Are Banana Republics Much More Appealing?

The term “BRIC” country is shorthand for the fastest growing major economies in the world: Brazil, Russia, India & China. I’ve recently blogged about the first name on that list, a Portuguese-speaking powerhouse with a robust economy and newly-discovered (and massive) off-shore reserves and how new initiatives promulgated by Brazilian President Lula da Silva have sent a statement that the U.S. is no longer the foreign policy dictator for the Western Hemisphere. For, example, with little in it for Brazil other than a declaration of policy independence from the U.S., Lula brokered a deal between Turkey and demon Iran over spent nuclear fuel rods. But Brazil isn’t the only Latin American country feeling its oats in an economic devastation that has otherwise slammed the European, American and Japanese economies to the mat.

The World Bank thinks regional growth in 2010 could push Latin America to the 4.5% level, and Brazil might reach 7.3%, each well above U.S. projections under the best interpretation of “nascent recovery,” which is anything but certain in the bigger and older economies of the U.S., Europe and Japan. Even Mexico, tattered by a civil war with drug lords, is seeing GDP growth estimates of between 4.3% and 5%. The July 1^st Washington Post: “Smaller countries are also growing fast. Here in Peru, where memories are still raw of an economy in tatters from hyperinflation and a brutal, two-decade war against Maoist rebels that left almost 70,000 people dead, gross domestic product surged 9.3 percent in April from the same month of last year… ‘We’re witnessing what are probably the best economic conditions in Peru in my lifetime,’ said Mario Zamora, 70, who owns six pharmacies in Los Olivos, a bustling working-class district of northern Lima [Peru’s capital city] where thousands of poor migrants from Peru’s highlands have settled.”

With a smile and touch of glee, not everyone “down there” is flourishing. The populist regime in oil-rich Venezuela seems to be giving President Hugo Rafael Chávez Frías a bad time as that economy is projected to shrink 5.8%! Seems like his policies have not exactly delivered the promised reform; instead there are brown and blackouts as business leaders tremble at the thought of more governmental “expropriations.”

Is this general upward trend too good to last? Are the wave of excessive poverty (and social polarization), the continued reliance on the export of commodities (without valuable add-on processing) and low-value manufactures an inevitable growth killer? Is the parallel economy of the cocaine trade a survival necessity for those who ply that deadly market? Do most of these economies look good to us because they have not relied as heavily on the global financial markets that took down large sectors of many of the bigger economies… but when the rest of the globe recovers, they will go back to the “same old, same old”?

While long-term failure is less likely for powerhouse economies like Brazil, the hope for transition lies in regional educational upgrades without which many of these nations are indeed facing long-term stagnation. Some, like Peru, are taking advantage of this growth to invest in education and job-creation in the poorest sections: “But some of what glitters in Peru’s boom seems to be paving the way for lasting prosperity. Felipe Castillo, 60, mayor of Los Olivos, is investing tax proceeds in a new low-tuition municipal university for 4,000 students. He gazed recently at the 11-story structure, in a slum that has begun to take on the trappings of a lower-middle-class district.” The Post. Others look to the devaluation the dollar vis-à-vis the Chinese yuan and the increasing wage demands of Chinese labor as perhaps an opportunity for job growth among the lowest rungs of Latin American society. Can Latin America be “next”? Sometimes U.S. political needs and economic demands overwhelm our neighbors to the south, but their power and their hope are very much a part of our own future as well.

I’m Peter Dekom, and it all fits together in the complexity we call planet earth.