Latin America's Coming Recovery THE GLOBAL ECONOMY
Peter Hakim and Richard E. Feinberg. Peter Hakim is director of the Inter-American Dialogue. Richard E. Feinberg is executive vice president of the Overseas Development Council., The Christian Science Monitor
AFTER a decade of shrinking income, low investment, and exploding poverty, Latin America may finally be emerging from its worst economic crisis ever. Although often overstated and oversimplified, the newly found optimism - if suitably tempered - is justified. This is good news for the United States too.
The positive outlook does not yet reflect greatly improved performance; sustained economic growth has by no means returned to Latin America. After three years of falling per-capita output, the region's growth in 1991 will just barely outpace population increases. The upbeat forecasts instead mainly derive from the intense, often successful efforts most countries are making to get their economies in order.
Recent reports of the UN Economic Commission on Latin America and the Caribbean and the Inter-American Development Bank, among others, stress the significance of measures governments are taking to balance budgets and cut inflation, curtail controls on prices and markets, privatize and deregulate economic production, and remove barriers to trade and foreign investment. These changes are expected to make Latin America's economies more productive and internationally competitive.
Also encouraging is the prospect of stronger economic ties with the US - Latin America's main trading partner and largest source of investment capital. President Bush's Enterprise for the Americas Initiative with its call for Western Hemisphere free trade offers little immediate assistance - but potentially it is a promising start toward more constructive economic relations in the hemisphere.
Some key numbers are improving in Latin America. In contrast to the past three years, most countries now anticipate positive, if modest, per capita growth in 1991. Inflation has moderated in the past year; capital is returning to the region; and foreign investment is once again picking up.
All this, however, has to be interpreted carefully. Foreign investors, for instance, are still wary. They are targeting only a few countries. Similarly, the sharp drop in inflation regionwide reflects the success of a few countries in battling hyperinflation; consumer prices are still rising at disturbing rates in many places. Some governments are effectively managing their external debts, but foreign debt obligations still block progress in many countries. …