Friday, January 26, 2018

Latin America Outlook Good (Except Venezuela)

In the endless commodity cycle, the International Monetary Fund says Latin America is on an upswing. The post could actually be labeled "except Venezuela." They actually have growth numbers for 2018 and 2019 with and without Venezuela because it drags down the average so much.

That's one hell of a drag. The downside to this otherwise optimistic report is that all the growth and momentum is centered on commodities: copper, other mining, good harvests (of unspecified products), and slight rise in oil prices. We've been here before.

But back to "except Venezuela." The juicy tidbit that the media justifiably picked up on is that inflation is projected to reach 13,000%. Just sit back and let that soak in. I can barely wrap my head around it. To help, here's Hannah Dreier, who until last year was AP's corresponded there.

Back in the worst days of Bolivian hyperinflation, the rate was about 23,000%. The Bolivian example is also a reminder that you need to be careful about how you deal with inflation. Gonzalo Sánchez de Lozada is demonized for his response much more than the military government for its role in creating it.


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