Analysis: Nimble neighbors outshine Brazil on growth

Mon Mar 19, 2012 12:41am EDT
 
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By Terry Wade

MONTEVIDEO (Reuters) - Swift growth by nimble Latin American countries like Chile, Colombia and Peru has put renewed focus on regional heavyweight Brazil, whose relatively closed, high-tax economy is now sputtering below its potential.

The three Andean countries grew more than twice as fast as Brazil last year and are expected to outpace it again this year. Brazil has also lagged its peers in the BRIC club of emerging market heavyweights that includes China, India and Russia.

Officials in the Andean countries say they have benefited from low public debt loads, fiscal surpluses that allow them to invest heavily, and an aggressive pursuit of free-trade deals with big countries that have made their economies among the most open in the world.

In Brazil, politics have at times stymied ambitious fiscal reforms to eliminate the deficit in a country with powerful public sector unions.

Strong business groups anxious to protect their lucrative positions in the domestic market of 200 million people have resisted free-trade pacts. That has left consumers in the lurch: the iPhone 4S was retailing for $1,250 at an outlet in Brasilia in February. They sell for half as much on Amazon.com.

"There are two visions," about which economic model to follow: an open one or a closed one, Colombian Finance Minister Juan Carlos Echeverry said at the weekend at a meeting of the Inter-American Development Bank in Uruguay's capital Montevideo.

"The message we send to our producers is you are in the world, not just Colombia. The future is about being competitive and this is as painful as giving birth."

The three Andean countries grew between 6 and 7 percent last year, well above Brazil's 2.7 percent.   Continued...