Exports boost region's outlook

Newfound profits allow many farmers to pay off debts, invest in their work.
Los Angeles Times
MARSELLA, Colombia -- A boom in Latin America's exports of farm products and natural resources is lifting standards of living, creating jobs and offering guarded hope that the region may improve education and reduce its many social ills, according to analysts and recent studies.
Surging prices of commodities from coffee to soybeans to copper to petroleum -- due largely to exploding demand from fast-growing China and India -- are bringing newfound wealth to the region's farmers, miners and workers, experts say. Violence and public disorderliness are down in towns such as this one, located in the heart of Colombia's coffee-growing region.
Poverty also has declined, as has unemployment since 2003, various economic reports show. And Latin American countries are using their newfound commodities wealth to boost spending on health, education and public works projects.
But experts say the region's problems are still daunting. Commodity prices will eventually settle back, experts agree. Although Latin American countries are in much better shape to avoid a crash, experts worry that the nations aren't converting their windfall into much more durable and ultimately productive human capital.
"Latin America is in a favorable conjunction, but I am fearful of excessive optimism," said Jose Antonio Ocampo, the United Nations' undersecretary for economic and social development. "The region is still too dependent on commodities and needs to be more active in developing manufacturing efficiency and competitiveness, which is the real long-term solution."
Reaping benefits
The commodity boom has been good for people like farmer Alberto Zapata. Here in this bustling hill town 200 miles west of the capital city of Bogota, prices for Zapata's beans are up 40 percent since early last year. The profits have enabled him to pay off debt, invest in his farm and even buy a used truck.
"It's the best market in 15 years" said Zapata, adding that the entire town of 23,000 seems to have kicked into a higher gear of prosperity.
Affluence also reigns half a hemisphere away in Pergamino, Argentina, the heart of that country's booming soybean industry. Farmer Federico Varela says he and his neighbors are cashing in on the 20 percent rise in soy prices and export sales stoked by soy-mad China. The Asian nation last year snapped up 7.8 million tons, or one-fifth of Argentina's crop, up from zero in the early 1990s.
Varela and others are remodeling their houses and buying SUVs. Demand for tractors among cash-rich growers is so high there is a one-year waiting list. Varela is also plowing profits back into his farm.
"We're all taking advantage of the higher prices to plan for the long term, to bet on innovations that will pay off in future profits," said Varela, a fourth-generation farmer in this town 150 miles northwest of Buenos Aires.
Over the past two years, prices of Honduran timber and Brazilian cotton are up 25 percent. Colombian sugar and Ecuadorian fish are up 50 percent. Cuban nickel is up 75 percent, and Chilean copper has doubled. Mexican and Venezuelan oil prices have more than doubled.
Economic growth
The price spikes have had a direct and highly beneficial impact on Latin America's economy, which is expected to grow 4.5 percent this year, down from the 6 percent clip of last year, which was the best expansion the hemisphere has seen in 25 years.
That growth is fueled primarily by an explosion in exports, which grew 23 percent in 2004 to $463 billion, and should grow another 20 percent this year, according to Jurgen Weller, a United Nations economist in Santiago, Chile. Half those exports are commodities such as farm products, minerals, petroleum, fish and timber.
Latin America has been through past commodity price cycles before, in which booms were inevitably followed by crashes, often leading to recessions, devaluations and massive joblessness. That's what happened in the early 1980s, when prices fell, causing widespread defaults on huge loans that many Latin American governments had taken out as bets on continued high prices.
Most economists say the current commodity price boom will moderate. But many, such as Ken Shwedel of Rabobank in Mexico City, believe there have been "structural changes" in the global commodities market that will keep prices at higher "levels of equilibrium" than before.