad nauseam by Rafael Correa, but that are totally applicable to Hugo Chavez, Daniel Ortega, and – why not? Cristina Fernandez de Kirchner.

When Correa or Chavez assumes that totalitarian role in the purest Castroist style, it means pushing aside the basic principles of distribution of powers in a democratic system.

And without judicial independence or freedom of the press, there is no democracy and there can be no social justice. Or equitable distribution of wealth. Or improved education. Or better infrastructures. Or consolidation of the middle class, the basis of prosperity in Western society.

So, are we facing another lost decade in for the Latin American economy? I’m afraid so. Because it’s not just Correa or Chavez. We have the lady of the south, Cristina Fernandez de Kirchner. Her battles against the two great Argentine newspapers, Clarin and La Nación, confirm that the Government Palace is tempted to make a play for absolute control.

But in other countries, such as the Dominican Republic, the relative economic bonanza has not led to anything as simple as improving the country’s legal certainty in foreign investments. Narcotic trafficking networks and corruption are undermining the basic structures of the Dominican State and the same thing, or something even more serious, is happening in Nicaragua, El Salvador and Guatemala. Education remains stagnant and there are no booming economic sectors beyond the traditional ones driven by the insatiable international demand for raw material.

The golden opportunity is still there to be grabbed, but much improvement is needed in Latin America if it is not to see this new opportunity slip through its fingers.

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  • http://www.facebook.com/people/Duke-Machado/100000551595999 Duke Machado

    An incredible write up and explanation of the situation in Latin America.  We all assume their economy is in shambles because so many are coming to America, but based on what you’ve said, many must be happy with the conditions there.  My question is, how do we compare their economic boom to ours?  Is theirs more modest?  Or are they on the verge of collapse when their “bubble” bursts?  It is a shame that many Latin American countries have to deal with the , as you put it, “Castroist style” of leadership.  You would think we have all learned our lessons from the past…with Spain and others.  

  • ewollc

    Just came back from Bogotá. What I saw is not exactly what I would call an economic boom. I mean, you go to a shopping center and you see people buying (US stuff or stuff that looks “American”). Figures say people are buying, that’s true. Real estate is expensive and all. But there is no development if you define development along the lines of a better quality of life. The streets are broken; the system of massive transportation is insufficient; the health system is now privatized; people leave the countryside to come to the big cities in search for an elusive better standard but end up living in marginal conditions and etc. If you ask those who know, if it’s worth investing there, they give you one of those smiles… like they know this illusion is not going to last. Typically, from what I remember, Colombia has suffered a crisis a few years after US’s crisis. We call it a “coletazo.”  Besides, I think the US is having crises that are closer together and the globalization wrecked all national shields. What has protected LA? I think their still weak attempts at independence from the WB and the IMF. But of course, I just an observer. And this observer thinks that the whole world is at a brink of a major turn.

  • Laura

    I think this sweeping and homogenizing comparison of what in fact are profoundly different social, economic, and POLITICAL realities is incredibly misled. Each country is undergoing its own, different processes and dealing with its own problems. There are innumerable nuances that go unnoticed even for most Latin Americans. Another mislead, and misleading, aspect of this article is that it characterizes  the changes in “Latin American economy” (?) as “boom times”. The truth is that in Argentina we are speaking of a decade of not just sustained but also increasing economic growth with industrialization, increased government support of technological and scientific development on all fronts, as well as political stability (whether you like Chavez or not, whether you like Cristina Fernandez or not, they were voted by an overwhelming majorities, especially Chavez, I suggest Noam Chomsky´s reflection on this subject). When we speak of regional integration, we are starting to see some strong signs of real dialogue, as the support for Argentina´s claim for Malvinas shows (and where we cannot leave out the fact of Chile´s unprecedented support on this issue), or the creation of CELAC, ALADI, UNASUR, in response to the absolute failure of ALCA a decade ago. But perhaps what is the most misleading perspective presented in this piece results from completely ignoring official stats from the past few years on Argentina, and not just those that speak of economic growth, but of social inclusion and the rebuilding of state and social institutions after decades of looting (beginning in the seventies, during the dictatorship in which the US had, as is well known today, an important involvement through the Condor Plan), which culminated in the nineties with neoliberal governments that implement the same type of policies and adjustment plans than those chastising Europe as we speak. The writer here is adopting a “view from above” on Latin America that is disturbingly distorted. It is disturbing because it misleads readers who come to this page to find opinions supported by data. You may not like Chavez, Kirchner, Correa (Dilma, Mujica, Santos, Ollanta Humala and Morales and many others didn´t make it to this analysis…), but the reality is much thicker than this, and the political and social transformations since the nineties are tangible and irreversible. It may not be a fast train, but it´s making its own way and choosing–thorugh democratic means–its own destination.