Latin America: prospects and development

All international analysts agree that Latin America has excellent prospects and will continue its process of economic expansion in the coming years. This growth, however, according to the recent analysis published by the Inter-American Development Bank, is characterized by a division into two groups of countries that run at two different speeds and have distinct prospects and trends.

On the one hand, the Brazil-led bloc emerges, bringing together commodity-exporting countries and moving toward emerging markets; on the other hand, the Mexico-led bloc maintains a model more dependent on industrialized countries.

The 2008 crisis undoubtedly reshaped the balance of power in the global scenario, creating a new economic order not exactly analogous to the previous one. The emergence of the dynamic BRIC countries, but not only them, triggered a mechanism with economic and trade repercussions for the Latin American Subcontinent as well, which was able to benefit from these changes.It is clear from the compiled report that the Latin American nations most tied to the emerging countries have better macroeconomic conditions, and the Inter-American Bank's thesis tends to show how Latin America's solid economic growth is not uniform, but masks two different speeds.

The first model led by Brazil, where GDP growth in 2011 is projected to be around 4.4%, is very well positioned in the international scenario and has prosperous prospects. The export of raw materials to major emerging economies, and Asian ones in particular, further fuels growth and is a real key to the development of the Subcontinent. In this group, in addition to the aforementioned Brazil, are Argentina, Bolivia, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay, Venezuela and Trinidad & Tobago, and these are countries that benefit not only from high commodity prices but also from the strong inflow of foreign capital.

In contrast, the group headed by Mexico, whose members have much stronger trade relations (especially in goods and services) with industrialized economies, will register +2.7%, due to the slow exit from the crisis of the countries that constitute their main markets, especially the European Union. In this bloc, which includes commodity importers, are Mexico and all Central American and Caribbean countries (except Haiti).

The data in the analysis testify to the differences even between the leading countries on the two sides. Brazil in 2006 exported 9% of its products to its BRIC (Russia, China, and India) “members,” and in 2009 the figure increased to 17%; in contrast, exports to industrialized countries experienced a decrease from 50% in 2006 to 44% in 2009. The Mexican economy's trend is shaped differently, with the share of exports to the BRICs accounting for only 3% of the 2009 total, while the figure for exports to industrialized countries reaches 91%. In a global context in which the recovery from the crisis that began in 2008 has been driven by emerging countries, it is therefore understandable why the Inter-American Bank saw fit to make this distinction.

The economic challenges and trade opportunities that Latin American countries will face in the coming years will mainly concern their ability to increase and consolidate their presence in Asian, European and U.S. markets. The current international situation favors the rise of the Latin American macro-area, whose governments, however, will have to be able to bring to fruition additional macroeconomic, fiscal and trade measures aimed not only at reducing vulnerability and dependence on the outside world, but also at containing the inflationary threat, fueled by rising oil and food prices.

Despite the different peculiarities of the Latin American economy, the road to more sustainable economic development that can enable players in this region to play an increasingly important role in the globalized context is a viable one.

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