The World Economic Crisis
by Jorge Vargas
I do not like to gloat for it is never an attractive activity for any person to partake in. I also do not like to laugh derisively though at times it must be done.
The United States is in a recession. Unemployment is rising, the stock market is falling apart, traffic congestion in most major cities is down (a direct result of an economic downturn that has made oil too expensive for people to consume as freely as before), and every single indicator demonstrates that this will continue for at least another year.
Europe is faring only slightly better and the only thing that will maintain them afloat is that their financial systems were not as deeply entrenched in poor business practices as was the U.S. financial system. In Europe, some nations are faring better than others and are applying strong policies to diminish the blow of the weakened stock market: Chief among this list are Russia and Spain, and Germany as well.
East Asia, in the meantime, is also suffering from a weak stock market performance however, in East Asia, most other economic indicators remain strong, as is the case in most of the nations of Europe.
After all, the stock market is but one indicator of the economy and not at all a perfect one. Better indicators are inflation and unemployment rates, and these are low in Asia and, when adjusting for Europe's kind unemployment laws, they are relatively low in Europe.
But these are not the reasons for why I gloat and laugh derisively.
When the crisis broke out, all of Latin America chuckled in amusement. As Brazil's president point out some three weeks ago: Latin America, derided by the United States for poor fiscal policies in the 1970s and 1980s, has emerged as one of the most fiscally sound regions in the world whereas the United States failed to practice what she so arrogantly preached.
Furthermore, Latin America's economies, by and large, are going through a period of strong growth in the industrial and service sectors, and in exports, all of which are driving GDP growth rates of 3-4% or greater. And unemployment in Latin America is decreasing significantly, not least of all in Brazil, Chile, and Peru.
Thus, the gloating.
But now for the derision.
The Wall Street Journal and a handful of other right-wing U.S. media agencies, ever-so-eager to take a swing at President Hugo Chavez of Venezuela, are aptly pointing out that Latin America's stock markets are falling. They then go on to say that Latin America will be bruised by this economic crisis because they want to believe that Latin America is still susceptible to the illnesses of the United States.
It is perhaps true that Latin America will be hurt by this economic crisis but it has not been proven yet. After all, much depends on what happens with China's economic growth.
The United States can go on believing herself to be the key player in Latin America and perhaps for the Central American nations and for Mexico this is true, but not so for South America. China is either the largest or second largest trading partner of Brazil, Chile, and Peru - Latin America's three strongest economies.
And although China's stock markets are slipping, China's growth continues, along with China's constant investment in infrastructure which requires the natural resources that Latin America is providing: Copper for electrification, mahogany and steel for construction, and, in the future, oil for China's population which is what is behind the pipeline across Colombia that China is investing in.
Since South America's economic growth has been related to exports and not at all to the stock market - therefore making South America's growth more quantifiable, tangible, and focused on infrastructure - this stock market crisis will have little effecton South America in the long-term, and in the short-term, all that South America's governments need to do is practice stronger austerity measures.
Peru's former president Alejandro Toledo recognized that the economic good times of the early parts of this decade would not last for long and it is for this reason that, as early on as 2004, he had the wisdom to begin practicing fiscal austerity policies. President Alan Garcia Perez followed the same policies when he took office in 2006. As a result of this, Peru's government now has the reserves and the liquidity to protect the Peruvian economy should the banks in Peru begin to fall, and the same is true of President Lula da Silva's Brazil and of President Bachelet's Chile.
So yes, the governments of South America should be careful and watchful, but they should not fear this crisis for it will wipe out the United States economy for some time, and it will weaken the Europeans and though the Chinese will feel it, their needs will exist and we will maintain our market.
In the meantime, the Wall Street Journal can continue publishing rubbish about the weakness of some of South America's stock markets, but that does not matter in the least: South America's wealth is not in the stock markets. It is found in ports and in airports. It is found in mines and in forests.
So, as far as South America is concerned - and to a point the whole breadth of Latin America - everything, in the words of Bob Marley, is going to be all right.
We do not have to worry about a thing.
Meanwhile, the U.S. continues to sink further and further into economic weakness, I believe I hear a little bell ringing in the horizon, and its sound is that of liberty, and its promise is that of life. So let those who resent our gloating and our derision resent it; we who have the ability to gloat and be derisive shall do so for some time to make up for decades of arrogance and abuse.
It's only fair.
