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Bright spots in Latin America despite global economic uncertainty
Details Category: Global Eye Published on Saturday, 09 February 2013 15:44 Written by Mimi Whitefield / The Miami Herald
THERE are bright spots as Latin-American and Caribbean economies begin the year, but the uncertain health of the US economy, the lingering financial crisis in Europe and more sluggish growth in China are casting shadows over the region.
A decade ago, dim prospects in those major markets would have delivered a knockout punch in the region, but this year Latin American and Caribbean economies are expected to grow by 3.5 percent and average 3.9-percent growth in 2014 and 2015, according to a World Bank forecast. The United Nations’ Economic Commission for the region has a slightly more sanguine forecast of 3.8-percent growth in 2013.
Both are better than the 2.4-percent growth the World Bank is forecasting for the global economy and the mere 1.3-percent increase it is predicting for high-income countries.
The US economy grew by 2.2 percent in 2012. But the economy shrank 0.1 percent in the fourth quarter, and the first quarter of 2013 also could be sluggish.
“That creates a soggy start for 2013 in Latin America,” said David Malpass, president of Encima Global, a New York economic consulting and research firm.
With a recession in Japan, even slower growth expected in Europe than in the United States, and questions about whether the dip in the Chinese economy has bottomed out and whether the United States will be making sharp cuts in defense spending and other federal programs come March 1, Latin-American and Caribbean nations can’t really depend on the industrialized world to spur growth.
The region must look inward and undertake structural reforms that will allow growth from domestic factors, Malpass said.
Panama’s $5.25-billion investment in expansion of the Panama Canal is an example of the inward focus that will pay off down the road, Malpass said. By 2015, Panama plans to have completed two new sets of locks on the Atlantic and Pacific sides of the canal and the deepening and widening of existing channels to accommodate “post-Panamax” ships too big to traverse the current locks.
“It’s a difficult period, but a period where developing countries are growing solidly, but not as quickly as they might otherwise want to,” said Andrew Burns, the lead author of the World Bank’s annual Global Economic Trends report.
That means they should focus on investment in infrastructure, health care, structural policies, regulatory reforms and improvements in governance that will pay future dividends down the road, Burns said.
Such economic reforms, plus high commodity prices enjoyed by countries with fertile fields and mineral wealth, helped the region move beyond the global financial crisis of 2008 and 2009 far more quickly than it did when it was so dependent on economic cycles in the rest of the world.
Economic growth slowed in Latin America and the Caribbean from 4.3 percent in 2011 to an estimated 3 percent but that was still better than the 1.3-percent growth high-income countries managed in 2012, according to the World Bank.
China will continue to play a major role in Latin America and the Caribbean this year but whether the slowdown in China has reached its low point is subject to debate. But it’s relative. Slow growth in China would be brisk growth elsewhere. China says its gross domestic product grew 7.8 percent in 2012, the most tepid growth in 13 years and a comedown from a 9.3-percent growth in 2011.
In year-end remarks to the Inter-American Development Bank’s executive board, Luis Alberto Moreno, president of the IDB, noted that the region’s trade with Asia has grown by 20 percent since 2000, reaching $442 billion last year.
Brazil, Latin America’s largest economy, has been one of the main beneficiaries of trade with China, which supplanted the United States as Brazil’s largest trading partner in 2009.
Mainly due to China’s appetite for Brazilian commodities such as iron ore and soybeans, Brazilian exports soared to a record $256 billion; it had a trade surplus of nearly $30 billion in 2011.
But in 2012 as the Chinese economy slowed, Brazil’s trade surplus narrowed to $19.4 billion—its smallest in 10 years. For 2013, the Central Bank is projecting a $17-billion surplus, but some economists are projecting it will be more diminutive.
Once the high-growth darling of Latin America, Brazil’s economy grew a mere 0.9 percent last year.
But the World Bank foresees a better 2013, saying “the benefits of lower interest rates are expected to start kicking-in during the course of the year” and predicting growth in Brazil will accelerate to 3.4 percent.
