Wednesday, October 07, 2009

Inflation in Latin America

Inflation used to be a curse in Latin America. Many countires of the region have suffered Hyperinflation in four digits and three digits. The joke in those days was that one could never tell the exact figure of Latin American inflation and Indian population. By the time one finishes the sentence, both would have gone up !

The governments of the region have tamed it decisively in the last decade. The average inflation of the region has remained in single digit in this decade.

The projection of average inflation in 2009 is 6.1% and in 2010 it is 5.2%, by Latin Business Chronicle and IMF. In an act of extraordinary courage they have even projected the inflation for the period 2010-14 as 5. 2%. This is remarkable. This is the twenty first century Latin America, which I call as the New Latin America, in which things have become predictable. No one would have dared to do such a five year projection even as lates as 1989, when the Argentine inflation was over 3000 percent.
There are , of course, exceptions to the single digit inflationary trend in the region. Venezuela is on the top with the highest inflation in the region with 29.5%. It is expected to increase to 30% in 2010 and more to 32.4% in 2010-14.
Argentina has the second highest inflation with 20%. Costa Rica is third with 8.4%.
Brazil is little over 4 percent in the next five years.
Mexico´s inflation of 5.4% this year is projected to go towards 3 percent in the coming years.
Colombia´s inflation of 4.6% this year is expected to decline to slightly over 3% in the next five years.
Besides inflation, the Latin American governments have also brought under control external debt and exchange rates which have also become predictable.

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