BY CHRONICLE STAFF
2008 was an overall strong year for business in Latin America, but ended -- like the rest of the world -- under the cloud of the global financial crisis. 2008 ended with an estimated 4.6 percent GDP expansion, according to estimates from ECLAC. That marks the fifth year in a row of strong growth. Trade was expected to post a new record, while foreign direct investments likely will post another solid year. The global crisis only started impacting the region during the last few months and will likely have a worse effect during 2009. Latin Business Chronicle singles out the five best and five worst events of the year.
FIVE BEST EVENTS
Panama Canal Credit. On October 14, 2008 Panamanian President Martin Torrijos announced that the Panama Canal Authority (ACP) had obtained $2.3 billion in loans for the expansion of the canal. The announcement, which came in the middle of a worsening of global credit, helped assure shipping lines and their customers worldwide that the canal expansion is on track to be completed in 2014. Moody's Investors Services had previously given ACP a prospective A2 investment grade for the financing. The 77 kilometer (48 mile) waterway linking the Atlantic and Pacific Oceans is a key transit route for global trade, especially between China and the United States.
Brazil Investment Grade. On April 30, S&P rated Brazil's sovereign credit rating to "BBB-" -- or investment grade. Fitch followed suit on May 29, 2008. The investment grade - along with expanded credit for the country's poor and middle class, and strong growth in exports and foreign direct investments - led Brazil to post its best economic performance in 14 years - an estimated 5.9 percent for all of 2008, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).
Costa Rica Set for CAFTA. On November 11, 2008, Costa Rican lawmakers approved the last law necessary for Costa Rica to comply with requirements for implementing the free trade agreement with the United States, Central America and the Dominican Republic (known as CAFTA). It is now scheduled to go into effect on January 1, 2009 - nearly four years after it was signed. The delay was caused by aggressive political opposition against CAFTA, which was approved by a 2007 referendum. CAFTA is expected to lead to increased competition in telecommunications and insurance.
China FTA with Peru. On November 19, 2008, China signed a free trade agreement with Peru, its second in Latin America. Two days earlier, China also agreed to start FTA negotiations with Costa Rica.
Botnia Reaches First Million. On December 21, 2008, Finland-based pulp producer Botnia registered reached its first one million tons of production from its new paper mill in Uruguay. The achievement has helped the South American nation become Latin America's fastest-growing economy this year.
FIVE WORST EVENTS
Ecuador's Debt Default. On December 2, 2008, Ecuador's President Rafael Correa declared that the government would not pay a $31 million payment due December 15, 2008 on its 2012 bonds. The result: Ecuador's exporters will have a difficult time obtaining credit, foreign investment will be further deterred and the economy will likely contract in 2009.
Congressional Delay in Colombia FTA. On April 9, the Speaker of the U.S. House of Representatives, Nancy Pelosi, announced her decision to block any vote on the U.S.-Colombia free trade agreement. The move was widely criticized among business groups, who had lobbied intensely on behalf of the agreement. It effectively killed the FTA during 2008. U.S. companies have had to pay $1.4 billion in duties since the agreement was signed 762 days ago, according to the U.S. Department of Commerce.
Nationalization of Aerolineas Argentina. On December 17, 2008, the Argentine Senate approved a government proposal to nationalize Aerolineas Argentinas. The lower house had approved the proposal on December 3. The government plans to take over the airline from its private Spanish owner, Grupo Marsans, without paying compensation. Marsans has said it plans to bring the case to the World Bank's International Centre for Settlement of Investment Disputes.
Nationalization of Cemex operations in Venezuela. On August 18, 2008, Venezuelan officials and national guard troops seized control of the Venezuela assets of Mexican cement producer Cemex. The Mexican company had refused to accept the government's price for the plants and will seek international arbitration at the World Bank.
Lawsuit Against Chevron. On April 2, 2008, an Ecuadorian court-appointed investigator asked the court to rule that U.S.-based Chevron, the second-largest U.S. oil producer, pay between $8 billion and $16 billion in compensation for alleged environmental damages. Chevron, which left Ecuador in 1990, has denied any wrongdoing. In November, the investigator asked the court to seek $27 billion instead, despite presenting no new evidence to back up his claims. Apart from the lack of any scientific evidence backing up the lawsuit, Chevron also has had to deal with indictments against two of its top lawyers handling the case in what the U.S. company sees as political interference in the lawsuit.
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