Latin America Business: Worst in 2015 

Cristina Fernandez de Kirchner not only left the economy in shambles, but also was a bad loser after the November presidential elections.  (Photo: Argentina Labor Ministry)

The worst news in Latin America business in 2015.


The worst events in Latin American business this year, according to Latinvex editors.

#1 Brazil’s Catastrophic Year

What an ano terrível this has been for Brazil. 

In addition to a significant deterioration of its economy, the Petrobras corruption scandal widened further, implicating business and banking pillars like Odebrecht CEO Marcelo Odebrecht and BTG Pactual CEO Andres Esteves (both behind bars and facing serious charges).  The scandal is estimated to have cost Petrobras more than $7.6 billion and has implicated more than 50 prominent businesspeople and politicians, including Delcídio do Amaral, leader of the ruling Worker's Party (PT) in the
the Brazilian senate (who was arrested with Esteves on November 25).

Brazil, only a few years back the star economy of Latin America, is now close to losing its coveted investment grade.

Economic data last week showed Brazil's economy contracted 4.5 percent in the third quarter from a year earlier, confirming the worst recession in 25 years.

Meanwhile, inflation hit a 12-year high

The bad news doesn’t end there. Brazil is now also suffering from a major political crisis, which is undermining any efforts to fix the economy. Congress Speaker Eduardo Cunha on December 2, 2015 accepted an opposition petition to start impeachment proceedings against President Dilma Rousseff. The petition may or may not succeed, but the process could last through August, delaying badly-needed reforms.

It also further weakens Rousseff, whose popularity is a record lows for a president. As a result, some market observers favor a successful impeachment in the hope that even a temporary leader (if impeached, Vice President Michel Temer becomes president until January 2019) will be able to get the economy back on track. Temer’s party, PMDB, is slightly larger than Rousseff’s PT party in the lower house (67 vs 62 seats) and nearly twice as big in the senate (21 vs 11 seats).

Meanwhile, Cunha himself is under investigation for corruption. On December 15, police raided his homes in Brasilia and Rio de Janeiro.

A further blow to the economy this year was the November 5 dam accident of Samarco, a joint venture between Vale and BHP Billiton. The accident killed at least 15 people, destroyed nearby villages and led to major environmental damage. Vale and BHP now face two, separate $5 billion lawsuits (one from the government, one civilian) over the accident.

#2 Cristina Kirchner

Cristina Kirchner was a bad president. After the presidential election victory of an opponent, she also was a bad loser.

Argentina’s former president not only managed to significantly weaken the country’s economy during her 8-year reign (Argentina now has Latin America’s second-worst macro-economic environment after Venezuela), but left office amidst a level of pettiness and outright maliciousness seldom seen outside the most primitive countries.

After recognizing the result of the November 22 presidential elections, where opposition candidate Mauricio Macri beat her candidate Daniel Scioli, she treated the whole transition as a “my-way-or-the-highway” project, ignoring the fact her candidate lost the election.

She issued a decree that funneled funds to provinces (which worsens the budget problems for the incoming government) and appointed more than 50 executives and two ambassadors.

Symbolically, she also refused to respect Argentina’s tradition of handing over the presidential sash at the presidential palace. Her late husband Nestor Kirchner in 2007 broke protocol and did so in the national assembly, a tradition Cristina wanted to follow. The problem for Macri was that the national assembly would be full of rowdy Cristina sympathizers sure to ruin his first day as president.

As a result, Macri asked for, and was granted a court  order, moving up the official time of the formal change of power to midnight December 10 instead of during the day when Cristina was to hand over the presidential sash at the formal ceremony with international guests. Cristina called the order a “coup” and refused to attend the official inauguration ceremony, again breaking protocol.  She also ordered legislators loyal to her to boycott the ceremony. Among those who ignored her wish: Scioli, the ruling party candidate who lost to Macri.  Meanwhile, many other prominent Peronists – including Massa – also attended the ceremony.

Interestingly enough so did two of Cristina Kirchner’s close allies, Presidents Rafael Correa of Ecuador and Evo Morales of Bolivia.

Does it end there? Nope. Cristina Kirchner also refused to hand over the official Twitter account of Argentina’s presidency, @CasaRosadaAR. (The new government opened a new Twitter account, @CasadeGobAR to replace the one Cristina took.)

Her Twitter action led to one user calling it CasaRobada (House Stolen) and her overall petty transition behavior resulted in a new Twitter hashtag  #CFKVerguenzaMundial (CFKGlobalEmbarassment)

“She could have left through the big door, but chose to leave through the small one,” Macri commented.

#3 Venezuela’s Continued Freefall

Venezuela’s economy is expected to decline by 10 percent this year, while inflation will likely reach 160 percent, according to estimates from the International Monetary Fund (IMF).  The GDP decline is the worst ever (beating the previous record of 9.9 percent in 1983), while the inflation rate is the world’s highest.

As a result, Venezuela has Latin America's worst macro economic environment, according to a Latinvex analysis.

The economic crisis, however, goes beyond issues like budgets and jobs. The country suffers from an unprecedented shortage of everything from food and toilet paper to medicines, largely as result of government restrictions on private enterprise and access to dollars, which importers need to buy goods.

Despite the complete and utter failure of government policies, President Nicolas Maduro has so far refused to change course. After losing the December 6 congressional elections, there is hope that at the very least the ruling Chavistas will split and force Maduro to change.

#4 Peru Oil Confusion

On September 4, 2015 Peru’s congress voted to grant state oil company Petroperu the rights to operate Block 192. The law came only a month after the government had reached an agreement with Colombia-based private oil company Pacific Stratus Energy to manage the block and was seen as violating that agreement. 

It also sent a negative signal that Peru favored state oil exploration over private oil exploration despite the dismal record of state oil company Petroperu. So bad is its reputation that it even failed to garner any interest in a planned IPO.

The vote also further weakened outgoing President Ollanta Humala (who leaves office in July) and who had strongly opposed the move, rightly pointing to the negative signal it would send foreign investors. 

Making matters worse: Keiko Fujimori, who leads all polls ahead of the May presidential elections, supported the move.


#5 Colombia Slowdown

While not suffering the type of crisis Brazil is seeing, Colombia also had a tough year. Its currency has declined a whopping 40 percent, hurting importers and driving up consumer prices. Inflation hit 6.4 percent in November, the highest in six years, forcing the central bank to raise rates for the third time this year.

Much of the problems are linked to lower oil and mining revenues, but also the lack of significant revenues from other sectors. The expected boost to exporters as a result of the weak peso has not happened.

As a result, the current account deficit could reach 6.2 percent this year, the highest since 1980, according to estimates from the International Monetary Fund.

Meanwhile, the economy will likely expand by 2.5 percent, a clear slowdown compared with last year’s growth of 4.6 percent, the IMF estimates. It will also be the worst result since the 2009 global crisis.

The economy could have been even worse without the government’s ambitious 4G road infrastructure program, which is pumping billions of dollars into the local economy, while overhauling the transport infrastructure for long term benefits.


© Copyright Latinvex


Latin America Business: Best in 2015 

Latin America Business: Worst in 2015 



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