WorldCity Business Magazine

Tempering the predictions

by Ken Roberts

Economic forecasts for Latin America are optimistic. But are too many unknowns looming in the background?

When everyone is nodding in agreement, I get a little nervous.

And pretty much everyone is nodding in agreement on one thing: This should be another solid year for Latin America and the Caribbean, not to mention the United States and the global economy.

Granted, we had a few nasty years in the region not too long ago, so we are still riding the tail end of the recovery. And free-trade progress appears like a non-starter. But we have sustained democracy and fairly stable growth in the hemisphere and that is unprecedented, if even a little scary.

Even the new bogeyman on the block, Venezuela’s Hugo Chvez, is albeit arguably a democratically elected president. Castro is not, but he is largely irrelevant, at least while alive.

There is some concern in the business community over the current string of elections across the hemisphere and the number of left-leaning candidates with a real chance of taking control of governments. But it was not so many years ago when Luiz Incio Lula da Silva was running for Brazil’s presidency, and there were fears that he would create a socialist state of marked magnitude. Now there are executives who will openly say they would like to see Lula re-elected.

Despite the positive forecasts, we need to be aware of where trouble is brewing.

Commodity prices in the region are remarkably high, driven up by China’s demand, which in turn is buoyed by U.S. demand for Chinese imports. And those are bolstered by, what? Everyday low prices at Wal-Mart?

And then there are the mid-term elections in the United States, when one-third of the U.S. Senate and 100 percent of the House of Representatives are up for re-election. Personally, I don’t see the elections as bringing any significant changes. There’s so much money in politics these days that there are few groundbreaking elections. These mid-term elections promise to be just another disappointing case of politicians gorging at the lobbyists’ trough.

Should we be worrying about calamity in Iraq? Terrorist strikes? A natural disaster? If I sound like Chicken Little it’s because the same lesson applies here: The sky isn’t falling. Not at all. Viewed in the context of what has transpired over the past century, including two devastating world wars, the current skies are blue and cloudless.

As for Latin America, perhaps we should worry less about a crisis or major economic tremor and more about its slow descent into irrelevance. That is, I think, a fear gnawing at some of the business leaders for Latin America based here. The stronger economies of Asia China, India, South Korea, Malaysia, etc. are advancing rapidly onto the global scene. But Latin America’s remain standstill, battling the same old problems.

Latin America and the Caribbean still have to make structural changes to their governments and economies. Even more, they must change the mind-sets of their people. As challenging as the former has been over these last decades, the latter requires a far tougher and slower evolution.

The United States’ global hegemony is threatened not by the governments of China, South Korea, Taiwan and Malaysia but by their people’s drive and determination for more and better. Were it not for the new acronym creeping into the globalization lexicon, BRIC, there would be even greater concern. BRIC stands for Brazil, Russia, India, China but any handicapper would re-order it as CIBR at best, or CIRB.

That said, it looks good. Too good to suit me, in fact. To borrow a phrase used by my friend, local economist Antonio “Tony” Villamil, it seems that “cautiously optimistic” is the best approach for 2006.