Latin America’s Long March Sideways
Slow growth, demands for greater social inclusion, and better conditions for the emerging middle class are Latin America’s main challenges today, and none will be easy to address. As some leaders are already recognizing, moving toward the political center is the only sensible path to political survival and eventual growth-enhancing economic reforms.
NEW YORK – The year 2019 could have been a memorable one for Latin America, with new governments in Brazil, Colombia, and Mexico promising change and a better future. It also looked like the year when Venezuela’s dictator, Nicolás Maduro, would finally fall, ending the world’s worst ongoing economic and humanitarian crisis – and likely one of the worst since World War II. Instead, 2019 became a year of regret.
The International Monetary Fund projects that GDP growth in Latin America and the Caribbean was only 0.2% in 2019, down from an anemic 1% in 2018, making it the world’s slowest-growing region. While the IMF expects that growth to rebound significantly in 2020, to 1.8%, Latin America will continue to be the world’s worst-performing regional economy. More important, the pace of growth will be insufficient to avoid an increase in poverty and unemployment, which will cause greater social unrest, a trend that became visible to the world in October, when Ecuadorians and Chileans poured into the streets to demand change.
But Latin America’s economic trends have less to do with the ideological leanings of the region’s governments, which cover a wide range, than with the hard realities imposed by external conditions. Low commodity prices, weak global growth, and trade tensions between the US and China are exacting a heavy toll. For some countries, such as Peru and Chile, the Chinese economy’s slowdown is the main culprit. For others, such as Mexico and Colombia – where oil plays a bigger role and the US is the largest trading partner – it is weak global demand. Moreover, inflows of foreign capital are down, despite increased global liquidity. Risk is valued differently now, and the region does not look as attractive as it used to. None of this is expected to change in 2020.