Latin America’s Glossed Decade

SANTIAGO – The Inter-American Development Bank declared last July that this would be “Latin America’s Decade.” A couple of months later, The Economist endorsed that idea, which has since been repeated by countless apologists and experts.

There is nothing like a little economic growth to get pundits’ juices flowing. And Latin America is growing, by 6% last year and an estimated 4.75% in 2011, according to the International Monetary Fund. Compared with the region’s mostly sluggish performance over the last three decades, this looks like takeoff velocity. And, compared to the dismal recent record in North America and Europe, it looks positively supersonic. Latin America’s stock markets are up sharply since the crisis, as are property prices in those few countries that keep track of house values. No wonder so many are so excited.

The mood about Latin America was equally optimistic at the start of the 1980’s. Bank loans from the US were plentiful, and countries like Argentina, Chile, and Uruguay were growing fast. But then Paul Volcker increased interest rates in the US, the dollars went home, most countries defaulted on their debts, and the 1980’s became a “lost decade” for Latin America.

The early and mid-1990’s witnessed another wave of optimism. Commodity prices were high, external financing plentiful, and many Latin American countries grew. Having adopted the liberalizing reforms dictated by the Washington Consensus, Latin America was thought to have turned the corner. But then came Mexico’s Tequila Crisis in 1994, followed by the Asian meltdown, which hit Latin American economies hard. Brazil blew up in 1998, and Argentina melted down in 2001.