The future is not clear for Latin American governments

Although there are different degrees of economic uncertainty in each country, this is a situation that can be generalized. The global scenario does not have a positive outlook, and this context of distrust aggravates tensions that have not been resolved since past financial crises, according to university researchers.

Participating in Dialogue 6: Latin America and the current financial situation, organized by the Network of Fiscal, Financial and Monetary Economics and UNAM's Institute of Economic Research (IIEc), César Duarte Rivera, from this university entity, pointed out: The inflationary processes occurring in most of the world produce important negative consequences, in addition to those generated by the conflict between Russia and Ukraine.

In Latin America, this uncertainty is deepened by the political factor and the change of governments in recent years, which has us in the expectation of what will happen. "We are not sure about the scope of some of the proposed reforms and how far they will be implemented, and what implications this may have on the region's outlook, or how much they will be affected by global trends."

In the case of Mexico, war and an uncertain future, after a long time, this change was achieved, "at least in the discourse of the federal government"; however, it has had to face the pandemic and global crisis. Mexican and other Latin American governments will face an uncertain scenario that will cast doubts and make it even more difficult for their projects to be successful or to fulfill what they promise in theory, or what is expected to happen with them.

Incipient recovery

Meanwhile, Monika Meireles, also from the IIEC, said that there is an extension of the domain of uncertainty, even after the North Atlantic financial crisis of 2007-2008, to which was added the COVID-19 pandemic. Faced with this, the responses in Latin America in terms of anti-cyclical public policy were apathetic and insufficient to deal with such a brutal crisis, and to this is added austerity, which is "the mother of fascism".

The economic-political crossover is fundamental to understanding and locating what uncertainty means. In Brazil, "we are just getting rid of the most recalcitrant proto-fascism", for example. Latin America today has a political context with a new balance of forces. "Hopefully the second progressive wave of the 21st century in the region will be able to do more than the first one, which did not consolidate progress in the social field, and will further deepen the development-democracy binomial", she considered.

Latin America is not on a clear path toward the consolidation of the new governments, and this is a factor that makes the uncertain future even more uncertain.

The pandemic makes it clear, with the breakdown of global value chains and their readjustment to seek suppliers closer to the final consumer market, that this is a structural cause that contributes to the acceleration of the increase in price levels, and reminds us that this increase, in itself, is not so problematic; however, the issue behind it is the redistributive effect of income that has an inflationary acceleration. "This is a serious problem in an already serious situation, given our incipient post-pandemic recovery," said the expert.

We have to think that in the last 10 years we had inflation under control, but with social costs to keep central banks operating under the inflation targeting regime on their feet. What we are seeing as a macroeconomic trend in Latin American nations are high-interest rates, following the US Federal Reserve; "the margin of maneuver of the central banks of peripheral countries is small", stressed Meireles.

Opportunities

According to Aderak Quintana Estrada, from the Autonomous University of San Luis Potosí, there is a lack of certainty, but the future is always like that. "The same economic processes on a global scale have taught us that we live in constant uncertainty."

Mexico is experiencing an interesting process in recent months, the result of disruptions in global supply value chains that have been damaged by the pandemic, as in Asia they are still struggling with confinement. Some companies decided to look to relocate and are considering Latin America, particularly Mexico, for that purpose, which brings growth opportunities.

In this region of the planet, left-leaning governments generate a block and an opportunity, "but we must not lose sight of the fact that there is still a polarization in the political and economic spheres".

Furthermore, the idea prevails, regardless of whether it is a government of the left, center, or right, of the ideology of austerity, and this marks even more uncertainty. Inflation also contributes to this and its management ends up accentuating the lack of certainty in the future, Quintana Estrada pointed out.

Roberto Soto Esquivel, professor-researcher at the Academic Unit for Development Studies of the Autonomous University of Zacatecas, who moderated the session, pointed out that the process of financial and commercial deregulation that began in the 1980s generated a series of recurring and increasingly deep crises.

Since that year, Southeast Asia has had an average annual growth of seven percent; the countries that make up the G7 (the world's strongest economies) have recorded growth of 2.09 percent over the same period; the Euro region, 1.06 percent; the countries that make up the European Union, 1.84 percent; and Latin America, 2.43 percent.

Forecasts indicate that during the 2023-2027 period the Southeast Asian zone will grow 5.14 percent; the G7, 1.4; the Eurozone, 1.48; the European Union, 1.74; and LA, 2.3 percent. "Given this, we must ask ourselves, for whom is the future uncertain, for those who bet on globalization-financialization, or for those who propose and apply regionalism-nationalism?", he said.