Rome—Long ago in an undergraduate universe far away, when people like me studied the problems of Latin American economies, the big buzz word that explained weakness south of the border was dependency. It meant that Latin countries depended too much on US purchases of raw materials to sustain growth and not enough on home-grown industries free from the vagaries of commodity prices.
Somehow in the growth years of the past two decades, everyone pretended that that flaw in Latin economies had disappeared. It hadn’t. The big purchaser of Latin American raw materials shifted from the US to China. And China, blessed with the calling card of anti-colonialism and being a longtime rival of Yankee hegemony, was not subject to the same resentment that Latin leftist intellectuals and politicians had toward the US. Somehow, the good times were going to last forever.
Well, with China in a tailspin Latin America has rediscovered its dependency problem. And it’s tough to blame the US, for a change. Venezuela, Brazil and Ecuador are among the big losers. Even Cuba, having lost its USSR sugar daddy two decades ago and not finding a replacement anywhere else, is looking to diversify its sugar-first economy by making amends with a friendly Obama-led US.
The so-called pink surge of leftist governments appears to be waning. See: recent elections in Venezuela and Argentina and the drive to force Brazil’s corrupt president Dilma Roussef, out of office. Even diversified Mexico, with a sort-of leftist government in power, is reeling under the pressure of low oil prices and persistent crime crises.
But shifting political winds does not guarantee quick and easy recoveries. Subsidies fed by easy money will be hard to reverse as the middle class citizens fear being thrown backwards and the somewhat poor into abject poverty. Getting domestic and foreign investors to put their money in shaky economies prone to wide swings in economic policy seems unlikely in the short term. I’m from Miami and believe me, Latin money is pouring into the city and its mushrooming skyline of condos at a fast rate.
The risks of the downturn are many. Especially, social unrest and the unpredictable actions of idle unemployed youth loom. The fattened-calf years in many countries were wasted. The lean years seem hardly auspicious for rebalancing Latin economies.
Brookings provides a quick political overview.
The Economist on disaster in Brazil.
Wharton School surveys the continental economy.
The Miami Herald frets over idle youth.