Inteligencia y Seguridad Frente Externo En Profundidad Economia y Finanzas Transparencia
  En Parrilla Medio Ambiente Sociedad High Tech Contacto
En Profundidad  
 
07/01/2006 | Americas - Overview (Part 3): Robust Economic Prospects, Uncertain Politics

WMRC Staff

In Latin and North America the strong growth of 2005 should moderate somewhat over 2006, but this should give little cause for concern. What is cause for concern is the rash of elections across the region, a number of which could produce leftist victories and sharpened tensions with the United States; 2006 is also a key election year for North America, with nail-biters foreseen in Canada's general election and the U.S. mid-terms.

 

Another Year of Robust Growth

The 2006 economic outlook for Latin America remains bright; after two years of relatively strong growth the region is set to expand again, albeit at a slower rate. The region's GDP is forecast to grow 4.0% in 2006, down from an estimated 4.3% this year. External demand and robust domestic investment will remain the main drivers of growth, although Global Insight expects private consumption to rise at a pace more in line with the average rate of expansion of the whole economy. The smooth decline of regional growth rates hides the sharp deceleration expected for Argentinaand Venezuela, which are estimated to grow at almost double-digit rates in 2005, and forecast to expand by 5.0% and 5.8% respectively in 2006. Although these countries will experience a significant slowdown, they will still grow above the regional average. The other two big players in the region - Mexicoand Brazil- are expected to accelerate modestly, to around 3.5%.

Inflation is expected to remain at moderate levels; our latest forecast for consumer prices is an increase of 5.8% in 2006, down from 6.3% in 2005. These regional averages are heavily influenced by the double-digit inflation we expect in Argentina and Venezuela. Major risks to inflation in the region are derived from the possibility of another oil-price shock. In 2005, several countries in the region took non-market measures to avoid the transmission of higher international energy prices into higher domestic consumer prices (i.e., price controls backed by subsidies and tax exemptions, and some other mechanisms). Countries that lack this ability to protect themselves against oil-price shocks, mainly Central American nations, are the ones that would suffer the most. Another source of inflationary pressure might be the depreciation of local currencies; several currencies in the region have strengthened substantially against the U.S. dollar in 2005, supported by sizeable trade surpluses. An adverse external environment may reverse this situation, leading to the devaluation of regional currencies that in turn will put pressure on consumer prices.

The Changing Political Complexion of Latin America

Potential political uncertainty is posed by over a dozen elections scheduled to take place across Latin America and the Caribbean in 2006. These include the region's economic powerhouses, Braziland Mexico. The former, Latin America's largest economy, remains entrenched in a government corruption scandal that first broke in June 2005. Although President Luiz Inácio Lula da Silva has not been personally implicated, his government's reform agenda has stalled and his approval ratings have suffered, as have his prospects for re-election in 2006, should he decide to stand. The scandal will remain in the news in early 2006, as investigations by two of the three congressional probes opened in 2005 continue, and the Chamber of Deputies decides the fate of the remaining legislators, who face the risk of impeachment. Even before the official electoral campaigning kicks off, the early part of 2006 is likely to see an intense jostling within and between parties, as potential presidential candidates compete for support ahead of the Brazilian Social Democratic Party (PSDB) and Brazilian Democratic Movement Party (PMDB) primaries scheduled for March, and parties seek to broker electoral alliances at both the state and federal levels. The campaign itself is expected to be fierce, especially as the corruption scandal has boosted the chances of a PSDB candidate winning the October 2006 presidential election. The government is expected to make little progress on its reform agenda in Congress during 2006, although there are likely to be efforts to frontload the spending of funds allocated for infrastructure and social projects.

Mexico'spresidential contest, scheduled for 2 July 2006, has dominated the political agenda far in advance of the official campaign period. Frustration with President Vicente Fox's stalled reform agenda has led the electorate to focus prematurely on the next presidential contest. Persistent leftist frontrunner Andrés Manuel López Obrador (AMLO) has provoked concerns in the private sector, but the ruling National Action Party (PAN) appears to be making a comeback under dynamic, would-be president Felipe Calderón. Also in 2006, it is all-change across the Andean region, with presidential contests due in Colombia, Ecuador, Peru and Venezuela, while Bolivians went to the polls in the last days of 2005. The first three Andean Community (CAN) members will also hold simultaneous Congressional elections, as did Bolivia and Chile in December 2005. Chile'ssecond-round presidential vote is set for 15 January, after the initial poll proved indecisive. Venezuela'spresidential vote will be closely monitored after the boycotted legislative elections in December 2005 paved the way to a 100%-Chavista parliament. Leftist and anti-U.S. president Hugo Chavez is set to secure yet another mandate, much to the chagrin of the domestic opposition and the private sector. In Peruthe electoral race is wide open. Parties are still embroiled in alliance-making and candidate selection, amidst the worrying rise in favour amongst Peruvians of ultra-nationalist Ollanta Humala.

