Latin America sees uncertain 2011

Carmen Miranda at the BBC in April 1948 What will be the South American Way in 2011?

As the year is coming to an end, Latin America is preparing for 2011 amid uncertainty over the future direction of some of the region's biggest economies.

Brazil begins the new year with a new president, while Argentina will see in 2011 without a new budget.

Mexico's very integrity as a state is threatened by drug-trafficking gangs. For its part, Peru is recalling darker times as the daughter of an authoritarian ex-leader prepares to run for the presidency.

But at least the region should emerge fully from recession, with the worst performing country, Venezuela, expected to return to growth.

BRAZIL

With Dilma Rousseff due to be inaugurated as president on 1 January, the announcement of who will fill her key economic posts has failed to calm markets' fears over future policy.

Brazilian flag flies over the Alemao favela Brazil still has many social problems to tackle

Since analysts have begun to talk about "unsustainable" levels of public spending, they were not exactly heartened to hear that the man responsible, Finance Minister Guido Mantega, is to remain in the job.

To stop the economy overheating as the government pumped money into it, Central Bank head Henrique Meirelles was forced to raise interest rates, which now stand at 10.75%.

But Ms Rousseff wants to bring rates down in a hurry, so Mr Meirelles is to be replaced by the bank's current head of financial regulation, Alexandre Tombini.

Even so, Ms Rousseff may not get the desired result. Mr Tombini helped devise the inflation targeting policy that has favoured high interest rates during the eight years of Luiz Inacio Lula da Silva's presidency.

In fact, the markets reckon he will have to put rates up still further, perhaps as early as his first monetary policy committee meeting on 18 and 19 January, although another rise would only put more upward pressure on the already overvalued real.

At the same time, the need for social spending on the government's poverty-fighting Bolsa Familia programme has not gone away.

Business horizons

The year behind us, the year ahead

And don't forget that Ms Rousseff first came to prominence as head of the government's continuing $290bn accelerated growth programme (PAC), designed to remedy what she describes as "years of stagnation" in the country's infrastructure.

ARGENTINA

Argentines spent much of this year speculating about who would be the government's presidential candidate in the October 2011 election.

Would it be the current president, Cristina Fernandez de Kirchner? Or would her husband and predecessor, Nestor Kirchner - perceived as the true power behind the throne - return to the fray?

Finally, with a year to go before the vote, the succession was definitively resolved: Mr Kirchner died of a heart attack at the age of 60.

Procession in Buenos Aires the day after Nestor Kirchner's death, with banner reading: Nestor with Peron, the people with Cristina The legacy of General Peron lives on in Argentina

In an already fragmented political landscape - where parties claiming to represent General Juan Peron's legacy provide not just the government, but also much of the opposition - this was a serious blow.

If the current tide of sympathy for President Fernandez lasts, she may well be re-elected. But since the Kirchners' interventionist economic policies have always been more opportunistic than strategic, much could go wrong in the meantime.

Ms Fernandez will certainly enjoy near-total economic power in 2011, since Argentine deputies' failure to pass a budget for next year allows her to rule by decree.

However, inflation is currently believed to be running at more than 25%, despite official statistics indicating less than half that figure.

Argentina has just renewed contact with the International Monetary Fund, after years of hostility, in an effort to devise a new and more accurate inflation index. But unless the true rate actually falls, a slowdown in growth predicted for 2011 could make life difficult.

MEXICO

US Secretary of State Hillary Clinton stirred up controversy in September when she compared drug cartel violence in Mexico to the Colombian insurgency of the 1980s.

While President Barack Obama moved swiftly to quash the comparison, some commentators said the main issue raised by Mrs Clinton's remarks was why it had taken her so long to notice.

Drugs haul found in a tunnel under the Mexico-US border in Tijuana Keeping Mexican drug shipments out of the US is a tough task

The problem for the US is that its economy is deeply intertwined with Mexico's, through their common membership of the North American Free Trade Agreement (Nafta).

In past US recessions, the rule has been that when Wall Street sneezes, Mexican businesses can end up in intensive care.

Right now, Mexico's legitimate economy is proving resilient, with manufacturing performing well, especially the car industry.

But the continued weakness of the US is expected to mean lower growth south of the border in 2011, prompting the Mexican central bank to keep interest rates on hold at 4.5%, with a possibility of cuts next year.

Unfortunately, US demand for Mexico's illegitimate exports, without which there would be no Mexican drug cartels, is not expected to slacken any time soon.

PERU

Although his country has the highest projected 2010 growth rate among Latin America's major economies (8.3%, according to the IMF), Peru's president, Alan Garcia, has just a 34% approval rating.

Admittedly, that is far better than the 5% rating that he had at the end of his first presidential term, from 1985 to 1990.

But that earlier term was an unmitigated disaster that saw the country's GDP shrink by one-fifth and the number of people in poverty rise by five million.

Peru's Alan Garcia and Chile's Sebastian Pinera The Peruvian and Chilean leaders are both free-marketeers

This time, Mr Garcia has presided over boom, not bust. Yet the gains have not been equally distributed among Peru's population: while urban coastal areas have benefited, the rural highlands remain impoverished.

Mr Garcia's last presidential stint was followed by a decade of authoritarian rule under Alberto Fujimori, who rebuilt Peru's economy and saved it from the Maoist Shining Path insurgency, but rode roughshod over the country's democratic process.

Mr Garcia is not eligible to run again in the April 2011 presidential election. However, Mr Fujimori's daughter, Keiko, is hoping to win the post for her Fuerza 2011 party.

She and Mr Fujimori's own successor, Alejandro Toledo, are vying with a former mayor of Lima, Luis Castaneda, in opinion polls.

All three front-runners are drawn from the right or centre-right. As a result, the victor is likely to join Chile's Sebastian Pinera and Colombia's Juan Manuel Santos, both elected during 2010, in South America's small band of non-leftist leaders.

VENEZUELA

Next year, President Hugo Chavez's Bolivarian republic is likely to rejoin its neighbours in returning to growth after the global recession.

By any objective standards, however, Venezuela has had a miserable year, with easily the worst economic performance in the region, not to mention the highest inflation at about 30% a year.

A menu outside the "socialist" Cafe Venezuela displays the cafe's prices (R) as well as the "capitalist" prices (L) charged elsewhere State-run cafes in Venezuela charge a "fair" price, not a "market" price

And since state control of the economy has been growing during this period, with more and more firms being taken over, Mr Chavez and his allies have fewer people to blame.

The president has not yet carried out his threat to nationalise food and drink giant Polar, the largest company still in private hands.

But the government's ability to manage food production and distribution is questionable after scandals involving thousands of tonnes of rotting food that were imported by state-run retailer Pdval, but never distributed.

Even the oil industry, responsible for more than 90% of Venezuela's foreign currency inflows and 50% of government revenues, is suffering. While state oil company PDVSA has diversified into social programmes, it has become less efficient at its core business of actually producing oil.

In 2011, expect sluggish growth in Venezuela and perhaps another devaluation of the bolivar.

But you can also expect most foreign firms to shun a country in which anything can be expropriated at the drop of a revolutionary beret.

Latin American growth forecasts

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