At a conference in Chile last week, I heard a statement that left me thinking: “Latin America has always been the land of hope, and the land of frustration.”
The line, by former Chilean President Sebastián Piñera, couldn’t be more timely this week, as much of the region is facing a perfect economic storm, and a new era of disenchantment.
South American countries, which enjoyed an economic fiesta in recent years thanks to record high world prices for their commodity exports, are suddenly finding themselves simultaneously hurt by China’s slowdown, lower commodity prices, a flight away from developing countries by international investors, and a stronger dollar that makes their imports of manufactured products more expensive.
Complicating matters further, Brazil, the giant economic engine that pulls several of its neighbors, is suffering one of its worse economic and political crises in recent years. Its economy is expected to have a negative growth rate of about 2 percent this year.
For the first time in 25 years, with one exception in 2009, Latin America’s overall economic growth may be negative this year.
What a difference with the kind of headlines we were seeing about the region not too long ago. As recently as in late 2009, The Economist magazine ran a cover story under the headline “Brazil takes off.” It was only in 2012 that The Economist proclaimed, in another cover story, “The rise of Mexico.” In 2013, Foreign Affairs magazine ran a story titled “Mexico makes it,” and many of us referred — with various degrees of confidence — to “Mexico’s moment.”
But Mexico, which was supposed to be growing at 4 percent rates, will grow by only about 2.2 percent this year. Argentina is expected to grow by an anemic 0.7 percent this year. And oil-rich Venezuela will be Latin America’s worst performing economy, with an expected negative growth of 7 percent this year, and a nearly 200 percent inflation rate, the world’s highest.
Not surprisingly, several of the region’s presidents’ popularity rates have sunk to all-time lows. The popularity of Brazil’s Dilma Rousseff has fallen to 8 percent, and the approval rate of Peru’s Ollanta Humala is about 17 percent, Chile’s Michelle Bachelet, 23 percent; and Venezuela’s Nicolás Maduro, 24 percent.
Alejandro Werner, the head of the IMF’s Western Hemisphere department, told me in an interview that Latin America’s new era of slower-than-expected growth “is likely to last for several years. There is nothing in sight that would allow us to say today that Latin America will once again grow at 4 percent annual rates within, say, seven years.”
My opinion: Latin America’s new era of disillusion — in many cases made worse by populist demagogues in Venezuela, Argentina and other countries that have squandered their countries’ recent bonanzas — should become an opportunity for the region to become less China-dependent, diversify its exports, focus on education, innovation and infrastructure, and to say “never again” to its most recent mistakes.
Never again should Latin America postpone investing in quality education and infrastructure. And never again should Latin Americans believe in authoritarian leaders who scare away investors, co-opt democratic institutions and constantly pick fights to justify grabbing ever growing powers. The region has seen too many eras of false hopes, and they have always ended in disillusion. It’s time to break the cycle.