Here we go again

Wednesday, January 3, 2018

First off, happy New Year to our readers, may 2018 bring you joy and prosperity.

As is tradition, here is my list of the individuals who I felt shaped Latin America last year:

Ricardo Gareca: Peru's football coach and the former Argentine international led the Blanquirroja to their first World Cup in 36 years – good news for a country now slammed by political crisis.

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Pedro Parente: The CEO of Brazil's state energy giant Petrobras – once the symbol of a corruption scandal still shaking the region's foundations – has helped turn around fortunes and restore credibility at the beleaguered company.

Mauricio Macri: The president of Argentina continued his pro-market push in 2017 backed by the overwhelming approval of commanding midterm results.

Michele Bachelet: Chile's unpopular outgoing president will probably be remembered fondly in five or 10 years (perhaps even sooner) for daring to reform a country stubborn to change.

And last but not least: the thousands of women and men who worked together, stone by stone, hour by hour to help dig Mexico out from under the rubble after a devastating earthquake rocked the capital city and its surrounding areas on September 19.

This is the sort of unifying effort that will be required in 2018, because it's a time of great importance in Latin America, where economies are on the up (except for in the catastrophic outlier Venezuela).

Our annual surveys, to be published during the first two weeks of January, demonstrate an optimism not seen in many years at BNamericas. The global economy could be at the early stages of another (perhaps somewhat quieter) commodities boom.

The prices of most major metals, and oil, are either rising or stable.

Mining companies are the most bullish on their spending since 2013, according to the BNamericas survey, while 80% of those surveyed in the oil business in Latin America expect increased spending in 2018 compared to 2017.

Much as politicians, columnists, and academics blast on about the need for diversification, raw materials remain the lifeblood of Latin American economies. Higher commodities prices usually means higher growth. 

But the management of this income is key – and there are crucial elections in 2018. The two global giants, Brazil and Mexico, will vote for new presidents this year, with other general elections slated in Colombia, Costa Rica, Paraguay and even potentially (though doubtfully) Venezuela.

How will candidates and new leaders such as Sebastian Piñera – who starts his second presidency in Chile in March – manage this new part of the cycle? It's a massive question, and you don't have to look very far into the past to see how damaging the resource curse can be.

Never has political risk been more important; for example, respondents to the infrastructure survey cited corruption as the biggest hindrance to development of new roads, metros, ports and airports in Latin America.

Did the previous commodities boom cause corruption? No, but windfall gains coupled with big state apparatuses and terrible governance certainly facilitated it.

In Brazil, Colombia and Mexico, candidates from vastly differing schools are leading polls. Anyone can win. Presenting the strongest pragmatic platform against corrupt and bankrupt practices, regardless of political orientation, could be the key to winning those votes.