Vertilux, a Doral, Florida, company that sells raw materials used in the manufacture of window coverings, is among the companies with an eye on Brazil.
About 65 percent of the company’s business is export, and Chief Executive Jose Garcia says 2013 is shaping up to be a very good year for his company.
He expects to triple sales to Brazil, although he says Brazil’s cumbersome tax and duty system make doing business with Latin America’s largest economy more expensive and challenging. “Any American company that wants to do business in Latin America should consider Brazil,” Garcia said, “but it is not easy to import into Brazil. Not everyone knows how to do it.”
The best Latin-American market for Vertilux now is Mexico, which was walloped during the US recession because its economy is so closely tied to the United States. “But the market has been growing steadily, especially in the past two years. There are no restrictions; it’s an open market like the United States,” said Garcia. “While it’s easier to do business in Mexico, there is also more competition.”
Despite drug-related violence and organized crime, analysts are optimistic about Mexico’s prospects, pointing to the emergence of a robust middle class, price stability and a youthful population.
Rising labor rates in China may also translate into more business for Mexico. Stiff competition from Chinese factories had contained Mexican manufacturing growth. But Mexican labor costs have remained constant, and “Mexico is now regaining what had been lost to China over the past decade,” said Jonathan Heath, chief economist at Jonathan Heath & Associates and also a professor at Universidad Panamericana in Mexico City.
“China doesn’t make changes very quickly, so we think, yes, China will allow Mexico to gain more market share in the United States,” said Heath, who visited Miami for a Latin-American Economic Forecast seminar hosted by the University of Miami’s Center for Hemispheric Policy.
There are other bright spots around the region.
Latin America’s unemployment rate is at a record low, and more than 1 in 3 people in Latin American now are considered members of the middle class. Some 58 million Latin Americans have moved above the poverty line to middle-class status in the past decade.
The economies of Colombia, Chile, Panama and Peru were the stars in 2012 and are expected to hold their own in 2013, although growth will slow somewhat.
It “may not be the great year we all want, but it will be a good year,” said Alvaro Moreno, a researcher at Colombia’s Private Board of Competiveness.
During the first few weeks of this year, Colombia hit two milestones: It placed $1 billion in bonds on the international market at a record-low rate of 2.7 percent, and the market capitalization of state-run oil company Ecopetrol overtook Brazilian titan Petrobras to become Latin America’s largest listed company.
Not bad for a country that just a decade ago was being written off as a precarious narco-state trapped in a 50-year guerrilla war.
As Colombia has shed its dark past, foreign investment has poured into mining and oil exploration. The Andean nation is expected to see growth of about 4 percent this year—down slightly from 2012 levels and slower than some of its neighbors—but still solid.
But Colombia’s success has a price. The avalanche of investment dollars has strengthened the peso, making Colombian exports less competitive. In the last four years, the peso has appreciated 36 percent versus the dollar, increasing the cost of exports at a time when many Colombians are hoping to reap the benefits of a new free-trade agreement with the United States.
“With the current exchange rate, it’s difficult for the agricultural sector, or any other commercial good, to get its head above water,” Minister of Agriculture and Rural Development Juan Camilo Restrepo complained recently.
The coffee industry is a case in point. Coffee is the country’s fourth-largest export after crude, coal and precious metals, but it remains Colombia’s flagship product.
Even though Colombia’s coffee crop was larger, the value dropped 31 percent from 2011 to 2012, in part due to the strengthening peso.
“Our top public policy issue is the valuation of the peso,” said Luis Fernando Samper, head of communications at the National Coffee Federation.
The government announced recently it would increase its monthly purchase of dollars from $500 million to $750 million. By soaking up excess greenbacks, it hopes to increase the value of the dollar relative to the peso.
The currency crunch isn’t the only problem. The economy has been showing signs that it’s slowing as manufacturing and construction have dipped. “This deacceleration will be a crucial theme for Colombia this year,” said Leonardo Santana, an economics professor at Jorge Tadeo Lozano University in Bogotá.
Colombia also has one of Latin America’s highest unemployment rates, around 10 percent, and inferior roads and ports keep it from fully taking advantage of the free-trade agreement, Santana said. “Infrastructure is our Achilles’ heel.”
