When Latin America looks back on 2010 it will see a year where the old rules were thrown out to accommodate a new reality: a period in which its dynamic rebound from the global financial crisis left the United States and Europe in its dust.
Figures from the International Monetary Fund show the topsy-turvy result.
This year, the United States’ economy should show 2.6 percent growth and the European Union just 1.7 percent.
Latin America is forecast to post five percent growth.
Why the gap? Analysts point to responsible policies and booming world demand for the commodities Latin America offers.
As a result, the region was one of the least affected by the crisis that broke open in September 2008, and it has emerged stronger than before.
Augusto De la Torre, the World Bank’s chief economist for Latin America, said the region had shown itself to be less vulnerable to external shocks which previously had amplified weaknesses in currencies and financial systems.
That was in part because the Latin American countries were “much more diversified” than in the past, reducing their trade dependence on Europe and the United States.
Now, business is done “also with emerging markets like those in Asia,” which was also expanding strongly, he said.
Another positive aspect was “the way in which Latin America is integrated into the international financial system,” becoming a creditor for the first time and also receiving huge direct foreign investment following “growing appetite for risk.”
Alberto Ramos, the head economist at Goldman Sachs for the region, said the hike in commodities prices between 2003 and 2008 helped Latin America “reduce its vulnerability, increase currency reserves and lower the level of public debt.”
The prime example was Chile, the world’s top copper producer, which used part of its revenues from the metal to finance measures spurring growth, said Francisco Castaneda, an economics professor at the University of Santiago.
Brazil, Latin America’s biggest economy, was in the front row of countries which had pursued responsible policies to keep its finances stable before the crisis hit.
The country was forecast to have growth of 7.5 percent this year, a performance buoyed by a domestic market enjoying greater access to credit and higher employment which fueled consumption.
Signs of Brazil’s broad prosperity were seen in the fact that there were now more mobile phones than inhabitants, and 1.5 million Brazilians took a plane for the first time during the southern summer.
Other regional economies were also in good shape, such as Argentina which was seeing six percent growth this year after implementing counter-cyclical policies and social programmes in the wake of its 2000 economic collapse.
“We maintained jobs in companies in trouble… and ensured pay increases for the poorest,” explained Alfredo Garcia, the head economist for the bank Credicoop.
Mexico, too, was bouncing back from the crisis, which struck it harder because of its greater dependence on the United States.
It was expected to show five percent growth this year thanks to “fiscal discipline, a broadening of the tax base, more manufactured exports, checks on inflation, and a low interest rate,” said Alejandro Asencio, an analyst for Bursametrica.
Next year, the experts agreed that the region would be looking to the northern hemisphere, seeking signs of a turnaround that would positively impact Latin America’s economies.
“If the outside scenario grows, we will have a very good year. If the outside scenario slips, we will only have a good year,” said Ramos, who added that any idea of a recession in Latin America should be completely discounted.