While Americans and Europeans, residents of “rich countries,” have spent the last few years fretting over their economic future and increasingly embittered with their governments, something remarkable has unfolded quietly in a region that receives little international attention. Latin America now finds itself in the midst of a full-fledged economic miracle.
The region that brought the term “Banana Republic” to the international lexicon of mockery, once the home of dysfunctional economies, runaway inflation and outrageously incompetent regimes, has become, for the most part, home to responsible governments producing impressive economic results and earning the respect of their people.
With the notable exception of Venezuela and its few imitators, Latin economies are booming. In some — Brazil, for example — the country not only moved quickly out of the global recession but emerged at such a scorching pace that the most serious challenge for policy-makers is slowing down the economy lest it overheat. With the United States and Europe struggling to keep from plunging back into recession, Brazil’s economy grew at a blistering 8.9 percent in the first half of 2010.
The latest analysis from the International Monetary Fund predicts 2010 GDP up 7.5 percent in Brazil, just one example of a regional phenomenon. Brazil, Peru, Argentina, each should grow more than 7.5 percent, a number that American and European leaders would not contemplate even in their wildest prosperity fantasies.
Chile, which suffered a devastating and costly earthquake this year, will still expand 5 percent. Uruguay’s 2010 forecast stands at 8.5 percent, Paraguay at 9 percent and Colombia, still fighting — although winning — a war against leftist insurgents should expand 4.7 percent.
The one country remaining in recession is Hugo Chavez’s Venezuela, whose economy the IMF predicts will continue shrinking this year because of “severe supply bottlenecks, challenges from capital flight and generally weak policy frameworks;” in other words, bad government policies. Unlike the rest of the region, Venezuela also suffers from corrosive inflation, about 30 percent per year. The rest of Latin America has managed to keep inflation in single digits.
To be sure, poverty remains an urgent problem in most of the region, and prosperity has been too slow to reach the poorest. But a middle class is gradually emerging in most countries. Corruption and a weak education infrastructure are still a problem. Also troubling is how much of the growth still comes from selling commodities — raw materials — to other countries, particularly China. Commodity exports risk plummeting with sudden drops in price or demand. But some Latin nations are doing a good job of diversifying and salting away their riches in rainy-day funds.
The contrast with the developed world could hardly be sharper. After barely emerging from a recession that nearly became a depression, rich countries are struggling to avoid a double-dip, a return to recession. The chief economist of Goldman Sachs just told investors that in the next six months the U.S. economy will be either “fairly bad” or “very bad.” The International Labor Organization has warned that continuing high unemployment threatens to bring social unrest.
North America and Europe, even with deficit-ridden economies, remain much wealthier countries than Latin America. The average citizen lives at a much higher level, but pressures are mounting. Dissatisfaction is simmering on both sides of the Atlantic. Economic anxiety is making the ground fertile for silver-tongued politicians offering populist, crowd-pleasing, but sometimes idiotic economic and social prescriptions. Europeans and Americans are unclear about whether the answer lies in cutting government spending or boosting it.
In the United States, the political system appears designed to function best in good times. These days, voters are increasingly disenchanted with politicians that seem unable to work together, for the country’s best interest, during a critical time in the nation’s history.
By contrast, Latin America, the land where democracy had such trouble finding its way to people’s hearts, has found a strong consensus in favor of democracy. In many countries presidents enjoy stratospheric approval ratings thanks to the strong results they have produced. There is growing agreement that the best approach is to fight poverty aggressively with market-friendly and fiscally responsible policies alongside special programs to lift up the poorest and build up the middle class.
Should Americans and Europeans find the news from Latin America depressing? Not at all. Rich countries spent decades telling the poor how to run their economies. Now the students’ success may inspire and perhaps even instruct the teachers.
Frida Ghitis, writes about global affairs for The Miami Herald.
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