People in Panama City, meanwhile, say their country is under construction—not only because of the canal expansion but also because of road projects, new office towers and a Panama City subway system that are being built.
“Panama City is doing great—it’s almost like an American city,” said Moreno, the Colombian researcher. The problem, he said, is “growth isn’t generalized across the country.”
Last year the Panamanian economy grew by 10.5 percent and the boom is expected to continue this year with the UN’s Economic Commission for Latin America and the Caribbean predicting a 7.5-percent growth.
The canal expansion, as well as Panama’s status as a financial and trading center, has helped pique interest by banks and corporations interested in planting regional headquarters in Panama City. And that, in turn, has piqued interest in the commercial trophy towers that dot Panama City’s skyline, said Asieh Mansour, head of Latin-American research for CBRE, a global real-estate services company.
“This type of space just hasn’t been available before,” she said.
“Overall, she said, Latin America’s growing middle class, improved labor markets and the trend toward pro-growth fiscal policies, combined with very limited supply of commercial space, “is fueling growth within Latin America’s key commercial real-estate markets.”
But that doesn’t mean there aren’t challenges ahead for the region.
The World Bank says with the exception of oil, commodity prices are expected to fall this year.
And count Venezuela, Argentina and Jamaica in the challenging column because of internal problems.
Argentina is plagued by high inflation and strapped for cash. Efforts to build up reserves and to better balance imports and exports have led to exchange-rate controls and import restrictions that traders say have had a chilling effect on their business.
Argentina also has been under fire for its statistics-keeping.
The government, for example, has said the inflation rate last year was 10.8 percent, but private estimates place it closer to 25 percent. The recent price set by the government for a 27-item basic-food basket for a family of four worked out to about P6 per person per day—an amount the Associated Press found would buy little more than a cup of yogurt in Buenos Aires. The government uses the food basket to help determine the inflation rate.
“Argentina has been faking its inflation rate for a number of years, and everyone knows that,” said Heath, and when you underestimate inflation, you overestimate growth. “The situation in Argentina is probably much worse than reported.”
The International Monetary Fund (IMF) board met last week and voted to censure Argentina for not providing accurate economic data—a step that could eventually lead to sanctions such as barring Argentina from access to IMF loans.
“We’re just not sure how the business of exchange controls will shake out this year,” said Victor Mora, managing director for global operations for Lennox International, a Texas company that’s a global leader in the air conditioning, heating and refrigeration markets. Lennox’s Latin-American operations are based at the Miami Free Zone.
The past year was especially challenging for US exporters because of the import permits that Argentina required before products could be shipped. “The permits are valid for 120 days and if you don’t ship in that time period, you need a new one—and they are not easy to get,” said Mora.
Although the impact still isn’t clear, late last month, Argentina announced it would be eliminating the import licenses for hundreds of products.
But as difficult as doing business in Argentina is, Mora said, “Venezuela is even more of a question mark.” Venezuela may have the world’s largest oil reserves and rank as Latin America’s fourth-largest economy, but it’s having trouble keeping flour and toilet paper on the shelves.
As President Hugo Chavez languishes in a Cuban hospital recovering from a fourth round of cancer surgery, analysts say the economy is also precarious, pounded by soaring spending and draconian price and currency controls that are slamming importers and leading to shortages.
Even so, Venezuela saw its gross domestic product grow by 5.5 percent in 2012 on the back of strong crude prices and a spike in public spending, particularly in construction, in the runup to Chavez’s October re-election.
But industry is getting hammered by foreign exchange controls. The official rate for the bolivar is 4.3 to the dollar. But importers, industries—and even people who want to study or travel abroad—find it exceedingly difficult to get those dollars from the government. Many turn to the black market, where the dollar fetches about 18 bolivares.
The disparity fuels inflation, foments speculation and drives a vicious circle of shortages and hoarding that have sparked mini-riots in supermarkets over items such as chicken and toilet paper. Inflation hit 20.1 percent last year, the highest in Latin America.
The government says reforms are coming, but has provided few specifics.
