Lessons from LA’s crises • The current account is a key variable that should not present major distortions • 3% of the GDP • The composition of capital inflows is extremely important • Long-term direct investment funds – Short term portfolio • Productivity gains are fundamental.
Lessons (cont) • Fixed exchange rates as a stabilization device are dangerous. • The structure of government debt is extremely important
The present of LA • 35% of Latin Americans live in poverty. That’s 163 million human beings. • 86 million people live with less than $1 a day. • Unemployment is high • Lack of education • Rising crime
The future of LA “A country becomes competitive by having good infrastructure, an educatedwork force, regulations that encourage fair competition, a legal system that is open, honest and not subject to pressure, and a political system that reinforces democracy and the will of the people”Jeffrey Davidow US Ambassador in Mexico
Red lights • Interdependencies: • Mexico: 80% of exports go to US • Argentina: 31% of exports go to Brazil • Recession erodes trade agreements • Backlash: EZLN, Sendero Luminoso, etc. • Countries in trouble • Ecuador • Colombia • Venezuela • Peru?
Interesting players in the future • Cuba • Castro? • Spain • Banks and telecommunications • EU • Trade vs protectionism • USA • Elections