Friday, April 25, 2014

Commodities and Growth in Latin America

The IMF sees slower growth in Latin America in 2014. If you are a regular reader of this blog or if you have taken one of my classes on Latin America, you should instantly know to a large extent why that is the case. If you ever hear about strong or weak growth, immediately think "commodity prices."

According to the report, Latin America still faces a number of downside risks. The key risk is a sharper decline in commodity prices caused by weaker demand from some of the major commodity-importing economies, especially China. 

The term "broken record" is now an anachronism but I don't know if a more updated version even exists. But that's what this is. And then I have my standard "You don't have to be a Marxist to see how this fits into dependency theory." It used to be the United States and now is also China and India. That represents diversification but not independence--you still rely too much on a small number of big countries to buy goods with prices that jump around.

The IMF has argued that Mexico and Central America less commodity dependent than they used to be, though this makes me wonder about remittances. They may well be replacing commodities but are also a sign of deep dependence on the U.S. economy and U.S. immigration policy.

I wrote about this in December 2013 and expect to write this blog post again in a few months.


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