eyes on the U.S.

American Political And Economic Problems Still Have A Way Of Trickling South

Countries like Chile and Brazil fared far better than expected during the 2008-2009 global financial crisis. It may still be too soon, however, to celebrate the region’s “independence” from its historic reliance on the United States.

Chile's busy industrial port in Valparaiso
Chile's busy industrial port in Valparaiso
Susan Kaufman Purcell

MIAMI -- The fact that South America's commodity exporting countries weathered the 2008-2009 crisis so well led many observers to conclude that the region had finally cast off the ties that bound it to the United States. Two years later, however, it's now clear that that conclusion was at best premature. At worst, it was just outright wrong.

Brazil, the only South America country in the so-called BRICS club, illustrates the fallacy of the theory that the region is no longer inextricably linked to the United States. After growing by 7.5% in 2010, the Brazilian economy is expected to slow down to just 3.7% growth this year, according to Morgan Stanley. The consulting firm, furthermore, lowered its 2012 growth forecast from 4.6% to 3.5%.

Brazil survived the 2008-2009 recession thanks to an increase in public spending and state-subsidized credit. The resulting inflation, currently above 7% annually, makes it unlikely the Brazilian government will use the same recipe twice. Adding to its woes is the fact that the Brazilian currency, the real, has appreciated 47% against the U.S. dollar in less than three years, making it increasingly difficult for Brazil's exported manufactured goods to compete.

At the same time, China – whose insatiable demand for raw materials has been the principal force behind the commodities boom – also seems headed toward an economic slowdown. Michael Pettis, of China Financial Markets, predicts that unless China modifies its growth model toward one that depends more on domestic consumption and less on public debt and major investments, its economic growth will begin to drop significantly in 2013-2014 and "level off at an average of 3% annual growth before the end of the decade."

Additionally, with the U.S. economy expected to grow at just 1% annually over the next couple of years, it's not clear how China will make up for the loss in export earnings from the United States. If that weren't enough, China's vast holdings of U.S. treasury bonds have lost considerable value due to the fact the United States has allowed the dollar to devalue.

Thanks to the latest economic slowdown, in other words, analysts are once again focusing on the economic links that tie together developed countries with their developing counterparts. Not much attention, however, has been paid to how politics fit into the equation.

Bad politics reflect real fears

During the recent – and incredibly tense – debate in the United States over whether to raise the debt ceiling, for example, the conclusion drawn by most people who followed the process was that the U.S. political system has become completely polarized and thus dysfunctional, nearly pushing the United States to default on its massive debt.

But the political system didn't cause the problem. Rather, the political problems are a reflection of fear and uncertainty regarding the deterioration of the U.S. economy, rising unemployment numbers, and spiraling national debt. When things work well, it's relatively easy to reach a consensus on what should be done, which tends in that case to be "more of the same." When things aren't working well, when there's a sense that conditions are deteriorating, no one has a monopoly on ‘the truth."

In the United States, there is currently a major disagreement about how to treat the problem of the debt. The spectrum of opinions goes from radical measures to reduce debt and spending, on the one hand, to increasing spending in order to spur the economy and create jobs, on the other. Many people don't want to lose the benefits they already have. Low growth creates a zero-sum game. The political polarization will continue in the United States until the economy begins to grown again.

When the global crisis begins affecting them as well, South America's commodity exporting companies – which have gotten used to rapid economic growth during recent years – will also see an increase in political polarization.

In Brazil, President Dilma Rousseff has already started talking about the need to control spending, which has provoked a backlash among her allies in Congress against the measures she has begun to implement. In Chile, another solid democracy and the regional economic leader in terms of international competitiveness, strikes and protests by workers and students have intensified significantly of late. That in turn has led to increased right-left political polarization. Even the region's autocrats are having more trouble leading, despite the billions they spend to appease their supporters.

Perhaps the only good thing that can be said about the contagious nature of these links between north and south is that the phenomenon operates in both directions. In other words, when one or two large Latin American countries start to grow again, there is an increased possibility that the economic recovery can spread northward.

Read the original article in Spanish

Photo - pablo/T

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
Future

How Facebook's Metaverse Could Undermine Europe's Tech Industry

Mark Zuckerberg boasted that his U.S. tech giant will begin a hiring spree in Europe to build his massive "Metaverse." Touted as an opportunity for Europe, the plans could poach precious tech talent from European tech companies.

Carl-Johan Karlsson

PARIS — Facebook's decision to recruit 10,000 people across the European Union might be branded as a vote of confidence in the strength of Europe's tech industry. But some European companies, which are already struggling to fill highly-skilled roles such as software developers and data scientists, are worried that the tech giant might make it even harder to find the workers that power their businesses.


Facebook's new European staff will work as part of its so-called "metaverse," the company's ambitious plan to venture beyond its current core business of connected social apps.

Shortage of French developers

Since Facebook CEO Mark Zuckerberg announced his more maximalist vision of Facebook in July, the concept of the metaverse has quickly become a buzzword in technology and business circles. Essentially a sci-fi inspired augmented reality world, the metaverse will allow people to interact through hardware like augmented reality (AR) glasses that Zuckerberg believes will eventually be as ubiquitous as smartphones.

The ambition to build what promoters claim will be the successor to the mobile internet comes with a significant investment, including multiplying the 10% of the company's 60,000-strong workforce currently based in Europe. The move has been welcomed by some as a potential booster for the continent's tech market.

Eight out of 10 French software companies say they can't find enough workers.

"In a number of regions in Europe there are clusters of pioneering technology companies. A stronger representation of Facebook can support this trend," German business daily Handelsblatt notes.

And yet the enthusiasm isn't shared by everyone. In France, company leaders worry that Facebook's five-year recruiting plan will dilute an already limited talent pool, with eight out of 10 French software companies already having difficulties finding staff, daily Les Echos reports.

The profile of Facebook founder Mark Zuckerberg displayed on a smartphone

Cris Faga / ZUMA

Teleworking changes the math

There is currently a shortage of nearly 10,000 computer engineers in France, with developers being the most sought-after, according to a recent study by Numéum, the main employers' consortium of the country's digital sector.

Facebook has said its recruiters will target nations including Germany, France, Italy, Spain, Poland, the Netherlands and Ireland, without mentioning specific numbers in any country. But the French software sector, which has so far managed to retain 59% of its workforce, fears that its highly skilled and relatively affordable young talent will be fertile recruiting grounds — especially since the pandemic has ushered in a new era of teleworking.

Facebook's plan to build its metaverse comes at a time when the nearly $1-trillion company faces its biggest scandal in years over damning internal documents leaked by a whistleblower, as well as mounting antitrust scrutiny from lawmakers and regulators. Still, as the sincerity of Zuckerberg's quest is underscored by news that the pivot might also come with a new company name, European software companies might want to start thinking about how to keep their talent in this universe.

Keep up with the world. Break out of the bubble.
Sign up to our expressly international daily newsletter!
THE LATEST
FOCUS
TRENDING TOPICS
MOST READ