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Inicio arrow Análisis arrow Latinoamérica arrow Political Situation in Latin America: December 2014

Political Situation in Latin America: December 2014 PDF Imprimir E-Mail
Jan-15-15 - by Rosendo Fraga

1. The central issue in Latin America during 2014 has been, as the Chilean President said, that "in 2010 the region grew 5.9 per cent and in 2014, 1.1%". Economic stagnation made the region part of the emerging world that has grown the least, lagging way behind Asia, Africa and the Middle East, despite their conflicts. Latin America has grown somewhat more than Europe, but less than the US. A first cause of this phenomenon may be awarded to the drop in the price of raw materials, involving Chilean copper, various minerals in Peru, oil in Brazil, Mexico, Ecuador and Colombia, iron in the former and soybeans from Argentina and Brazil. But some small countries of South America - Paraguay, Uruguay and Bolivia- have grown above the average and Colombia has had the best rate in South America after Paraguay. Politics has played an important role in the economic halt of the region. The weak institutional framework in Mexico has partly neutralized the favourable prospects of Peña Nieto's reforms. In Brazil, Rousseff's statist policies have discouraged investors and economic actors. Recession and inflation in Argentina and Venezuela - where doubts about governance and default are deep- have deteriorated during 2014. These four countries account for three fourths of Latin America in terms of GDP, territory and population. Politically, the decline in the price of oil undermines the political influence of Venezuela in the region, and therefore its political and ideological bloc -ALBA.

2. The seven presidential elections held in the year proved altogether more continuity than change. In the four elections carried out in South America (Colombia, Bolivia, Brazil and Uruguay), all were won by the ruling party, which was the left-leaning alternative. This implies that the cycle of the centre-right coalition led first by Uribe and now Saints in Colombia will be extended for 16 years until 2018; Evo Morales for 15 years up to 2019, the PT in Brazil 16 until 2018 and the Frente Amplio in Uruguay, 15, until 2019. On the other hand, in the three presidential elections held in Central America (Costa Rica, Panama and El Salvador), some changes were recorded. In the first two, the opposition candidate won, and in the last one, the ruling coalition won in second round and by a difference of one point. Ideologically speaking, center-left parties won five in elections with different hues (Brazil, Bolivia, Uruguay, El Salvador and Costa Rica) and only two (Colombia and Panama) were left for the center-right. Latin America - which, in 2014, elected President in more than one third of the countries that comprise it - thus showed more permanence than change, both in terms of the victory of the ruling party as well as in the permanence of center-left governments.

3. But at the same time the division between two geo-economic blocs consolidated: the Pacific Alliance and the Mercosur. The former - formed by Mexico, Colombia, Peru and Chile - has a greater foreign trade volume, although less population and a lower GDP. It also has a greater growth rate (over 1.1% of the regional average) and more economic openness both to the US and Asia. Paraguay and Uruguay in South America and Costa Rica and Panama in Central America are, inter alia, observer members of the Pacific Alliance, a group that expanded and consolidated in 2014. Mercosur, for its part, is made up of Argentina, Brazil, Venezuela, Paraguay, Uruguay and Bolivia (the latter in the process of adhesion). It has failed to advance in the only important trade agreement which is underway, that is with the EU. Unasur is an area where both blocs converge - with the exception of Mexico, but the meetings to bring them economically closer have not progressed. This group is a more political than economic entity, while the Pacific Alliance has primarily economic and commercial entity. In addition, Mercosur is a geographic and regional group rooted in commercial integration which then derived into political ties. At the same time, China's influence in the region is enhanced: in 2003 it invested 1 billion dollars in it and in 2013 it invested 87,000, and does so in areas such as railways, oil, hydroelectric dams, etc. Although the Chinese influence is greater in South America than to the North of the Panama Canal, the initiation of works to build an inter-oceanic way in Nicaragua shows that it extends northward with a strategic intent.

4. The year ends with restored diplomatic relations between Cuba and the United States, a fact of importance in historical perspective. The rupture lasted more than half a century and Pope Francis played an important role in bringing both parties together. This solution was imperative for Cuba since the Venezuelan crisis -exacerbated by the collapse of oil - prevents Chavism from funding the Castro regime, which thus faces a critical situation. Although it is not easy for the U.S. Congress to lift the blockade, tourism and investment will escalate. The question is if this openness will contribute to the democratization of the regime or, conversely, give some economic relief to prolong it. Raúl Castro has the Vietnam model in mind, which after the political reconciliation with the U.S. after a tough war, it succeeded in economic openness without freeing up the Communist authoritarian single-party regime. But the U.S. has also shown that its "soft power" (consumption, freedom, free access to the media, etc.) can produce political changes and this cannot be ruled out in Cuba, although it may appear to be a certainty. In addition, regionally it increases the odds for success in the negotiation of Colombia with the FARC.

5. To conclude:

a) In 2014, Latin America has had a year of economic stagnation, partly caused by the decline in the price of raw materials, though this has not been the only cause.

b) Of the seven presidential elections carried out in the region, the ruling coalition represented by center-left parties won, showing the prevalence and continuity of politics and ideology.

c) The division of Latin America into two neo-economic blocs (Pacific Alliance and Mercosur) moved forward, just like the growing influence of China as economic and strategic player.

d) The restored relations between the US and Cuba is a historic event, which gives some fresh air to the Castro regime economically but may entail political consequences.

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