When the bona fide period of the early 2000s ended for commodities, Latin America was caught in the cross fire between two of the most powerful countries in the world: USA and China. Read on to understand the role that political changes in the region have in this moment of the world.
Bolsonaro, Macri And Trump
Since 2014 the region saw a diminished economic growth because of the dropping of commodities prices in the world. Although that could be thought as an isolated economic phenomenon it got some serious repercussion in some countries´ political status too.
Venezuela had Chavez, Argentina had Nestor Kirchner and Brazil had Lula Da Silva as presidents and population in those three countries (three of the most important economies of the region) refer now to those moments as the golden age of their lives. Nowadays everything changed because commodities price dropped worldwide and also, Trump´s protectionism had a huge impact on smaller economies.
Bolsonaro and Macri are echoing on neoliberalism and its disregard for local, internal economic growth. The raise on loan interest internationally affected them in terms of having to pay more to get the same money injection to their local economies. Having to cut on social welfare led to a drop in internal consumption and economic recession.
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Some experts like Alejandro Izquierdo encourage governments to spend smart, which means to cut the alleged “fat” from the state expenditures (especially state workers and retired people) to increase the available liquid money. Both: Bolsonaro and Macri are completely aligned with this way of thinking and are cutting through social welfare policies.
USA and China tensions and the impossibility to export commodities to them have had a deep effect that reached up to 0.5% of the GDP in some cases. For an economy that has a growth rate of 2%, it is a lot.
With tensions outside the boundaries of their countries and also inside, the instability for which the region is known for is drastically increasing. With two of the most powerful countries in the world in tension and interests going up, there is not such a good panorama ahead. As all Economy Forecast, it is not 100% accurate, but there are high chances that being caught in the crossfire with a drop in commodities and also USA and China being protective can end up being a nightmare for the region.