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For Argentina, however, it is a precarious road back despite the international goodwill and, as we explore in this issue, the government’s room for manoeuvre – always small – has just shrunk even further after the administration’s first unforced error.
This year it is Brazil, Colombia, Mexico and Paraguay’s turn to go to the polls. In Mexico’s case there is real risk of a step back with Andrés Manuel López Obrador, who is ahead in early polls.
The markets will be happy enough with any likely results in Paraguay and Colombia; although in the latter they will be keeping a watchful eye on leftist Gustavo Petro’s recent advances in the polls.
In Brazil there is a strange paradox: the markets are confident that the winner will be a reforming president who will tackle the increasingly need for a fiscal adjustment. This is despite the fact that there is very little clarity about who will be running – and the two leading candidates are hardly those the market would welcome.
The cover story explores this apparent contradiction and the source of the market’s unshakeable faith that a reformist saviour will emerge to save the continent’s largest economy.
The move to the political centre and to economic orthodoxy in the region is in sharp contrast to the US and, to a lesser extent, Europe, which are flirting with populist politics. This shines a light on those of us working in a part of the world that can sometimes feel forgotten.
The region’s demographics and structural strengths are generally positive. The vast majority of the countries are maturing democracies with the rule of law. Many have financial strengths, such as inflation-targeting regimes and independent central banks. There is huge room for banks and financial institutions to grow in economies with low credit penetration. Yet Latin America doesn’t receive the attention from the financial world that it deserves.
To capitalize on these strengths, the region needs to make bigger strides on its perennial weaknesses: productivity-sapping regulations and rampant inequality. We could add the poor provision of public services, such as education, health and infrastructure, to the list. And it is important to note, in addressing these issues, micro reforms are often as important for progress as grand macro policies.
The need for innovative companies – especially in the technology sector – is a pressing issue across the continent. The lack of these is one of the reasons given for emerging market investors’ switching their focus to other regions.
Thankfully, the region’s investor base and domestic capital markets are flourishing and providing capital to growing companies, even if international investment is, for now, looking to other parts of the world. These markets must continue to grow in scale if they are to take over the unsustainable role that the state has been playing in many areas.
We are excited to have the editorial space of this new publication to explore more of the great stories that we have in the region. Our editorial team is based here and we live these economies and markets every day. This first issue took us from smoke-filled offices in Paraguay to the similarly oxygen-scarce altitude of Bolivia, via Montevideo, New York, São Paulo and Buenos Aires.
We hope you enjoy the journey and we hope to play a role in uncovering the dynamism, financial innovation and business diversity that has for too long gone unacknowledged in Latin America.