Latam economies: South America may finally gain economic independence from the Yanquis. Most of the region is entering economic recovery, as competition for its natural resources has intensified. Higher resource prices will benefit countries open to free foreign investment. They may achieve Latin America’s centuries-old goal.
A joint survey by Brazil’s Getulio Vargas Foundation and Germany’s IFO Institute showed a sharp improvement in business sentiment in most of Latin America. Several countries, notably Peru, Brazil and Chile, registered economic climate indexes indicating that they were on the mend. At the other extreme, Venezuela’s index reflected a continued deep recession. Mexico and Argentina registered only modest rebounds from their earlier lows.
The GVF/IFO’s index values correlate closely with the openness of national governments to foreign investment, and their attractiveness for business. Brazil, Peru and Chile all have centre-left governments, yet unlike some of their neighbours they have retained decent business climates and remain open to foreign investment.
That has benefited them in recent years, as Latin America’s resource-rich economies have profited from high commodity prices and expanding demand from China and other rapidly growing emerging markets for energy and minerals. Since China and India have continued growing throughout the global downturn, resource prices have remained relatively high and can be expected to move higher if the global recovery proves robust.
In that event, the more open economies of Latin America, particularly Brazil, Chile, Colombia and Peru, will benefit. They will also increasingly divert their trade patterns away from the colossus to the north. China has already replaced the US as Brazil’s number-one trading partner, exemplifying this.
Conversely Venezuela, which has nationalised foreign holdings in most sectors, and its autarkist allies in Argentina, Ecuador and Bolivia will benefit little, since they do not offer seekers of natural resources the assurance that their contracts will be honoured. Even Mexico is less open to foreign investment in energy, forestry and some minerals than in other sectors, so will benefit less from Asian resource demand than it might.
Latin leftists have dreamed for centuries of achieving economic independence from the US. Now some countries are finally doing so – through “neo-liberal” economic policies.