Latin American economies have continued to show growth and resilience despite the global economic downturn in 2012

Despite the continuing crisis in Europe, the sluggish recovery of US and the Chinese slowdown, Latin America has 

• shown growth of 3.1% in 2012 with promise of 3.8% in 2013
• Increased its international reserves to a historic record of 780 billion dollars
• Increased net FDI to 189 billion dollars in 2012 from 126 bn in 2011
• Increased imports to 1075 billion dollars in 2012 from 1035 billion in 2011
• Reduced unemployment to 6.4% in 2012 from 6.9% in 2011
• Reduced inflation to 5.8% in 2012 from 6.9% in 2011

These are according to the report of Economic Commission for Latin America and Caribbean ( ECLAC) released on 11 December 2012. 

Highlights of the report:

The region’s GDP growth rate in 2012 is estimated at 3.1%. This exceeds the global growth of 2.2%. Panama showed the highest growth of 10.5%, followed by Peru-6.2 %,  Chile- 5.5%, Venezuela –5.3% and Colombia 4.5%.  Lower growths were witnessed for the three largest countries; Brazil- 1.2 %, Mexico- 3.8% and Argentina 2.2% . Paraguay was the only country which had experienced a negative growth ( - 1.8% ) in 2012.

The region is expected to increase its growth to 3.8 % from 3.1% in 2011. It may be noted that the region grew by 5.9% in 2010 and 4.3% in 2011.

In 2013, Brazil is projected to grow by 4%, Mexico- 3.5%, Argentina 3.9% and Colombia 4.5%

With external demand weakening, growth in the region was driven by domestic demand, fuelled partly by monetary or fiscal policy measures in most of the countries. The rise in demand was chiefly a reflection of consumption, with public consumption making a larger contribution than in 2011, consistently with the expansion of public spending in many countries.The increase in private consumption is based mainly on the expansion of credit to the private sector and on the continuous improvements in labour indicators.

Unemployment eased down to 6.4% in 2012 from 6.9% in 2011. It was 8.1% in 2009 and 7.3% in 2010.

In 2012, real wages rose, which helped to bolster domestic demand, particularly consumption. Higher minimum wages in many countries contributed to the rise in real wages.  


Inflation has gone down to 5.8% in 2012 from 6.9% in 2011. The region’s highest inflation rates —into double digits— were recorded in Argentina and Venezuela. Inflation has come down in Venezuela from 29% in 2011 to 18.5% in 2012. Argentine inflation should be over 20% but the government cooks the books and shows the official rate at less than half of the actual inflation. 
It may be noted that the average inflation rate of the region has remained in single digit in the last ten years. The maximum inflation rate was 8.2 % in 2003.

While the fiscal position deteriorated in most of the countries, the fiscal policies have remained predominantly prudent
Debt levels rose only slightly and did not pose a threat to fiscal sustainability 

International reserves of the region in 2012 is estimated to be around 780 billion dollars, increasing from 723 billion in 2011 and 413 billion in 2007. Brazilian reserves are an impressive 378 billion dollars while the Mexican reserves are 166 billion.

The Latin American countries posted a balance-of-payments current account deficit equivalent to 1.6% of regional GDP in 2012, a slight deterioration from the 1.3% in 2011. 

Net FDI in Latin America in 2012 was 189 billion dollars as against 126 billion in 2011 and 75 billion in 2010. Brazil had the highest FDI of 132 bn $, followed by Peru –18 bn $ and Colombia-14 bn $. Mexico had a negative 4.7 bn $ since the outflow of FDI was more than the inflow.

The average Debt-to-GDP ratio for 19 countries of Latin America is estimated to have continued on its downward path, falling from 30.5% of GDP in 2011 to 29.57% in 2012 at the central government level. 

Total external debt of the region reached 1104 bn$ in 2012 from 1080 bn $. Brazil's debt has increased to 303 bn $ in 2012 from 298 bn in 2011. Mexican debt stands at 218 bn in 2012 as against 209 bn in 2011. The Argentine debt has marginally gone up to 142 bn from 141 bn in 2011.

Brazilian Real and Mexican and Argentine Peso had depreciated in value in 2012 while most other currencies of the region had appreciated.

In 2012, a number of the region’s countries implemented new macroprudential measures to strengthen their financial systems. The most common measures of this sort were changes to legal reserve requirements and reforms to the regulatory frameworks of financial systems. 

Total trade of the LAC region in 2012 is estimated to be 2196 billion dollars. Exports will be 1122 billion dollars, marginally increasing from 1106 billion in 2011. Imports of the region is estimated to be 1074 billion dollars, increasing from 1035 billion in 2011. Mexico, the top trading country of the region will have exports of 370 billion dollars in 2012 increasing from 350 billion in 2011. Their imports will be 370 billion in 2012. Brazilian exports in 2012 is to decline to 244 billion dollars from 256 bn in 2011. Their imports would remain at 226 billion, the same as in 2011. The third largest trader in 2012 is Venezuela with 96 bn exports and 56 bn imports. Surprisingly, Chile ( market of 17 million people)  has overtaken Argentina ( 40 million population) and Colombia ( 50 million population ) in trade with exports of 80 bn and imports of 73 bn in 2012.

