- Latin America experiencing apparent end of "pink tide" of left wing (populist, anti-American) governments, and now seeing possible improved relations with the US.
- Does this mean "Washington Consensus" unfettered free markets economic policies are back in the region?
- No, because China is heavily invested (now the region's 2nd biggest trade partner) and here to stay.
- After WW2, US established Bretton Woods Institutions (IMF & World Bank) - by doing so it underwrote, and hence set the tone for the global economic system (post Cold War known as "Washington Consensus").
- Over the last few years, due to pressures from the right, the US refused to give developing countries a bigger say in these institutions.
- China has therefore set up rival institutions, and recently managed to get US allies to join - represents comprehensive failure of US strategy & tactics of global economic policy.
- 2 years into painful and unpopular austerity, and little to show for reforms except for slow growth and tax hikes.
- But some signs of better fundamentals, e.g. inflation down and exports better.
- Good news is Mexico shadows US with a lag, and with US growth looking good, expect healthier Mexico growth later in the year.
- The biggest single structural issue in global financial markets for 2015 is the timing of the US Fed rate rise - a fundamental driver of where the global savings that swish around the planet are parked.
- As the US is poised to tighten monetary policy (interest rates up) and most other major countries are loosening or neutral, the US$ has soared.
- The health of the US job market is the key determinant of timing - 1Q15 was looking strong so markets expected rate rise in June, but recent job market numbers weaker - for dinner party kudos, fine to suggest it will happen between June and Aug :)
- Round one goes to China as approx. 50 countries poised to join China-led Asian Infrastructure Investment Bank (AIIB).
- Round two will be about US proposed Trans-Pacific Partnership (TPP), a 12 country trade deal that excludes China.
- But progress on TPP has been bumpy - likely it will be watered down & possibly might not even happen - would be very embarrassing for the US.
- Total mess.
- Years of overspending & mismanagement under former president Chavez.
- Reliant on energy exports, so oil price fall proving disastrous.
- Energy exporter so bad 1Q15 due to low oil price.
- But weak currency and strong US growth will boost exports from 2Q15 onwards.
- GDP growth expected 2.0% 2015 and 2.2% 2016 - see our Growthometer.
- Big chunk of bailout funds being withheld by creditors until Greece shows it's making credible economic reforms.
- Meanwhile Greek government struggling to find cash to pay monthly pension + civil service salary obligations.
- Possible that government will be unable to repay the IMF EUR540m due on 09 April and will soon default.
- Looks like it will be the worst in 25 years.
- Consumption-led growth model has run its course (high consumer debt levels + weak labor market).
- Huge budget deficit after years of heavy government spending so painful austerity now needed.
- Continually updated, graphic snapshot of global growth trends.
- Growth rates depicted as weather symbols.
- Click here to see it.