South America Inc
Economy
Economic Overview:
Because of histories of high inflation in nearly all South American countries, interest rates remain high and investment remains low. Interest rates are usually twice that of the United States. For example, interest-rates are about 22% in Venezuela and 23% in Suriname. The exception is Chile, which has been implementing free market economic policies since establishing military dictatorship in 1973 and has been increasing its social spending since the return of democratic rule in the early 1990s. This has led to economic stability and interest rates in the low single digits. South America relies heavily on the exporting of goods and natural resources. On an exchange rate basis Brazil (the seventh largest economy in the world and the second largest in America) leads the way in total amount of exports at $137.8 billion dollars followed by Chile at 58.12 billion and Argentina with 46.46 billion. The economic gap between the rich and poor in most South American nations is considered to be larger than in most other continents. In Venezuela, Paraguay, Bolivia and many other South American countries, the richest 20% may own over 60% of the nation's wealth, while the poorest 20% may own less than 5%. This wide gap can be seen in many large South American cities where makeshift shacks and slums lie adjacent to skyscrapers and upper-class luxury apartments.
Chile should tout its passage to first world
BY ANDRES OPPENHEIMER / The Miami Herald
By the end of this year, Chile is likely to become the first South American country to join the exclusive club of the world's 30 richest countries. Yet, amazingly, you don't see Chileans jumping for joy, nor presenting themselves to their neighbors as a model nation.
According to officials from the Organization of Economic Cooperation and Development (OECD), the Paris-based institution that groups the world's wealthiest democracies, Chile may be officially accepted as a full member at its Dec. 18 meeting.
The OECD is waiting for the Chilean Congress to pass three pending measures to fully adhere to the organization's tax information exchange and corporate governance standards. Chilean officials hope the pending measures will be passed by December.
Chile has been pretty coy about its economic achievements. Unlike any other Latin American country, Chile's economy has grown steadily for the past two decades, and it leads Latin America in virtually all competitiveness rankings. More importantly, Chile has reduced its poverty rate from 39 percent of the population in 1990 to 13 percent nowadays. Yet, unlike Venezuelan President Hugo Chávez, who goes around the world claiming that his country's oil-driven growth is a "revolutionary model," Chile's President Michelle Bachelet has abstained from political evangelism abroad. >>>>Go to Full Story >>>
Argentina's Subsidy Policy Raises the Specter of Nationalization
From Universia-Knowledge@Wharton
Beyond the political uproar caused by the loss of control of the Argentinean parliament by the Kirchners in the legislative elections held last Sunday, some economic indicators are beginning to worry experts — increasing informal employment, declining demand for labor, increased state subsidies and a growing number of companies that are in crisis and risk being privatized.
More than 77,000 workers in various industries receive a monthly salary of US$160 through Argentine government subsidies. The goal is to prevent those people from losing their jobs. The more than 53,000 companies affected by this program are bankrupt. So far this year, the government of Cristina Fernández de Kirchner has spent some US$48 million on the program, known as REPRO (the Federal Productive Reconversion Program) and created in 2002 by then-president Eduardo Duhalde amid the deepest social and economic crisis in the history of Argentina. At the time, the government of Fernando de la Rua had fallen, bank deposits had been confiscated and the Argentine currency had been devalued.
Although the current crisis is not as serious as that one, employment is one of the indicators beginning to suffer the consequences of the deterioration in the local and global economy. Through the subsidies authorized by REPRO, the administration of Fernández de Kirchner avoided a half-point rise in unemployment, now at 8.4%, according to INDEC, the National Institute of Statistics and Census. The official figures don't include any social spending plans. According to critics of INDEC, the government has intervened under the supervision of Commerce Secretary Guillermo Moreno and changed the methodology for measuring unemployment. INDEC's credibility has been further challenged by private reports that predict unemployment of about 10% by the end of the year. >>> Go to Full Story >>>
