Friday, December 22, 2006

The year 2006: Some notes before it goes away

The year 2006 is close to its end and it is appropriate to make some balance for Latin America economies , although not a detailed one, but emphasizing some elements which can be part of new trends. Let take a brief look to some of the most important on the list:

a.- The year 2006,was an election year in Latin America: Brazil, Mexico, Nicaragua, PerĂº, Equator, Colombia . No matter the political environment and its tensions , it looks like each of these economy went through quite well in terms of its overall perspective to continue growth. Venezuela is a different case because of its oil resources endowment , it can take the risk of some luxuries.-
b.- Growth has reduced poverty and Unemployment in Latin America in the year 2004, 2005 and 2006, so Growth should be the first priority for the year 2007 ,to get further gains on both social illness .It seems that a majority of Latin America countries , believes in the power of markets to create wealth .-
c.- Quite on the contrary to some pessimism at the beginning of the year 2006, this year, was very positive in terms of promoting free trade, as one of the key condition for growth .Uruguay, Peru, Equator ,Colombia worked hard to get through a Free Trade agreement with the USA economy .-
d.- It follow that the Latin America economies, are ready to pursue further steps to complement free trade and Growth ,moving forward to a higher stage of economic performance, throughout additional steps like reforming the still heavily centralized colonial State , and open up new opportunities for private sector throughout microeconomics reforms such as those related to the entry barriers to begin new small business ,or greater flexibility to participate on public infrastructure.-
e.- It is also clear the increasing pressure for a greater social balance to distribute the benefit of growth, specially towards those more vulnerable to be left behind. Poverty reduction requires constant policy effort, simultaneously orientated to both: short run and long run . Growth by itself is not enough, the trickle down policy ,is far away from being the right policy in Latin America economies to reduce poverty. Chilean economy experience is quite useful on that issue.-
On the negative side, it is the attempt of moving backward the clock of economic history , when national leaders try to fool their own people with old solutions to new problems. The Traditional welfare State is on its way over to a new Services orientated State, which provide training, information, financial support for productive purposes , good quality of public education and public health, and lower entry barrier for new small business. Price controls, State intervention on the sphere of private sector, weak institutional framework, make a very dangerous policy mix. Two key countries like Brazil and Mexico ,have already settle down the way.
The Spaniard Chamber of Commerce has given its forecast for the year 2007.The expectation is positive, no matter the risk of a slowdown in the USA Economy. This might be explained because Latin America is well integrate to global economy ,and at the same time has an interesting flow of capital resources coming from migrants from the advanced economies, which make the continent less vulnerable.-

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