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The economic effects of Trump’s protectionism are less drastic

The chief economist of the Development Bank of Latin America (CAF), Pablo Sanguinetti. Visited Madrid as part of a conference on the development of large cities in Latin America. With the Economist he explains the conjuncture of this region.

the economic effects of Trump's protectionism are less drastic

the economic effects of Trump’s protectionism are less drastic

How do you see the Latin American economy with Trump in the White House?

It is expected that Latin America will have greater growth in 2018, around 2.2%, after a bad 2016 (0.5) and a better 2017 (0.9). The low growth is due to the increase in raw materials and the situation of countries such as Venezuela, in crisis after the fall in the price of oil, the unprecedented recession of almost three years in Brazil and the low advance of Argentina in 2014 and 2015. Thus, the fiscal situation is controlled and the region can respond to international shocks.

So, does the tariff policy of the United States not affect trade?

There are international circumstances that can affect the economy. One of them is the protectionist policy of the North American Government and its consequence in the Tlcan, fundamental for the region. This was seen as something that could be negative, but today, the situation is not being so drastic.

How important is the success of international trade agreements for the region?

They are important, but when one takes into account the numbers of increase in trade are not as broad, although the profits go beyond the economy. These agreements generate cooperation and transmission of experiences that extend over time. The Mercosur agreement with the EU is very relevant, it has been negotiating for 30 years and we believe that it will come to an end in a couple of months. But countries have to break some domestic restrictions, such as protectionist resistance or vested interests. The food sector, for example, has generated resistance in France and the industrial sector does so in Latin America. But if we get a credible and solid agreement now, it will already generate good synergies of foreign investment.

Can the crisis in Venezuela affect the surrounding countries?

Whenever a country in Latin America does poorly, it affects others. The situation in Venezuela is bad news for the region, and the issue of migration is the one that most affects its neighbors. But Venezuela is a supplier of goods and is no longer exporting, and the region was carrying food to Venezuela, which it no longer buys. This affects interregional trade, which was already low. Although the issue of migration must be addressed, commercial problems already exist.

What role do Spanish multinational companies play for the growth of the region?

Spain has a very important role. He had a rebirth with his incorporation to the European Union and this was reflected in the heavy investment in infrastructure (highways, airports). Which he knew how to do. It has leading international construction companies. That are already working in the region and have transmitted that potential. Although public investments are more limited. Due to the control of the deficit. Through schemes of public-private participation there is room for Spanish companies. Obviously, there is a lot of competition for Chinese. European and American companies. But the fact that Spain already knows the region gives it an important advantage.

How can the 2018 electoral calendar affect the economy?

Many countries have already learned from certain macroeconomic stability and productivity promotion policies, which are already rooted in past crises. The possible changes in the political sign do not imply greater risks. Since, when it comes to governing, things with good results it is in the interest of everyone not to change them.

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