A devaluation, which undercuts spending power, would be highly unpopular and many analysts expect such a move would come only after new presidential elections, which could be triggered if Chavez were to step down or die as a result of his battle with cancer.
The economic troubles have provided fodder for an opposition that’s hoping it will have a second shot at the presidency after losing last October.
At a rally last month, the head of the opposition coalition, Ramon Guillermo Aveledo, said it was “inexplicable” how in the midst of an oil boom the country was deeper in debt with record-high inflation.
“Our infrastructure is destroyed; our streets, avenues, roads and highways have deteriorated,” he said. “We have blackouts in the whole country.”
For the most part this also will be a year of tepid growth for the Caribbean.
Eclac projects economic growth of 3.5 percent for Cuba—and that would make it one of the Caribbean’s better performers. Cuba is in the midst of economic reforms that give the individual a greater role in the economy but the pace of overhauling its creaky economy is moving at a slower pace than many would like.
But economist Carmelo Mesa-Lago, who has written a book in Spanish about the process, Cuba en la Era de Raul Castro: Reformas Economico-Sociales y sus Efectos (Cuba Under Raul Castro: Economic and Social Reforms and their Effects), says while there are contradictions in the reforms, they are not stalling. “I think there is an acceleration,” he said.
Cuba’s neighbor, Jamaica, has the unenviable position as the Caribbean nation expected to experience the lowest economic growth—a scant 0.1 percent. Jamaica was already saddled with a large fiscal deficit and significant debt when it was walloped by Hurricane Sandy last October, causing infrastructure damage that must be repaired with meager public funds.
“This year is definitely going to be a mix in terms of markets,” said Lennox’s Mora. “It depends on whether you view it as a glass half-empty or a glass half-full. I prefer to view it as half-full.”
In Photo: Construction is on schedule as workers continue work on the 7-foot wharf expansion at PortMiami. PortMiami is already preparing for expansion of the Panama Canal with work on its wharves in preparation for deepening the channel to accompany post-Panamax ships. (Carl Juste/Miami Herald/MCT)
Details Category: Global Eye Published on Saturday, 09 February 2013 15:44 Written by Mimi Whitefield / The Miami Herald
THERE are bright spots as Latin-American and Caribbean economies begin the year, but the uncertain health of the US economy, the lingering financial crisis in Europe and more sluggish growth in China are casting shadows over the region.
A decade ago, dim prospects in those major markets would have delivered a knockout punch in the region, but this year Latin American and Caribbean economies are expected to grow by 3.5 percent and average 3.9-percent growth in 2014 and 2015, according to a World Bank forecast. The United Nations’ Economic Commission for the region has a slightly more sanguine forecast of 3.8-percent growth in 2013.
Both are better than the 2.4-percent growth the World Bank is forecasting for the global economy and the mere 1.3-percent increase it is predicting for high-income countries.
The US economy grew by 2.2 percent in 2012. But the economy shrank 0.1 percent in the fourth quarter, and the first quarter of 2013 also could be sluggish.
“That creates a soggy start for 2013 in Latin America,” said David Malpass, president of Encima Global, a New York economic consulting and research firm.
With a recession in Japan, even slower growth expected in Europe than in the United States, and questions about whether the dip in the Chinese economy has bottomed out and whether the United States will be making sharp cuts in defense spending and other federal programs come March 1, Latin-American and Caribbean nations can’t really depend on the industrialized world to spur growth.
The region must look inward and undertake structural reforms that will allow growth from domestic factors, Malpass said.
Panama’s $5.25-billion investment in expansion of the Panama Canal is an example of the inward focus that will pay off down the road, Malpass said. By 2015, Panama plans to have completed two new sets of locks on the Atlantic and Pacific sides of the canal and the deepening and widening of existing channels to accommodate “post-Panamax” ships too big to traverse the current locks.
“It’s a difficult period, but a period where developing countries are growing solidly, but not as quickly as they might otherwise want to,” said Andrew Burns, the lead author of the World Bank’s annual Global Economic Trends report.
