Saturday, September 20, 2008

Latin America and the USA economy:Looking ahead of 2009 (II)

The nineties were years of a very active economic compromise between the US economy and Latin America ones. NAFTA, (1991)which included Canada ,Mexico and the US was a breaking point in the long run trend of dependency , as much as for the first time in history , Latin America was considered a trustable official commercial partner, allowing these economies to waking away from the traditional countries - dependent status. This time was up to the Latin America economies ,to take advantage of such trade opportunity, with lower tariffs and better access to a high income markets . Unfortunately, it was not that easy to get the necessary conditions for growth. Mexico in particular, had to overcome its second shock on the road(the previous was in 1982). The “Tequila crisis”, in 1995 proved as strong were the new commercial ties between these partners. Former President Clinton Government, supported Mexico with an economic aid package (U$$ 50.000 millions),to solve the financial crisis in that country.
Thus , back to the nineties, the US was a genuine commercial partner , to go further along with free trade ties in the years 2000 as planned. As a matter of fact, it made its way through with smaller economies like Chile, Uruguay, and Peru .However, for all these cases there was a new framework. The year 2001, set a new parameters for the main concerns in the US .No doubt about it. Commercial ties fell down on the list, to give more attention to security matters.
Latin America also changed after 2001, because of the whole debate about what to do next the year 2001(the Terrorist attack on WT center in New York),it could stand politically on their own. As a result , in some countries there was a return to ideology ,which although it represented a new leadership profile, it was not on the right side of history. Free trade and investment , were no longer the issues .State intervention in the economy , (widely proved by empirical evidence to be insufficient to overcome inequality, poverty and corruption),became a threat , rather than a complement for private investment , undermining the foundations for economic growth. On the other side, there were the pragmatic economies , those which want to look up for a better future of prosperity based on private initiative . Therefore, these days there are two lines of approach to what Latin America economies stand for. However, it stills prevail some common purposes about integration, energy shortage and regional trade. Anyway ,Latin America has become more independent because of:
a: The high prices for its raw material export, supporting investment and growth (average 3% in this decade)
b: New strength due to its new macroeconomic setting,(lower inflation, fiscal responsibility, better institutions (autonomous Central Banks), freer trade with a new partner ( European Union),surplus on its external account(average 1,5% (roughly) of GDP on this decade).-
c.- Remittances from abroad which count as an alternative source of capital, reducing its exposure to external debt.
So, what lies ahead of the year 2009?.It is not just about trade and investment, it is also about education, innovation ,entrepreneurships and technology programs. Social needs go beyond the traditional approach of “give them a fish”. This time, it rather goes as how to get a fish.