Thursday, December 12, 2013

Performance of the Latin American economies in 2013

According to the provisional figures of the December 2013 report of ECLAC ( Economic Commission for Latin America and Caribbean) Latin America had a modest GDP growth of 2.6% in 2013. Brazil, the biggest economy, grew by 2.4% and Mexico, the second biggest by 1.3%. Paraguay had the highest growth (13%), followed by Panama (7.5%), Bolivia (6.4%) and Peru (5.2%). The economies of Argentina, Chile, Colombia, Guyana, Haiti, Nicaragua and Uruguay grew at between 4% and 5%. Venezuela had the lowest growth of just 1.2%. The main driver of the growth of the region was domestic demand along with investment.

The GDP growth of the region in 2013 is less than the growth of 3.1% in 2012 and 4.4% in 2011. The decline in growth is mainly due to the adverse external environment. Before the 2008-9 global crisis, the region had an average growth of 5.1% from 2004 to 2008. At the height of the crisis the region contracted by 1.5% in 2009 but bounced back immediately with an impressive 5.9% in 2010.

The GDP growth rate of the region is projected to increase to 3.2% in 2014. Panama is expected to have the highest growth of 7% next year followed by Bolivia and Peru at 5.5% each. Brazil will grow by 2.6%, Mexico by 3.5%, Argentina by 2.6%, Chile by 4% and Colombia by 4.5%. Venezuela is condemned to have the lowest growth of just one percent in 2014.
Net FDI in Latin America in 2013 is estimated to have increased to 147 billion dollars from 126.3 billion in 2012. It has steadily increased from 47.9 billion in 2004.
International reserves of  Latin America stand at a comfortably high level of  817 billion dollars in 2013, marginally less from the 2012 figure of 819.9 billion but up from 219 billion in 2004. Only Argentina has an uncomfortable level of foreign exchange reserves of 30 billion dollars. The government of Argentina has imposed a number of foreign exchange, foreign travel and import restrictions because of the low forex reserves. Venezuela has also similar restrictions as part of the political philosophy of the Chavista regime to control everything and everyone in the country.
Average inflation of the region has gone up in 2013 to 7.1% from 5.6% in 2012 mainly due to rise in food prices. Venezuela had the highest inflation of 51.7% in the region, going beyond its 2007 record of 31.9% in this decade. Argentina had an official inflation of 10% but unofficial one of over 25% in 2013. All the other countries in the region had kept inflation down in single digit in 2013 as well as in recent years.
Latin America’s debt levels have continued to fall, with public ( central government) debt at around 31% of GDP in 2013 from 51% in 2004. Chile has the lowest of  just 12% in 2013 up from its recent record of  3.9% in 2007. The gross external debt of the region as a percentage of GDP in 2013 is 21 percent, down from 21.2% in 2012 and 34.6% in 2004. The gross external debt of Latin America in 2013 is 1.207 trillion dollars.
Latin America's exports have stagnated due to the fall in demand in China, Europe and US , the decline in prices of commodities exported by the region and the slower global growth in 2013. Exports to Europe have decreased by 5% while exports to Asia increased by 8%. Exports of goods of Latin America in 2013 are estimated to be 1.108 trillion dollars slightly up from 1.104 trillion in 2012. Imports in 2013 are 1.09 trillion, up from 1.053 trillion in 2012. Service exports have gone up from 128.9 billion in 2012 to 133.5 billion in 2013. Service imports have also increased from 204.8 billion in 2012 to 214.4 billion in 2013. 
Lending rates in 2013 continued to be high and in double digits in the case of many Latin American countries ranging from the highest in Brazil at 31.6% to the lowest in Mexico at  4.4%.

Unemployment in the region has declined to 6.3% in 2013 from 6.4% in 2012.

Venezuela and Argentina are the only black sheep in the region. They have ended the year in 2013 with worse economic situations than they were in 2012. Both the countries are paying a heavy price for poor governance and are the exceptions to the main trend of stability, predictability and prudent policies in the region.

Except for Venezuela and Argentina, the rest of the Latin American economies have stayed relatively stable and sound in 2013 despite the European crisis and the slow down in Asia and US. The region has steadily become more resilient and resistant to external shocks while strengthening the domestic macroeconomic fundamentals. 

No comments: