Little Cause for Latin American Optimism
Letter to the Editor
Desmond Lachman | Financial Times
May 29, 2006
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Victor Bulmer-Thomas' optimistic assessment of Latin America's growth prospects appears to be markedly at odds with the prospective deterioration in the region's external environment as well as with the region's decisive retreat from Washington consensus-style policies ("Prospects for Latin America are better than they look", May 25).

Resident Fellow Desmond Lachman
Resident Fellow Desmond Lachman
Over the past four years, Latin America has enjoyed an unprecedented benign global environment. Global growth has been the fastest in 20 years, global interest rates have remained unusually low, international commodity prices have been at record levels, and China has become increasingly engaged in the region. Yet Latin America's growth averaged barely 4 per cent a year, a fraction of the growth in the non-Japan Asian economies.

Looking ahead, the key question would seem to be what happens to the Latin American economies when global growth slows, when global liquidity is drained, and international commodity prices decline. Judging from recent market jitters, Latin America's economic prospects hardly look encouraging. This would especially be the case if its main economies were now to stall on the basic reforms still so sorely needed to address their remaining structural weaknesses.

Recent adverse political developments in Argentina and Brazil hardly give cause for optimism, not to mention the decisive drift to populist policies in Venezuela and in the Andean countries.

Desmond Lachman is a resident fellow at AEI.

About the Author

 

Desmond
Lachman
  • Desmond Lachman joined AEI after serving as a managing director and chief emerging market economic strategist at Salomon Smith Barney. He previously served as deputy director in the International Monetary Fund's (IMF) Policy Development and Review Department and was active in staff formulation of IMF policies. Mr. Lachman has written extensively on the global economic crisis, the U.S. housing market bust, the U.S. dollar, and the strains in the euro area. At AEI, Mr. Lachman is focused on the global macroeconomy, global currency issues, and the multilateral lending agencies.
  • Phone: 202-862-5844
    Email: dlachman@aei.org
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