São Paulo – The Gross Domestic Product (GDP) of Latin American and Caribbean countries in 2013 should grow by an average of 3.5%. In 2012, the rate was 3%. According to the Regional Economic Outlook report for the Western Hemisphere, released this Monday (6th) by the International Monetary Fund (IMF), the region’s economies will benefit from strong foreign demand, favourable financing conditions and positive results stemming from previously adopted economic policies.
Despite projecting a year of growth, the Fund warns that Latin countries, particularly Mexico and Central America, may be harmed by low growth in the United States. All Latin American countries may be affected by a “sudden” difficulty obtaining financing or by a decline in Asian demand for commodities, especially in China.
“Strong demand from emerging Asia economies and the gradual recovery in the advanced economies will continue to support commodity prices, benefiting commodity exporters. However, a reversal of these favorable tailwinds at some point in the future remains a distinct risk. In this context, the main policy challenge for most of the region is to take advantage of the current favorable conditions to build a strong foundation for sustained growth,” according to the Fund’s report.
The report notes that in 2012, the region saw “moderate” growth at 3%, after having grown by an average of 4.5% in 2011. The slowdown was strongest in the region’s major economies, such as Brazil, which grew by 7.5% in 2010, 2.7% in 2011 and 0.9% in 2012. The growth deceleration was brought about by declining private investment and “policy uncertainty.”
The IMF said that Brazil’s economy experienced a “pronounced” deceleration in 2012, despite stimulus measures. “High unit labor costs, infrastructure bottlenecks, and domestic policy uncertainty are likely to have weighed on business confidence and private investment. Recent indicators point to strengthening activity, and investment growth turned positive in the last quarter of 2012,” according to the report.
Other Latin American economies experienced a more gradual slowdown than Brazil due to increased income and easy credit conditions. Chile and Peru benefited from foreign investment. In turn, Mexico’s “dynamic” economic growth as of early 2012 lost steam towards the end of the year due to the United States’ bearish industrial output.
The report advises countries in the region to carry out reforms which enable their productivity and growth potential to increase. They are admonished to strengthen their financial systems and keep current account balances in harmony. The document also sets forth that as global investors allocate a larger share of their portfolio to Latin American countries, their governments must strengthen economic regulation.
The IMF forecasts that in 2013, Brazil’s GDP will be up 3%, Chile’s, 4.9%; Venezuela’s , 0.1%; Peru’s, 6.3%; Colombia’s, 4.1%; and Argentina’s, 2;8%. The growth forecast for Mexico is 3.4%, and for the United States, 1.9%.
*Translated by Gabriel Pomerancblum
