Set For Growth
Even though the majority of the continent’s nations have experienced economic regression over the past years, some of its powerhouse economies have started showing signs of stabilization and even modest growth.
According to a report by Ricardo Aceves, Senior Economist at Focus Economics, the engagement of the United States in the Latin American economy has remained low, while China’s presence in the region has risen sharply.
His estimates are further supported by a 2015 report by ODEC/United Nations/CAF titled Latin American Economic Outlook 2016 – Towards a New Partnership With China: “Trade between Latin America and China has expanded in an unprecedented way over the last 15 years, but the commodity-based growth model is revealing its limits. China and Latin America have experienced an impressive trade boom since 2000, increasing trade 22-fold. Between 2001 and 2010, mining and fossil fuels exports from Latin America to China grew at an impressive 16% annually, followed by agriculture products at 12%. Today, China is the largest trading partner for Brazil, Chile and Peru. The result is stronger, though uneven, global value chain linkages between China and Latin America. Commodities accounted for 73% of the region’s exports to China (versus 41% worldwide), while technology manufactures only reached 6% (versus 42% worldwide). China’s higher reliance on consumption instead of investment is already reducing its demand for commodities, which, together with the fall of prices, is affecting Latin American commodity exporters.”
Aceves of Focus Economics states that “after a steep fall of 3,4% in 2016, Brazilian economy is expected to demonstrate a 0,8% growth in 2017.”
His projections for the region’s inflation and GDP dynamics suggest a moderate, yet upward trend: “Considering that Venezuela is experiencing an episode of near hyperinflation, – the report says, – inflation in Latin America is projected to rise mildly toward the end of the year. Analysts expect it to end 2016 at 28.9%. Latin America’s inflation forecast excluding Venezuela is projected to end the year at 9.1%. Next year, forecasters expect overall inflation in the region to come in at 27.3%, which was revised up from the 25.5% projected in last month’s LatinFocus. Stripping out the inflationary effects from Venezuela, inflation in Latin America is expected to end 2017 at 6.4%.”
Aceves believes that “Looking at the countries in the region, economists cut the 2017 GDP growth forecasts for 6 of the 11 economies surveyed, with notable revisions to Argentina, Brazil and Mexico. They maintained the forecast for four economies, including Chile and Peru, and improved the outlook only for Ecuador.”
Despite current fiscal and political instability, Latin American nations are among the world’s most dynamic economies, benefiting from abundant resources as well as qualified yet relatively inexpensive labor and untapped production potential in such industries as production of steel and petrochemical compounds; computer/electronics manufacturing and airplane building; consumer goods.
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