Cash is king.

Economists often like to explain the way countries work in terms of personal finance. Current account? That's just a monthly budget. Deficit spending? That's like a very big credit card. If the analogy holds true, then most of Latin America's leaders just won the lottery. The historic rise in the price of nearly every commodity--metals, oil, soybeans, you name it--has turned on the money spigot.

Interestingly, some who watch the region are worried. The long-touted Free Trade Area of the Americas is a nearly dead topic, yet trade is freeing up just the same, contend PricewaterhouseCoopers' Mark Ludwig and Jorge Gross. Problem is, World Trade Organization rules soon will take investment tax incentives--the only real weapon small countries still wield--off the table.

What will be left to attract investment? Simplified tax schemes, an educated workforce, perhaps a nice airport or close beaches, but after that it's hard to imagine why a major company would choose Latin America first. Despite the huge inflows of commodities cash, foreign investment is slipping. "Money is not going into Latin America like only a few years ago," says Ludwig. A shocking statement, and one few sitting politicians are likely to listen to--for now.

So, watch the dollars. As commodities cash flows in, the burning question--one addressed at length in this issue--is how best to spend the windfall. If it's make-work schemes and giveaways, get ready for a hard landing. If it's infrastructure, education and technology, perhaps not. In any case, the deep pockets of the world are looking east to Asia. When, and if, they'll look back is anybody's guess.

P.S. Does television matter? When the communist states in

Eastern Europe began to wobble in the 1980s, pitched battles broke out in state-run stations. See our interview with the director of Venezuela's government-backed Telesur on his mission. It's simpler than you might guess. (Page 18)

Greg Brown 

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