As usual. After the storm on the global chessboard is a permutation of the figures. So it was throughout history. In 1870, at the outbreak of the crisis of overproduction, the Latin American region has been re-integrated into the global economy. In addition to its former functions of a supplier of raw materials, he still had to become a consumer of goods. Then, during the twentieth century, again there was some economic disengagement, in which the relationship of the continent with the rest of the world is once again changed.
The last historical phase, of course, was the neoliberalism, which assumes the model of subordination in the field of Finance, technology and intellectual property. When it is XXI century, the processes of change put an end to it. The economic policies pursued by neoliberal governments, have played a key role in the new geo-economic projection of Latin America. While it is true that many countries have continued to export commodities, which acquired a different form, was introduced in the new conditions of sovereignty and with greater diversification, in China, India, Russia. There is a new integration space. Reduced the number of free trade agreements. Significantly decreased bilateral investment treaties and agreements on aspects of intellectual property rights related to trade. The financial plan was introduced any restrictions? Maybe on speculative mechanisms? In any case, the results were much less significant than in other areas. Change is also manifested in the external world. Latin America to some extent regained its geo-economic space in the world. North America continues to command, but to a much lesser extent than before.
And then the financial crisis of 2007-2008, marking the collapse of the dominant geo-economic order. The economic disruption has lasted for almost ten years. We have entered a period of stagnation in which the real economy suffered heavy losses. The slowdown of economic development will not last long. Consumption is not restored. Raw material prices dropped significantly. Labor productivity is low. Increasing the money supply does not bring results, because the money is not channeled to the needs of economic activities. New dollars and euros should only be used to Finance health, completely detached from productive investment. Thus, the world economy is not growing, the rate of profit, too, and the only thing that continues to be profitable, it’s finances. The domination of Finance capital is spreading everywhere. Global debt continues to be a great way to get money without working. The figures are frightening: the world’s debt is 3.3 times more than world GDP. The concentration of capital continues unprecedented pace. The leading countries are seeking new ways for expansion. Global value chain are becoming increasingly blurred.
And these processes do not bypass Latin America side.
1. On the continent are accelerated processes of mergers and acquisitions business. Large companies absorb smaller ones. For 2017 transnational Latin American market increased by 89,42%. Latin American multinationals have become well-established phenomenon that contributes to the character of the turnover on the continent. They have become major economic factors in the countries where develop their activities. Their interests also extend to foreign markets. The transnational market is gaining momentum in various parts of the continent.
2. An equally important issue is the activity of medium-sized companies of the leading world countries. The crisis in domestic demand kompensiruet access to foreign markets. Medium-sized companies from Europe and the United States seeking foreign markets and strive to gain a foothold in the Latin American countries in order to ensure the sustainability of the business on a global scale. This undoubtedly affects the local economy, since excluding from the market of domestic products.
3. Balkanization is a serious threat to regional economic integration. As soon as the situation is complicated, everyone is trying to negotiate with who can and how can. Each time the attitude of members of one unit with foreign countries more and more different, which weakens the overall project from the inside.
4. More and more countries give priority to developing relations with the Asian geo-economic space, and the ideological orientation of the next government’s special role here is not played. For example, Venezuela, Brazil, Peru, Chile, Bolivia and Argentina attended the last meeting of the Asian Bank of investment and infrastructure. On the other hand, Chinese figures speak for themselves: less than 10 years, direct Chinese investment in Latin America grew by more than 10 times. The Chinese presence is felt as never before.
5. If the southern common market (MERCOSUR), will join with the European Union, it will mean an important change in the global geo-economic order, since we are talking about two huge spaces. They will not be easy to quickly come to an agreement, despite the lobbying by large industrial groups. Still have to overcome a lot of difficulties to reconcile such opposing interests. Everything will depend on how consistent a conservative course taken by the governments of Argentina and Brazil.
6. While in the world’s leading countries remains so low interest rate, cash flows would swoop in Latin America thanks to the high yield debt. Foreign investment in Latin America has decreased simultaneously with the growth of the debt issuance. Factory external debt is more active in any other economic activities.
7. The growth of geographical fragmentation of global production reduced the possibility that regional value chain will grow. Increasingly important surplus value. The view of Latin American economists that industrialization could be achieved through import substitution, should be brought in line with the new realities. Currently more important to establish the average cost of demand on a global scale, than to make a good final product, not having all the necessary means.
The continent is not developing by itself, but together with the rest of the world. To believe that everything that happens does not entail a change in the external world rather inherent in the classical closed economy, unable to explain almost anything that happens to us.
New Latin American economic policy should carefully take into account the ongoing geo-economic changes.