Latin America Stays Strong amid Economic Stagnation

Brazil’s President Dilma Rousseff riding towards a future of better infrastructure

As developed nations continue to stagnate and Asian tigers appear to be slowing down, Latin American countries remain resilient.  Brazil launched a campaign for competitiveness, Argentina’s trade surplus soars and Mexico’s middle class remains.  Even Haiti received praise for measures to improve its business environment.

Through a new campaign for competitiveness, President Dilma Rousseff is determined to reduce the business killing deficiencies in infrastructure and tax structure, known as the “Brazil Cost.”  She plans to continue reducing interest rates, below the historic low of 7.5 percent, while cutting certain taxes, increasing the rate of loan disbursements by 8 percent, and reducing electricity costs by 16.2 percent for consumers and 28 percent for industry.  Additionally, she has vowed more stimulus amid a 26 percent drop in job growth in the first half of 2012, as well as massive improvements in transportation infrastructure to break the ‘logistical bottlenecks’ that contribute to the “Brazil Cost.”

Moreover, her agenda includes an historic affirmative action law, which seeks to ensure that half of all students at Brazil’s 59 federal universities come from public schools.  The new bill, known as the Law of Social Quotas, was approved 80-1 by the Brazilian Senate in early August.  Officials expect the number of black students at these universities to rise from 8,700 to 56,000, a small step in the right direction in a country where 51 percent of citizens identify as black or mixed-race.

Further south, Argentina’s protectionist trade policy contributes to a growing trade surplus, while foreign investment continues.  President Cristina Fernandez has been widely criticized for her restrictions on imports, expropriation of foreign corporations and measures to ban the purchase of US dollars.  While she might have angered her trading partners – Japan, EU, and US filed complaints to WTO – her policies have not scared away all foreign investment and the nation’s trade surplus has doubled to $1.64 billion in August.   Procter and Gamble has agreed to invest $120 million in a new packaging plant, Monsanto will invest $329 million in a corn seed factory, and Russia’s state-owned Gazprom has agreed to supply liquefied natural gas (LNG) to Argentina’s YPF.

In 1960, eighty percent of Mexico’s population lived in poverty; today 62 percent identify as middle class and extreme poverty now effects less than a quarter of the population.  The change manifests most strongly in immigration, which reached net zero for the first time in 2011.  Though the recession lowered Mexico’s per capita income by 9.3 percent, economic opportunities and more stable employment at home have continued to outcompete with US alternatives.

Meanwhile, as Caribbean economies struggle to grow, Haiti received praise for new measures, which seek to improve the country’s business environment.  The government reduced the time it takes to acquire a construction permit from 1,110 days to 60 days and lowered the registry time for new businesses from 180 days to 10.  Another $300 million industrial park, funded by the US government and the Inter-American Development Bank (IADB), is set to create 60,000 jobs.

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Follow Up

Tiny Uruguay outshines neighbor Argentina with investors

A tale of two neighboring leftists

9 September, 2012

McClatchy Media

[Uruguay], the long-overlooked South American nation, which lacks Argentina’s flair for political melodrama and Brazil’s clout and ambition, finally is emerging from their shadows, becoming a darling among investors and even a model for democracy.

Uruguay was the only South American country in the “Full Democracy” category.  Its overall 17th rank was even ahead of the United States, at 19, and the United Kingdom, at 18.

Uruguay surpassed the United States in the index in civil liberties, functioning of government, and electoral process and pluralism.

Alberto Bernal, with Miami-based Bulltick Capital said, “[In Uruguay], It is not a question of ideology. You can be as much of a leftist as you want, but don’t change the rules of the game. If you say you are going to respect laws, then respect them.” By contrast, with Uruguay’s neighbor, “There is no certainty in Argentina, because you know the rules of the game could change.”

http://www.kansascity.com/2012/09/09/3804926/tiny-uruguay-outshines-neighbor.html#storylink=cpy

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