Reuters
For 667,504,000 Latin Americans living on the territory of 20,111,457 square kilometers in 20 countries and 14 dependent territories, 2024 does not bode well. According to the world expert community, 2024 will be a difficult year for Latin America, which will face an unfavorable international context, when a simultaneous recession will affect the world’s three leading economies — the United States, the European Union and China.
Latin American governments will still have to choose between nationally oriented or vassal-dependent policies in all areas of domestic, foreign socio-economic and political activity in the coming year.
The mainland’s status as a nuclear-weapon-free zone and its geographic distance from the world’s major hotspots in 2024 are likely to give it a comparative advantage over those other regions prone to various crises. The risk of global economic collapse caused by market instability in the US and Europe, as well as armed conflicts fomented by the global North outside Latin America and the Caribbean (LAC) will have multiple impacts on the region. It includes, among others, probable increases in oil and energy prices, rising economic and social tensions, migration flows, and increased threats of violence and terrorism.
According to the World Bank, Latin America will not avoid the global fate, but will be the slowest growing region in the global South in terms of economic development. Latin America’s combined economy will grow by only 2.3% in 2024, compared to 5.6% in South Asia, 4.5% in Asia-Pacific, 3.5% in the Middle East and North Africa, and 3.8% in sub-Saharan Africa.
In an interview conducted last year, the Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), one of the five regional commissions of the UN Economic and Social Council, José Manuel Salazar-Xirinachs, when asked how Latin America’s economy will grow in 2024 compared to last year, responded with two words: «A little worse». According to ECLAC, South America is expected to grow by 1.4%, Central America and Mexico by 2.7% and the Caribbean by 2.6%.
And in different countries in different ways. Somewhere better: Venezuela and Paraguay will grow by 4%, while the Caribbean will grow by a combined 8.3%. Somewhere worse: Brazil will grow by only 1.6%, Colombia by 1.7% and Mexico by 2.5%, while Argentina is likely to grow negatively by minus 1%.
At the same time, the average inflation rate in 2024 in most countries, with the exception of Argentina and Venezuela, where inflation will remain in the triple digits, will be between 3.2 percent and 4.9 percent on an annualized basis, according to various estimates.
Strong global demand for commodities will remain a key driver of economic performance, while the possibility of higher food prices will be a key risk factor. Meanwhile, the region’s economic future looks promising: agriculture, mining, manufacturing, the digital economy and renewable energy will remain the most attractive for external investment.
In terms of regional extremes, Argentina will fall into a further recession in 2024 due to Milei’s voluntaristic policies, while Guyana is expected to grow rapidly due to oil discoveries.
Currently, almost a third of the transition economies with a population of about 3.3 billion people are on the verge of debt crisis. LAC will not climb out of the debt hole in the new year as well. In its report, the World Bank warned of the danger developing countries face in making payments on public debt service alone. In Latin America, almost a third of the population — 32.1% — live in poverty and 13.1% live in extreme poverty. And South America’s debt is 3.3% of the world’s total and equals $3.2 trillion. The projected increase in the cost of servicing public debt in 2024 is estimated by ECLAC to be 5%. Over the past decade, external debt growth has outpaced economic growth in Latin America by 55 percentage points.
Political instability remains a major challenge in the region. Under Brazil’s leadership, Latin America had a relatively coherent foreign policy in 2023. Milei’s victory in Argentina is likely to cause a split in regional politics both within and outside the region.
Events such as the armed uprising in the Brazilian capital in early 2023, political tensions in Venezuela, increased drug trafficking, and intensified crime highlight the unpredictability of the political climate.
In 2024, for the first time in history, more than 70 elections will be held in countries where more than half of the world’s population — about 4.2 billion people — live. In Latin America, six countries are set to change power: Venezuela, the Dominican Republic, Mexico, Panama, El Salvador, and Uruguay.
Analysts note that the election results will indicate continuity rather than a change in the socio-political course of these countries. In this year’s LAC electoral super-cycle, experts believe that the priority of voters will not be politicians’ commitment to democracy, the rule of law or the fight against government corruption, but the fundamental needs of the population in terms of food prices, personal security and employment. These sentiments have already led to the opposition winning the 2023 elections in almost all countries. But that trend could change this year, thanks to leaders who have had some success in domestic politics, at the expense of some civil rights in favor of strengthening the economy and bringing order to the country. This is especially true in El Salvador, whose experience in cracking down on organized crime has made President Nayib Bukele popular on the continent.
In general, incumbent and future presidents in Latin America in 2024 will face the challenge of their ruling parties’ lack of control over legislatures, which will slow down policymaking across the region. Alliances with opposition parties will emerge to promote their legislative programs.
But democracies will be threatened, on the one hand, by the growing power of organized crime and, on the other, by the new intervention of the military, which is fed up with the anarchy and corruption of the judiciary and law enforcement and is ready to take over many civilian responsibilities. So far, this has not led to anything good.
By early 2023, it seemed that another era of progressive politics had arrived, as 12 of the 19 countries were governed by leftist governments. They accounted for a whopping 92% of the region’s population and 90% of its GDP. Political observers predict that 2024 seems likely to be the year when old divisions between left and right are resolved.
