Brazil and Mexico Come to the Aid of a Flailing Europe

Louis Nevaer


From New America Media:


MEXICO CITY – With no end in sight to Europe’s financial strains, countries in Latin America are looking on as their one-time colonizers struggle to keep popular unrest over unemployment and austerity measures at bay. Many see signs of a historical shift in the trans-Atlantic power dynamic. Some, notably Mexico and Brazil, see opportunity.


In early March, hundreds of thousands of Portuguese marched from Lisbon to the city of Oporto in protest over slashed budgets. Those protests came on the heels of a series of major rallies in Spain, where thousands across the country demonstrated against government austerity measures from Madrid to Barcelona and scores of smaller cities and towns.


Meanwhile, young Portuguese and Spanish job seekers are leaving their home countries in droves, in search of economic opportunity elsewhere. Add to that the recent "junk" rating given Portuguese and Spanish government bonds, and the resurgence of the Mexican and Brazilian economies, and you have nothing short of a paradigm shift in the making.


Carlos Slim, the Mexican billionaire who was named the world's richest man by Forbes magazine, recently warned that the crisis enveloping the European Union -- Spain and Portugal in particular -- was an unprecedented development with major implications for Latin America.


“It is unimaginable to think that young people [in Spain] can have an unemployment rate of 50 percent, or [even] 30 percent or 25 percent," Slim told the Spanish news organization La Entrevista late last year, suggesting that Mexico and other growing Latin American economies take a lead role in coming to their aid.


Slim’s words carry as much weight in Latin America as Warren Buffett's do on Wall Street – that is to say, a lot.


Mexican and Brazilian officials now find themselves in the unfamiliar, if ironic position of contemplating possible economic lifelines to the countries that once ruled over them.


For its part, Mexico has allowed for the unimpeded influx of young, unemployed European professionals. To date, thousands of Spanish youth have arrived in Mexico, either on tourist or work visas. Brazil, since last year, has considered purchasing Portuguese bonds as a way of infusing cash into Lisbon's treasury.


The moves are not without controversy. In January, Mexican President Enrique Peña Nieto unveiled an ambitious anti-poverty campaign designed to address the needs of Mexico's poorest citizens. Called Cruzada Nacional Contra el Hambre, or National Crusade Against Hunger, the campaign was launched in Chiapas, Mexico's poorest state.


With an estimated 52 million Mexicans living below the poverty line, there is tremendous pressure on the Peña Nieto administration to take care of Mexico first.


In Brazil, too, which is set to host the World Cup later this summer and the Summer Olympics in 2016, ordinary Brazilians question the idea of spending billions to purchase “junk” Portuguese sovereign debt as the country struggles with growing economic inequality and rampant crime.


Colonial memories are also at the fore. When Brazil’s former president, Luiz Inácio Lula da Silva, urged Brazilian companies "to invest" in Portugal, critics mocked the idea as "capitalist exploitation,” citing the very public clashes, for example, between rival Brazilian companies over the acquisition of Cimentos de Portugal. The company was eventually taken over by Brazil’s Camargo Corréa.


For Slim, the lessons of history are clear. "I have argued,” he said, “that the [Latin American] external debt crisis of 1982 … offers a model in which Mexico can invest in the outside world, encouraging exports [and] opening up trade.”


Jerry Haar is a professor at the business school of Florida International University in Miami, where he tracks foreign investment. In an interview with Bloomberg Businessweek he noted, “Bottom fishing during and after financial crises is nothing new.” What is new, he continued, “is the increasing participation of emerging markets in the game. Where language and cross-cultural affinity are involved, all the more so.”


Still, the impulse to come to the aid of Europe’s flailing economies is not entirely motivated by the promise of monetary gain. Concerns over the potential of a “Lost Decade” similar to the experience of Latin America during the 1980s weighs heavily on debates in Mexico and Brazil.


Officials openly ask what might happen to today's unemployed 25-year-old architects, engineers and doctors in Spain and Portugal. Moreover, do Latin American offers of meaningful employment for these young professionals represent a potentially life-threatening “brain drain” in their home countries?


Such questions point to the thin line now being navigated in Mexico City and Brasilia between opportunism, on the one hand, and altruism on the other. They also point to the historic shift in cross-Atlantic ties.


"We are living through a period of significant change,” noted Slim, “and have to make the structural changes that are required.”


New America Media


Photos: New America Media; Rubem Porto Jr. (Flickr, Creative Commons).

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