By Abhismita Sen
Move over, China. Latin America is the new market investors are eager to break into. Latin America experienced a net growth of 3.1 percent in its economy in 2012, exceeding the global growth of 2.2 percent. The Latin American Private Equity and Venture Capital Association (LAVCA) gauges an increase of 21 percent in investment in the region, to $7.9 in 2012. During recent years, many Latin American countries have undergone significant reforms. The economic systems that emerged in the 1930s, stifled by heavy government intervention and protectionism, have given way to new ones based on market orientation, openness, and competition. The energy exporters like Bolivia, Ecuador, and Venezuela saw the growth of average around 5 percent in 2012, accompanied by continued growth in government expenditure.The European Union is the biggest investor in Latin America, accounting for 43 percent of all foreign direct investment in the region. Chinese finance in Latin America ? chiefly from the China Development Bank and the Export-Import Bank of China ? is staggeringly large and growing. The deals clinched by Russian and Cuban Statesmen value to about $650 million. There has been an expansion in bank credits to the private sector is by 10?15 percent in inflation-adjusted terms.
However, development in Latin America presents a plethora of paradoxes, which befuddle the predictions, prescriptions, and commentaries. The tax take in Latin America is still low and tax systems are often regressive. That leaves Latin American governments with little spare cash to spend on social policies. Hegemonic leadership over vast sectors of the lower middle class, urban and rural poor operates juggling between the downwardly mobile proletariat, organized public employees, peasantry, and in some cases, the urban unemployed, and organized agro-export elites, financial and mineral-based multinationals led by big business backed radical right wing middle-class demagogues. The dependence of the center-left on the primary sector and its failure to introduce structural changes in land tenure, mineral and energy control were crucial to the powerful resurgence of the Right. The centre-left’s refusal to re-nationalize the strategic economic sectors privatized during the previous decade and its strategy of political demobilization of the popular movements has dramatically shifted the balance of political power to the right. The death of Hugo Chavez left a void in Latin America’s leftist leadership and raised questions about the future of the “petro-diplomacy” which helped put Venezuela on the geopolitical map.
“Behind Latin America’s economic boom, there is a hidden wave of crime and violence that threatens a decade of progress hurting all citizens, particularly the poorest, who have no way of protecting themselves,” Hasan Tuluy, vice-president of the World Bank for Latin America and the Caribbean. On conflict and crisis issues, most people are involved in direct relief, refugee and displacement issues, as well as local level programming to help economic development in crisis-affected areas. Natural resources have been traditionally considered a curse on Latin American societies, from the plundering of the colonial era to the ills of commodity dependency in later years.
Policymakers and analysts in the region should be vigilant about rapidly growing mortgage credit and home prices because they can create financial instability. Privatization has the potential to be an area of within-sector institutional change that can break unequal and inefficient patterns of production and spur a transition to a new and better equilibrium in terms of greater equality and efficiency. There is evidence that both the sectoral reallocation of production and employment and changes in the skill composition within sectors favored skilled workers, in particular college graduates. Research suggests that while the direct effect of trade liberalization on wage inequality was small, the indirect effect of trade and capital account liberalization through their impact on adoption of new skill intensive technologies of production and organization might have been substantial.
The need of the hour is to reduce the prevailing social inequalities by promoting equal opportunities for all and spreading education. The Brazilian Government plans for 2013 and beyond show an increase in government spending in areas such as social welfare, health, and education. The government also sets out that a quota of 12.5 percent of university places are to be reserved for black and indigenous students.
Policies aimed at reducing corruption in the administration of the various fiscal systems and progressive tax systems are a necessity. Labor unions and Local small and medium enterprises can have a powerful part in the reduction of inequalities. The Brazil Sem Mis?ria aims toeradicate extreme poverty in Brazil by 2014.
Environmental and ecotourism, sports tourism, discovery tourism and Cultural tourism have become an important sources of revenue for Latin American countries, however its isolation from the big markets of the United States and especially Europe and other problems such as drug dealings have concentrated this positive effects only on specific areas.
Economic success, social inclusion, and political assertiveness are should be the buzzwords of the new Latin America governance, and the region would exude confidence and optimism.
A?postgraduate student of the Jadavpur University-Department of International Relations, Kolkata, West Bengal. Has interned with the Alexis Centre for Public Policy and International Relations on the project- media and (mis) representation of minority groups. Speaks German and French in addition to English, Hindi and Bengali. Won the Winter Spring Writing Competition organized by the Centre for International Relations, International Affairs Forum for authoring the essay ?China ? Getting Ahead or Losing Ground?? which was published in the summer 2012 issue of the same.
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