That means they should focus on investment in infrastructure, health care, structural policies, regulatory reforms and improvements in governance that will pay future dividends down the road, Burns said.
Such economic reforms, plus high commodity prices enjoyed by countries with fertile fields and mineral wealth, helped the region move beyond the global financial crisis of 2008 and 2009 far more quickly than it did when it was so dependent on economic cycles in the rest of the world.
Economic growth slowed in Latin America and the Caribbean from 4.3 percent in 2011 to an estimated 3 percent but that was still better than the 1.3-percent growth high-income countries managed in 2012, according to the World Bank.
China will continue to play a major role in Latin America and the Caribbean this year but whether the slowdown in China has reached its low point is subject to debate. But it’s relative. Slow growth in China would be brisk growth elsewhere. China says its gross domestic product grew 7.8 percent in 2012, the most tepid growth in 13 years and a comedown from a 9.3-percent growth in 2011.
In year-end remarks to the Inter-American Development Bank’s executive board, Luis Alberto Moreno, president of the IDB, noted that the region’s trade with Asia has grown by 20 percent since 2000, reaching $442 billion last year.
Brazil, Latin America’s largest economy, has been one of the main beneficiaries of trade with China, which supplanted the United States as Brazil’s largest trading partner in 2009.
Mainly due to China’s appetite for Brazilian commodities such as iron ore and soybeans, Brazilian exports soared to a record $256 billion; it had a trade surplus of nearly $30 billion in 2011.
But in 2012 as the Chinese economy slowed, Brazil’s trade surplus narrowed to $19.4 billion—its smallest in 10 years. For 2013, the Central Bank is projecting a $17-billion surplus, but some economists are projecting it will be more diminutive.
Once the high-growth darling of Latin America, Brazil’s economy grew a mere 0.9 percent last year.
But the World Bank foresees a better 2013, saying “the benefits of lower interest rates are expected to start kicking-in during the course of the year” and predicting growth in Brazil will accelerate to 3.4 percent.
Vertilux, a Doral, Florida, company that sells raw materials used in the manufacture of window coverings, is among the companies with an eye on Brazil.
About 65 percent of the company’s business is export, and Chief Executive Jose Garcia says 2013 is shaping up to be a very good year for his company.
He expects to triple sales to Brazil, although he says Brazil’s cumbersome tax and duty system make doing business with Latin America’s largest economy more expensive and challenging. “Any American company that wants to do business in Latin America should consider Brazil,” Garcia said, “but it is not easy to import into Brazil. Not everyone knows how to do it.”
The best Latin-American market for Vertilux now is Mexico, which was walloped during the US recession because its economy is so closely tied to the United States. “But the market has been growing steadily, especially in the past two years. There are no restrictions; it’s an open market like the United States,” said Garcia. “While it’s easier to do business in Mexico, there is also more competition.”
Despite drug-related violence and organized crime, analysts are optimistic about Mexico’s prospects, pointing to the emergence of a robust middle class, price stability and a youthful population.
Rising labor rates in China may also translate into more business for Mexico. Stiff competition from Chinese factories had contained Mexican manufacturing growth. But Mexican labor costs have remained constant, and “Mexico is now regaining what had been lost to China over the past decade,” said Jonathan Heath, chief economist at Jonathan Heath & Associates and also a professor at Universidad Panamericana in Mexico City.
“China doesn’t make changes very quickly, so we think, yes, China will allow Mexico to gain more market share in the United States,” said Heath, who visited Miami for a Latin-American Economic Forecast seminar hosted by the University of Miami’s Center for Hemispheric Policy.
There are other bright spots around the region.
Latin America’s unemployment rate is at a record low, and more than 1 in 3 people in Latin American now are considered members of the middle class. Some 58 million Latin Americans have moved above the poverty line to middle-class status in the past decade.
The economies of Colombia, Chile, Panama and Peru were the stars in 2012 and are expected to hold their own in 2013, although growth will slow somewhat.
It “may not be the great year we all want, but it will be a good year,” said Alvaro Moreno, a researcher at Colombia’s Private Board of Competiveness.