In Central America, Costa Rica and Nicaragua are set to go to the polls to pick a new president and lawmakers, while El Salvador will select a new legislative branch. Nicaragua'spolitical situation remains particularly volatile and, as such, the national votes are more likely to affect investment risks. Dissident leftist Herty Lewites, one-time mayor of the capital, Managua, has been heading opinion polls, and tensions will heighten as he challenges Liberal Constitutionalist Party (PLC) Secretary General Eduardo Montealegre for the top job. Costa Rica is likely to see a Social Democrat victory lead by popular ex-president Óscar Arias, while the Salvadoran Congress is deemed to remain dominated by the ruling rightist Alianza Republicana Nacionalista (National Republican Alliance). 

Electoral and Economic Changes in the Caribbean 

Caribbean countries preparing for elections include Haiti, the disintegrating Dutch Kingdom territory of the Netherlands Antilles, and the French island of Martinique. The Dutch five-island alliance, which will cease to exist from July 2007, is due to go to the polls during 2006. Under the new arrangement, Curaçao and Sint Maarten will follow Aruba's example, becoming autonomous members of the Dutch Kingdom. The remaining islands - Bonaire, Saba and Sint Eustatius - will be converted into Kingdom Islands, making up a discreet part of the Netherlands. Guyana, a member of the Caribbean Community (CARICOM) despite its location on the South American mainland, is due to select a new head of state and legislators in March 2006. The schismatic politics of the Anglophone country, largely attributable to racial divisions, mean that violence is anticipated. The most challenging democratic test of the whole Caribbean basin will take place in Haiti, under the intense supervision of United Nations forces and despite soaring violence. It is hoped that the first vote since the demise of President Jean-Bertrand Aristide in February 2004 will bring the impoverished nation onto the path of institutional stability, an uncertain prospect at this stage. Across the Haitian border, Dominican opposition parties are devising alliances to retain their grip on the legislative branch. The French territories of French Guiana and Martiniquewill renew their respective General Councils. The 2005 colonisation polemic in the French government could translate into the pro-independence parties securing further seats in the locally based institutions. Smaller nations such as St Luciaand Montserrat will also witness a parliamentary overhaul.

Attention will also be directed at the Caribbean Community (Caricom), which is set to implement its Caribbean Single Market and Economy (CSME) on 1 January 2006. The self-imposed deadline looks feasible now after past postponements, as the scheme was initially scheduled for 2004. However, far from eliciting unanimous enthusiasm, the CSME generates much fear in some participant nations. In particular, the smaller members of the Organisation of Eastern Caribbean States (OECS) - comprising Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts and Nevis, St Lucia, and St Vincent and the Grenadines - are concerned about the effect of domestic markets liberalisation, which could critically hurt their undersized and fragile economies. In essence, they fear the devastation of their national productive apparatus under the unleashed forces of greater competition emanating from regional powers such as oil-and-gas-rich Trinidad and Tobago, Barbados and Jamaica. St Lucia in particular enjoys production costs higher than the Caricom average, thus making its industry vulnerable to cost-competitive imports bound to flow in with the advent of the free-trade bloc. 

Most countries now seem to be on target, but St Kitts and Nevis and Grenada have successfully bid for a deferral of the scheme. Caricom leaders have agreed to afford another month (31 January 2006) for St Kitts to prepare, as the islands seem embroiled in parliamentary processes. The CSME will come into force in Grenada by 31 March 2006. In a move seeking to allay the fears of CSME's stakeholders, the leader of the process - Barbados premier Owen Arthur - has visited most of the hesitant nations. The Caricom has also established the creation of a Regional Development Fund (RDF) that is set to direct funds to more exposed economies to assist the OECS in the implementation of the CSME and compensate for revenues losses. Funds will proceed from regional powerhouses and the international community. The CSME is becoming more compelling as the latest European Union-World Trade Organization talks make the abolition of preferential terms on banana and sugar, the key pillars of Caribbean economies alongside tourism, an imminent reality. The year 2006 will be a decisive one for the Caribbean, beset by impressive economic challenges, namely countering the negative impact of the new sugar and banana deals, and adapting to the new regional dynamic inherent to the CSME. The single-economy facet of the scheme is set to come into force in 2008.

Testing Times in the United States and Canada

As the subsequent article explores, U.S. president George W. Bush had a particularly difficult year in 2005 and will be hoping the worst is past as his Republicans prepare for the mid-term Congressional elections at the end of 2006. These could feasibly hand control of one or both chambers to the Democrats, although this looked unlikely at the time of writing. The main challenges Bush will have to face include the political stabilisation of Iraq following its December 2005 elections, ongoing scandals affecting administration figures and Republican congressmen, and crunch Congress votes on regular spending packages and the administration's delayed reform agenda. Moreover, the economy will slow somewhat as consumers retrench, weakening the pre-election economic 'feel-good' factor.

