For the First Time, Latin America Emerges Strengthened from a Worldwide Crisis
By Dialogo January 03, 2011
For the first time in its history, Latin America was not dragged down by an international financial crisis and returned to vigorous economic growth in 2010, thanks to its good economic policies and the yield of its raw materials.
While the United States and the European Union should close the year with GDP growth of around 2.6% and 1.7%, respectively, the Latin American figures will be around 5%.
And the fact is that in the world financial crisis – triggered in September 2008 in the United States, prolonged this year by the crisis in Europe – the region turned out to be one of those least affected in the world and even, despite some glancing impacts, succeeded in coming out strengthened, in the judgment of analysts consulted by AFP.
According to Augusto de la Torre, chief economist for Latin America and the Caribbean at the World Bank, there are various factors that explain the region’s favorable trajectory in this crisis scenario.
In the first place, there was a “transformation of factors that in the past usually amplified external shocks,” such as weak currencies, weak financial systems, and not very orderly budget processes, which magnified “the effect (of the crisis) on our economies,” he explained.
For its part, the region’s “integration in international trade is much more diversified,” since the region is no longer focused solely on Europe and the United States, but has now opened to markets such as the emerging markets of Asia, he affirmed.
Another aspect is the “way in which we are integrated into the international financial system,” having become creditors and recipients of large amounts of foreign direct investment, he added.
At the same time, the region took advantage of two circumstantial factors: the growing “appetite for risk” that is attracting foreign investment and high prices for raw materials, De la Torre added.
In this regard, Alberto Ramos, chief economist for Latin America at Goldman Sachs, judges that between 2003 and 2008 there was a valuation of raw materials that offered favorable conditions “for reducing vulnerabilities, increasing foreign reserves, reducing the level of public debt.”
The most representative case is that of Chile, which used the resources accumulated thanks to the high price of copper, of which it is the world’s leading producer, to launch stimulus packages worth millions, explained Francisco Castañeda, a professor at the University of Santiago in Chile (USACH).
For Ramos, “it’s not that Latin America was in a situation of immunity with regard to the crisis (…) but that it wasn’t in a catastrophic situation,” as in the past.
Brazil, Latin America’s largest economy, will have growth of around 7.5% this year (7.7% according to the Economic Commission for Latin America and the Caribbean (ECLAC), 7.6% according to economists who study the local market), accompanied by greater access to credit and an increase in employment, which translated into in an increase in consumption.
With more money in their pockets, the more than 190 million Brazilians passed the mark of one cell phone per inhabitant (194.4 million devices activated), and a million and a half are expected to travel by plane for the first time during the Southern Hemisphere summer.
Argentina, for its part, is forecasting growth of up to 9% this year according to the latest official figures (8.4% according to ECLAC), after applying anticyclical policies and social programs.
For the upcoming year, specialists agree that the region must continue looking north.