Not too long ago, Latin America was one of the regions with the best economic perspective on the planet.
After the crisis of 2009, recovering and booming economies in the south looked for Asian partners to establish business opportunities with China, India, and even Russia.
Those partnerships were established enthusiastically with the signing of new bilateral and multilateral agreements between China and individual commercial partners as well as among the members of the BRICS.
However, a strong slowdown in Chinese production, as more countries cut down on imports left most Latin American countries handicapped; unable to export raw materials to Asia, Europe and other Latin American partners.
Fast-growing poverty as a result of the decreasing economic activity and an out of control level of government corruption moved countries like Brazil, Venezuela, Chile, Ecuador and Nicaragua to establish even more restrictions to their economies, imposing austerity and market controls that resulted in deeper recessions.
In a sense, Latin America never recovered from the 2008-2009 crisis and neither did its commercial partners in Europe and North America.
Added to the economic free fall, countries like Colombia and Mexico have seen the return of guerrilla-style attacks led by the FARC and narco cartels in some of the most important cities. In El Salvador, drug gangs have made a strong come back and now use city streets to wage war against the country’s militarized police.
The economic slowdown caused to a great degree by illegal practices on Wall Street and the multiple fraudulent schemes in the international banking system resulted in a shortage of credit for small and mid-size business at a time when large corporations rip the benefits of abundant liquidity and access to bailout funds at less than zero percent interest.
The latest case of financial collapse comes from Brazil, where its president, Dilma Rousseff, announced a new era of austerity that includes a R$70 billion cut in spending. Those cuts will include less money for education, healthcare and housing projects.
According to official numbers, inflation has grown and will continue to grow this year. Government numbers expect inflation to be at around 8.5% in 2015, almost double the official target of 4.5%.
In addition to cutting spending on social programs, the government, which has already raised gasoline and electricity prices by adding more taxes to energy costs, sent to Congress more taxing initiatives. One of those intends to increase rates on bank profits from 15% to 20%.
Austerity measures in Brazil began after Dilma selected Joaquim Levy, a former International Monetary Fund student to occupy the position of Finance Minister back in January. According to Levy, Brazil needs to go back to 2013 spending levels. However, wasteful spending is much older than that. Brazil has seen an increasing growth in the size of government since Dilma’s predecessor, Lula da Silva came to power 12 years ago.
Right now, large industrial players in Brazil are beginning to cut down their operations. As previously reported, General Motors has cut production while other companies have imposed forced vacations on employees or cut down the number of employees.
The rest of Latin America does not look much better.
Just a couple of days ago, we reported on Venezuela’s collapsing currency. The Bolivar has been consistently tumbling down, falling through the threshold of 400 bolivars per dollar, which is twice as low as the value of the so-called Marginal System.
The bolivar has depreciated so fast that there are very few people who can deny the coming collapse of the Chavez economic model, which was good enough as long as the price of oil was kept high by artificial manipulation.
Along with a collapsing currency, Venezuelan’s have to deal with out of control inflation, lack of basic products such as flour, fuel and even clean water.
Meanwhile, in neighboring Ecuador, things are not any better. The Correa administration has now decided to confiscate public and private pension funds. Under such a condition, workers will be obligated to surrender their life’s savings to the government.
Teachers and other unionized workers have had to provide the Bank of the Ecuadorian Institute of Social Security (Biess) savings they have accumulated on their own to improve their lousy public pensions.
The teachers’ pension fund is the most significant, with $405 million saved in 23 years by 126,000 teachers. That is why they are the ones denouncing the arbitrary nature of the government’s demand to surrender their hard-earned money.
The confiscation of their funds was approved by the Monetary and Financial Code adopted last September by the National Assembly.
Biess president, Richard Espinosa, said last week that an audit has already determined that the educational sector recorded a deficit of 40% in the period 1999-2000, and that te government helped cover that deficit. According to Espinosa, from the $405 million that teachers claim as their only $17 million are in cash.
Moving north to Central America, economic conditions are equally as bad as in Ecuador or Venezuela. However, in Nicaragua poverty is nothing new. What is new is Daniel Ortega’s latest attempt to violate privacy.
As we reported on May 14, the Nicaraguan president, is sponsoring a law whose goal is to give his government complete control over the Internet.
That control will be exercised through the creation of a state company that will manage broadband services in the Central American country, and that will decide who will receive licenses or permits to offer such services.
The initiative is promoted by the Executive branch as a policy to ‘modernize’ telecommunications in Nicaragua. The proposal has generated much rejection, including from Nicaraguan private enterprises that are traditionally strong Ortega allies.
The law supposedly intends to promote and develop the national telecommunications network services, but in practice it seeks to give power to Telcor, a state company, to force private companies that provide Internet service, to provide “information and documentation related to telecommunication services that it requires from customers.
Telcor will also demand access to all the technical, economic and financial information for “statistical purposes, control, monitoring and tariff setting.”
According to the association of Nicaraguan Internet, analysts and civil society organizations, the new law could involve a violation of the privacy of Nicaraguans, which would go against the Constitution.
“We are completely against it, because it seeks full control of Internet and because it goes in the opposite direction of the efforts of all public and private sector to attract investment to the country. It also goes against economic freedom,” said Joseph Adam Aguerri, a member of the Superior Council of Private Enterprise.
There is nothing better to look up to in Latin America. There is still Argentina, always an easy prey of the IMF and its international creditors is also immersed in deep corruption. In Uruguay, Paraguay and Bolivia, it seems that poverty is the only way of life their people know.
The only people doing well in Latin America, as it happens in the rest of the western world, are the small wealthy elites, who are the only ones favored by the political decisions made by bureaucrats in government.
In this part of the world, the gap between the richest and the poorest is going to continue growing. In countries like NIcaragua, El Salvador, Venezuela and Colombia, there is no middle class, while in others like Brazil, the middle class is beginning to dissapear.
Not one single ideology that has been parroted as a salvation ladders by the so-called leaders of Latin America has done anything to prevent the scenario described above.
Neither socialism nor communism, nor representative democracy -three of the most prevalent ideologies in the region- have contributed anything to prevent or improve the scenario described above. That is because ideology alone is incapable of solving any social or economic problem.
This is something that Latin American voters can’t get their heads around despite many years of living in misery and oppresion.