“For Latin America and the Caribbean, an Age of Anxiety” by Jerry Haar

Published in the Miami Herald (January 18th, 2019), “For Latin America and the Carribean, an Age of Anxiety” discusses the economic outlook for the Americas.

For Latin American and the Caribbean, an Age of Anxiety
by Jerry Haar
January 18th, 2019

In 1947, the famous British poet W.H. Auden penned “The Age of Anxiety”. This moniker is an apt description of the economic (not to mention psychosocial) environment in which we find ourselves today. The stock market tanks 600 points in one day then recovers by the same amount the next. Populist politicians make bizarre and absurd pronouncements that freak out the investment community, and consumers try to grapple with a merry go round of mixed signals and conflicting economic statistics.

The global economic outlook, in general, is not rosy, to say the least. Anemic growth in the U.S., Europe and Japan will be exacerbated by worsening trade terms, declining capital flows, illiberal protectionist policies and an appreciating dollar. The economic environment for Latin America and the Caribbean region in 2019 will be characterized by increasing uncertainty, medium-term risks, and a recovery characterized by ebbs and flows. Excluding Venezuela, GDP is projected at 2.3% vs. 3.7% for the world.

Four trends or factors will impact both the local and multinational business communities in the region in the new year:

  1. Interest rates and economic performance in industrialized nations. Taking a queue from the U.S. Federal Reserve, the European Central Bank, and other central banks, are expected to raise rates, although the percentage hikes and timing are uncertain. Such moves will increase business and consumer borrowing rates in an environment where trade and investment flows to the region from the U.S., Canada and Europe, in particular, have been slowing for the last few years.
  2. Falling demand from Asia for the region’s commodities. Despite healthy projected growth rates of China (6.2%) and India (7.3%), there will be declines in commodity purchases such as soybeans, corn, sugar, iron ore, and mineral fuels, as a result in slowing growth in the Asian region. Brazil, Argentina, Chile, Peru, Ecuador and Colombia will be impacted by this contraction.
  3. Domestic demand from lower/middle classes. The proliferation of credit, relatively low inflation rates, and major gains in poverty reduction in the region have catalyzed consumer purchasing at all income levels, especially the lower and lower-middle classes. Credit cards, e-commerce, and online lending by non-bank institutions have significantly fueled domestic demand for goods and services.
  4. Technology proliferation. Businesses of all sizes, national and multinational, will continue to harness technology—by necessity as much as choice—to improve efficiency and productivity, gather market information, enhance customer service, and expand their business. Artificial intelligence, blockchain, and a myriad of customized software are key features of this continuing technology wave where not only large providers such as Microsoft, Hewlett-Packard, and SAP service a wide range of industries, but small and medium-size firms and start-ups proliferate, as well.

Given this environment, the challenges that businesses will face in 2019 are numerous. These include greater competition from China, possible recessions in Europe and the U.S., and issues of intellectual property protection and data privacy, witness the recent Facebook debacle. For smaller firms and consumers, wider access to financing (especially for suppliers) is still daunting despite market improvements in financial access in recent years. Firms that are commodity producers will find the global business environment especially challenging. Finally, for firms of all sizes workforce availability and readiness are significant daunting hindrances. Latin America underperforms vis-à-vis nations with similar levels of GDP and education spending. The region spends more per capita than Asia but with poor results. Talent attraction and retention are no easy feats to say the least.

Despite the challenges elucidates above, microeconomics will trump macroeconomics in the new year. As previously mentioned, the growing demand in internal markets by both business and consumers, across a range of socioeconomic classes, means that a slow-down is not anywhere near a shutdown. Goods and services with that are heavily technology-based have a bright future, as technology is harnessed to boost productivity and accountability to both shareholders and customers. And with few exceptions (Venezuela, in particular) pro-market environments characterized by neoliberal economic policies will ensure a favorable playing field.

