Most of South America's economies are booming. None of them face external crisis. Remember, this is in a region where current account deficits and IMF rescues were commonplace for over two decades. Now, many countries are boasting robust external sector figures. Thanks to the world economy, most South American countries are showing current account surpluses year after year. In just four years, Argentina climbed to a surplus of 3.3% of GDP from a current account deficit of 5.6% of GDP.

China's extraordinary performance and the fast-growing American economy have sustained high prices for commodities, benefiting many South American commodity-exporting economies.

Nonetheless, an old enemy is coming back to haunt some nations: Inflationary pressures. In Argentina and Venezuela, inflation has reached 15% despite price controls and subsidies. This trend could prove very harmful.

And in the political arena, the region is a mess. Last week presidents from almost all South American countries attended a summit in Rio de Janeiro only to show their conflicting views about the region. President Hugo Chavez, as usual, galvanized media attention with his loquacious, out-dated speeches. Evo Morales, from Bolivia, and Rafael Correa, from Ecuador, performed as if they were in a 1960s-like meeting of revolutionaries against capitalism. Evo Morales accused Colombian president Alvaro Uribe for collaborating with "the enemy". He is in an imaginary war against the United States. Argentina and Uruguay kept bickering over their economic disagreements. Brazilian president Lula equivocated. And Chilean President Michelle Bachelet tried vainly to remind her colleagues that this was the 21st Century.

The world economy won't boom for too much longer, especially if the American and Chinese economies remain unbalanced. Latin America needs to get its political act together if it wants its economy to keep improving in the years ahead.