Category: Latin America

Led by resource-rich Brazil, the region is forecast to enjoy 4.1% growth next year, far outpacing the U.S.

By Chris KraulLos Angeles Times

From appliance stores in Brazil to auto assembly lines in Mexico, signs are evident that Latin America has seen the worst of the global economic crisis and is poised for solid expansion.

The region is expected to post economic growth of 4.1% next year, according to a forecast released Thursday by the United Nations’ Economic Commission for Latin America and the Caribbean. That’s a stronger rebound than previously anticipated.

Emerging powerhouse Brazil is expected to lead the way with projected gross domestic product growth of 5.5% in 2010. It should be helped by strengthening foreign demand for its oil, soybeans and other commodities, as well as increased spending by an emerging consumer class that’s helping to keep Brazilian factories humming.

“The most encouraging signs are a recuperation of manufacturing and in foreign trade over the last two quarters,” said Alicia Barcena, the U.N. commission’s executive secretary. “Brazil began to show progress six months ago.”

The agency, which is based in Santiago, Chile, also expects strong growth of 5% from Peru and Uruguay next year. The economies of Bolivia, Chile and Panama are projected to expand 4.5% in 2010.

Even Mexico, whose deeply troubled economy could contract as much as 6.7% this year, will probably outpace the U.S. in 2010. The U.N. commission expects the Mexican GDP to expand 3.5% next year. The U.S. economy is projected to grow at just a 2% rate, according to a recent UCLA forecast.

Hit hard by the global banking crisis and a drop in global demand for commodities earlier this decade, Latin America’s total output of goods and services is expected to shrink 1.8% this year, the commission said.

But the region should recuperate faster this time compared with past global crises, Barcena said. She credited swift government intervention throughout the region to keep credit flowing and to boost public spending.

Those policies included reducing interest rates, increasing lending by state-owned banks, expanding public expenditures and implementing a broad array of social programs, such as consumer subsidies and support for low-income households.

Still, next year’s expansion won’t be enough to fully address social challenges and keep pace with population growth. That would require 5% annual growth, which the region nearly averaged (4.7%) during its boom years from 2003 to 2007, Barcena said. Unemployment in the region will remain a trouble spot, topping 8% this year.

The rosy growth projection for Brazil is just the latest in a string of positive news for the South American giant in recent months. In October, Rio de Janiero was selected to host the 2016 Olympics, while billions of barrels of new oil reserves have been discovered off the nation’s coast.

Meanwhile, Mexico has been slammed by the downturn in the United States, the biggest customer for its manufactured goods. The drop in U.S. auto sales has hit Mexico particularly hard because it is a major producer of vehicles sold in U.S. showrooms.

Slumping remittances have hurt as well. Through October, Mexican laborers working outside the country, mostly in the U.S., sent home $18.1 billion to their families in Mexico, 16% less than in the same period in 2008.

Other remittance-dependent economies, including Honduras, Guatemala, Nicaragua and El Salvador, are forecast to lag behind the region with anemic growth of 2% or less next year, the United Nations commission said.

The report highlighted some unusual winners.

Bolivia had the best-performing economy this year, growing a projected 3.5%. Barcena cited rising prices for minerals, including silver in the San Cristobal mine.

She also credited the government of President Evo Morales for being “very careful with its public finances” and investing wisely in social and fiscal stimulus programs, including monthly welfare checks to its poorest families, which in turn has boosted consumption.

Barcena said Latin America still faced challenges and could be hurt from the fallout from developing crises in countries such as the United Arab Emirates and Greece.

“We see things as improving, but there could be stagnancy as well if the world recovery isn’t as dynamic as we’d like,” Barcena said.

Kraul is a special correspondent.

A slow maturing of democracy

More Latin Americans now trust the government than the army

From The Economist print edition

DESPITE the recession which rippled across the region over the past year, Latin Americans are more supportive of— and satisfied with—their democracies and their governments. More of them favour the market economy, and most take a dim view of Hugo Chávez, Venezuela’s radical leftist president. Those are among the findings of the latest Latinobarómetro poll taken in 18 countries across the region and published exclusively by The Economist. Because the poll has been taken regularly since 1995, it tracks changes in attitudes across the region.

