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Scrutiny
 
LATIN AMERICA: MODEL ECONOMIES
Downhill & on the gas
Europe can learn a lot from Latin America, or is that history?
Issue Date - 27/10/2011
 
Latin America is at the forefront of an economic boom spearheaded by sound economic policies, a commodity boom, energy and other resource mobilisation, a young population, and abstinence from war zones. IMF figures show that Latin America has registered an impressive 6% growth in 2010, piggybacking on rising internal demand. Testimony to the continentís success are Paraguay, Uruguay and Peru with growth rates of over 8% while Brazil and Argentina lagged slightly behind with 7.5%. One of the main reasons why they are more insulated from recession is lower integration with the US economy (Brazilís & Argentinaís exports to US are below 1% of their respective aggregates), and more with emerging Asian economies like China and India, which are significant importers of Latin American iron, coffee, coal, sugar and other products. Good reserves also allow the nations to avoid borrowing funds from IMF, which puts detrimental conditions aligned with US policies.

For EU, in contrast, even a forecast of 0.5% economic growth would be too much to expect. The European Commissionís Economic Sentiment Index is falling too, reaching 98.3 in August from 103.0 in July. The causes of the crisis are rooted in a strong euro (so struggling economies like Greece, Spain & Portugal are unable to devalue their currency to stay competitive), great dependence on American growth, and lack of urgency to increase trade and exports further into Asian economies. Of course, the EU is also doing incalculable economic damage by supporting unaffordable wars in Afghanistan and Iraq. What EU needs to do is to plan a long term solution for the turnaround in Europe; a solution whose foundation pillar is based not on America, but on the basic premise of opening up more trading channels to Asian nations. That tactic holds the strongest revival possibility.

 

Sayan Ghosh           

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