March 28, 2024

Latin American Connection

Going South?

Florida watches nervously as a neo-populist tide rolls through Latin America, the state's most important trade region

Cynthia Barnett | 11/1/2006
Left-hand turn
Chavez's 1998 victory in Venezuela -- he is expected to be re-elected Dec. 3 -- has been followed by a string of other wins by left-leaning candidates and parties: Luiz In?cio Lula da Silva -- popularly known as Lula -- and his Workers' Party prevailed in Brazil in 2002 and won in a re-election runoff last month; Néstor Kirchner was elected in Argentina in 2003; and Tabaré V?zquez in Uruguay in 2004.

This year, two more left-leaning presidents were inaugurated: Bolivia's Morales in January and Michelle Bachelet, the first woman president of Chile in March. However, three neo-populist contenders, Ott?n Sol?s in Costa Rica, Ollanta Humala in Peru and Andrés Manuel L?pez Obrador in Mexico, lost by small margins -- in Humala's case, perhaps because of Chavez's support for his candidacy.

The new leaders all have tapped into popular beliefs that open market reforms and free-trade agreements, including the North American Free Trade Agreement (NAFTA), have helped foreign investors far more than Latin America's poor. But the leaders fall into two quite different camps. Lula and Bachelet, social democrats, have steered their countries down a more centrist path. While they champion social policies, they "have implemented them in a very responsible way, which rather than scare away capital and damage domestic confidence in the economy and antagonize the private sector, has actually reassured foreign and domestic investors and maintained that good relationship," says Manny Mencia, senior vice president for international business development at Enterprise Florida.

Others, such as Morales in Bolivia and several now running for office, have fashioned themselves in Chavez's neo-populist mold. They're seen as less predictable and more likely to make moves calculated to appeal to anti-U.S. sentiment, such as imposing protectionist tariffs, actively fighting trade agreements or even nationalizing some industries. A victory for front-runner Daniel Ortega in Nicaragua in the Nov. 5 presidential election, for example, "would seriously unsettle the business environment," says McCoy.

Short-term gains
In the short term, the trends in the region actually have stimulated some business between Florida and Latin America -- particularly with Venezuela. Rich with oil revenue in the wake of Chavez's creeping nationalization of the oil and gas industries, Venezuela has been the fastest-growing market for Florida exports over the last three years. Total bilateral merchandise trade with Venezuela was up 41.6% between 2004 and 2005, according to Enterprise Florida. Florida's top export to Venezuela: Electronics. Venezuela's to Florida: Oil. No. 2 going both ways: Motor-vehicle parts.

In addition to buoying Florida's export trade, Chavez's policies have been a boon to south Florida's banking, real estate and other industries, as Venezuelan nationals move assets here. Francisco Cerezo, a partner in the Miami law firm Tew Cardenas who practices corporate and international law, says that "in Venezuela, you see a fear that things are getting worse, so you see people who can do so investing more in the U.S., opening bank accounts, moving assets into Florida."

In addition to buying second homes, Cerezo says, many wealthy Venezuelan business owners in recent years have launched operations in Florida partly to obtain visas. "They're spending a couple of million dollars just to make sure they can get a foothold here," he says.
Longer term, however, the trade picture in Latin America could darken. The prevailing political winds make it more likely that an economic slowdown would spur a protectionist backlash, for example. The region has seen steady economic growth since 2003 -- the longest period of sustained growth in decades, says McCoy. But historically, the area's economic fortunes have been like a roller-coaster ride: Highs can be followed by surprising dips.

Florida executives are reluctant to go on the record with concerns about the region, particularly as they do more business with the very governments whose tilt now concerns them. But lawyers and other professionals say their clients fear both a general retreat from bloc trade agreements as well as specific protectionist policies that would make foreign investment more difficult: Higher tax rates and tariffs and strict limits on the percentage of foreign equity investment in business, for example.

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