January 1st, 2013
06:24 PM ET

2013: Latin America’s bulging middle

By Global Public Square staff

Who are the most positive people in the world? Well, at least according to the responses in a recent Gallup poll, eight of the top 10 countries whose citizens feel happiest are in Latin America – Panama, Paraguay, El Salvador, Venezuela, Trinidad&Tobago, Guatemala, Ecuador, and Costa Rica. Such results could in part be down to a cultural predisposition to looking on the bright side. But if Latin Americans have taken a moment to reflect on their financial situation, they will also see tangible reasons to be positive about the future.

While the rest of the world has become more unequal in recent years, Latin America is the only region in the world to reverse that trend. According to a World Bank report, 50 million people joined the region’s middle class between the years of 2003 and 2009. Poverty rates have plummeted; more women are working; safety nets have become stronger.

Amongst all the region’s countries, 2013 holds the greatest opportunities for Mexico. Despite often finding itself in the headlines for the wrong reasons (drug war deaths, failed Mayan predictions) the country is becoming a global force to reckon with, as I’ve written before in the last few months. Mexico will continue to grow rapidly in 2013, and is on track to join the world’s top 10 economies by the end of the decade. “Made in Mexico” will become a more familiar label – for cars and TVs alike. The country’s greatest challenge remains how to deal with corruption, a bloated public sector, and a lack of competition in telecoms and petroleum. But the early signs from new President Enrique Pena Nieto are promising. If his ambitious “Pact for Mexico” takes off, Mexico Inc. will be unstoppable – starting in 2013.

Brazil’s outlook is less promising. It recorded just 0.6 percent growth in the third quarter of 2012. When the final figures come in, Brazil may have grown only 1 percent for the year – hardly a BRIC-like statistic. Much of Brazil’s slowdown can be attributed to declines in global demand for commodities. In response, President Dilma Rousseff has overseen large stimulus measures, tax breaks, and record low borrowing rates. But it hasn’t been enough so far. The Economist has called for the firing of Finance Minister Guido Mantega, for putting out over-optimistic growth forecasts and losing investor confidence. Brazil also has a reputation as being one of the world’s red tape capitals: The World Bank’s annual Ease of Doing Business list puts Brazil at 144th in the world, below Pakistan, Yemen, and Ethiopia. That needs to change. Look for Rousseff to make one last push to appease big business. Elections, after all, are set for 2014.

Argentina has a separate set of worries. Inflation is running at an estimated 25 percent, and growth has declined to below the regional average. But President Cristina Kirchner has so far proved to be a wily and enduring political operator. Expect her to stay in power through the year, and try to push through a change in the constitution to allow her to run for a third term in 2014.

Finally, 2013 may be time to say goodbye to a few leaders the world has come to know well. Venezuela’s Hugo Chavez was due to be sworn-in for a new presidential term on January 10 – that seems unlikely to happen now. If his cancer worsens, his hand-picked successor, Nicolas Maduro, will take over. But it will still be the end of an era. Economists will forever wonder how Chavez managed to squander the world’s greatest oil reserves to run his economy into the ground; perhaps a new crop of leaders will be able to change course.

Cuba’s 2013 looks more promising – and yet more precarious. For years, it has happily accepted cheap oil and largesse from Venezuela. That could soon come to an end. But at the same time, Cuba under Raul Castro has begun taking small steps towards reforming and opening up business. If older brother Fidel passes away, those changes will accelerate.

Latin America has had an impressive rise in the last few years. Chief among its accomplishments is the many millions it has lifted out of poverty. For that to continue, its leaders need to focus on continuing to open up their economies and encouraging competition. Mexico is showing the way. Will the rest follow?

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Topics: 2013: What's Next? • Brazil • Latin America • Mexico • Venezuela

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soundoff (8 Responses)
  1. Joseph McCarthy

    This is good news indeed. Could this be because the C.I.A. might be losing it's touch here in this part of the world? What's good for Latin America can be good for our economy too.

    January 2, 2013 at 11:48 am |
  2. g2-0f07faa7e5249c94df24917178887a50

    lol the mayans never predicted the end of the world on December 21, 2012. You guys in the United States and Europe did to sell books and movies.

    January 2, 2013 at 5:42 pm |
  3. j. von hettlingen

    There's a saying, "each dog has its day". For decades Latin America had been seen as an impoverished neighbour of the US. Now it's enjoying prosperity and stability. Indeed the US will benefit from Latin America and it's time for Washington to rekindle the relationship there.

    January 3, 2013 at 7:25 am |
  4. empresstrudy

    Hopefully they will learn from Maximum Leader Obama and be taxed heavily just as they reach the middle class. Also I don't think Uruguay was asked because if they had been they would have come near the top of this survey too. Uruguay has the second highest standard of living in South America, the lowest crime, fantastic weather, and, thanks be, an honest to Marx genuine ex communist as their leader.

    January 5, 2013 at 10:14 am |
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