What Happened to All Those Rosy Forecasts for Latin America?

2016 was supposed to be the year of light for the Americas...

“2016 was supposed to be the year of light for the Americas. What happened to all those rosy forecasts?” posits Latin expert Beatrice Rangel, pointing out that “The answer seems to lie in the outcome of the ongoing crisis in Venezuela.”

2016 was supposed to be the year of light for the Americas.

The US and Cuba would deepen the thaw initiated on December the 17th, 2014.
Argentina’s economy would bounce back to growth.
Mexico would definitively experience the beneficial impact of economic reforms undertaken by the Pena-Nieto Administration.
Colombia would bring to an end a century old civil strife to concentrate on infrastructure building and economic transformation through Pacific trade.
Halfway through the year however we are observing the emergence of a two-faced Cuba that one day favors greater opening and the next shuts down every single conduit to exchange with the rest of the world. This has brought to stall expected reforms while reducing change to a Rolling Stone concert and a Chanel catwalk.
An Argentina struggling to deactivate the minefields left behind by the Kirchner Administration that make progress towards economic deregulation bureaucratically difficult and politically unpalatable.
Mexico, on its turn, is failing to deliver its economic potential as growth is anchored at 0.8% over the first two quarters of 2016. Cognoscenti believe this poor performance to be linked to low oil prices and slower than expected recovery in the US as well as reduction of trade with China. As a result, the Mexican peso lost 30% of its value vis-à-vis the US dollar.
And while Colombia experienced a construction industry led growth impetus in QII 2015 which continues to fuel its growth rate, the much anticipated peace plan is about to hit public dissent and foreign dissolution forces. President Santos has indeed taken a popularity dive as a result of what his citizens perceive as an ill-fated obsession with achieving a peace agreement with the guerrilla movements. This stems from a perceived lack of concentration on social and development issues by the Santos Administration. Nose diving commodity prices have not helped either.
But what seems to carry more weight on Colombia’s economic recovery is reigning chaos in Venezuela. Trade among both countries impacts a good 12% of Colombia’s GDP. In spite of the Santos Administration efforts to diversify trade, the degree of economic integration among both countries makes insulation from the neighboring meltdown impossible.
To make matters worse reigning collusion among the ruling elite in Venezuela and Colombian guerrilla leadership will make it impossible for the Colombian government to keep political control over the peace agreement’s execution.
The FARC and ELN will continue to operate their drug business from Venezuela thereby accessing billions of dollars to finance their political campaigns. Their candidates will then stand a better chance of being elected than those of any competing political force. Soon Colombia and Venezuela will integrate their economies through drug trade. This will imperil the development of the Transpacific Partnership and other economic plans that would give Colombia a solid economic standing.
The question then arises as to whether these are passing clouds or incoming details of a forming hurricane that will soon impact our hemisphere.
The answer seems to lie in the outcome of the ongoing crisis in Venezuela.
As long as the Bolivarian regime is in place (albeit its recent weakening), Cuba will enjoy its oil related generosity and will be able to stay put on any improvement of human rights, civic freedom or economic openness.
Should the already evolving humanitarian crises In Venezuela worsen, Colombia’s economy will feel the brunt of at least 2 million Venezuelan refugees escaping starvation and death by disease.
This would not only impact urban life in bordering cities but also disrupt production and break down transportation networks.
Should there be a negotiated solution Cuba would need to concentrate on its economic development or at the very least, seek and find a new source of hard currency just to keep its paltry economy alive.
Colombia would become crucial to reinject energies to the Venezuelan economy.
Further, its peace process would escape the destiny of being hijacked by the drug trade.
And as Colombia gets stronger both politically as well as economically, it can deliver on the promise of being the connecting land for the emergence of Pacific trade, the strengthening of exchanges within Mercosur and the enrichment of trade with Mexico.
But with the Venezuelan catastrophe hanging as Damocles’ sword, Colombia and the rest of the hemisphere will miss a historic opportunity to propel growth through regional trade while expending billions in humanitarian missions.

Published by Latin American Herald Tribune on June 5th, 2016