Trends to watch for in the year ahead

The year 2010 saw dynamic emerging markets steal the spotlight from the US and Europe which continued to struggle to recover from the global financial crisis. Economics and politics in Latin America proved surprisingly stable and economies like Colombia grew more strongly than expected. As we enter a new year there are some important global and regional trends which will set the tone for 2011. This year will see power shift, new leaders emerge and new alliances take form. Technological innovators will continue to set the pace while unexpected events shape policy decisions.

Economic and political power in Latin America will tilt toward the Pacific rim. The Brazilian and Argentine economies will grow firmly in 2011 but the Pacific and Atlantic sides of the continent will become more equal as the economies of Peru, Colombia and Chile expand rapidly. Latin American integration (particularly in South America) will advance though some underlying tensions will remain. The death of Nestor Kirchner in Argentina, the change of power in Brazil and a weaker Hugo Chávez in Venezuela marks a shift in the leadership of Latin America. Peru and probably Argentina will elect new presidents and the new leaders of Chile and Colombia, Sebastian Piñera and Juan Manuel Santos, will increase their influence in the region.

Innovators in both the public and private sectors will lead the region. Those that can innovate and adapt to new circumstances have done well in the recent years and will do well in 2011. Technological advance, use of the internet and social networking will be even more integral to success in the years ahead. Eyes will be on Latin American businesses, particularly those in Brazil, Colombia and Chile which have seen their currencies lose competitiveness against the US dollar, to see if they can continue to increase revenues and adapt to changing global and regional markets. The business leaders that can improve how they produce, market and sell their products will experience the largest profit gains and the politicians who can create and implement cost effective solutions to problems in areas such as health, transport and education will gain in popularity.

Severe weather will continue to cause damages. It is very likely that 2011 will be another year of unpredictable weather in Latin America with more cases of flooding, drought and strong storms. Colombia is directly experiencing the negative impact of heavy winter rains but other parts of South America, particularly the Southern Cone, will experience drought during the early part of this year which will hit corn and soybean production.

US demand will stabilize but Europe will face sporadic crises. A tax deal agreed by the US Congress and president Obama in December will inject around US$900m into the US economy in 2011 which will help to support domestic demand and keep economic growth from slowing. Meanwhile, Europe will continue to struggle with Portugal likely the next country to require bailout support from the EU and IMF. The continued weakening of peripheral economies while Germany strengthens will exacerbate tensions within the euro zone.

It is important to remember that unexpected events may end up shaping the year. Business and government need to be prepared for unforeseen shocks and new trends that emerge. One area to watch out for will be weak neighbors. Crazy destabilizing things could happen in Haiti, Venezuela and Bolivia as leaders in all three countries struggle to govern. Latin American leaders in business and politics will need to be nimble as they navigate through 2011, preparing for both the advancing trends mentioned above and potential shock events.

Click here to read the Spanish version in La Republica


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