Latin America and the China bubble
Oppenheimer points out that Paul Krugman, George Friedman (founder of the geo-political newsletter Stratfor), and
even the usually upbeat United Nations Economic Commission for Latin America and the Caribbean (ECLAC) downgraded its growth projections for Latin America in 2013 from 3.5 percent to 3 percent, to a large extend because of China’s decreasing raw material purchases from the region.
Latin American exports to China — mainly commodities — had soared from nearly $4 billion in 2000 to $71 billion in 2012. Some economists had predicted that China would surpass the United States as Latin America’s top trading partner by 2015. But that seems increasingly unlikely.
The Chile-based ECLAC warned this week that we are witnessing “the likely end of the boom in commodity export prices brought about by China’s growth.”
Among the Latin American countries that will be most affected are metal exporters such as Peru, Chile and Suriname, oil exporters such as Venezuela, Bolivia, Ecuador and Colombia, and food exporters such as Argentina, the U.N. agency said.
Mexico and Brazil will be less affected by China’s slowdown because they have more diversified economies and are less China-dependent, it said.
Oppenheimer is hopeful that
China’s economic slowdown may mark the end of the commodity-based populist cycle in Latin America, in which Venezuela, Bolivia, Ecuador, Argentina and other countries squandered their raw material export booms in feel-good subsidies, instead of investing in infrastructure and education.
Let’s hope he’s right. As far as Venezuela, Bolivia, Ecuador and Argentina go, I’m nowhere near as optimistic.
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