Up and about, down and out
Latin America has at last begun posting some positive economic performances. The average figure does, however, blur some important differences between countries in the region, Hisham El-Naggar writes from Buenos Aires
At the outset of a new year, it is useful to look back on 2003 and ask how Latin America, a mostly forgotten region of the world, has fared.
The answer is: not too badly.
There's been trouble here and there; one president -- Bolivia's -- was sent packing by an angry populace. Venezuela is still in a state of ferment with the opposition struggling to oust President Hugo Chavez via a referendum that Chavez supporters have proven extremely adept in delaying. And Colombia is, sadly, still in the grip of what amounts to civil war.
What is remarkable, however, is how democratic institutions in Latin America are proving far more resilient than they have in the past. It has been ages since a successful coup has been staged, and while popular uprisings have hastened many a government's end, respect for the rule of law and the constitution has been impressive. Even in the face of economic hardship, "de- facto" regimes -- meaning military dictatorships -- have failed to reappear.
Perhaps even more reassuring has been the economic performance of the region. 2003 may be remembered as a turnaround year where, after years of poor economic results, much of Latin America staged a recovery, albeit a modest one. Despite stagnation in Europe and Asia, Latin Americans didn't give up on the prospect of growth for their continent.
The star performer has been -- to everyone's amazement and to the consternation of a notable few -- Argentina. The country which, in the hallowed opinion of the International Monetary Fund (IMF), made a dizzying transition from star pupil who did everything right to a basket case who did everything wrong has astonished the world with its economic recovery. Despite being virtually cut off from international financial markets and continuing to default on most of its international debt, Argentina is set to post an impressive economic growth of over seven per cent this year and with good prospects for equally strong numbers next year as well.
Argentina's impressive performance balanced the relatively disappointing results of Brazil, whose valiant attempts to follow the IMF's guidelines on fiscal austerity -- and hence avoid default -- has resulted in a moderate recession, somewhat unusual for the habitually fast-growing giant.
Brazil's President Luiz Inacio "Lula" Da Silva has surprised both friend and foe. Despite his socialist background, he has adopted an economic policy that is amazingly conservative. Little wonder the IMF has taken to describing Brazil as its current star pupil.
The fact remains however that the basket case is outperforming the star pupil. There appears then to be something defective with the IMF's logic, which may explain why the IMF has toughened its attitude towards Argentina. Even though Argentina has met the targets of its current IMF programme, the IMF has indicated it wants more. Notably, it would like Argentina's budget surplus target revised upward, so the country can "improve" its offer to foreign creditors who reacted indignantly to Argentina's proposal of 25 cents on the dollar for non- performing Argentine government debt.
So far, Argentinean President Nestor Kirchner has dug his heels in and refused to give in to the IMF. And so as the new year begins, relations between the IMF and Argentina are at a low point, a sharp contrast to the effusive praise with which the IMF is showering Brazil. What is certain is that investors in both countries -- and in the region at large -- are paying little attention to the IMF's opinion and acting according to a rather sensible rule: deep fiscal austerity may thrill foreign creditors, but it's hardly a recipe for fighting economic recession.
One wishes the IMF itself were as sensible.
