Latin America
Related: About this forum"Brazil is becoming Argentina, Argentina into Ven., Ven. into Zimbabwe"
http://m.asia.wsj.com/articles/SB10001424052702303370904579296352951436072?mg=reno64-wsj
Because both sets of countries share similar geography, culture and history, this divide makes the continent today something of a controlled experiment in economics. For almost a decade, the economies of the Atlantic countries have grown more quickly, largely thanks to rising global commodity prices. But the years ahead look far better for the Pacific countries. The region as a whole thus faces a decision about (as it were) which way to face: to the Atlantic or the Pacific?
There is good reason to think the Pacific-facing countries have the edge. Much of the continent is "paying the costs of exaggerated protectionism and…irresponsible policy," said Alan Garcia, Peru's former president, at a recent conference in Mexico City. "That is not the Latin America that I see in the future. I see the future in countries like Chile—which has been a good example of how to do things for a while—Colombia, Peru and Mexico."
In 2014, the Pacific Alliance trade bloc (consisting of Mexico, Colombia, Peru and Chile) is slated to grow an average of 4.25%, boosted by high levels of foreign investment and low inflation, according to estimates from Morgan Stanley. But the Atlantic group of Venezuela, Brazil and Argentina—all linked in the Mercosur customs union—is projected to grow just 2.5%, with the region's heavyweight, Brazil, slated to grow a meager 1.9%.
The diverging trend lines between the two Latin Americas may last long past 2014. When China's economic growth was at its peak, the rising giant snapped up Venezuelan oil, Argentine soy, Chilean copper and Brazilian iron ore. But as China's economy has slowed, commodity prices have followed suit, hitting the Atlantic economies hardest. Brazilian Finance Minister Guido Mantega used to boast that his country's model of economic development would soon spread throughout the world. But Brazil—with its high taxes, red tape and tariffs—did little to prepare for the day when commodity prices might weaken.
Economists say that countries in the free-trading side of Latin America are better poised to prosper, with higher productivity gains and open economies more likely to attract investment. The Pacific countries, even those like Chile that still rely on commodities such as copper, have also done more to strengthen exports of all kinds. In Mexico, manufactured exports now account for nearly a quarter of annual economic output. (The figure for Brazil: a paltry 4%.) The Pacific economies are more stable too. Countries such as Mexico and Chile enjoy low inflation and bulging foreign reserves.
By contrast, Venezuela and Argentina are starting to resemble economic basket cases, with high inflation and weak government finances. In Venezuela, inflation is running above 50%—on par with war-ravaged Syria. President Nicolás Maduro, the successor to the late populist Hugo Chávez, is doubling down on price controls to try to tame inflation. The fairly predictable result: widespread shortages of everything from new cars to toilet paper. A popular new app uses crowdsourcing to tell residents of Venezuela's capital where lucky shoppers have found, say, meat—allowing others to rush to the store and snap up the precious stuff.
This Latin America's finances are unimpressive too. Among the three worst performing currencies in the region in 2013 were those of Venezuela, Argentina and Brazil. Argentina's peso, for instance, fell 32% against the dollar at official rates—and some 47% on the black market.
Argentina has also suffered from heavy-handed regulation. In Buenos Aires, the southern hemisphere's summer months have brought soaring temperatures—and regular blackouts. The government slapped price controls on energy prices back in 2002, hoping to help the poor overcome the 2001 financial collapse. But what was supposed to be a temporary measure became permanent. Electricity companies scared off by the price controls stopped investing in the city's aging electricity grid.
Even Brazil, which has had far more responsible economic management than Venezuela or Argentina, is starting to struggle with rising prices and a boom in credit that is starting to turn. Last year, one Brazilian summed up the Atlantic bloc harshly: "Brazil is becoming Argentina, Argentina is becoming Venezuela, and Venezuela is becoming Zimbabwe."
A key moment in creating the two Latin Americas came in 2005, when Brazil, Argentina and Venezuela (then led by Mr. Chávez) lined up to kill the proposed Free Trade Area of the Americas—a free-trade zone stretching from Alaska to Patagonia and promoted by President George W. Bush. Troubled by the FTAA's demise, the Pacific Alliance set out to create its own free-trade area, eliminating tariffs on 90% of goods and setting a timetable to eliminate the rest.
The diplomacy practiced by this half of Latin America differs too: While the Atlantic bloc often views the U.S. with suspicion or outright hostility, the Pacific countries tend to have closer ties to Washington. "We set out to create the Pacific Alliance because we wanted to set ourselves apart from the populists," said Pedro Pablo Kuczynski, a former Peruvian finance minister. "We wanted a thinking man's axis."
Many of the region's young, the bulk of the population, have cast ballots for politicians such as Mr. Chavez, who offered painless growth by printing money. These youthful voters may have painful lessons ahead of them.
"In the end, the results from the different blocs will resolve the debates," Mr. Kuczynski said, "but bad ideas take a long time to die."
= new reply since forum marked as read
Highlight:
NoneDon't highlight anything
5 newestHighlight 5 most recent replies
truebluegreen
(9,033 posts)What a surprise.
Flatulo
(5,005 posts)truebluegreen
(9,033 posts)do you think they are giving us the whole picture?
