The mixed outlook for Latin America
NEW ORLEANS — There is no better place than the annual meeting of the Inter-American Development Bank to take stock of the economies of Latin America and the Caribbean. The week-long meeting - in New Orleans this week - assembles nearly every finance minister in the hemisphere, a host of other top officials, and hundreds of business leaders. This year, the mood has been mixed.
There are reasons for optimism. Many countries have progressed rapidly toward recovery from last year's slump, triggered by financial crises in Asia and Russia. Foreign direct investment in the region continues to rise, at a pace faster than in East Asia and other emerging markets. Prices for the region's commodity exports are turning upward.
But despite wide-ranging reform and restructuring efforts, the region remains dangerously vulnerable to global economic turbulence. In most Latin American economies, growth has been too slow to deal with accumulated social deficits. Few countries have done much to upgrade education, improve justice systems, or stem the upsurge in crime and violence.
Brazil, Chile, and Mexico have the most to celebrate. Little more than a year ago, the Brazilian economy seemed headed for a nosedive. Analysts forecast a slide of 4 to 6 percent and a resurgence of inflation. Instead, Brazil grew slightly last year and prices held steady; an expansion of 4 percent is expected this year. The future may be brighter yet, if politics allow key economic reforms to stay on course.
Chile is bouncing back from its first recession in 15 years, anticipating 5 percent growth this year. The Pinochet affair, though unresolved, has had minimal impact on Chile's politics or economy - showing sturdiness in its democratic institutions.
The Mexican economy, instead of its usual election year decline, is barreling forward. Growth this year may be the second highest in two decades. The election is likely to be the fairest and freest in Mexican history.
Argentina could join this bullish-looking group - provided the four-month-old de la Rua government can sustain its good performance in managing a still troublesome economy.
The positive trajectory of Latin America's three largest economies may give a healthy appearance to the region. But this is part illusory. Most other countries are in difficult circumstances. Colombia is having a hard time shaking recession. More discouraging has been its inability to control drug criminals, guerrillas, or paramilitary forces. Large-scale US aid, which could boost the government, may be delayed for some time.
Despite the oil price hikes, Venezuela's economy is stalled, with little prospect of important gains soon, and politics still unsettled. After 14 months in power, President Hugo Chavez faces some serious opposition. But - on the eve of presidential and congressional elections - there is little clarity on the directions he or his opponents would take the country.
It's been two months since Ecuador's president was ousted by a military coup. The new government has succeeded in negotiating an IMF agreement worth $2 billion and is moving ahead to dollarize the economy. With rising oil revenues, this may get Ecuador back on track, but politics and the economy are shaky.
Peru's economy is doing well, expanding 3 percent in 1999. But two weeks before presidential elections, the country's politics are unsavory and conflicted, as President Alberto Fujimori seeks a constitutionally questionable third term.
Among the Andean nations, only Bolivia - the poorest - has maintained democratic stability.
Central American countries, save Costa Rica, confront an array of hardships. Border disputes, internal conflicts, and natural disasters are disrupting what appeared, a short time ago, to be steady progress toward economic reform, democratic change, and regional cooperation. A few Caribbean nations are prospering, but most struggle with deep economic and social problems.
Concern is surely justified that only a small number of Latin American nations will end up with thriving economies and stable democratic politics - while most will, at best, achieve only modest gains. The future may turn out better, but current circumstances make it hard to argue that progress will be significant and uniform.
* Peter Hakim is president of the Inter-American Dialogue in Washington.
(c) Copyright 2000. The Christian Science Publishing Society