Latin America's economic stability arouses envy of EU

2013-01-26 06:41:42 GMT2013-01-26 14:41:42(Beijing Time)  Xinhua English

European leaders gathering this weekend in Chile may be filled with uncharacteristic envy toward the economic stability in Latin American countries.

The 27-member European Union is still mired in an economic impasse, with Spain and Greece bearing the brunt of a debt crisis that has caused political and economic tension in the eurozone.

Spain, which has very close links with Latin America, has suffered economic contraction since 2009. Although it experienced year-on-year growth in 2011, its annual growth rate never exceeded 1 percent. In the last quarter of 2012, it returned to decline, shrinking 0.6 percent.

Seeking to cheer markets, Spain's economy minister told media Friday that his country would return to growth in 2013, after the International Monetary Fund forecast no growth until late 2014.

Spanish Prime Minister Mariano Rajoy, who arrived in Chile Thursday night, used his Friday press conference to announce new plans to stimulate Spain's economy, offering grants of up to 2,000 euros to citizens to buy new less-polluting cars.

But he cautioned "Spain is not in any condition to undertake expansive monetary policy right now, but I believe that the nations that are in shape should do so."

This was a clear reference to Germany, the eurozone's largest economy, where Chancellor Angela Merkel has been refusing to lend or spend to help the economy grow unless nations with debt problems show enough austerity to convince her.

Germany is perceived as having a chokehold over the region as wealthier citizens of vulnerable nations have been sending their money to Germany, whose banking system and economy are believed to be stable, robbing their home governments of much needed economic ballast.

Meanwhile, Latin America, led by Brazil, has experienced years of steady growth, though at lower levels than expected. Brazil had just two quarters of shrinking gross domestic product, both in 2008, when the world entered an economic tailspin following the financial crisis in the United States. It reported 0.6-percent growth in the last quarter of 2012.

Brazil has done a better job of supporting potentially fragile neighbors than Germany, whose demands of austerity have caused political turmoil in Greece and an unemployment spiral in Spain. Through its state banks, such as the National Development Bank, Brazil has been providing loans to shaky southern neighbor Argentina to keep its financial system stable and businesses in motion.

Chile, host nation of the first summit between the Community of Latin American and Caribbean States (CELAC) and the European Union, has done even better, ending last year with a 5.5-percent GDP growth, thanks in large part to high prices for copper, its major export.

Germany's Merkel will arrive at the CELAC-EU summit late on Friday and talks will begin on Saturday. Although Latin Americans have plenty to discuss, including the illness of Venezuelan President Hugo Chavez, they do not face contradictions of the sort between Merkel and Rajoy.

Some 43 heads of state have confirmed their presence at the summit, out of a total of 60 invited. Croatia, which will become a full EU member in July, was also invited to the conference.

Add Comment
Please read our Terms of Service. Messages that harass, abuse or threaten others; have obscene or otherwise objectionable content; have spam, commercial or advertising content or links may be removed.