This year’s poll was taken in late September and October, when many countries in the region were starting to pull out of the downturn. Latin Americans felt the recession, but in most places only moderately. Respondents describing the economic situation as “bad” or “very bad” increased from 35% last year to 40% this year, while those calling it “good” or “very good” fell to 43% from 47%. Unemployment edged ahead of crime as respondents’ main concern, as it was in all the previous polls except last year’s (though in seven countries crime remains the number one worry).

Yet this did little to diminish Latin Americans’ increasingly sunny mood. Support for democracy is at its highest level since the late 1990s, up 11 points from its trough in 2001. A clear majority across the region are now committed democrats (see table 1 and chart 2). Elections that ushered new presidents into office brought the customary boost in support for democracy in El Salvador and Panama.

In Honduras so, seemingly, did the coup in June against Manuel Zelaya, the elected president. Among respondents in that country, 58% disapproved of the coup; in the region as a whole, only 24% of respondents approved of it. (But 61% of those polled in Brazil, 58% in Mexico and 42% in the region agreed that the army should remove a president if he violates the constitution, as the coup leaders in Honduras claimed of Mr Zelaya.) Meanwhile, there were big falls in support for democracy in Colombia and Ecuador.

Even more strikingly, satisfaction with the working of democracy has increased sharply, to its highest level since the polls began (chart 3). Trust in democracy’s basic institutions is also growing steadily, albeit from low levels (chart 4). Those saying that democracy cannot exist without political parties have increased steadily, to 60% from 49% in 2001, when amid economic collapse protesting Argentinians shouted at their politicians, “Que se vayan todos” (“kick them all out”). For the first time since Latinobarómetro began polling, more respondents now approve of their governments than trust the armed forces—a milestone in a region with a long history of military interventions in politics.

All of this is in marked contrast to the last recession in the region in 2001-02, which undermined Latin Americans’ faith in democracy. One difference this time is that many do not seem to blame their governments for the downturn. Another is the sense of greater well-being generated by five years of faster economic growth until 2008 and, in many countries, more effective social policies and some income redistribution. The fact that democracy has brought political change, allowing the left to come to power in many countries for example, also has an impact.

All this seems to point to a slow maturing of democracy in Latin America. “There’s an important increase in the legitimacy of governments, which is good for democracy,” says Marta Lagos, Latinobarómetro’s director, though she cautions that it is also providing fuel for the spreading habit of presidents seeking re-election.
Greater faith in democracy has gone hand-in-hand with more support for the market economy—despite the financial crisis (chart 5). But there is disenchantment with markets in Colombia, even though the country all but escaped recession. That may be because of the collapse of several big pyramid-savings schemes, or because unemployment has risen sharply. One in three of those polled across the region now say that privatisations were beneficial for their country, up from 22% in 2003.

There are hints, too, of greater social liberalism. Those who say they would not like to have homosexuals as neighbours have fallen from 59% in 1998 to 29% this year. On the other hand, 36% say that women should stay at home, rather than go out to work, the same number as in 1997. A similar proportion say that men make better political leaders than women.

The upbeat mood is particularly striking in Brazil and Chile, where two-thirds of respondents said their country was progressing (Panamanians and Uruguayans were not far behind). Even the notoriously curmudgeonly Peruvians have warmed a bit to democracy. But Mexicans are gloomier, unsurprisingly given that the economy shrank by 10.1% in the year to June. So in some ways are Argentinians: not only do only 25% approve of their government, only 4% of those polled thought the distribution of income was fair and only 13% think any progress has been made over the past two years in reducing corruption (compared with a regional average of 39%).

The poll offers a warning to Mr Chávez. Though 45% of Venezuelan respondents still support his government, that is down from 65% in 2006. And although he has nationalised many businesses, 81% of them say that private enterprise is indispensable for economic development, a big increase on previous years. Support for the market economy among Venezuelan respondents has also surged.

The poll also suggests that Mr Chávez’s image in the region is much less favourable than that of many other leaders, and especially than that of Barack Obama (chart 6). The advent of Mr Obama has boosted his country’s standing in the region: 74% of respondents had a favourable opinion of the United States, up from 58% last year and the highest figure since the polls began. Nevertheless, more respondents now see Brazil as the most influential country in the region, ahead of the United States and Venezuela. But the influence of the United States is ranked higher than Brazil’s in the northern part of the region.

