Summary:Despite public perception of weak Latin American economic growth and unfavorable regimes, underlying trends paint a more optimistic picture.
"The vestiges of sound fiscal policy are there," affirms Jeffrey Davidow. Davidow pointed out that the series of economic reforms attempted in the region, guided by principles commonly known as the Washington Consensus, have ended the catastrophic inflation problems felt by much of the region in past decades.
Other panelists agreed. "The last two years have actually been very buoyant," commented Richard Feinberg. Feinberg cited higher commodity prices and the recovery of the U.S. economy as positive developments in stimulating Latin American growth.
Despite this progress, however, high levels of inequality and corruption plague the region, and popular dissatisfaction has caused a push for leftist and populist leaders in many Latin American nations, which could spell trouble for foreign investment. The region also gets low scores from monitoring organizations in its protection of property rights, and for the strength of its court systems.
"All these things are very bad for investment," according to Andres Antonius. Still, said Antonius, "the important thing with these risks is not to get gloomy… but to recognize them. Those companies that do well… understand the risks, and face them head on."
So what prospects does the future hold for Latin American economies?
According to many of the experts present, one of the keys will be China. As China′s own economy soars, increasing financial flows with the Asian giant has contributed to bolstering Latin American economies.
However, the panel agreed that Latin American economies are difficult to generalize. "There are some very important distinctions," said Paul Knight. Knight maintains that while China′s explosive growth is good for nations such as Brazil, Chile and Argentina, it could be bad for nations like Mexico that compete with China in international markets. Further, concerns about China's ability to maintain its present growth loom. Nurturing other trade agreements in the region will be important to the stability of its growth.
"Trade agreements, these days… are the equivalent of strategic alliances," stated Feinberg. Agreements in the making, such as the Central America Free Trade Agreement (CAFTA), "can produce sustainable growth."
Certainly, the world will be keeping an eye on Latin American growth, watching for signs of trouble that have triggered past financial crises as the landscape of global trade continues to change. But lowered inflation and trade alliances may be reasons to believe that growth is stable, this time around. As Knight hopefully suggests, "The outcome may not be as traumatic as it has been in the past."
