Brazil and Chile remain shining stars of Latin America's economies

Argentina: The government put the settlement of old defaulted debts high up on its agenda for 2010. To this end it announced its intention to take over US$6.6bn of foreign reserves held by the central bank and apply it to a fund servicing public debt. The country could thus negotiate better terms for any loans and loan extensions. The central bank's governor refused to comply and was promptly sacked by the president. However, the latest twist in the political drama in Buenos Aires occurred when a federal judge almost instantly reinstated Martin Redrado, the central bank's chief. At the time of publication the limbo had not been resolved but criticism against President Cristina Fernandez is mounting steadily. Her opponents vociferously decry her insatiable appetite for other people's money. Last year, her government had taken over private pension funds and ramped up taxes on farmers. Meanwhile, the schism in the inflation figures continues unabated. While the government announces consumer price increases in the single digits, private institutions see them closer to twenty percent. Even official figures from the provinces (11.7% in Santa Fe and 15.3% in San Luis) differ considerably from the official numbers.

Brazil: Economic growth in Q3 2009 fell short of hyped up expectations. Consequently, the central bank will likely maintain the record low benchmark interest rate for some time to come. The agricultural sector slipped dramatically by -2.5% in Q3. Still, industrial production grew impressively in November and Brazil's Purchasing Managers' Index for manufacturing hit a two year high. Capital goods rose 6.1% in November but output of consumer goods fell by 0.6%.
 
Chile: The country has doggedly stuck to its free market economic policies with the result that Chile emphatically reduced the poverty level, made education, pensions and health care widely available and built South America's best infrastructure. Last month it received recognition for these accomplishments and was invited to join the Organization of Economic Cooperation and Development (OECD) as its 31st member. The consumer price index for 2009 fell 1.4%, the first yearly drop in 74 years. Initial data showed that the trade surplus rose over 50 percent last year. October saw an unexpected 0.9% fall of the GDP compared to the same month last year. Central bank officials still voiced their optimism that economic outturn in Q4 will be positive but likely not as high as expected. The benchmark interest rate was kept at the record low 0.5%.

Venezuela: The economy continues to shrink amidst a hostile business environment highlighted by energy shortages, a maze of price and currency controls and the ever-present fear of nationalization. President Chavez was forced to revalue the bolivar and doubled the US dollar peg to 4.30. The exchange rate for imports of food, medicine and other essential items will be set at $2.60. General imports will increase drastically in value and could add up to 5 points to the already sky high inflation rate. On the other hand, the government will receive more funds in local currency from its crude oil exports and the budget deficit's share of GDP will go down to 3.0% from 7.0%. But the president's meddling in the economy is getting more pronounced and more desperate.

*year-on-year