Thursday, January 9, 2003

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The latest on Latin America

The current meme about Latin America is the huge backlash against "Washington Consensus"-style policies, because of the massive inequalities they cause. In response, voters are turning towards the protectionist, populist left.

Today, the Financial Times has several stories on Latin American economies that contradict two elements of that narrative. The first is the supposed correlation between market-freiendly policies and mass immiseration. Chile has pursued policies -- fiscal conservatism, pension privatization, deregulation, free trade agreements with everyone who's willing -- most closely in line with the Washington Consensus. As a result, it has been able to issue its largest bond offering ever. This story notes that: "Chile is one of the few Latin American countries whose credit quality has remained stable in recent years, and the pricing of the bond issue was tighter than expected at 163 basis points over US Treasuries. The credit quality of most Latin American countries deteriorated last year and few are expected to improve in 2003, according to Standard & Poors."

In contrast, there's Venezuela: "Venezuela will be forced to default on payments due to state oil company bondholders or on its domestic debt with private banks in the next few weeks if the government is unable to restart crippled oil production, bankers and oil industry officials said on Wednesday.

A five-week-old strike by opposition-aligned workers at Petróleos de Venezuela (PDVSA), who are pressuring President Hugo Chávez into resigning or calling early elections, has cut daily output from 3.1m barrels to about 300,000 barrels.

Employees loyal to the government have so far made minimal progress in restarting oil production, resulting in a collapse in export revenue. PDVSA sells its oil at between 30 and 45 days' credit, and executives at the company say cashflow has now dried up."

The scale and success of the Venezuelan protests suggests that perhaps the other part of the meme -- the leftist turn in Latin America -- has been overstated. [But what about Lula in Brazil?--ed. Given his administration's recent actions on state debt and monetary policy, it looks like Brazil is actually moving closer to neoliberal fiscal policies and away from populism. So there.]

posted by Dan on 01.09.03 at 09:41 AM