MEXICO CITY – For Latin America, 2011 was, in Frank Sinatra’s terms, a very good year – and 2012 doesn’t look like being so bad either. For a region not always accustomed to things going well, this is a somewhat strange state of affairs.
Three elections were held in Latin America in 2011. Two – in Argentina and Peru – went well; the other – in Nicaragua – was marred by egregious fraud and heavy-handed government intervention in favor of the incumbent. Still, two out of three is not bad in a region where, previously, if elections were held at all, disputes about the outcomes were the norm.
In economic terms, high commodity prices fueled strong growth in South America in 2011, and the modest US recovery benefited nearby countries. In Chile, Peru, Argentina, Uruguay, Bolivia, and, to a lesser extent, Brazil and Colombia, voracious Chinese and Indian demand for raw materials and food boosted foreign reserves, enabled heavy government spending, and sustained high levels of imports. All this led to average growth rates well in excess of 4%.
But it also led to new doubts about the wisdom of reliance on commodity exports. Chilean economist and politician Carlos Ominami, in his tell-all memoir Secretos de la Concertación, wondered what would happen if China's economy slowed or its real-estate bubble burst. By the end of the year, this seemed to be happening: commodity prices and growth rates were dropping, and 2012, while still promising strong economic performance, will not match this year's success. Sustained lower prices may bring chickens home to roost.