Rising Returns To Labor Are Raising Living Standards And Lowering Inequality In Latin America According To The World Bank

A paper written by the World Bank's Louise Cord, Leonardo Lucchetti, Carlos Rodríguez Castelán, Adam Ratzlaff posted on the VOX web site offers guarded optimism for Latin American and Caribbean progress on equality and growing middle classes with Argentina, Chile, Paraguay, Uruguay and Mexico leading. Their analysis, looking back as far as 1995, finds a 50% reduction in extreme poverty from 26% to 13 % by World Bank standards ($2.50 PPP/day). Gini coefficients are also showing continuous improvement for the region.The paper credits rising returns to labor for much of the progress.

However, all is not sunshine and daises. The writers warn that a substantial portion of Latin America's population remains close to the poverty line and could easily be tipped back given an economic shock or backsliding.

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Bloomberg Story Predicts Declining Values For Latin American Currencies

I'm skeptical enough to believe that predictions have very little power beyond the immediate future. This doesn't make them meaningless, but I don't take them at face value. My take on predictions is that they are useful for understanding the trend analysis of the predictor. Even when the prediction is wrong, walking through the analysis can be a good way to extend one's own understanding.

In that spirit I've linked to a Bloomberg story by writers Ye Xie, Eduardo Thomson and Denyse Godoy predicting a route for Latin American currencies in 2014. And indeed 2013 was a less than stellar year for that large portion of Latin American economies that is based on commodities exports. As the US economy improves there is a potential for US interest rates to move up making it harder for Latin American investments to compete with the giant sucking sound to the north. Compounding the grief China, which has been a significant investor in Latin America of late, is in retreat. And so Southern currencies are trending downward.

That said the world rarely goes as long as 12 months without a few big surprises and one can't be too cautious about over extrapolating from looking at a small piece of a large and complex system.

Click through to the Bloomberg story here:

Patricio Navia Column on Project Syndicate Site Spells Out Challenges For Chile's Bachelet

Chile's Michelle Bachelet was elected with a large majority, but by a small electorate. Large numbers of Chileans stayed home this election cycle leaving the ultimate meaning of Bachelet's victory open for interpretation. Bachelet, herself, will need to navigate potentially rough political waters with skill and nuance.
Chile is a nation of extreme wealth inequality. Bachelet has worked hard to bring about a thriving middle with some success. But Chile has a long way to go and all eyes will be on Chile's new president. Senior Navia spells it out.


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Economist Magazine Boosts Latin Amarica Coverage, Names Uruguay Country of The Year

In most English language international news sources Latin American coverage gets buried under mountains of stories on Europe, Asia, the Middle East, in fact just about anywhere that isn't Latin America. So it is with real pleasure that I note the Economist's explicit intent to expand coverage of the region and it's selection of Uruguay as 2013 country of the year. Uruguay would have to be on the short list of any publication that is paying attention to the rather large chunk of the planet that lies south of the US/Mexican boarder. Uruguayan President Jose Mujica has shown a level of leadership that is truly remarkable in a world that has become overweight on a global level with wealth on the one side and the majority of people who have so very little on the other like opposing balls on a rather long dumbbell.

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Michelle Bachelet Reelected Chile's President

Michelle Bachelet handily beat Evelyn Matthei in Chile's presidential election contest in what the New York Times is calling a landslide, 62% to 38%. This will be good news for populists and those who side with a demand side focus.
The Chilean economy has enjoyed respectable growth in recent years with commodities exports making a substantial contribution to Chile's economic fortunes. But like many countries, particularly those enjoying large contributions from commodities exports, income inequality has been a policy challenge in Chile. Keynesians, and even the IMF seems to be nodding its head toward Keynes lately, would tend to line up broadly with a middle out growth strategy such as that which Ms. Bachelet would seem to be indicating.
Ms. Bachelet appears poised to pursue an aggressive policy agenda including proposed constitutional changes. Chile is going to be an interesting story to follow. For the young and ambitious a move to Santiago might not be your least option.


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