BUENOS AIRES - South America has managed to withstand the knock-on effects of
recession in the European Union and United States thanks to the protection
offered by soaring Asian demand for commodities. But many things could change
in the medium term.
There is a new center of gravity in the world, comprised of emerging countries
led by China, while the influence of the powers of the industrialized North is
waning, experts in political science and the economy agreed at a recent seminar
in Buenos Aires.
As a result of growing exports of food and mineral to China, producers of those
goods such as Argentina, Chile, Paraguay, Peru and Uruguay have posted high
levels of growth and achieved
enviable fiscal stability, said participants at "Crisis in the developed world:
Opportunity for emerging countries" held last month.
But that beneficial effect, which is projected to continue in 2012, may not
last if the global crisis drags on and if South America does not move in the
direction of greater industrialization and higher spending on education, said
experts from Argentina, Brazil, Ecuador, Peru and Uruguay, who were brought
together by the private consultancy Abeceb.
China is driving global growth by means of increasing demand for minerals and
grains, said Ecuadorean economist Leonardo Suarez of the University of
Guayaquil.
"My forecast is that China will rescue commodities, and that is good for Latin
America," Suarez told Inter Press Service (IPS). "But there is also a risk that
the crisis will affect spending decisions, change expectations and trigger
devaluations."
Argentine political scientist Juan Gabriel Tokatliแn at the private
Torcuato Di Tella University said the international context in 2012 will be
marked by "great turmoil and uncertainty", and even higher levels of social
polarization.
US influence has declined significantly in South America, he said, and against
that backdrop, Argentina and Brazil should lead a "strategic alliance" based on
hi-tech industries and other sectors.
"Crises bring both opportunities and risks, because although the conditions are
now favorable for Latin America, the developed countries are facing a slowdown
and Asia is producing goods at lower and lower costs," economist Bernardo
Kosacoff, a professor at Torcuato Di Tella University and a former director of
the Economic Commission for Latin America and the Caribbean (ECLAC) in
Argentina, told IPS.
The crisis should drive "an agenda of competitiveness" in the region, he said
in his speech.
Former Brazilian minister of finance and the environment Rubens Ricupero made
the same point. Ricupero, who was secretary general of the United Nations
Conference on Trade and Development from 1995 to 2004, said Brazil is
confronting the crisis by means of incentives for consumption, as it did in
2008 and 2009.
In 2012, these incentives will enable Brazil to continue growing and to keep up
wages and the current situation of near full employment.
But there will be uncertainty in the medium term, the economist said. He cited
a "worrisome sign" in Brazil: the loss of competitiveness of local industry in
the face of imports from China.
Ricupero said the growing demand driven by incentives in the domestic market
cannot be met by Brazilian industry, but is covered by products from China, "a
phenomenon that cannot be fixed with old-fashioned protectionism".
In Brazil, some industrialists are becoming importers - the same thing that
happened in Argentina during the 1990s, a period of deindustrialisation, he
said, stressing that it is necessary to come up with "regional solutions" to
this challenge.
Ricupero does not believe commodities will rescue the economies in the region
in the medium term.
"It's not a question of rejecting profits from agriculture or mining, but those
activities do not have the capacity to diversify and generate jobs like
industry has. The question is: how are we going to stand up to China five years
from now?"
Value must be added to natural resources, interest rates must be lowered,
appreciation and volatility of local currencies must be avoided, and the tax
burden must be lightened, he recommended.
He was responding to the more optimistic scenario outlined by Suarez and Pedro
Kuczynski, a former Peruvian prime minister and minister of economy and energy
and mining. Kuczynski stated flatly that "China will save Latin America,"
noting the fact that nearly 20% of Peru's exports are shipped to ports in the
Asian giant.
"This demand will save South America, which is in the best position to supply
China with food and minerals," he said. "The myth that commodities are bad has
burst. They can serve as a source of financing."
He acknowledged, however, that it's not a question of specializing in raw
materials. "The economy must diversify, but in the meantime these goods
generate hard currency that enabled many countries that are now industrialized
to finance their own development," he said.
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