Political situation

This year, more than 10 Latin American countries have held presidential or parliamentary elections, or both. Thus, the media have dubbed 2006 the year of elections for the region.

Except for Mexico, most elections were held in a peaceful environment. After the elections, most defeated candidates faced reality and accepted the choice of the electorate.

Left-wing leaders did not accomplish as much as people expected. In late 2005, some observers and analysts forecast that the left-wing forces of Latin America would continue to show their strength and dominate the political arena. However, so far, their achievements have not been as outstanding as predicted earlier, though left-wing politicians successfully defeated their rivals in Brazil, Nicaragua and some other countries.

Since the 1990s, many Latin American countries have carried out political reforms, with the focus on election laws. Such reforms have been successful in most countries. All political parties participate in elections within a democratic framework, and electorates are able to express their political choice by voting.

Stressing the importance of maintaining consistency in government policies, most newly elected leaders said they would continue the policies of the previous governments so as to maintain the confidence of domestic and foreign investors.

But perhaps Bolivia is an exception. On May 1, President Evo Morales announced that the country's oil and natural gas industry would be nationalized. The measures stirred a panic among international investors in the energy-related fields, and created tension in Bolivia's relations with Brazil, Argentina and other countries.

The political conflicts in some "problem countries" took a positive turn this year. In 2005, political turbulence occurred in some Latin American countries, such as Haiti, Peru, Ecuador, Nicaragua and Bolivia, because of domestic political, economic and social problems. But in 2006, through elections and political dialogue, these contradictions have been alleviated to a greater or lesser extent.

Economic situation

The Latin American economy has grown five percent in 2006, marking a four-year high-growth period. The previous such high economic growth period was from 1991 to 1994.

The economic growth is closely related to the favorable external environment. For example, the rapid development of the world economy makes Latin America able to continue to expand its exports, which will in turn help the countries further improve their trade positions. The UN Economic Commission for Latin America holds that Latin America ranks second in the world next to China in terms of its export growth rate.

It should also be pointed out that in recent years the "China element" has contributed to the economic growth of Latin America. As China has imported a good number of primary products with high prices from the international market, it has benefited Latin American countries that depend on exporting raw materials.

Currently, the Latin American economy is in a rising period with the following characteristics:

First, the positive effects of external elements are increasingly prominent. Although the recent economic rise of Latin America can be attributed to the vitality that economic reforms have brought about since the 1990s and some other internal elements, research shows that the positive effects of the improved performance of the world economy, especially the U.S. economy, on the Latin American economy cannot be ignored. It means to a certain degree that if the world economy can maintain its good growth, the prospects for the Latin American economy will be further brightened.

Of course, to better utilize the favorable external conditions, Latin American countries need to increase the efficiency of investment, improve their infrastructure and strengthen government administration.

Second, a current account surplus accompanies the high economic growth rate. On one hand, Latin America's export trade is increasing, and on the other hand, many Latin American countries, especially Central American countries, obtain a large amount of remittances from emigrants. The current account surplus in 2006 accounts for 1.5 percent of the region's gross domestic product (GDP). The coexistence of a high economic growth rate and current account surplus is rare in the history of Latin America, and it also provides an advantage for the Latin American economy to cope with external problems. The occurrence of the current account surplus is closely related to the improved trade environment.