The Economic Debacle In Latin America

Subject: The Economic Debacle In Latin America Mon Jan 20, 2020 3:10 am

With the region showing almost no percentage growth, last year’s economic numbers for Latin America didn’t paint a rosy picture. The United Nations Commission for Latin America estimates that in 2019 the Latin American economy grew only at a 0.1% rate and is expected to grow only 1.4% in 2020.

Let me offer a refresher on the importance of the region. We may start with trade. Latin Americans buy four times more goods from the United States than the Chinese do. U.S. trade with Mexico alone is larger than its trade with China. U.S. trade with Latin America decreased 10% last year, but its trade with China went down more than 25%. Like other economists who favor the free economy, I see imports and exports at free market prices as good for both sides. The reduction in trade is a loss for all. The end result will depend on the level of tariffs and openness to markets.

The Economic Debacle In Latin America 960x0

The Economic Debacle In Latin America 960x0

Rule of Law and GDP growth forecast for selected Latin American countries. GDP figures, CEPAL, Rule ... [+] of Law, World Justice Project Rule of Law Index 2019. GDP size by PPP

In nominal terms, the Latin American economy is larger than Germany’s but smaller than Japan’s. But in Purchasing Power Parity (PPP), which considers the amount of goods that the population can buy at local prices, it is as large as the economies of Japan and Germany combined. Roughly half the size of the U.S. economy. This is due in great part to the large proportion of the economy that is informal.
Without question, Latin America’s biggest economic problem is the weak rule of law, the institutional framework needed for a free economy to prosper. If we consider 6 out of 10 a passing grade, only three countries – Chile, Uruguay and Costa Rica, representing just 5% of the region’s GDP – have judicial institutions that do not flunk the test.
I’ll give some of last year’s bad news first. One negative was the lack of progress in the effort to liberate Venezuela. Another negative, and for me an even greater one, is the social explosion in Chile. Allegedly ignited by protests over public transportation fare increases, activist street revolts ended up burning or destroying 80 metro stations and numerous other targets, including supermarkets. The short-term economic damage is calculated to be around $2 billion (in an economy that is less than 2% of that of the United States), but the medium- and long-term damage is incalculable.

https://www.forbes.com/sites/alejandrochafuen/2020/01/19/the-economic-debacle-in-latin-america/#142524565c73
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The Economic Debacle In Latin America

The Economic Debacle In Latin America

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