Political Risk Latin America Blog @PolRiskLatam

Forecast: Latin America in 2010

Posted in News and Articles, Political Risk by politicalrisklatam on February 3, 2010

By Ian Bremmer, for The Call, at Foreign Policy, February 2, 2010.

I’ve been comparing notes with my colleague and close friend Nouriel Roubini on political and economic expectations for a few key regions in the year ahead — a back and forth that’s resulting in a global forecast for 2010.

Today, we begin with Latin America.

Ian Bremmer: I do think we can expect a solid recovery in Latin America in 2010, as most governments in the region profited from sharply improved macroeconomic fundamentals to survive the slowdown with minimal damage. But a busy electoral calendar over the next two years, highlighted by Brazil’s presidential election in October, will tempt policymakers to inflate their political popularity via heavy state spending. Governments like those in Brazil, Mexico, Chile, and Peru will benefit from the sound macroeconomic policies of recent years. Political officials in places like Argentina, Venezuela, and Ecuador may find their popularity built atop shifting sands. The Cristina Fernandez de Kirchner government in Argentina, faced with rising inflation and an increasingly hostile congress, will prove especially vulnerable.

The really interesting story this year is in Brazil, where oil wealth and President Lula‘s popularity have seduced the government into less disciplined macroeconomic policy and a more statist approach to foreign investment and strategic economic sectors. Lula’s preferred presidential successor, Dilma Rousseff, should be considered a slight favorite to win. If she does, she’ll deepen state involvement in Brazil’s economy. If opposition candidate Jose Serra wins, we’ll see less bias toward state-owned enterprises and tighter fiscal policy. Whoever wins, there is one obvious wide-open sector for foreign investment: transport infrastructure. There’s a lot of work to do to prepare Rio for the World Cup in 2014 and the Olympics in 2016…(continue reading)

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