During the first few weeks of this year, Colombia hit two milestones: It placed $1 billion in bonds on the international market at a record-low rate of 2.7 percent, and the market capitalization of state-run oil company Ecopetrol overtook Brazilian titan Petrobras to become Latin America’s largest listed company.
Not bad for a country that just a decade ago was being written off as a precarious narco-state trapped in a 50-year guerrilla war.
As Colombia has shed its dark past, foreign investment has poured into mining and oil exploration. The Andean nation is expected to see growth of about 4 percent this year—down slightly from 2012 levels and slower than some of its neighbors—but still solid.
But Colombia’s success has a price. The avalanche of investment dollars has strengthened the peso, making Colombian exports less competitive. In the last four years, the peso has appreciated 36 percent versus the dollar, increasing the cost of exports at a time when many Colombians are hoping to reap the benefits of a new free-trade agreement with the United States.
“With the current exchange rate, it’s difficult for the agricultural sector, or any other commercial good, to get its head above water,” Minister of Agriculture and Rural Development Juan Camilo Restrepo complained recently.
The coffee industry is a case in point. Coffee is the country’s fourth-largest export after crude, coal and precious metals, but it remains Colombia’s flagship product.
Even though Colombia’s coffee crop was larger, the value dropped 31 percent from 2011 to 2012, in part due to the strengthening peso.
“Our top public policy issue is the valuation of the peso,” said Luis Fernando Samper, head of communications at the National Coffee Federation.
The government announced recently it would increase its monthly purchase of dollars from $500 million to $750 million. By soaking up excess greenbacks, it hopes to increase the value of the dollar relative to the peso.
The currency crunch isn’t the only problem. The economy has been showing signs that it’s slowing as manufacturing and construction have dipped. “This deacceleration will be a crucial theme for Colombia this year,” said Leonardo Santana, an economics professor at Jorge Tadeo Lozano University in Bogotá.
Colombia also has one of Latin America’s highest unemployment rates, around 10 percent, and inferior roads and ports keep it from fully taking advantage of the free-trade agreement, Santana said. “Infrastructure is our Achilles’ heel.”
People in Panama City, meanwhile, say their country is under construction—not only because of the canal expansion but also because of road projects, new office towers and a Panama City subway system that are being built.
“Panama City is doing great—it’s almost like an American city,” said Moreno, the Colombian researcher. The problem, he said, is “growth isn’t generalized across the country.”
Last year the Panamanian economy grew by 10.5 percent and the boom is expected to continue this year with the UN’s Economic Commission for Latin America and the Caribbean predicting a 7.5-percent growth.
The canal expansion, as well as Panama’s status as a financial and trading center, has helped pique interest by banks and corporations interested in planting regional headquarters in Panama City. And that, in turn, has piqued interest in the commercial trophy towers that dot Panama City’s skyline, said Asieh Mansour, head of Latin-American research for CBRE, a global real-estate services company.
“This type of space just hasn’t been available before,” she said.
“Overall, she said, Latin America’s growing middle class, improved labor markets and the trend toward pro-growth fiscal policies, combined with very limited supply of commercial space, “is fueling growth within Latin America’s key commercial real-estate markets.”
But that doesn’t mean there aren’t challenges ahead for the region.
The World Bank says with the exception of oil, commodity prices are expected to fall this year.
And count Venezuela, Argentina and Jamaica in the challenging column because of internal problems.
Argentina is plagued by high inflation and strapped for cash. Efforts to build up reserves and to better balance imports and exports have led to exchange-rate controls and import restrictions that traders say have had a chilling effect on their business.
Argentina also has been under fire for its statistics-keeping.
The government, for example, has said the inflation rate last year was 10.8 percent, but private estimates place it closer to 25 percent. The recent price set by the government for a 27-item basic-food basket for a family of four worked out to about P6 per person per day—an amount the Associated Press found would buy little more than a cup of yogurt in Buenos Aires. The government uses the food basket to help determine the inflation rate.
“Argentina has been faking its inflation rate for a number of years, and everyone knows that,” said Heath, and when you underestimate inflation, you overestimate growth. “The situation in Argentina is probably much worse than reported.”