Canadians meanwhile go to the polls on 23 January 2006, for the second time in 18 months. The minority Liberal administration was brought down by the opposition parties in late 2005 after a long-running scandal over federal advertising and sponsorship programmes in the 1990s. This presents a golden opportunity for the opposition Conservatives to return to power after many years in the political wilderness, but polls indicate that the Liberals may finish ahead once more. Whoever wins is very unlikely to achieve an outright majority, raising fears that the political instability of 2005 could continue through 2006.

Contact: Raul Dary

24 Hartwell Ave.
Lexington, MA 02421, USA
Tel: 781.301.9314
Cel: 857.222.0556
Fax: 781.301.9416
raul.dary@globalinsight.com

www.globalinsight.com and www.wmrc.com

WMRC (Reino Unido)

 



Otras Notas del Autor
fecha
Título
05/06/2006|
23/05/2006|
21/05/2006|
11/05/2006|
09/05/2006|
05/05/2006|
14/04/2006|
10/04/2006|
08/04/2006|
08/04/2006|
08/04/2006|
08/04/2006|
08/04/2006|
06/04/2006|
06/04/2006|
30/03/2006|
30/03/2006|
28/03/2006|
28/03/2006|
25/03/2006|
24/03/2006|
24/03/2006|
24/03/2006|
26/02/2006|
26/02/2006|
20/02/2006|
18/02/2006|
18/02/2006|
18/02/2006|
10/02/2006|
10/02/2006|
09/02/2006|
08/02/2006|
07/02/2006|
04/02/2006|
04/02/2006|
27/01/2006|
23/01/2006|
23/01/2006|
23/01/2006|
23/01/2006|
22/01/2006|
22/01/2006|
22/01/2006|
22/01/2006|
22/01/2006|
22/01/2006|
20/01/2006|
20/01/2006|
19/01/2006|
19/01/2006|
19/01/2006|
19/01/2006|
19/01/2006|
19/01/2006|
19/01/2006|
19/01/2006|
18/01/2006|
16/01/2006|
15/01/2006|
14/01/2006|
12/01/2006|
11/01/2006|
08/01/2006|
06/01/2006|
06/01/2006|
06/01/2006|
05/01/2006|
05/01/2006|
01/01/2006|
31/12/2005|
25/12/2005|
28/10/2005|
21/10/2005|
20/09/2005|
01/09/2005|
13/08/2005|
13/08/2005|
13/08/2005|
13/08/2005|
08/08/2005|
08/08/2005|
08/08/2005|
08/08/2005|
30/06/2005|
30/06/2005|
30/06/2005|
30/06/2005|
08/06/2005|
08/06/2005|
08/06/2005|
08/06/2005|
08/06/2005|
08/06/2005|
03/06/2005|
03/06/2005|
27/05/2005|
27/05/2005|
27/05/2005|
27/05/2005|
27/05/2005|
27/05/2005|
27/05/2005|
10/05/2005|
10/05/2005|
10/05/2005|
05/05/2005|
22/04/2005|
22/04/2005|
22/04/2005|
22/04/2005|
22/04/2005|
22/04/2005|
04/04/2005|
04/04/2005|
01/04/2005|
01/04/2005|
01/04/2005|
01/04/2005|
29/03/2005|
29/03/2005|
29/03/2005|
29/03/2005|
29/03/2005|
29/03/2005|
27/03/2005|
27/03/2005|
27/03/2005|
27/03/2005|
23/03/2005|
23/03/2005|
23/03/2005|
23/03/2005|
11/03/2005|
11/03/2005|
09/03/2005|
09/03/2005|
08/03/2005|
08/03/2005|
05/03/2005|
05/03/2005|
03/03/2005|
03/03/2005|
03/03/2005|
03/03/2005|
03/03/2005|
03/03/2005|
02/03/2005|
02/03/2005|
19/02/2005|
19/02/2005|
18/02/2005|
18/02/2005|
06/02/2005|
06/02/2005|
06/02/2005|
06/02/2005|
06/02/2005|
06/02/2005|
31/01/2005|
31/01/2005|
26/01/2005|
26/01/2005|
22/01/2005|
22/01/2005|
21/01/2005|
21/01/2005|
21/01/2005|
21/01/2005|
06/01/2005|
06/01/2005|
06/01/2005|
06/01/2005|
06/01/2005|
06/01/2005|
02/12/2004|
02/12/2004|

ver + notas
 
Center for the Study of the Presidency
Freedom House