Tuesday, April 25, 2017

Latin American GDP projected to grow by 1.1% in 2017

Latin America is projected to have a GDP growth of 1.1% in 2017, according to the 24 April report of the UN Economic Commission for Latin America and Caribbean (ECLAC). This latest growth estimate is less than the prediction of 1.3% in ECLAC's December 2016 report.
Even the 1.1% growth comes as a welcome news, given the fact the region had suffered an economic contraction of 1.1% in 2016 and 0.5 % in 2015. 
South America is expected to have a low growth of 0.6% while Central America will have a higher rate of 3.6%  
Growth estimates for the major countries are as follows:
Brazil  0.4% 
Mexico- 1.9%
Argentina 2%
Colombia- 2.4%
Peru- 3.5%
Chile- 1.5%
Dominican Republic will be the region's growth champion in 2017 with 5.3%, followed by Panama at 5.2%, Nicaragua at 4.6% and Bolivia-4%.
Venezuela is likely to suffer yet another economic contraction at 7.2% in 2017. The country is in a hopeless free fall. Its only hope is change of the Chavista regime which has no clues to stop the economic deterioration. The country is heading towards a political explosion and economic collapse. 
The recovery in the global prices and demand of commodities should help South America to hope for a higher growth in 2018. 
Brazil , the biggest economy faces internal problems while Mexico, the second biggest faces external challenges. Brazil is lurching from one political crisis to the next and is coming out with more and more incredible scandals of corruption. Earlier this month, the Supreme court has authorized investigation of 108 politicians which include nine ministers in President Michel Temer's government, three state governors, 29 senators and 42 members of the lower house of Congress. Consequent to this, the corporate activities are paralyzed, bank credits frozen, infrastructure projects delayed and investments postponed. The Odebrecht corruption scandal has claimed victims in Colombia, Peru and other Latin American countries. China is taking advantage of the situation and buying up assets whose prices have come down due to the economic crisis. In the first four months of 2017 the Chinese have invested 5.7 billion dollars in Brazil. Last year they invested 11.9 billion dollars and they are the largest foreign investor in Brazil.
The Brazilian situation has an adverse impact on Argentina which is finding it difficult to grow faster as expected under the business-friendly Macri government. 
Mexico faces challenging times with Trump's threats to build a wall, repatriate illegal Mexicans in US and change NAFTA to favor US more. Foreign investors have become more cautious about investing in Mexico which was emerging as the ' manufacturing hub' of Americas, becoming even more competitive than China in some manufacturing sectors such as cars and appliances.
Peru and Colombia are the countries which show promise of higher growth. Being a larger market, Colombia should be considered as the best opportunity for business in the region.

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