India should target 2% of the total imports of Latin America. Two percent of 1074 billion dollars in 2012 is 20 billion dollars. In 2011 India's exports were 11.6 billion dollars.  Indian exports could reach 20 billion dollars by 2015 if the exporters and the government of India intensify their export promotion to this under explored and promising market.

Made in Mexico ( Hecho en Mexico)

Hecho en Mexico ( Made in Mexico ) is the title of a musical documentary film released on 30 November. It takes the viewers through an odyssey of Mexican music featuring performances by rockers, rappers, folk artists and pop stars and narrates the diverse and colorful history, culture, poetry, philosophy, ethnicity and tradition of Mexico. 

According to the projections of Economist ( 24 November issue) Made in Mexico  products are going to overtake Made in China in the US market by 2018. Mexico will become the top supplier to US accounting for 16 % of the US imports as against 15.8 % projected for China.  In 2012, Mexican share stands at 12.3% while that of China is 17%. The Mexican  ascendancy has become possible thanks to the bridging of the wage gap with China. The average manufacturing wage of China has risen to 1.6 dollars per hour in 2011 ( from 0.3 dollars in 2000) while the Mexican wage was 2.1 dollars an hour in 2011, increasing from 1.5 dollars in 2000. The minimum wage in Shanghai is now more than that of Mexico city and Monterrey. This new wage situation combined with the increased cost of freight due to high oil prices have given a competitive edge to Mexico, from whose border towns goods reach US cities in a matter of hours or days while it takes several weeks from China. The businesses which had fled to China in the past have now started returning to Mexico. 

Today Mexico is the fourth largest exporter of vehicles. With several new plants being set up, the production capacity is set to go up to four million vehicles. The country has become the world's largest exporter of flat-screen TVs, Blackberries and fridge-freezers. A number of foreign companies including Chinese are putting up plants in Mexico to supply to the US market 

As member of NAFTA, Mexico has free access to the markets of US and Canada while China's access is being limited by growing protectionism. Besides, Mexican products have access to the markets of 42 countries with whom it has signed FTAs.

The Mexican industry and economy are going to benefit from the opening up of the energy sector, expected in the near future. Mexico, which is among the top ten oil producers in the world with 2.5 million barrels per day of production, is set to increase exports with new investment in exploration and production. Last month,Pemex, the Mexican oil company announced discovery ( the largest in the last ten years) of a new field with reserves of 500 million barrels. The shale gas/oil revolution, which has transformed the US energy situation, is also likely to spread to Mexico, which has large shale reserves. 

It is creditable that the Mexican economy has withstood the global financial crisis without any major damage, despite the proximity and exposure to the epicenter of the crisis. This is attributed to the prudent macroeconomic management of the Mexican policymakers who have learnt  lessons from the previous crises. The inflation has been kept under control and it is estimated at 4.6% in 2012. International reserves exceed $160 billion, a record.  Interest rates and External Debt are relatively low. Though the growth has been modest in recent years, it is expected to pick up. 

Encouraged by the new trajectory of the economy and industry some Mexicans even talk about overtaking Brazil, the largest economy of Latin America.They highlight the fact that their boom in manufacturing is more sustainable than the commodity boom of Brazil driven by China. In trade, Mexico is, of course, way ahead of Brazil with 700 billion dollars in comparison to the Brazilian trade which stood at 484 billion dollars in 2011. While Mexico is gaining edge in manufacturing, Brazil suffers from  high cost of production, interest rates, wages and antiquated labour laws as well as strong currency and is losing its competitive edge in industry. Recently, the Brazilians had to wriggle out of a bilateral automobile accord after the huge increase in import of cars made in Mexico. While the Brazilians are protectionist, the Mexicans have become more outward-looking. Earlier this year, they signed up as member of yet another grouping called as the Pacific Alliance ( with Chile, Peru and Colombia). 

Although Mexico has been ruled by the centre-right party PAN for the last ten years, Inclusive Development has been the priority of the governments. The Calderon administration has brought 50 million Mexicans (unaffiliated with any health insurance) under the Seguro Popular programme. The number was just 15 million six years back. His administration has built 21,000 kilometers of new roads and bridges. Unfortunately, Calderon got bogged down in the futile war against the drug gangs. While, the drug war and mindless violence of the drug cartels have given a bad image, it is believed that the violence has started declining. In any case, the fundamental cause for the drug trafficking and gun violence comes from US, the consumer of drugs and supplier of guns.

The manufacturing and export boom of Mexico is coinciding with a good news. On 1 December, Mexico is getting a 46-year old dynamic and energetic new President in Enrique Pena Nieto who won a comfortable victory in the July elections. He promises to take Mexico to greater heights and prosperity. His party PRI shares some common agenda with PAN, the party of the outgoing President Calderon. The two parties collaborated in passing the labour reform legislation recently. In a gesture of goodwill, he has included PAN as well as the leftist PRD members in his cabinet. 

While Pena Nieto is a fresh face, his party PRI had ruled Mexico for 71  years uninterrupted till 2000 as a one-party dictatorship. Having been out of power in the last ten years, the party has learnt lessons to adapt to the new realities of Mexican democracy. Conscious of the criticism that his administration will be old wine in a new bottle, Pena Nieto has a low key and sober inauguration today without the usual Latino pomp and show.

The Mexicans are, understandably, upbeat and optimistic about the future. They have started dreaming ( like the Brazilians and Indians) that their time too has come.