The International Monetary Fund (IMF) board met last week and voted to censure Argentina for not providing accurate economic data—a step that could eventually lead to sanctions such as barring Argentina from access to IMF loans.
“We’re just not sure how the business of exchange controls will shake out this year,” said Victor Mora, managing director for global operations for Lennox International, a Texas company that’s a global leader in the air conditioning, heating and refrigeration markets. Lennox’s Latin-American operations are based at the Miami Free Zone.
The past year was especially challenging for US exporters because of the import permits that Argentina required before products could be shipped. “The permits are valid for 120 days and if you don’t ship in that time period, you need a new one—and they are not easy to get,” said Mora.
Although the impact still isn’t clear, late last month, Argentina announced it would be eliminating the import licenses for hundreds of products.
But as difficult as doing business in Argentina is, Mora said, “Venezuela is even more of a question mark.” Venezuela may have the world’s largest oil reserves and rank as Latin America’s fourth-largest economy, but it’s having trouble keeping flour and toilet paper on the shelves.
As President Hugo Chavez languishes in a Cuban hospital recovering from a fourth round of cancer surgery, analysts say the economy is also precarious, pounded by soaring spending and draconian price and currency controls that are slamming importers and leading to shortages.
Even so, Venezuela saw its gross domestic product grow by 5.5 percent in 2012 on the back of strong crude prices and a spike in public spending, particularly in construction, in the runup to Chavez’s October re-election.
But industry is getting hammered by foreign exchange controls. The official rate for the bolivar is 4.3 to the dollar. But importers, industries—and even people who want to study or travel abroad—find it exceedingly difficult to get those dollars from the government. Many turn to the black market, where the dollar fetches about 18 bolivares.
The disparity fuels inflation, foments speculation and drives a vicious circle of shortages and hoarding that have sparked mini-riots in supermarkets over items such as chicken and toilet paper. Inflation hit 20.1 percent last year, the highest in Latin America.
The government says reforms are coming, but has provided few specifics.
A devaluation, which undercuts spending power, would be highly unpopular and many analysts expect such a move would come only after new presidential elections, which could be triggered if Chavez were to step down or die as a result of his battle with cancer.
The economic troubles have provided fodder for an opposition that’s hoping it will have a second shot at the presidency after losing last October.
At a rally last month, the head of the opposition coalition, Ramon Guillermo Aveledo, said it was “inexplicable” how in the midst of an oil boom the country was deeper in debt with record-high inflation.
“Our infrastructure is destroyed; our streets, avenues, roads and highways have deteriorated,” he said. “We have blackouts in the whole country.”
For the most part this also will be a year of tepid growth for the Caribbean.
Eclac projects economic growth of 3.5 percent for Cuba—and that would make it one of the Caribbean’s better performers. Cuba is in the midst of economic reforms that give the individual a greater role in the economy but the pace of overhauling its creaky economy is moving at a slower pace than many would like.
But economist Carmelo Mesa-Lago, who has written a book in Spanish about the process, Cuba en la Era de Raul Castro: Reformas Economico-Sociales y sus Efectos (Cuba Under Raul Castro: Economic and Social Reforms and their Effects), says while there are contradictions in the reforms, they are not stalling. “I think there is an acceleration,” he said.
Cuba’s neighbor, Jamaica, has the unenviable position as the Caribbean nation expected to experience the lowest economic growth—a scant 0.1 percent. Jamaica was already saddled with a large fiscal deficit and significant debt when it was walloped by Hurricane Sandy last October, causing infrastructure damage that must be repaired with meager public funds.
“This year is definitely going to be a mix in terms of markets,” said Lennox’s Mora. “It depends on whether you view it as a glass half-empty or a glass half-full. I prefer to view it as half-full.”
In Photo: Construction is on schedule as workers continue work on the 7-foot wharf expansion at PortMiami. PortMiami is already preparing for expansion of the Panama Canal with work on its wharves in preparation for deepening the channel to accompany post-Panamax ships. (Carl Juste/Miami Herald/MCT)
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