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Left to its own devices

The days of large foreign investment flows to Latin America appear to be over. Companies and countries in the region are therefore going to have to find new ways to achieve sustainable growth.

Latin America is being left to its own devices. Foreign direct investment is falling, privatizations have largely run their course, country-risk levels have risen to the point at which most investments make little sense, and no-one talks any more of Latin countries following Spain's smooth transitional path from second world to first world. If anything, several countries in the region are moving in the direction of wealth destruction rather than wealth creation. Television pictures show malnourished Argentine children dying of starvation, and Venezuela and Colombia have been hugely damaged by, respectively, a general strike that has crippled the oil industry and a civil war.

And in the developed world, the boom years are over, closing the door on the wilder shores of foreign investment. Corporations that a few years ago were either swimming in cash or able to raise it at dirt-cheap rates are now pinched, with little appetite for exotic adventures.

Even at multinational level, the debates are no longer about whether to extend 11-figure bailout packages to beleaguered countries. Rather, they're about deciding if existing debts should be rolled over, and whether or not the IMF should help some countries to default on their bondholders in an orderly and predictable fashion.


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