FEBRUARY 20, 2013
THE PACIFIC PUMAS by Samuel George As the world grapples with stimulating employment, growth and innovation, a new club of countries is emerging as an engine of regional growth. Through improved governance, liberalized trade and stable macroeconomics, the economies of Mexico, Colombia, Peru and Chile have rallied in recent years. Rather than following the lead of increasingly protectionist and interventionalist Mercosur countries, these Pacific economies have taken their cues from the Asian tigers of the 1980s.1 Characterized by strong growth and pragmatic governance, these four countries appear to be blazing a new trail for Latin American development. With global attention trained on Brazil, the “Pacific Pumas” on Latin America’s figurative and literal periphery have quietly become economic overachievers. This anonymity will be short lived. Given the rise of China and the American pivot to the East, the Puma countries are poised to play a significant role in the emerging Pacific century. Statistically, the Pumas are growing by leaps and bounds. They have averaged 4.69 percent annual growth since 2005; Peru has led the pack with an average annual rate of seven percent. Removing 2009, a year of global economic tailspin for which Latin America bore little responsibility, average annual Puma growth nudges above 5.5 percent. These figures compare favorably to ASEAN over the same span (4.42 percent growth, 4.8 percent excluding 2009), and are within striking distance of Asian-tiger growth in the 1980s (8.12 percent annual average). The strong economic performance has coincided with rising incomes. Colombian poverty dipped from 45 percent in 2005 to 34.1 percent in 2011.2 Peruvian poverty dropped 17 percentage points between 2006 and 2010,3 while Chilean unemployment fell from more than nine percent in 2005 to less than six percent in 2011.4 All told, the Colombian, Chilean and Peruvian middle classes expanded more than 10 percent between 2000 and 2010, while some estimate that the Mexican middle class already accounts for more than half the population.5 Inflation, a great scourge of Latin American economies, has been held within central-bank bands across the Puma economies. Strong foreign reserves have allowed members to assume countercyclical macroeconomic positions—a rarity in Latin America. Puma sovereigns are investment grade, and their issuances are hot. In January, Mexico issued US$1.5 billion in bonds at a yield of 4.2 percent, 110 basis points over comparable US Treasuries. Later in the month, Colombia issued US$1 billion in bonds at only 88 basis points over US notes. Both issuances were oversubscribed.6 On paper, the Pumas roar. But what is driving these figures, and are they sustainable?