What lies ahead this year for Latin America? Well, it is easy to list a few of the main items on the region’s agenda: presidential elections in Colombia and Brazil, sorting out the mess in Argentina, returning Mexico to growth. There are the same old policy issues that have headed the to-do list for years in most countries: fiscal reform, capital market reforms, supply side reform. And as always, the less glamorous but probably most important objectives of any government – modernizing education, health and the administration of justice – get pushed aside as officials grapple with crises and emergencies.
If last year was a disappointment, does 2002 have to be a year of woe and calamity too? Clearly not. Recovery in the US and Europe, oil price stability, some form of resolution for the Argentine crisis and smooth transition post-election transitions in Colombia and Brazil would all help make life in Latin America easier. Governments in most countries – Venezuela and Argentina are the exceptions – are following the right policies, if not always with the vigor and decisiveness one would wish for.
Although it is clearly important for the interests of all countries in Latin America to carry on in the correct direction, progress in the region also matters for the rest of the world. Latin American issuers form the largest component of the EMBI+ index of bond prices that guides emerging market investors the world over. The region comprises about two-thirds of the index. Where Latin America goes, so does the emerging market asset class as a whole.