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Economy

Can Latin America's Economy Rebound? Keep An Eye On Brazil

Capital flows back into Latin America suggest Brazil's economic free fall may have stopped.

Posters advertising jobs in the Brazilian city of Sao Paulo
Posters advertising jobs in the Brazilian city of Sao Paulo
Darío Epstein

BUENOS AIRES — Over the past two years, Latin America has experienced one of its worst drops in economic activity since the "80s. And Brazil, the regional giant, has a lot to do with it.

Brazil has been mired in a recession that's even worse than the one it suffered before the currency devaluation of January 2002. The recession has had a spillover effect, stunting GDP growth throughout the region.

Recession in Argentina this year is complicating matters as well. There's also the crisis in Venezuela, which is something of a case apart. The best performers in 2016 are expected to be Peru and Panama, followed by Colombia, Mexico and Chile.

Brazil's economy shrank 4% in 2015. A similar negative figure is expected this year. In keeping with cyclical theories, things are likely to bottom out soon. Analysts predict that its growth rate could stabilize in the third quarter of 2017 and gain momentum in the fourth. Nothing to celebrate, perhaps, but it will at least signal a turning point for producers and consumers to regain confidence.

Portfolio investors (rather than investors in the real economy) have already had their confidence boosted by stock market returns. Brazilian share prices are encouraging. That's because the markets are always several months ahead of the curve.

After two years of flight, speculative capital returned to the region in December 2015. In the world of currencies, the Brazilian real appreciated most this past year (25%) after its dramatic fall. The rise, in turn, boosted the performance of Brazilian shares, which grew in value by 33% (as measured in reals).

The Argentine peso, at the same time, is losing value due to inflation. It's also despite the massive inflow of hard currency through sovereign, provincial and corporate debt issues that followed the election of the conservative government of Mauricio Macri.

It's difficult to say if the currency appreciation in Brazil is an isolated rebound or a more sustained trend reversal. The political context remains deeply troubling and corrective measures are not providing the expected results.

One thing is clear: Given Brazil's economic clout in the region, it's difficult to imagine any long-term growth in Latin America if the giant remains dormant.

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Geopolitics

Utter Pessimism, What Israelis And Palestinians Share In Common

Right now, according to a joint survey of Israelis and Palestinians, hopes for a peaceful solution of coexistence simply don't exist. The recent spate of violence is confirmation of the deepest kind of pessimism on both sides for any solution other than domination of the other.

An old Palestinian protester waves Palestinian flag while he confronts the Israeli soldiers during the demonstration against Israeli settlements in the village of Beit Dajan near the West Bank city of Nablus.

A Palestinian protester confronts Israeli soldiers during the demonstration against Israeli settlements in the West Bank village of Beit Dajan on Jan. 6.

Pierre Haski

-Analysis-

PARIS — Just before the latest outbreak of violence between Israelis and Palestinians, a survey of public opinion among the two peoples provided a key to understanding the current situation unfolding before our eyes.

It was a joint study, entitled "Palestinian-Israeli Pulse", carried out by two research centers, one Israeli, the other Palestinian, which for years have been regularly asking the same questions to both sides.

The result is disastrous: not only is the support for the two-state solution — Israel and Palestine side by side — at its lowest point in two decades, but there is now a significant share of opinion on both sides that favors a "non-democratic" solution, i.e., a single state controlled by either the Israelis or Palestinians.

This captures the absolute sense of pessimism commonly felt regarding the chances of the two-state option ever being realized, which currently appears to be our grim reality today. But the results are also an expression of the growing acceptance on both sides that it is inconceivable for either state to live without dominating the other — and therefore impossible to live in peace.

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