The current global environment may be described as one of volatile stability or stable volatility (witness the roller coaster performance of equity markets in recent weeks). This new age of anxiety we have entered will be with us through 2019. Astute investors, well-managed and agile firms, and savvy consumers should be able to successfully negotiate through the challenging times before us.

Jerry Haar is a professor in the College of Business at Florida International University as well as a Global Fellow of the Woodrow Wilson Center in Washington, D.C.

Radical Islam’s Latin American Connection

By Jerry Haar

In the aftermath of the barbarity inflicted by Islamic terrorists in France, five Syrians heading to the United States with fake Greek passports were arrested in Honduras. When queried, one of them stated they were “students.” At that point, it became alarmingly clear that Latin America could well serve as a launch pad for Islamic terrorists to attack the United States.

In his March testimony before Congress, General John Kelly, head of the U.S. Southern Command, warned lawmakers that Islamic extremists are radicalizing converts and other Muslims in Latin America, and that the Islamic State could exploit trafficking organizations in the region to infiltrate the United States.

Additionally, it has been increasingly common for Muslims from Mexico to change their Islamic surnames to Hispanic-sounding names to facilitate moving across the border.

Islamic terrorism is not new to Latin America. In 1992 Islamic Jihad bombed the Israeli Embassy in Argentina, killing 29 and injuring 250. In 1994, Iran and its proxy, Hezbollah, were responsible for bombing AMIA, a Jewish community center in Buenos Aires, killing 87 and injuring over 100 people.

Beginning in 1999 with the rise to power of Hugo Chávez, the locus of terrorist-supported activity gravitated northward from Argentina to Venezuela. The Venezuelan leader and Iran’s then president, Mahmoud Ahmadinejad, quickly forged a close relationship between their two countries and ramped up their adversarial campaign against the United States.

Venezuela became a de facto subsidiary for Iranian terrorism in the Western Hemisphere through Hezbollah’s Rabbani and Nasseredine networks and has established more than 80 “cultural centers” to promote their brand of Islam in the region.

While Iran’s Shi’a Islamists have had “first mover” advantage over Sunnis in penetrating Latin America, both are actively spreading their reach in the region, which is home to 4 million Muslims, more than half residing in Brazil and Argentina and the rest primarily in Central America, Ecuador, Chile, Mexico and Trinidad and Tobago.

Radical Islamists are especially active in the Tri-Border area (Argentina, Brazil, Paraguay), a notorious locale known for smuggling, piracy, money laundering and drug dealing. Strategic alliances abound between radical Islamists and criminal networks such as Colombia’s FARC and Mexico’s Zetas.

Unfortunately, Latin America’s horrendous prison system is a breeding ground for jihadists, via conversion to Islam among prisoners; and far too often governments take a stance of neutrality toward Islamic terrorism, thereby making the region a safe haven for them. While counterterrorism and surveillance efforts, including bilateral and multilateral cooperation, have improved in recent years, the lack of sufficient financial resources and highly trained personnel remains a critical issue.

For Islamic terrorists to target the United States, the best foreign region from which to operate is Latin America. Intelligence agencies report that there are sleeper cells in the Tri-Border area; and it is conceivable that they could link up with their counterparts in U.S. cities such as Dearborn, Michigan, and Paterson, New Jersey.

In the wake of the Paris bombings and shootings, I queried several U.S. intelligence experts about the chance of an ISIS attack on the U.S. homeland, emanating from Latin America. Their uniform response? “Highly likely.”

With porous borders, transnational criminal organizations, sophisticated smuggling networks and the dubious ability of Latin American governments to detect and intercept terrorists, it is imperative that the U.S. government double or even triple its efforts in aiding our neighbors to the south to prevent radical Islamists from conducting heinous activities in the Western Hemisphere. “Not in our backyard” should be the watchwords of the day.

This article is originally published in the Miami Herald.

Jerry Haar is a business professor at Florida International University and a Global Fellow of the Woodrow Wilson International Center for Scholars in Washington, D.C. He is also a research affiliate at Harvard University’s David Rockefeller Center for Latin American Studies.