Marksman_91
(2,035 posts)Alright, big picture is the price controls resulted in even more scarcity. Businesses barely have any products to sell now. And while Maduro recently declared that the minimum wage would be raised by 10%, that is still not nearly enough of what it should be. Inflation in 2013 was over 50%, and even higher for basic food products. A 10% minimum wage increase is barely gonna make a difference. 2013 had a record number of murders, over 23,000, and that is coming from OFFICIAL numbers in Venezuela. Criminals are running around unchecked and find it easier to find weapons on the street than in the US. This is reflected by the recent murder of Mónica Spear, former Miss Venezuela and telenovela actress, and her husband, which you probably heard of in the news. Last month there was also a blackout that affected most of the country, and Maduro and his ilk were quick to claim that it was "sabotage" by the opposition despite the fact that there was no consistent story regarding how that could've been done. In fact, they militarized the entire Guri facility after the previous big blackout before that one, which occurred some months before, and yet this most recent one still happened. Sure as hell seems like it was lack of maintenance and negligence from the government that caused the blackout, not a fucking "sabotage".
My family still lives in Venezuela, and I still keep in touch with all of my friends who are still there, and from what they tell me, things only keep getting worse every day. One has to do lines in the supermarket that last hours just so they can buy milk or even harina pan, the most common product used in Venezuelan cuisine, and it's not happening in just certain places, but rather all over the country, so the scarcity sure as hell isn't caused by hoarders either. Other than that, there are barely any products now that are themselves produced in Venezuela, simply because all the lands taken away by the government have been really poorly handled to the point of becoming unproductive, so now most products actually have to be imported.
Is that enough of a "whole picture" for you?
truebluegreen
(9,033 posts)People don't have enough money to buy things now, but they will have enough to buy imported goods from other countries, and send what money they have to those countries? This will improve the local economy how?
You need a labor movement, and local investment, not free trade. So do we. We used to have one, until those fucks over at the WSJ, and elsewhere, sold the idea that if we just deregulated, had free trade agreements with the whole planet, exported our manufacturing and gave more money to rich people everything would be great for everyone. Didn't work, did it?
Bacchus4.0
(6,837 posts)therefore, these products are cheaper to the consumer. Venezuela imports 70% of its food so it is highly dependent on imports. If Venezuela didn't have some type of favorable trade agreements with surrounding nations, prices would be more expensive. Under the chavista administrations they have NOT invested locally as you suggest. Furthermore, Venezuela doesn't have the capacity to be self sufficient so couldn't restrict imports much even if it actually wanted to. Now they should invest in other industries, but the state run ones are pretty much failures making the situation even worse than before.
Now, free trade agreements might not improve the overall economy but some products will indeed be cheaper. A huge problem of course is eliminating local businesses when imported products are cheaper. See China. So in the case of the US, we were fairly self sufficent but free trade made it possible to produce more cost efficiently overseas and with the reduction on tariffs make those overseas products even cheaper than US ones. I think free trade is a net benefit to those countries that are doing most of the exporting.
The alternative is to reinstate the tariffs making imports more expensive with the idea of local industry sectors to fill in the gap. But I don't see either the US or Ven doing that any time soon.
p.s. Venezuela is in Mercosur and ALBA which are free trade agreements yet you only see opposition to FTAs when it involves the US.
spanza
(507 posts)for development, even in the WTO agreements. And the last 3 decades have showed that it's better to be a mediocre protectionist than a mediocre free-trader. Specifically for Venezuela, I'd risk saying that with its current structure, almost any free-trade agreement would be a handicap.
spanza
(507 posts)But nothing has been done to change this scourge in the last decade. One could even say it got worse when one sees how the govt has been subsidizing imports through an incredibly overvalued official exchange rate in the last 10 years of oil bonanza.
Some here applaud at what they consider to be a positive kind of populism and it's their choice. But here's one of its most obvious effects for an oil state economy evolving with an open market: when in boom, search for immediate satisfaction and electoral support through final consumption imports (way cheaper than local goods due to 1. the complete abandon of trade barriers and 2. the overvalued bolivar). No interest in favoring the local industrial sector and no technical development; they bear fruits in the long-term. That's why in Venezuela, during the current oil boom (2004-), you see a reduction in unemployment without any significant increase in formal employment and a fast-growing economy with a stagnating manufacturing sector.
We are consuming fast what we're getting from the windfall, but we're "only" consuming foreign goods. All in all, money is flowing from the state but we're missing a historic opportunity of promoting local production. We need to pick some strategic sectors in our industry, protect them and develop linkages. But I stopped expecting this from our current administration long ago.
Flatulo
(5,005 posts)Crony socialism coupled with theft on a grand scale do not make an economic system. They make a slow-motion train wreck.
No amount of spin can disguise the fact that poor VZ, blessed with an abundance of the most valuable substance on earth, is circling the drain.
I'm not in favor of unrestricted free trade. But you need competent people to run the industries on which the country depends. The regime values loyalty and adherence to doctrine over competence. They've chased most of the technical and managerial class out of the country, vilifying their ability to create wealth. What's left are lackeys and useful idiots and a massive, dependant underclass
The results speak for themselves.
