The year 2007 has just began. What can we expect from it?. As usual, the new year includes some remaining events from the previous one. On this regard, it is highly probably that the year 2007 will be at the beginning a sort of follow up on issues such as oil prices, USA economy slowdown, and the decoupling from it from the rest of the global economy .
However, some key questions shall be solved:.
a.- The most important one, the USA economy slow down process and its either soft or hard landing and its expected effect on Latin America economies.. At the same time ,the so called decoupling from the USA economy arising from the rest of the global economy .The answer to this question will make a difference for Latin America, and its prospect for keeping its current rate of growth. The expectations among analyst, is for the USA economy to have a soft landing ,which means a transitory slowdown in economic growth, not strong enough to have a negative impact on the economic growth for Latin America economies. Additional data will clarify definitively the situation probably in the middle of this year.
b.- Oil Prices will continue to be on the head lines, just because it is still the key energy resource, but also because its price trends will signal the transition from the oil energy resource which the industrial economy was based on, to a knowledge based global economy capable of changing its energy matrix toward new energy sources. The faster this transition, the lower the long run oil prices will be. But it is unlikely that the speed of such transition ,will be fast enough to push oil prices sharply down below its current trend given considering a normal scenario, which means oil producer cartel react to the lower oil price, and there is not disruptive geopolitical forces in motion. Therefore it is feasible that oil prices are going to be on the range of U$$ 55 to U$$ 65 the barrel.-
c.- New energy sources, will continue to move further ahead on the global energy matrix. Wind power as energy source ,solar panels among others ,will continue to be an alternative solution . It follows that environment, will also continue to be on the spot light ,specially on issues related to energy sources. This is nothing new except that the current institutional arrangement (Kyoto Protocol) will be under stronger pressure to be left out, to clear the way to a new protocol.-
d.- Market mechanism for environment contamination will also moves on upward , as long as there is increasing information about its benefits and expected gains. The price of such financial instrument in the secondary market, the “green bonds” markets, will continues to move in the upward direction.-
e.- The local stock exchange markets will be a good alternative for investment ,specially the retail sector which still has a wide area for further growth. In Chile it has been the star sector in the last five years , and there are strong expectations for higher return this year. Its share on the stock exchange index price has increased from 2,07% in 1997 up to 22.92 % in 2006 ,which reflect the increasing volume of business related to consumption expenditure, key characteristic of a growing economy .-
So, it is time for moderate optimism. Some caution on commodity prices and global economy unbalances adjustments and its impact on the dollar value deterioration .-