Latin America’s GDP is likely to grow by 3% in 2013 (the same rate as in 2012) according to the 24 July 2013 report of the Santiago-based UN Economic Commission for Latin America and Caribbean (ECLAC). The report predicts above 4% growth in 2014.
The South American sub-region is expected to grow by 3.1% in 2013 (up from 2.5% in 2012) and Central America by 4% (down from 5% in 2012).
Growth projections for the major countries in 2013 are:
- Brazil: 2.5% ( better than the 0.9% in 2012)
- Mexico: 2.8% (down from 3.9% in 2012)
- Argentina: 3.5% (up from 1.9% in 2012)
- Colombia: 4% (no change from 2012)
- Peru: 5.9% (down from 6.5% in 2012)
- Venezuela: 1% (from 5.6% in 2012)
- Chile: 4.6% (5.6% in 2012).
The highest growth will be 12.5% in Paraguay, the only country in the region which suffered a negative growth of 1.6% in 2012. Paraguay is known for such ups and downs. Panama will have the second highest growth of 7.5%.
The region’s growth rate of 3% looks modest, but is not bad given the external environment of GDP contraction in the Eurozone in the last two years and the lower growth rates in the rest of the world.
The primary driver of growth during 2013 continued to be consumption, helped by expanding credit, improving labour market conditions, and an increase in wages.
The macroeconomic fundamentals of the region continue to be healthy and strong with the following indicators:
- In May 2013, the cumulative 12-month inflation for the region stood at 6%, compared to 5.5% in December 2012 and 5.8% in May 2012. Venezuela and Argentina were the exceptions, with double digit inflation figures.
- Unemployment stood at 6.7% in the first quarter of 2013.
- Foreign Direct Investment in Latin America in 2012 was $122.86 billion dollars, the highest in the last eight years.
- Total Gross External Debt of the region in 2012 was $ 1.18 trillion. The ratio of gross external debt to GDP stood at 20% in 2012, down from 34.8% in 2004. A number of countries have decreased their public debt in recent years and have access to funding for their deficits.
- The international reserves of Latin America and the Caribbean have steadily risen from $226 billion in 2004 to $826 billion in May 2013. The region faces a slowdown in exports due to reduced external demand and a drop in the prices of some of the region’s export commodities, such as minerals, metals, oil, and some food items. Sugar and coffee prices have gone down, while the prices of wheat and maize have increased in the first half of this year. Although the prices of oil seeds had increased modestly in the first half of 2013, they are expected to go down due to a bumper harvest. Some experts say that the super cycle of high commodity prices is over, others expect the prices to remain relatively high in the coming years.
- The exports from the region are expected to increase by 4% and imports by 6% in value terms in 2013.
The total GDP of the region reached $5.64 trillion in 2012. Brazil and Mexico are in the trillion dollar league, with $2.25 trillion and $1.17 trillion, respectively. Argentina is the third largest economy with $477 billion, followed by Venezuela with $381 billion, Colombia $370 billion, Chile $268 billion, and Peru $204 billion. The remaining 13 countries of the region have double digit billions as GDPs, except Haiti whose GDP was $7.8 billion.
Ambassador Viswanathan is Distinguished Fellow, Latin America Studies, Gateway House. He is the former Indian Ambassador to Argentina, Uruguay, Paraguay and Venezuela, and Consul General in Sao Paulo.
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