World Predictions for 2010

Castro Dies, U.S. Relations Improve

Fidel Castro has been ailing for years, and 2010 looks to be his last year on earth. Control of Cuba will formally pass to brother Raul, who has been running the country during Fidel’s dotage. The transition will be peaceful, as most citizens, though they are dissatisfied with components of Fidel’s totalitarian system, don’t reject socialism outright. Cuba won’t change overnight, but Fidel’s demise will mean that all the doctrinal rigidities tied to his name (lack of press freedom, immigration restrictions, a cult of personality, persecution of gays) will get a second look. Foremost, Raul, recognizing the economic potential of improving ties with the U.S., will curtail the government’s anti-American rhetoric. The Obama administration, always on the lookout for rapprochement with rogues, will send a delegation of assistant secretaries from the State, Defense, Homeland Security, and Commerce Departments to visit. Within short order, and perhaps by year’s end, Secretary of State Hillary Clinton will announce a plan to normalize relations with Cuba by the year 2013.

Europe Faces New Financial Crisis

After 2008’s banking crisis and 2009’s recession, in 2010 we’ll likely see the next phase of global economic turmoil: a crisis in public finance. The troubles are most acute in Europe. Government deficits have ballooned to more than 12 percent of GDP in Spain, Ireland, and the U.K., while government debt will hit over 100 percent across the European Union by 2014. Greek markets crashed in December 2009 due to worries about the government’s ability to finance its enormous deficit. Because most EU countries now use the euro as a common currency, they can no longer finance their debt by printing money, or by devaluing their currency to make their exports more competitive and thus grow themselves out of the slump. At best, the crisis will delay recovery—as in Spain, which is raising taxes even as unemployment soared past 20 percent, or in Ireland, which cut civil servants’ wages by anywhere from 5 to 20 percent despite the hit to consumer spending. At worst, faltering countries could face sharply higher interest rates, problems refinancing their debt, and, ultimately, default—something that has not happened in a developed European economy since 1948.

Brazil Is the New China

Certainly, Brazil has already received its fair share of hype from international investors, development economists, and the International Olympic Committee, which selected Rio de Janeiro for the 2016 Games. But as 2010 unfolds, the distance between Brazil and the rest of the BRICs will only grow. Russia long ago dropped out of the running, as Putin’s chilling, authoritarian tendencies became more apparent, scaring away foreign money. India is still growing strongly, but it’s locked in an unstable region with threats on all sides. China, of course, is still the delight of the international moneymen, but a number of risks—a real-estate or equity bubble, ethnic unrest, an environmental catastrophe—hover on the horizon.

For Brazil, it’s all upside. The economy will grow at 8 percent in 2010. Exploiting the new offshore oil find—the largest in the Western hemisphere in three decades—will create jobs for Brazilians and riches for the government. (It will also solidify Brazil’s enviable energy independence.) New infrastructure projects are in the pipeline as the country gears up for the 2016 Games. Next year’s presidential election will likely be a snoozer, but that’s only because it’s hard to outshine Brazil itself these days.

Mayan Prediction for 2010