MCViewPoint

Opinion from a Libertarian ViewPoint

Latin America’s Descent into Interventionism Continues | Mises Wire

Posted by M. C. on December 31, 2022

Why would “populist” governments impose policies that perpetuate poverty and hurt the people? Interventionism does not aim to increase prosperity but take full control of a nation. The three mentioned policies are aimed at grasping full control of a country and make the population dependent, not deliver growth and improve social conditions.

https://mises.org/wire/latin-americas-descent-interventionism-continues

Daniel Lacalle

The latest estimates from consensus for the main Latin American economies show a continent facing a lost decade. The region GDP growth has been downgraded yet again to a modest 1.1% for 2023, with rising inflation and weakening gross fixed investment. Considering that the region was already recovering at a slower pace than other emerging markets, the outlook is exceedingly worrying.

The poor growth and high inflation expectations are even worse when we consider that consensus estimates still consider a tailwind coming from rising commodity prices and more exports due to the China re-opening.

How can a region with such high potential as Latin America be condemned to stagflation? The answer is simple. The rise of populist governments in Colombia, Chile and Brazil have increased the concerns about investor security, property rights and monetary discipline.

Argentina is expected to post a modest 0.2% GDP growth in 2023 with 95% inflation and a debt to GDP of 72%. Years of monetary and fiscal excess have destroyed the purchasing power of the local currency and dilapidated the prospect of real growth. In Argentina, poverty has escalated to 36.5% of the population and the government policies double down on interventionism, price controls and higher taxes with the expected negative result. Despite the tailwind of high demand for soja and cereals globally, Argentina dives deeper into Venezuela territory, where consensus expects another year of weak 3% bounce after destroying 80% of the output in a decade, with enormous inflation, 132%.

The problem? The new governments in Chile and Colombia are announcing policies that resemble those of the “Peronist left” in Argentina and the Fernandez government in Argentina is looking more like Maduro’s Venezuela each day.

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