Thursday, November 07, 2019

Decade of Deception for Latin America 2011-19

Latin America’s GDP is projected to grow by 0.2% in 2019, according to an IMF report of October. This meagre growth will close the miserable second decade with an average annual growth of just 1.4% in the last nine years.

After the peak growth of 6.3% in 2010, the rate has gone down in the last nine years and ran into negative growths in 2015 and 2016. 

The good news is that it is going to be better in 2020 and possibly in the next decade.

The GDP growth rate is projected to increase to 1.8% in 2020.

The ten South American countries will together suffer a GDP contraction of 0.2 this year but will resume growth of 1.8% next year.

Central America’s growth rate will increase to 3.4 % in 2020 from 2.7% in 2019.

The changes projected in GDP growth of the major markets of Latin America from 2019 to 2020 are:

Brazil’s growth rate will increase from 0.9% this year to 2% next year.

Mexico 0.4% to 1.3 %

Argentina from negative 3.1 to negative 1.3 percent

Colombia 3.4% to 3.6%

Chile 2.5% to 3 %
Peru 2.6% to 3.6%

Even Venezuela is going to improve… from 35% economic contraction this year to just 10% contraction next year. However, their inflation will increase from 200,000 % in 2019 to 500,000% in 2020. I wonder how IMF has arrived at this exact number despite the fact the Venezuelan government figures are unreliable, some of them secret and some information which the Venezuelans themselves don’t know.

The Argentine inflation will come down to 51% next year from 54 % this year.
But the average inflation of the region will dip from 7.2% this year to 6.7 % next year ( not including Venezuela)

In the first decade of the twenty first century, Latin America underwent a paradigm shift with remarkable political stability, economic growth, Inclusive Development and a new promise. There was a new wave of confidence and optimism when the region grew by 6.3 % in 2010, in the aftermath of the global financial crisis. There was unanimous acclaim when the first decade was named as the “ Decade of Latin America”. It was also called as the “ Decade of Growth” to contrast with the “ Lost Decade” of the eighties when the region’s economy was hit by the “ Washington Consensus” resulting in increased poverty and inequality. The decade of growth was guided by Brasilia Consensus which reduced poverty and inequality through a pragmatic and balanced mix of pro-poor and business-friendly policies.

So how does one describe this unfortunate second decade in which neoliberalism was revived in some countries but again without positive outcome. The best example is Argentina, where President Macri did everything what the Free Market told him. Result, Argentina is worse than what it was in the pre-Macri days  with more poverty, higher inflation, debt and devaluation. On the other hand, the Chavistas misused the name of socialism to ruin the country with incompetent and corrupt policies. Venezuela is in a hopeless mess politically, economically and socially. 

So let us call us this as a “Decade of Deception”. The region was betrayed by the Left as well as the Right.

Hopefully, the region will learn the right lessons and move “ up” through the Centre instead of swerving to extreme Left or Right.. It has been conclusively proven that neither 100% socialism nor Free Market can solve the problems of development. There is need for a flexible, pragmatic mix of pro-poor and business-friendly policies. 

The next decade starting from 2020 could be the Decade of Hope.

The main reason for my hope is the power of the people of Latin America. In the last few weeks and years they have taught lessons to both the Rightist and Leftist political leaders and governments.

In the recent weeks, the people of Chile, Peru and Ecuador have shown their power through protests and made their governments to reverse some policy decisions. The electors have punished both the Left and the Right in the recent elections in Brazil, Mexico and Argentina.

Political leaders from both the Right and Left have learnt enough lessons in recent years. So the governments in the coming decade would be more careful and less adventurous.They have no choice but to be more responsive to the needs of the people. 

This Power of the People is the best hope and guarantee for the democracy and prosperity of the region. 

No comments: