Boom in mining investment in Peru

There are 52 ongoing mining projects in Peru with 53 billion dollars of investment in the coming ten years.

In 2012, the government gave 4668 mining permits to 582 companies up from 3100 in 2011.

Peru expects to increase its copper production from the current level of 1.3 million tons to 5 m tons by 2025. Peru is currently the third largest coppoer producer. Chile, the number one, produces 5.7 m tons
Mining accounts for 15% of the GDP of Peru.

The big investments include
- Chinalco ( Chinese) - 2.2 bn $ copper mine
-Newmont - 5 bn in gold and copper
-Anglo American - 3 bn
-Xtrata - 6 bn

One of the major challenges for mining is the protests from local communities displaced and affected by the mining operations. There have been more than 200 conflicts some of which turned violent resulting in the death of some protestors. Chinalco is spending 150-200 m $ for resettlement of the affected families but the community leaders demand 300 m. Other companies are also making provision for " social funding" to avoid the social tensions. Fortunately, Ollanta Humala, the leftist president of the country, is able to manage the conflict between the miners and the local communities with his leftist credentials.

Brazilian investment in new hydroelectric power

Brazil is investing in 34 new dams to be completed by 2021 to increase the generation of hydroelectricity by fifty percent.
The two biggest are:
the 7.5 billion dollar Jirau Dam.
and the Belo Monte project, to be completed by 2015 at a cost of 9 billion dollars, will produce 11,000 MW.
90% of power consumed by Brazil comes from the hydroelectric sector.
Itaipu power plant alone accounts for 25% of the Brazilian electricity generation with its 14000 MW capacity.
The biggest challenge is not finance or technology. It is the coalition of motivated western NGOs and the media who use the bogey of Amazon rain forest and environment. They carry out misleading propaganda and try to put obstacles in the way of Brazilian economic development.

Devaluation of Venezuelan currency

The Venezuelan government devalued the currency by 32% to 6.3 Bolivars for a dollar from 13 February. This was not unexpected. It was predicted for some time because of the large fiscal deficit which reached 11% of GDP in 2012. 

This is the fifth devaluation in nine years.

The black market rate is 19.53 Bolivars for a dollar. 

Imports are constrained by the delays and restrictions in releasing foreign exchange by CADIVI, the control agency of the government.

Shortages of food items, empty super markets, chaotic distribution system and the nationalisation and mismanagement of many companies have made a Cuba out of Venezuela.

The economy and secuity situation of the country are as bad as the cancer of Chavez.

The Bolivarian Revolution and the 21st Century Socialism of Chavez which started with good intentions have become nightmares. While the condition of of poor people have become better under Chavez, the economy, the society and the country in general have suffered long term damages.

Brazil development bank plans to invest almost a trillion dollars in next three years

Brazil’s Social and Economic Development Bank (BNDES) has plans to invest 1.858 trillion Reais (approx 906bn dollars) between 2013 and 2016, according to the statement by its President Mr Luciano Coutinho.

 In 2012, total investments amounted to approximately 156 billion Reais, up 12% compared to 2011, and a total of 2.394 trillion Reais was invested between 2008 and 2012.

The figures do not include the housing sector.

Manufacturing sector received the highest investment in 2012, totaling 847 billion Reais, and it will be the largest recipient of loans in the next three years too.

Infrastructure absorbed 359 billion Reais in 2012, with a further 498 billion Reais expected to be invested between now and 2016. BNDES supplied the service sector with 159 billion Reais last year and future investments are expected in the order of 219 billion Reais.

The remaining sectors together received 1.858 billion Reais and should receive a little over another billion in the next three years.

The volume of funds released to micro, small and medium enterprises was the largest in the bank's history, totaling 50.1 billion Reais.

Besides lending to companies, BNDES also takes equity participation in some cases.

The financial support of BNDES has helped many Brazilian companies, both public and private, to go global and be leaders in their areas of operations.

Praj gets a 20 million dollar contract to build ethanol plant in Colombia

This is the seventh project of Praj Industries, Pune in Colombia. Riopaila Castilal is the client this time. The project is to build a 400,000 litre a day ethanol plant at La Paila in Valle de Cauca region of Colombia.

Praj has recently commissioned a 150,000 liters per day corn-to-ethanol plant for Vicentin SAIC in the Santa Fe province of Argentina.

Praj, a leader in ethanol technology, has also done projects in Central America.

Zamin plans to produce 27 million tons of iron ore in Brasil

Zamin proposes to buy the Amapá mine ( current production 4.8 m tons) , 70% owned by Anglo American and 30% by Cliffs Natural Resources. The deal is said to be around $300 million. 

Zamin already has ongoing iron ore projects which include

- Susa mine, in Rio Grande do Norte

- Zamapa mine in the Amapá state) 

- mine  at Bahia

Pramod Agarwal, the company’s founder, based in London, is betting on iron-ore production of 27 million tons by 2017 in Brasil

Zamin has a iron ore project in Uruguay, which is undergoing the process of governmental regulatory evaluation for clearance. 

In 2010 Zamin had sold a mine in Brasil at an attractive price.

Zamin plans to export  60% to 70% of the total to China and the rest to the Middle East.

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. 

Business with Nicaragua

A Nicaraguan delegation lead by Commandante Bayarde Arce, Advisor to the President on economic and financial affairs was in CII for interaction with the Indian industry on 27 November. The delegation sought Indian investment in IT, agriculture, food processing, infrastructure and renewable energy. They were also interested in importing buses and equipments and machinery. The delegation was encouraged by the presence of 20 Indian companies in the CII meeting.

Caplin Point, the Chennai-based pharma company hosted a dinner for the delegation. They are the leading exporter of pharmaceuticals to Nicaragua and some other central american countries.

India's exports to Nicaragua were 53 million dollars in 2011. Pharmaceuticals, two wheelers, three wheelers, automobiles and engineering goods were the major exports. Bajaj three-wheelers and Mahindra vehicles are popular there.

Praj has done a distillery project. Gammon India is starting a hydropower project with World Bank funding. Suzlon is into a wind energy project. Gravitas from Rajasthan is doing a Lead extraction project.

The Indian Ministry of External Affairs has already extended a Line of Credit of 10 million dollars as part of the 80 million to the SICA group of 8 central american countries. More credit is being requested by the Nicaraguan delegation.

Nicaragua has authorized their Honorary Consul in Mumbai Mr Mehta to issue visas. Mr Mehta informed in the CII meeting that he has issued 0ver 40 visas in the first ten months of 2012. The Delhi Honorary Consul Mr Burman has also been authorised to issue visas from November 2012. This is a rare and commendable gesture by the Nicaraguan government. Normally governments around the world do not allow the honorary consuls to issue visas.

Nicaragua has become politically stable with credible democratic functioning. The economy has been growing over 5% in recent years. The leftist government of Ortega is committed to business-friendly polieies besides Inclusive Development. More and more people are coming out of the poverty line. Nicaragua is the safest country in central america, free from violence and crime witnessed in some of the Latin American countries.

Despite being an authentic Marxist, President Ortega has shown pragmatism in external policy too. He has continued the traditional policy of recognition of Taiwan and has resisted the pressure from China.  USA which waged a bloody proxy war to overthrow Ortega's regime in the eighties, has now become the principal market for Nicaraguan exports.

This is a good time for Indian business expansion in Nicaragua. India's exports can be increased to over 200 million dollars in the next three years, if the Indian business takes Nicaragua seriously.

FDI in Latin America and Latin American investment abroad increase in 2012, despite the global crisis

Inflows of foreign direct investment (FDI) into Latin America rose by 8% in the first six months of 2012  reaching 94 billion dollars from 87 billion in the first half of 2011, according to figures released by the Economic Commission for Latin America and the Caribbean (ECLAC) on 23 October.

In the first six months of 2012, Brazil received 43 billion $, followed by Chile 12 bn, Mexico 9.6 bn, Colombia 7.8 bn, Peru 5.4 bn and Argentina 5.3 bn. Among the smaller countries Uruguay got 1.4 bn and Costa Rica 1 bn.

At the same time, investment by Latin American enterprises abroad surged by 129% in the first half of the year reaching 21 bn $ as against 9.3 bn in the same period in 2011. Mexican companies lead with 11.5 billion followed by Chile with 10 bn.

The rise in FDI income is attributed by ECLAC to economic buoyancy and stability in most countries and high commodity prices, which continue to encourage investment in mining and hydrocarbons, particularly in South America. Peru is the hottest destination for investment in mining while Colombia has also become attractive for energy and mining investment.

The manufacturing sector in Mexico and Brazil have been steadily attracting FDI.  With the closing of the gap  (at one time it was four to one) between Mexican and Chinese wage levels, Mexico has regained its privileged position as the factory for US. Mexico has become is the world’s second-largest exporter of fridges, and the second-largest supplier of electronic goods to the United States and a competitive automobile exporter. 

It should be noted that FDI had increased in Latin America by 31% in 2011 from 2010, reaching a record 153 billion dollars. Latin America was the region that recorded the highest percentage increase in  2011 taking its global share to 10%.

The increase in FDI in Latin America and even more impressively the jump in the increase of  Latin American investment abroad at this time of European crisis, American sluggish recovery and the Asian slowdown are indeed remarkable. They reconfirm the general trend of the new paradigm of economic stability, growth and promise of the New Latin America.

There was no new significant Indian investment in Latin America in 2012 except for the Godrej acquisition of a Chilean cosmetic firm. Many Indian companies have plans to increase their existing investment in IT/BPO, agrochemicals and energy. Some new players are exploring opportunities in mining. The cumulative Indian investment in the region is around 10 billion dollars.

Latin American investment in China

During the sixth China- Latin America Business summit in Hangzhou in October 17-18, the Inter American Development Bank (BID) brought out a report on Latin American investment in China. 

BID starts the report saying, " it is difficult to make a meaningful statement about Latin America’s economic future without mentioning China". 

The report is useful for Indian companies and policy makers interested in attracting FDI from Latin America, although the amount that can be expected might not be substantial. 
According to the BID report, the total Latin American FDI in China is 858 million dollars of which the share of Brazil is 314 million, Argentina-58 million, Mexico – 48 and Chile – 47 . There are 85 Latin American companies which have invested in China.

The BID report has given short but interesting case studies of the entry strategy and experience of the following companies which have invested in China

- Techint, the Argentine steel tube company ( turnover 24 billion dollars) has set up a plant to produce for local market as well as for exports.

- Vale, the Brazilian mining giant which exports around 20 billion dollars of iron ore to China, has some local plants for pelletisation.

- Bimbo , the Mexican bread and bakery products maker (the third largest in the world with a global turnover of  11 billion dollars ) has become one of the top ten bread suppliers in China with a presence in 27 Chinese cities with sales of 40 million dollars

- Gruma (Grupo Masecho) of Mexico, the maker of tortillas and other food products ( global turnover 4.6 billion dollars) has significant investment in China.

- Weg, the Brazilian electrical motors company with a turnover of 3.6 billion dollars has a unit in China employing 620 Chinese staff.

- Stefanini, the largest Brazilian IT company with a turnover of 400 million dollars is well established in China

- Concha y Toro, the Chilean winery with a turnover of 872 million dollars is aggressively marketing its wines in China

Trade highlights of the the BID report 

 - Trade between China and Latin America has increased at an annual average rate of 25% since 2000, reaching $236 billion in 2011 

- The Southern Cone countries, along with Peru and Venezuela, have enjoyed booming exports to China, leading to bilateral trade surpluses in the cases of Brazil, Chile, and Peru. For Mexico and Central America, however, manufacturing imports from China have swamped any gain in exports, resulting in considerable trade deficits with China.

- The composition of Latin America's exports to China - Iron ore 26%, Soya beans – 19%,  copper –21% and Petroleum crude 9 %

China has become a member of BID and has become the mover and shaker within the organization with its enormous financial clout. The Chinese credit to Latin America is much more than the credit being given by BID and World Bank together. 

BID is very keen to have India as a member. The President of BID Mr Luis Moreno visited India in 2011, met the Indian policy makers and expressed interest in India's membership. While the Indian Ministries of External Affairs and Commerce realize the strategic importance of membership, the Finance Ministry is dragging its feet saying that the amount of subscription is high. They need to see the long term opportunities for our companies to get projects and contracts which are possible through BID membership.. 

There is only a limited window of opportunity for India to become a member of BID by purchasing the left over shares of an East European country which broke into pieces. BID does not offer new shares, under pressure from the existing members who do not want competition. Even in the case of China, they were blackballed by USA for a year and finally the Chinese managed to force themselves in. I hope the Indian policy makers will move quickly to become BID member and will not miss the last window of opportunity.

The Indian chambers of Commerce and Industry as well as the Government of India should also consider organizing regular business summits with Latin America as the Chinese have done for the sixth time this year with over 1100 companies. India should seek the collaboration of BID, ECLAC and other regional organisations and banks of Latin America who would be willing.

Latin American growth rate in 2012 is modest but going to be better in 2013

GDP growth rate of Latin America in 2012 is projected to be 3.2% (down from 4.3% in 2011). This is not bad, given the background of the European crisis, uncertain recovery in US and the slow down of China. The good news is that the GDP growth rate is expected to increase to 4% in 2013. This is according to the annual report of the Economic Commission for Latin America and Caribbean ( ECLAC) released on 2 October. The highlights of the report, with my comments, below:

Brasil's growth is projected to be 1.6 % in 2012 and 4 % in 2013. Brasil is struggling with its high cost of production and doing business (Custo Brasil). The government is determined to to put the economy back on fast track with massive public investment, infrastructure development and lowering of interest rates.

Mexico's growth expected to be at 4 % in 2012 and in 2013 too. Mexico has been gaining ground in manufacturing and labour cost competitiveness vis a vis China to which it had lost jobs and production in the past. The recent labour reforms legislated by the Mexican Congress and the prospects of reforms in energy and other sectors as well as the election of the young and dynamic Enrique Pena Neto as the next President augur well for the economic prospects of Mexico in the coming years.

Colombia, which is aspiring to overtake Argentina as the third largest economy of the region is projected to grow by a healthy 4.5 % in both 2012 and 2013. Part of this growth story is credited to the administration of President Juan Manuel Santos, who has managed to neutralize the FARC guerrillas and pursue prudent external policies. With its investor-friendly approach, Colombia has emerged as the hottest destination for foreign investors in the region.

Argentina is expected to grow by 2% in 2012 and 3.5% in 2013. The government of President Cristina continues its policies of restrictions and controls of imports, foreign exchange, remittances, prices of many items, retail shopping and foreign travel. There is a strong black market for foreign exchange at a rate of 6.5 pesos for a dollar while the official rate is 4.3. Inflation continues to be high at more than 20% while the official figure is 9%.

Peru remains on the top of the growth chart among major economies of the region with projection of growth in 2012 at 5.9% and in 2013 at 5.5%, after having experienced growth of 6.9% in 2011 and 8.8% in 2010. President Humala has proved to be a true follower of Lula with his pragmatic pro-poor and pro-market policies.

Chile will grow by 5% in 2012 and 4.8% in 2013. Chile continues to be an admirable market of good growth, predictable and transparent policies, least corruption and the best managed economy in the region.

Venezuela is expected to grow by 5% in 2012 thanks to the high oil prices. The elections to be held later this week will be crucial for the long term interests of the country.

Panama has shown the highest growth in the region with 9.5% in 2012 after its double digit growth in 2011. 

The nine countries of Central America have shown a collective performance of 4.4 % growth in 2012 and 4% growth expected in 2013.

Paraguay is the worst in the region with GDP contraction of 2% in 2012. The country which had an exceptional 13.1% growth in 2010 is facing fall in agricultural production due to adverse weather conditions. However, it is expected to recover in 2013 with a 5% growth.

The continuing growth of the region has been driven mainly by domestic consumption followed by investment, improving employment and wage levels. The governments of the region have been following, in general, prudent monetary and fiscal policies, Inclusive Development Agenda, reduction of external debt and stimulation of local industry and business. 

The average Inflation of the region in the twelve month period upto june 2012 declined to 5.5%, the lowest since November 2010. The only two countries with double digit inflation ( in fact, over 20%) are  Venezuela and Argentina. The government of Argentina continues it policy of Magical Realism by showing inflation figures around 9%, while increasing the salary of its employees (including those of INDEC, the agency which cooks up the official inflation figures) by over 20% to compensate for inflation.

Current account deficit of the region is expected to reach 1.9% of GDP in 2012 from 1.2% in 2011.

Unemplyment rate continues to fall in the region as a whole and wage levels are going up.

The countries of the region continued to build up forex reserves which reached 767 billion dollars in June 2012 increasing from 687 billion dollars in June 2011 and 453 billion in December 2008.

Public debt to GDP ratio has been falling in the region and domestic debt accounts for a much larger share of the total debt. The region’s external public debt now represents around 15% of GDP, compared with 85% in 1990. 

Thanks to the stronger macroeconomic fundamentals and resilience, the countries of the region have some room for manoeuvre if the external context takes a turn for the worse.