January 11, 2015

AT THE eND OF hISTORY, THERE'S ONLY ONE MODEL:

South American nations struggle to find new economic model (John Paul Rathbone in London and Joe Leahy in São Paulo, 1/11/15, Financial Times)

[A]s commodity prices collapse alongside China's slowing economy, Ms Rousseff has begun her second presidential term by saying she wants to rebuild relations with Washington. She has barely mentioned Beijing.

The shift reflects broader changes in South America's commodity-dependent economies, where the abrupt collapse in energy, food and metals prices has opened up dangerous trade and financing gaps that could force deep economic and political change.
 [...]

The broad implications for South America from this new state of affairs are threefold. First, belt-tightening will slow growth. Brazil is cutting public spending by 2 per cent of GDP, while Colombia has increased taxes to cover revenue shortfalls. "Slower growth is the new normal," said Mr Shearing.

Second, the region needs a new post-boom economic model, especially if local manufacturing were to be hollowed out by cheap Chinese imports. Greater economic orthodoxy may result.

"You have to understand that commodities are subject to deep cycles," said Mr Ramos. "Don't get too carried away during the good years."
Third, there may be a re-emphasis on north-south trade ties that languished during the commodity bonanza. Ms Rousseff's desire to improve US relations -- and even Washington's rapprochement with Cuba, as the latter's benefactor, Venezuela, bounces off the ropes -- may be two early signs of this.


Posted by at January 11, 2015 8:51 AM
  

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