Globalization a Boon to Latin America for Coming Decades

Globalization of the world economy will have a positive impact on Latin America for the next few decades, said Domingo Cavallo, former minister of the economy of Argentina and chairman and CEO of DFC Associates, LLC. “Reform, modernization, or the opening up of these economies will benefit them for many years to come,” Cavallo said during the keynote address at the fifth annual Latin American Business Conference, sponsored by the student-led Latin American Business Group, at Harper Center on April 12.

The majority of Latin American countries have introduced reforms and successfully fought inflation, he said. However, at least two others – Venezuela and Argentina – instead chose against granting central banks power to control inflation, he said. Cavallo is president of Accion por la Republica, a political party he created in Argentina in 1977, and a member of the Group of Thirty, the nonprofit international think tank.

While the rest of the world’s businesses fear competition from China, businesses in China are most afraid of each other, said Fishman, a U.S. government consultant who has testified on China before Senate and Congressional committees but calls it “absurd” to say he is an expert on the subject. In no more than 25 years of free enterprise, 85 million private businesses operate in China, he said. “The U.S. has had free enterprise for 400 years, since the first Englishman came here,” Fishman said. “We only have 26 million private businesses.”

“So far, this strategy has provided political benefits to the governments of Venezuela and Argentina,” he said. “But they are already generating strong opposition in their populations. Inflation is creating social unrest. Eventually they will have to change their policies to those already applied in the rest of Latin America.”

Venezuelan President Hugo Chavez has spread his populist politics by financing campaigns of candidates running against his opponents in other Latin American countries, Cavallo said. “He’s always trying to exert his influence,” he said. “But Chavez is already losing popularity, as we have seen in the last referendum. His policies are so disastrous, he will face increasing opposition. His lack of scruples will not prevent the emergence of democratic opposition that will eventually win the elections in 2013.”

The current turmoil in financial markets will trickle negative impact on Mexico and other Central American economies significantly integrated with North America, Cavallo said. But South American economies will not be affected as much because they have reduced their exposure to U.S. markets, he said. “Because South America has huge demand coming from Asia, it will suffer only if Asia suffers from the downtown in the United States,” Cavallo said.

The United States is not likely to experience the same difficult recovery as Japan did during the 1990s, he said. “The Federal Reserve’s action to assist both commercial and investment banks will prevent a long-term stagnation of the U.S. economy and the global economy and a long-term crisis in the capital markets,” Cavallo said. “Even though there may be a recession in the recent crisis, the negative influence on Latin America, particularly South America, will not be very big.”

The Latin American Business Group chose to invite Cavallo to speak because he is a major figure in Argentina and has very strong opinions on Latin America, said first-year student Viktor Moszkowicz, an LABG co-chair. “I think the political arena is very important in Latin America, because politics is one of the risks in the region that has jeopardized our growth for so long,” Moszkowicz said. “I learned from his address that things can change for the good and for the worse, so we need to be prepared business-wise for either if we plan to work in the region.”

—Phil Rockrohr