This post is a summary of two articles. The first with the title above, published at http://www.huffingtonpost.com/news/latin-america, on May,8th 2013. And was written by Alejandro werner, director of the IMF. The second with the title of, "Grounded." was published at http://www.economist.com/, on September,28th 2013.
Latin America continues to be one of the fastest growing regions in the world, even though growth slowed down in 2012. Many economies in the region are operating at or near potential, inflation remains low and unemployment is at low levels. In the near term, the region will continue to benefit from easy external financing and high commodity prices. We project that the region will expand by about 3.5% in 2013, on average. In Brazil, economic activity is strengthening, driven by improving external demand, measures to boost investment and the impact of earlier policy easing. Since 2003, Lain America has experienced a period of resurgence, with strong growth, low inflation and improved social outcomes. Prudent macroeconomic policies and important structural reforms habe been the cornerstone of this performance. Foreign financing has been cheap and abundant and there has been a large and persistent increase in the prices of the region`s commodity exports. However, even gold can lose its luster. These blissful external conditions will not last forever. Commodity price are projected to decline and interest rates will eventually rise as growth in the advanced economies returns. The key challenge is to adjust policies to preserve macroeconomic and financial stability, and build strong foundations for sustained growth, under possibly less favorable external conditions. With labor participation at historically high level, future growth would have to rely increasingly on productivity gains. Boosting productivity is not an easy task. Policies that would be conducive to this outcome include higher investment in infrastructure and human capital, more modern legal frameworks, and more efficient and competitive product and labor markets.
In June this year Brazil was struck by an outbreak of mass protests that brought more than a million to the streets. It gave vent to public fury over rising inflation, high taxes, poor public services and political corruption. The change in political weather came after almost two decades of brightening skies. Since 1994, when hyperinflation was tamed with a new currency. The economy grew and inequality declined. The global commodity boom helped by sucking in Brazilian iron ore and agricultural produce, and in 2007 Brazil struck vast deposit of deep-sea oil. Seemed due recognition that its days as a chronic underachiever were behind it. But Brazil`s economy did not play ball. It has slowed to 2.7% in 2011 and a mere 0.9% in 2012. This year will see a tepid recovery at best. Inflation is sticking at around 6%. Many now wonder whether it has managed nothing more than a chicken flight, a brief, unsustainable growth spurt followed by a rapid return to earth. More than half of population of Brazil now belong to a lower-middle class, living in houses equipped with cookers, fridges. Many own cars. But when they step outside their doors, most roads are still unpaved. Public transport consists mainly of packed buses. When life was a struggle for survival, the jobs were the main concern. Now that people are a little better off, the parlous state of infrastructure and public services is at the front of their minds. The politicians should have realised that the new middle classes would want decent public services and elected representatives who were visibly working towards these ends. Several parties have proposed electoral reforms to make politicians more responsive to voters, but they all want different things, so reaching consensus will be difficult. A less favourable economic climate is now making it even harder to meet the voters increasingly vocal demands. The slowdown in growth has caused a downturn in investment, which last year was just 18.4% of GDP, not enough to lead a recovery or to build the infrastructure Brazil needs. And commodity prices seem unlikely to bail out Brazil with another spurt.
