Latin America is poised for opportunity as individual nations abandon unsuitable economic policies of the 1990s, the former governor of the Central Bank of Argentina told Darden students Feb. 20.
Alfonso Prat-Gay was keynote speaker of the ninth annual Latin America Student Association Conference, held each February on the Darden Grounds. Prat-Gay is now chairman of Tilton Capital, an asset management company in Buenos Aires. His conference topic on Latin American economies focused on whether the region is increasingly Left-leaning — shifting toward “neo-populism,” as he called it — or does the change more accurately reflect a move away from U.S. economic advice that dominated the region’s financial policies during the 1990s? He suggested the ongoing evolution of Latin American economies may be due to both factors, adding that the policies promoted by the United States to aid Latin American nations a decade ago actually resulted in economic chaos for the region. “Was it the set of policies that were not the right fit at the time, or did they not work?” he asked rhetorically. But his implication was clear: Economic policies that work in one country may not translate well into the social and political climate of another. Unlike the United States, where freedom already rubs shoulders with wealth, Latin American nations are trying to sustain democracy amidst rampant poverty. (The United Nations commissioned a 2004 survey of 18 Latin American countries that showed a majority would support an authoritarian regime in exchange for economic progress.)
In the last three years, the region has enjoyed economic growth of approximately 4 percent, but Latin American nations, overall, are still lagging in investment opportunity, Prat-Gay said. Inflation across the region “remains rather low,” he added. Fiscal surpluses have allowed several nations to repay debt ahead of schedule. Stock markets are up 300 percent over the same period, he added. Another significant event leading to the turnaround in regional fortunes has been the emergence of China in the global markets. While China is renowned as an exporter, the county's massive consumption needs created tremendous opportunity for commodities producers in Latin America, Prat-Gay said.
Against this robust picture, Prat-Gay said Latin America faces a critical election schedule in 2006, with major leadership questions recently decided or pending on the ballots in Bolivia, Chile, Costa Rica and Haiti. Presidential elections will be held in Peru, Mexico, Columbia, Brazil Ecuador and Venezuela this year.
“The trend is telling us the region is moving to the left,” he said. Meantime, real wages in Venezuela have fallen 25 percent since President Hugo Chavez took office in 1998, Prat-Gay said. “So you have to ask, what kind of populism is this, or is it orthodoxy?”
Without offering any hard answers, the investor and businessman said he believes Latin America faces a bigger danger from a global hard landing than a political shift. Effective and sustainable fiscal policies are in place in Chile and Columbia, he said, although Brazil and Mexico remain vulnerable due to a reliance on a strong currency. Prat-Gay described Venezuela and his native Argentina as “anxious” nations, saying both want to grow as fast as possible. Real interest rates are negative in both countries, while each has “an extremely cheap currency” right now, he said.
Today macroeconomic policies are sound across the region, he added, saying, “I look out and see governments starting to do what they should have been doing many, many years ago. We’re starting to see right now a much more intelligent approach to facing and profiting from globalization.”
The annual student-run conference drew a capacity crowd to Darden's Abbott Center Auditorium.
Founded in 1996, LASA is a Darden club committed to provide students with a forum to pursue cultural, professional and social opportunities. Members aim not only to increase Latin American awareness at Darden, but to expand Darden awareness in Latin America. Visit LASA on the web at:
http://student.darden.virginia.edu/lasa/
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