Like previous “year ahead” reviews I have published on EconVue, this is not intended as a prediction of how events will necessarily unfold in real life. Instead, as always my intent is above all to consider the main risks to the stability to the international political and economic environment in various regions of the world that I am relatively familiar with.

Europe

I am sharing with  you my new article examining trends and challenges facing Latin America and the Caribbean as we begin 2019.  The work focuses on the reinforcing effects of the fragmentation and other changes in the criminal groups across the region, the advance of the PRC, and deepening political crises in Guyana, Venezuela, Honduras, and Guatemala.  The article also highlights significant developments and challenges in Mexico and Colombia as countries of concern.

I normally feel after reading, reviewing, and discussing the events of the previous week that I’m able to discern a direction or constructive theme.  Today however, every corner of the world seems mired in some degree of turmoil, and markets are reacting. There is so much noise that it is difficult to decide what is causing this new volatility. Is it China, the Fed, the Mueller investigation, Yellow Jackets, or technology run amuck?

Forecasts for 2019 are now coalescing. The typical view is that the first half of the year will be more difficult for the world economy than 2017 and 2018, with beneath-trend growth likely. As has been anticipated in these notes for some time, the Eurozone is the focus of concern. Not only will the European Central Bank end its asset purchases next year, but warnings are being given to the weakest banks – the banks that cannot easily fund their assets from market sources – that the ECB’s long-term loan facilities to them may not be extended in mid-2020.

There are numerous analyses about China and its future, as well as about Chinese engagement with Latin America. This report examines, in detail, how the growth of China, with its power and role in the global economy, is likely to transform Latin America and the Caribbean through economic, political, and other forms of engagement with the region.

Has the “new Cold War” between the People’s Republic of China and the United States of America began? Pessimists argue that the tough speech on China made by US Vice-President Mike Pence at the Hudson Institute on October 4, 2018 was the dangerous sign.

The G20 leaders gathering on November 30 in Buenos are meeting at a time of rising global challenges to the global economic and financial system: slowing global growth, rising trade tensions, attacks by the Trump administration on the global financial architecture, financial markets meltdown,  regional disputes among key G20 members.

I know some people abhor social media.  The sector has certainly taken a beating lately in the markets, but I really love Twitter. It gives me the ability to hear the (curated) voices of people I know, don’t know, and in some cases hope I never know, but who make me think.  I follow the newspapers and journals I used to have to login to separately, read other media from all around the world I didn’t even know existed, and get into impromptu conversations with real experts. 

Since World War Two and the Bretton Woods agreements that established the post-war dollar-centric global financial system, the dollar has been the pre-eminent vehicle (reserve/international) currency. The dollar accounts for over 60% of global foreign exchange reserves and 80% of world trade is dollar-denominated, as are 100% of the global transactions in oil and other commodities. Moreover, the chronic U.S. external deficits have provided global markets with abundant dollar liquidity.

The expansion of Chinese commercial activities in Latin America and the Caribbean raises questions.