By Andres Oppenheimer
Leading international financial institutions have published their economic forecasts for 2022, and their projections for Latin America are awful: They agree that it will be the world’s slowest-growing region this year.
Even the economies of sub-Saharan Africa, which has several armed conflicts going on, will grow more than Latin America in 2022, according to the forecasts. And most economists agree — rightly — that the region will have mostly itself to blame for its terrible performance.
According to the International Monetary Fund, the U.S. economy will grow by 5.2% in 2022; China will grow by 5.6%; Europe by 4.3%; the Middle East and Central Asia by 4% each; and sub-Saharan Africa by 3.8%. But Latin America and the Caribbean will only grow by 3%. It is estimated that Latin American economies would have to grow by at least 4% just to provide jobs to the youths that enter the labor market every year.
Within the region, Colombia’s economy will probably grow by 3.7% in 2022; Peru’s by 3%; Mexico’s by 2.9%; Brazil’s by 0.5%; Argentina’s by 2.2%; and Chile’s by 1.9%, according to a new forecast by the United Nations Economic Commission for Latin America and the Caribbean.
“It’s going to be a bad year for the region,” Alicia Bárcena, ECLAC’s executive director, told me in an interview. “There will be a significant decrease in economic growth.”
Ironically, if it weren’t for the disastrous policies of most of its leaders, Latin America could be one of the world’s fastest growing regions. The disruption of global supply chains because of the Covid-19 pandemic has opened up a golden opportunity for Latin American countries to attract China-based factories to the region.
U.S. multinational companies are eager to reduce their dependence on China’s supplies to avoid future breakdowns in their supply chains. Many would be eager to shift some of their operations to Latin America.
With similar labor costs, shorter transportation times and the same time zones, Latin America could take advantage of the global supply-chain disruption by becoming a new global manufacturing base. U.S. companies could shift from “off-shoring” to “near-shoring.”
An Inter-American Development Bank study shows that if Latin America could replace just 10% of China’s exports to the United States, the region would earn an extra $70 billion a year. What’s more, that could be done by exporting goods that Latin America already is producing, such as car parts and TV sets. It wouldn’t take a giant industrial transformation.
But leftist and right-wing populist leaders are killing the region’s biggest growth opportunity in decades.
Leftist nationalist leaders in Mexico and Argentina — not to mention ruthless dictators in Venezuela, Cuba and Nicaragua — are scaring away potential investors who could be moving manufacturing plants to their countries.
And a right-wing populist in Brazil is creating so much political uncertainty that few investors are willing to set up factories there before the October, 2022 elections.
It’s no mystery that the main reason Latin American countries don’t grow and are unable to reduce poverty is that they don’t attract investments. They are stuck on the mistaken belief that their countries’ dichotomy is between left and right, when in reality it’s between attracting investments and scaring them away.
Even communist-ruled Vietnam, a major manufacturing base for U.S. and European companies, is expected to grow by 6.6% this year, according to IMF projections. That’s double the median growth forecast for Latin America.
But, sadly, most Latin American populist leaders keep selling the fantasy that their countries can grow and reduce poverty by refusing to insert themselves into the global economy and making anti-business speeches to fire up their political base.
It’s no wonder that capital flight from Latin America reached $128 billion in 2021, a record in recent years, according to the Institute of International Finance.
We can only hope that 2022 will mark an inflection point, and that the expected downturn in Latin America’s economy will create a new critical mass of people saying, “¡Basta de mentiras!” — “Enough of the lies!”
Credit: Miami Herald