MercoPress. South Atlantic News Agency

Latinamerica upbeat about prospects for 2007 and 2008

Latin American economies have improved fiscal positions and achieved better shape than they have in decades, and risks to that stem mostly from the United States and China, according to a World Economic Forum report issued this week.

"Given Latin America's export growth and leverage to commodity prices, the region is particularly vulnerable to the risk of a hard economic landing," the Geneva-based organization said in the report, entitled "Latin America@risk." "For instance, any slowdown in industrial production in the US or a deceleration of China's growth will hit the economies of Mexico and Brazil (which account for two-thirds of regional GDP)," the report said. The World Forum experts stressed, however, that the mood in Latin America is upbeat, with a consensus that growth will remain strong in 2007 and 2008. "Latin America as a whole is far better placed to withstand an economic downturn than it was in the 1980s and 1990s," the group said. The 16-page report, prepared for the WEF meeting that will take place in Santiago de Chile next week, also discusses the impacts of climate change on the region, as well as threats to political stability, and social inequalities. It concludes that pockets of populism threaten to spread throughout Latin America, even as democracy and political stability remain at historically high levels. It also says that Latin America's social and economic inequalities remain the most significant in the world, hampering the region's progress. "While poverty is reducing overall, perceptions of rising inequality remain a lightning-rod issue: over 70% of people in Latin America perceive income distributions as either 'unfair' or 'very unfair,'" according to the report. This aspect was underlined by several international publications such as Forbes which points out to the risks that non satisfaction of Chile's civil society represents. "Street protests will keep increasing unless political parties respond to citizens' demands and the political elite yields power", says Oxford Analytica a consulting firm quoted by Forbes magazine. Similar interpretations were recently published in The Financial Times and The New York Times, regarding the collapse of the new massive transport system in Santiago, Transantiago, which instead of symbolizing "prosperity and progress" showed "official ineptitude and poked fun of President Michelle Bachelet electoral promises". But representatives from investment institutions such as Merrill Lynch and Goldman Sachs argue they gauge the situation according to concerns from investors, "and so far there have been none". Cato Institute political scientist Ian Vazquez has another interpretation of the recent street protests and says that what is at stake to international observers is "President Bachelet popularity and ruling capacity, not Chile's financial stability".