Free market South America is Hot, Socialist South America Not

Within South America, socialism has long been a romantic ideal.  I have travelled extensively in the region and it is not unheard of bumping into a businessman or a taxi driver named Lenin or Stalin which would be unheard of in America.  Even rational minded Latin Americans seem to blame America's imperialism for most of their woes. 

That is why it is revealing to see the difference in the performance of Statist Socialist, vs free market capitalism.  There are two important statistics to pay attention to: GDP growth and Inflation.  Nominal GDP growth by itself means nothing because as GDP only measures the nominal value of goods and services, inflation will erode their meaning. 

For example, if you have income as a determinant of your real wealth, ignoring inflation, you might be nominally increasing your income while your purchasing power would be eroded and you would be worse off.  The difference between nominal growth and inflation is real GDP growth.

Free Market Economies  

Peru will grow 7 percent this year instead of 4.9 percent, Morgan Stanley economist Daniel Volberg wrote in a report today. In 2011, South America’s sixth largest economy should see growth of 6.4 percent, instead of a previously estimated 5.5 percent, he wrote.
Inflation rate in Peru per The Economist is 1.0%. 


The economy expanded 8.2 percent in April from March, the biggest increase since 1996, and 4.6 percent from a year earlier, the central bank said today on its website. It was the quickest annual growth since September 2008 and double the median forecast of 10 economists surveyed by Bloomberg.
Inflation rate in Chile is 0.9%.

Economists covering Brazil raised their 2010 gross domestic product forecast to 6.6% growth, higher than the previous estimate of 6.47%, according to a June 4 central bank survey of about 100 economists.
Inflation rate is at 5.3%


Now, the government expects growth to be in the region of 3% - 3.5% as global economic recovery pushes Colombian exports forward and domestic consumption recovers.
Inflation rate is 2.0%

Socialist Economies

Morgan Stanley now forecasts gross domestic product will shrink 6.2 percent this year and 1.2 percent in 2011, compared with an earlier prediction for 0.3 percent growth this year and 3.5 percent expansion next year.

Venezuela’s economy contracted 3.3 percent last year as investment dried up following nationalizations and oil revenue plunged on waning output and production cuts in line with OPEC quotas. Morgan Stanley, based in New York, expects investment to plunge 28.1 percent this year while private consumption drops 5.8 percent.
Inflation rate is the highest in the world at an estimated 30.4%


Argentina's economy grew at its fastest pace in nearly two years in March, expanding a sizzling 8.1 percent from a year earlier as brisk industry activity strengthened a recovery, the government said.

While analysts say the outlook this year for industrial production, a key indicator of the economy, is positive, they warn high inflation could boost wage demands and erode the local currency's competitive edge over trade partners.

Private economists forecast inflation at between 20 percent and 30 percent by year's end.
That would put Argentina in a deep recession instead of a brisk expansion.


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