Latinobarómetro is a non-profit organisation based in Santiago, Chile, which has carried out regular surveys of opinions, attitudes and values in Latin America since 1995. The poll was taken by local opinion-research companies in 18 countries and involved 20,204 face-to-face interviews conducted between September 21st and October 26th 2009. The average margin of error is 3%. Further details at


Only a few months ago, Latin American leaders hailed the Obama administration as a new beginning in hemispheric relations. But now, the honeymoon is over.

Brazil, the biggest country in the region, perhaps emboldened by its steady economic growth, oil discoveries and a recent cover story in The Economist magazine headlined “Brazil takes off,” is stepping up its criticism of U.S. foreign policy. And several of its neighbors are going along.

The U.S.-Brazilian spat over the Nov. 29 elections in Honduras is the latest in a series of recent confrontations after an eight-month love affair. President Barack Obama was widely applauded at the April Summit of the Americas in Trinidad and Tobago and got much applause in June when Washington joined the rest of the region in voting to lift Cuba’s 5-decade-old suspension from the 34-nation Organization of American States.


But in recent weeks, the elections in Honduras and Brazil’s open support for Iran, as well as Colombia’s decision to allow U.S. anti-narcotics troops to use its military bases, have soured the atmosphere.

• On Honduras, Brazil — supported by Venezuela, Argentina, Bolivia, Ecuador and Nicaragua, among others — has refused to recognize the recent election. On the other hand, the United States — supported by Colombia, Peru, Costa Rica and Panama — says it will recognize the Honduran vote.

Both sides have a point. Brazil and its friends argue that recognizing an election convened by a de facto government would set a bad precedent and encourage coups in other countries. U.S. officials counter that the Honduran election was planned long before the coup, and that most of the current Latin American democracies were born out of elections convened by de facto regimes.

In addition, critics of the Brazilian position point out that it doesn’t make sense to impose sanctions on Honduras, which held multiparty elections, while demanding to lift sanctions on Cuba, which hasn’t held a multiparty election in five decades.

• On Iran, Brazilian President Luiz Inácio Lula da Silva recently gave a red-carpet welcome to Mahmoud Ahmadinejad, giving Iran’s racist president a much-needed international image boost after the United States and much of the world blasted Iran’s nuclear program and Ahmadinejad’s dubious election victory earlier this year.

In a telephone interview, Arturo Valenzuela, the head of the U.S. State Department’s office of Western Hemisphere affairs, downplayed the rift in U.S.-South American relations. He said Brazil and Washington see eye to eye on most issues, although he highlighted U.S. concerns about Lula’s support for Iran.

“I don’t see a worsening of relations,” Valenzuela told me. “We are disappointed about Brazil’s vote [on Iran’s nuclear program] at the United Nations IAEA, because it was a vote in which China, India and Russia agreed, and Brazil abstained.”

He added, “We also appreciate the fact that many countries, including Argentina and Uruguay, voted in support of a Canadian-sponsored human rights resolution that criticizes Iran on human rights, in which Brazil also abstained.”


Why is Brazil taking a more confrontational stand? Some Brazil analysts say that widespread optimism about Brazil has gone to Lula’s head, while others attribute it to Brazil’s quest for Third World votes in its campaign for a permanent U.N. Security Council seat.

Most likely, however, it has to do with Brazil’s domestic politics. Brazil will hold presidential elections in October, and Lula’s candidate, government chief of staff Dilma Roussef, is trailing Sao Paulo state Gov. Jose Serra in the polls.

Both Roussef and Serra are left-of-center candidates. Lula may be trying to make sure that his candidate is not outflanked on the left, and could be preparing the ground to cast Serra — who has criticized Lula’s embrace of Ahmadinejad — as a candidate with weak “progressive” credentials.

My opinion: Obama will prevail over Lula on the Honduran crisis. Already, the 27-nation European Union is inching toward the U.S. position. And after the Jan. 27 inauguration of President-elect Porfirio Lobo, the Honduras crisis will fade out of the headlines and more Latin American countries will quietly recognize the new government.

Still, U.S.-Latin American relations may not go back to what they were a few months ago. Obama has won many friends by departing from former President George W. Bush’s arrogant foreign policies. But not being Bush is no substitute for a proactive policy in Latin America.

Unless Obama pays more attention to the region, there will be more cracks ahead in U.S.-Latin American ties.