The cash machines in Santiago are running out of money, but it is not a run on the banks; shoppers in Chile are simply spending peso notes faster than the automated tellers can provide them. New skyscrapers are rising up in Bogota to create the office and retail space needed for a growing economy. Mexico — the new darling of foreign investors — is outstripping GDP forecasts. Brazil, which overtook the UK as the world’s sixth biggest economy last year, has just announced a US$66 billion stimulus plan in addition to the money it will splash out in preparation for the 2014 World Cup and the Olympics in 2016.
The economic mood in Latin America for most of this year could hardly have been more of a contrast from that of the EU, mired in financial crisis, depressed by austerity and dipping back into recession.
Latin America is now being retuned, as most nations expect slower but still solid growth, and some prepare to tap extensive reserves to spend their way out of a global downturn.
Their ability to withstand the coming storm will have long-term implications for perceptions of a region that was until recently a byword for financial turbulence. Recently, many of the region’s governments have been praised by the UN, IMF and World Bank for building strong reserves and maintaining generally low levels of public debt.
This gives them more scope to open the fiscal stimulus taps when the economy starts to flag, as Brazil did on Wednesday with the announcement of a 133 billion real (US$66 billion) stimulus package. If they can avoid the worst impacts of the international crisis without sinking into debt — as most nations here did in 2008 — it would reinforce a growing reputation for prudent economic management.
Several strong years of growth in the strongest performing economies have created a visible momentum. In Santiago, soaring housing prices, hundreds of new restaurants and thickets of cranes on the skyline suggest the Chilean economy has coasted through the early stages of the latest crisis. Car sales soared so high last year that at one point the government ran out of license plates and was forced to issue cardboard substitutes.
With an estimated GDP growth this year of 4.5 percent, plus hefty government reserves, Chile is prepared to weather potential fallout from Europe.
“We have a pretty comfortable position to face challenges in 2012,” budget director Rosanna Costa told reporters in Santiago this year.
The government sits on an estimated US$14 billion stabilization fund that can be used to stimulate the economy via public works projects or cash infusions, as needed.
Peru is also enjoying steady expansion, while Venezuela, buoyed by oil sales and a pre-election spending binge by President Hugo Chavez, is expected to grow by more than 5 percent, though its ability to pay its bills will depend on high oil prices.
There are some significant exceptions to these trends. Argentina’s economy has ground to a halt in the wake of the nationalization of local assets owned by Spanish oil company YPF, indicating the still strong influence of global financial markets in Latin America.
Even so, the region is expected to grow by 3 to 4 percent this year — a bonanza compared with the depression that afflicts the Latin nations in the old world. Portugal, Spain and Italy were among the worst-performing nations when the EU announced this week that the GDP of the eurozone fell 0.2 percent in the latest quarter.