Crashing the Latin America Commodities Party

The commodities boondoggle that allowed left-wing leaders from Venezuela and other Latin American countries to create new levels of inefficiencies at the producer level by nationalizing mines and industries is coming to an end. But it's not just these left wing mecas -- and their administrations and citizens -- who will be paying the price. It's also free market leaning commodities powerhouses such as Brazil. Consider this article from Reuters that suggests "The end of a long global commodities boom threatens to hit Latin America harder than any other region … with prices of everything from Chilean copper and Brazilian beef to Argentine soybean all sliding on expectations that the financial crisis will force a global slowdown, economists are sharply cutting growth forecasts and farmers are preparing for harder times."

If there's any silver lining in this it's that the commodities crash could lead to the overthrow of regimes that seized control of industry from the private sector in hopes of creating socialist utopias. Reuters writes that "leftist governments that have sheltered their poor supporters through social welfare, fuel subsidies and price controls are likely to face growing economic strains. Venezuela's Chavez, who leads an anti-American group of leaders in South America, may have to halt new infrastructure projects and slow social spending due to the falling price of oil, which provides half his government's budget." How will we know that these regimes are coming under pressure from commodity prices? As the anti-western fire breathing rhetoric from dictators in the region heats up, we'll know that nationalist inefficiencies are getting the better of the Red dream. Just as the Soviet Union came crashing down under the weight of its own bureaucracy and the market inefficiencies of authoritarianism, so will administrations such as Chavez’ that thrived thanks, in part, to rising commodity prices.

- Jason Busch

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