In the past 10 years, South America never had it so good. The continent surfed a global commodity price boom, helped by abundant global capital. In Sir Martin Sorrell’s clever marketing phrase, the 2010s were to be the “decade of Latin America”. Maserati dealerships opened in Bogotá, while Brazil minted 22 millionaires a day . Nor was it only the rich who gained. Poverty fell and, uniquely, social inequality shrank across the continent.
Like all good things, though, the party is ending. As commodity prices fall with China’s slowing economy, there is a new sense of anxiety. Everywhere, countries are vibrating with mildly suppressed panic – and the end of US quantitative easing does not help the mood. As the economic cycle turns, many governments seem confused as to which direction to take. Given how much has been achieved, there is often profound disagreement about what should come next.
Growth is already slowing fast, to just 1.2 per cent for the region this year. As the World Bank warns in its most recent regional outlook: “It is not clear whether the slowdown is bottoming out.” Levels of investment that had reached heights comparable to those in Asia, spurred by the “commodity supercycle”, are falling. Meanwhile, social protest is on the rise – through both the ballot box, as in Brazil’s closely fought election, and direct action, such as last year’s Colombian farmers’ protests or Brazil’s street riots. Everywhere, the region fizzes with social effervescence.
This mood of agitation spans the political divide. At one end of the spectrum lies Venezuela, a spectacularly mismanaged country blessed with the world’s largest energy reserves yet flirting with default, thanks to a state so incompetent that it gives fresh meaning to the word “lemming”. Remember the last scene in Thelma & Louise, when the heroines gun their car towards the cliff edge? No wonder polls show that most Venezuelans think President Nicolás Maduro should resign.
At the other end lies Chile, often taken as a model of sober economic management. But in just a year, the growth of its copper-dominated economy has slowed from almost 5 per cent a year ago to as little as 1.5 per cent in the third quarter. Santiago’s political atmosphere has turned poisonous and Michelle Bachelet has seen her ratings slide after last year’s landslide electoral win.
Between these extremes lie a range of experiences, and one big exception: Mexico. Unlike commodity-rich South America, it suffered rather than enjoyed the past decade. But now rising Chinese wage costs have lifted the competitive pressure on its manufacturing-led economy, and the terms of trade are turning in its favour. In time, despite serious security issues, it should deliver growth.
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