LATIN AMERICA AND GROWTH PROSPECTS

Latin American emerging economies will remain the path of growth of the Gross Domestic Product (GDP) accompanied by high dependence on commodity prices, domestic political and social upheavals, united as always significant inflation.

Economic figures show that the Latin American economy as a whole has been slowing down since 2012 after the rapid recovery from the global crisis of 2008, however, economists, international agencies, investment banks and large consulting firms expect 2014 to be better than 2013. This is due to the change in U.S. economic policy, which has decided to begin to reverse a cycle of 5 years of cheap dollar, which in turn encouraged investment in commodities and emerging markets, and now motivates that high rates start falling commodities and speculative capital to leave.

I should clarify that predictions are just this, something that can be and we are getting used to be wrong sometimes, so it should be taken as a guide to latent uncertainty in a globalized world .

Analyzing the growth prospects of individual countries that make up Latin America, according to data released by a major British company, which produces averages based on forecasts of consultants and banks, we can observed very different predictions for the region.

Brazil, after the 0.9% in the year 2012, in 2013 recorded an estimated growth in the GDP of 2.3%, despite having been a year in which various social protests erupted. Experts forecast growth of 2.7 % for 2014, as this year in this country the presidential elections are held where Dilma Rousseff is seeking reelection and the World Cup is held. We can tell that there are disparities between the most pessimistic predictions of 1.8 % to 3.5% more optimistic, in this case, because the Brazilian expansion depends more on the prices of raw materials, strongly influenced by the Chinese economy and its domestic market, than the North American. Also affected by the recent devaluation of Argentina, Brazil will lose part of their exports to the neighboring country, therefore, without seeking alternative markets such as Asia and Mexico, to redirect their products can these predictions remain far from reality. Estimated an inflation rate of 6% in 2014 after 5.6% in 2013.

Mexico, as the second largest economy in the region, come from 3.8 % growth in 2012 to 1.3% of estimated GDP growth in 2013. This occurred due to the reforms implemented in the country in the energy sector, fiscal, educational and telecommunications, also combined with news of violence and training of paramilitary militias to control them. By 2014, experts predict a growth of 3.4 % due to U.S. demand and increased Chinese investment in mining, energy and infrastructure. They estimate that inflation will rise relatively little from 3.8 % in 2013 to 3.9 % this year.

Regarding Argentina all agree on the lack of credibility of their statistics, which are not even considered by the World Bank. Considering the data revealed by the opposition to the government of Cristina Fernández, we could say that GDP grew 0.3% from 2012 to approximately 3.1% in 2013. For 2014, an increase in GDP of 1.8 % is expected. We should consider that Argentina's economy depends mainly on the economy of China and Brazil, its domestic market and U.S. agricultural crop that influence the pricing of agricultural export commodities. In this country, as in any other Latin American countries, a key endogenous factor is inflation, almost uncontrollable in their history, which was privately estimated 26.6 % in 2013 and could reach 27 % in 2014. However, through devaluation could make you shoot forecasts at the expense of the following measures established by the Argentinian government.

Venezuela had a significant slowdown in GDP from 5.6 % growth in 2012 to 1.3% in 2013. This has happened because the Venezuelan economy fluctuates according to its internal problems, and the evolution of the oil price, which depends not only on China, U.S. and the European Union but also in the Middle East. This past year the internal problems due to the death of Chavez and the election of the chosen president, Nicolas Maduro, has led to a sharp decrease of the economy, so that, estimates of GDP growth are not encouraging and are closer to 0.5 %. Nicolas Maduro's government acknowledged inflation of 56.2 %, making forecasts in this respect, without ever giving a high figure because in this case the reality exceeded all predictions say will remain high for this 2014 .

Colombia , which had grown by 4.2 % in 2012 and decreased to 3.9 % growth in 2013, the year 2014 is estimated to grow to 4.6 %, from some points of view a very optimistic forecast since this year President Juan Manuel Santos looks for the reelection and is a country like Venezuela which depend heavily on oil prices, plus the price of minerals. Inflation in 2012 was 2.4% and 2.27% in 2013, so it is expected to remain the same in similar figures for 2014.

Chile, happened to grow 5.6% in 2012 to 4.2 % in 2013, it seems that will not fail to have a moderate decline, as growth predictions for 2014 say they would not exceed 4.1%. This year is marked by the return of the socialist Bachelet to power that comes from winning elections in a second runoff. This country has a strong dependence on copper exports accounting for half of them and the price depends more or less robustness of China. It is one of the great Latin American countries with low inflation rates, with 1.5% in 2012 and 2.2% in 2013, so it predicts 1.8% for 2014 .

Peru, where 55 % of exports are minerals (copper and gold - the latter with a price decline during 2013, following continued growth since 2000), had increased in 2012 by 6.3 % from 5.2% in 2013. Under the leadership of the nationalist president Ollanta Humala is presumed that the growth will continue at a moderate rate of 5.5 % for 2014. Inflation will be contained around 3 % by 2014, with the 3.28% of 2013 .

The rest of Latin American countries are not far from the data of its neighbors, with positive growth rates and also maintain similar inflation figures. The common factor in these economies lies in social inequality and the influence on commodity prices.

It´s necessary to redirect these economies to the production of manufactured goods, combating internal corruption, improve income distribution for shoveling social inequality and improve infrastructure that enhance the international marketing of its products.

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Until the next article...

Leonardo Dufau 
LinkedIn