Economist.com: The World in 2009 - Latin Drift

After five years in which Latin America’s economies have averaged 5% annual growth with generally low inflation, they face a severe test of their new-found resilience in 2009. Subdued consumption in the rich world will squeeze exports and commodity prices, and finance will be harder to find. Countries with diversified exports and sound policies will be better placed to ride out the storm than those, such as Venezuela and Argentina, that have squandered their commodity windfalls and spurned private enterprise. Politically, tougher times will coincide with, and contribute to, the start of a tentative shift away from the left.


Of the region’s two big economies, Brazil will continue to do better than Mexico, but neither will do well. Softening commodity prices will erode Brazil’s trade surplus (and cause further depreciation of the real), but the diversity of its export markets and the vigour of domestic consumption will keep growth below 3% (down by more than two percentage points from 2008). With a presidential election due in 2010, Brazilian politics will be dominated by preliminary jockeying over candidacies, with President Luiz Inácio Lula da Silva, the social-democratic president, seeking to transfer his own popularity to his chosen successor, probably Dilma Rousseff, his chief of staff.

read full article here

Thomas Friedman: Obama's Big Call

Barack Obama is possibly going to have to make the biggest call of his presidency — before it even starts.


“A great judgment has to be made now as to just how big and bad the situation is,” says Jeffrey Garten, the Yale School of Management professor of international finance. “This is a crucial judgment. Do we think that a couple of hundred billion more and couple of bad quarters will take care of this problem, or do we think that despite everything that we have done so far — despite the $700 billion fund to rescue banks, the lowering of interest rates and the way the Fed has stepped in directly to shore up certain markets — the bottom is nowhere in sight and we are staring at a deep hole that the entire world could fall into?”

If it’s the latter, then we need a huge catalyst of confidence and capital to turn this thing around. Only the new president and his team, synchronizing with the world’s other big economies, can provide it.

“The biggest mistake Obama could make,” added Garten, “is thinking this problem is smaller than it is. On the other hand, there is far less danger in overestimating what will be necessary to solve it.”

Thomas Friedman: What we can do

What we can do now, ....said the Congressional scholar Norman Ornstein, co-author of “The Broken Branch,” is “ask President Bush to appoint Tim Geithner, Barack Obama’s proposed Treasury secretary, immediately.” Make him a Bush appointment and let him take over next week. This is not a knock on Hank Paulson. It’s simply that we can’t afford two months of transition where the markets don’t know who is in charge or where we’re going. At the same time, Congress should remain in permanent session to pass any needed legislation.

It’s Up to Brazil

From AméricaEconomía

When Latin Americans hear the word “intervention,” they tend to associate it with the United States. This is not irrational, since the United States has militarily intervened in a number of countries to its south – including Mexico, Panama and several Caribbean and Central American countries. Washington has also used its economic and political influence to shape events in the region. Depending on ones’ point of view, such military and non-military intervention has been viewed on balance as either helpful or harmful to the region’s development. It was also something that the Latin Americans could do little to prevent, given the asymmetry of power between the United States and any single Latin American country.

The only way for a Latin American country to make its relationship with the United States more symmetric was by allying with a more powerful country that was willing to challenge U.S. interests in the hemisphere. This was the genius of Fidel Castro’s successful effort to get the Soviet Union’s support for his efforts, from the 1960s onward, to foment anti-American, marxist revolutions throughout Latin America. With the Soviet collapse in 1989, the asymmetry between the United States and Latin America became even more pronounced, since the bipolar world of the Cold War was replaced by a unipolar world in which the United States was the only global superpower.

This unpolar world, however, was quickly superseded by a multipolar world, as big countries such as China and India adopted market economies and became integrated into the global economy. Their insatiable demand for food and natural resources unleashed a commodities boom that benefited producers of oil, agricultural products and minerals. Within Latin America, the biggest beneficiaries were Brazil and Venezuela. These two countries also came to represent two different kinds of government, with contrasting and competing geopolitical agendas.

Brazil under President Luiz Inácio Lula da Silva aspired to join the ranks of industrialized countries characterized by democratic governments and market economies. Venezuela under President Hugo Chávez, in contrast, wanted to recreate the Bolivarian dream of a united Latin America, under his personal control, which would replace U.S. power and influence in the hemisphere. To this end, Chávez began funneling money to governments, political leaders and guerrilla groups, such as Colombia’s FARC, that shared his goals, to varying degrees. And following the example of his mentor, Fidel Castro, Chávez recently succeeded in persuading Russia, a new energy powerhouse, to support his effort to challenge not only U.S. power and interests in Latin America, but those of Brazil as well. The latter country now finds itself surrounded by neighbors who are, for the most part, hostile, unstable or both, due in no small part to Chávez’s help and encouragement.

All of this is occurring as the United States is waging wars in Iraq and Afghanistan, is experiencing a financial crisis second only to the Great Depression and is about to change presidents. As a result, it seems unlikely that the United States will be able to give Latin America the attention that it needs in the coming few years. Whatever attention it is able to pay to the region will undoubtedly focus on the Caribbean Basin. This so-called fourth border of the United States includes strategic sea lanes and the Panama Canal, as well as friendly countries threatened by Venezuelan-backed guerrillas (Colombia) and powerful drug cartels (Mexico). It is also where the Russian fleet will be engaging in joint naval exercises with Venezuela, as well as supplying Venezuela with large amounts of military hardware. This means that Brazil will have to play an ever-larger role in South America – thwarting Chavez’s meddling and stabilizing its neighbors. That task may be made more difficult as regional economic growth slows and political demands increase in the aftermath of the U.S. financial crisis and the resulting global economic slowdown.

The prospects for strengthening democracy and market economies in the hemisphere, and for containing Chavez, could be greatly enhanced if Brazil and the United States could increase their bilateral free trade and join their individual free trade partners together so as to create a more substantial free trade area. The two countries could also cooperate in finding ways to ensure that the benefits of free trade are more equitably distributed and that free trade is complemented by other kinds of programs to enhance hemispheric development. It will not be easy to achieve all these goals, but the costs of not trying could be very high.

Susan Kaufman Purcell
Director, Center for Hemispheric Policy
University of Miami

Related articles by Zemanta

• Russian navy sails to Venezuela