Thus, it seems unlikely that any new pink or blue tides will sweep the region in 2024. Instead, a mixed political picture awaits Latin America. Probably, the most interesting question is whether countries will follow Argentina’s lead and put Señor Milei’s «wild card» on the agenda.
However, the results of the US presidential election in November this year will have the greatest impact on the future development of the Southern Hemisphere.
Organized crime and security risks will increase. International criminal groups will continue to forge alliances in Central and South America with local groups in Colombia, Ecuador, Guatemala, Paraguay, Bolivia and Venezuela, fueling internal rivalries and exacerbating street violence, especially in ports and adjacent urban areas. Drug lords will seek to control wider drug trafficking routes through international sea and air ports. The activities of criminal cartels will lead to a new surge in murders and social unrest in protest against the existing authorities.
The exception will be Argentina, where not criminal gangs but an impoverished population will take to the streets to protest against the anti-people social and economic policies of Milei. The likelihood of protests and strikes, vandalism, looting and disruption of critical economic sectors will increase if the new government withdraws subsidies and social benefits.
Another scourge is population migration. The recent report that a record 520,000 migrants will cross the treacherous Darien Gap in 2023 is a grim reminder of provocative U.S. policy in Latin America. This alarming surge in migration reflects a growing crisis that Washington is exacerbating in order to maintain its shaken hegemonic position.
The U.S. intends to resettle up to 50,000 LAC refugees this year as part of the Biden administration’s plan to receive up to 125,000 people «fleeing violence» around the world in fiscal year 2024, according to internal government memos obtained by CBS News.
Let’s recall that from Latin America and the Caribbean, the number of refugees increased from 33 million to 45 million in seven years — from 2015 to 2022.
On the environmental front, Latin America will seek to take the lead in the fight against climate change, especially with regard to deforestation. The El Niño climate phenomenon will last until at least mid-2024 and will increase prices for agricultural, metallurgical and mining raw materials, disrupting economic activity in much of the region, says rating agency Moody’s.
Looking back to 2023, El Niño, which is disrupting weather patterns across the region due to rising Pacific Ocean temperatures, will continue to affect Latin American economies, causing droughts in some places (Central America, Colombia and the Amazon) and increased rainfall in others (Northern Mexico, Paraguay, Uruguay and Argentina). Panama may be the hardest hit, with the Panama Canal already having to reduce the number of ships passing through it.
The region’s rich natural resources, especially in renewable energy sources such as solar and wind, will also attract more investment in 2024, in line with the global trend towards sustainable energy.
In 2024, the idea of a single currency similar to the euro seems to be unrealistic. It will be replaced by the further development of central bank digital currencies (CBDC). Given the continued significant investment in blockchain technology by governments, banks and other private sector organizations, it is likely that 2024 will see significant advances in both the wider use of CBDC and the private sector’s use of new technologies offering cheaper and almost instantaneous cross-border and domestic payment and settlement mechanisms. As a result, banks will face constraints in traditional product areas such as foreign exchange, securities settlement and cross-border payments.
The surge in digital innovation, especially in financial technology and e-commerce, should be expected to attract more investors looking for rapid growth opportunities. Latin America will continue to experience a surge in the digital economy with a focus on e-commerce, financial technology and digital services. Brazil and Mexico are taking the lead, with their technology startups and digital innovation centers becoming key drivers of economic growth.
The new understanding by Washington, Brussels and London of the strategic importance of Latin America is unlikely to shake China’s position in the region this year as well. «If in 2000 the total volume of Latin American trade with China was a relatively insignificant $12.5 billion, by 2021 it has grown to $450 billion, while trade with the European Union has doubled from $98 billion to $197.4 billion», — says the document of the Council on Foreign Relations of the United States. Moreover, some economists predict that trade and economic relations with China may exceed $700 billion by 2035. Today, China is already the leading trade partner of South America and the second largest for Latin America as a whole after the United States.
The new Concept of the Foreign Policy of the Russian Federation states that Russia intends to develop relations with Latin America and the Caribbean, taking into account the growing role of the countries of this region in the international arena, on a pragmatic and mutually beneficial basis, prioritizing the strengthening of friendship and deepening of multifaceted partnership.
Against the backdrop of the Ukrainian crisis, Latin American countries, with the exception of the Bahamas, did not impose sanctions against Russia. Countries such as Chile, Brazil and Peru have refused to send arms to Ukraine despite Western offers to upgrade their arsenals in exchange for military aid. Latin American countries are seeking access to uninterrupted supplies of fuel and fertilizers and to diversify their foreign and economic ties. Consequently, despite the Ukrainian crisis, relations between Latin America and Russia continue without a hitch.
The bilateral trade turnover between Russia and Latin American countries is currently about $12 billion (about $4.3 billion in 2016), which leaves much to be desired. Of course, this is in no way comparable to the United States, China and the European Union, but, as they say, in 2024 Russia in Latin America has something to work on.