(21 July 2010) Latin America and the Caribbean has consolidated its economic recovery as of the latter half of 2009 and will grow 5.2% this year, resulting in a 3.7% rise in per capita GDP, according to ECLAC's most recent report released today.
"This growth rate is higher than expected, but economic performance in the region is very diverse. What stands out are the members of Mercosur and countries with greater capacity to implement public policies, as well as those with strong domestic markets spurred by regional activity and their exports to Asia," stated ECLAC Executive Secretary Alicia Bárcena during the launching of the report Economic Survey of Latin America and the Caribbean 2009-2010 in Commission headquarters in Santiago.
The highest growth rates in 2010 are in South America, led by the biggest economy in the region, Brazil, which is expected to grow 7.6%, followed by Uruguay (7.0%), Paraguay (7.0%), Argentina (6.8%) and Peru (6.7%).
Other countries in the region will have lower growth rates, such as the Dominican Republic (6.0%), Panama (5.0%), Bolivia (4.5%), Chile (4.3%) and Mexico (4.1%). Colombia will grow 3.7%, Ecuador and Honduras 2.5%, Nicaragua y Guatemala 2.0%, and Venezuela will experience negative growth: -3.0%.
The Haitian economy will fall -8.5% as a result of the earthquake last January, while other Caribbean nations will also have negative growth.
In general, the region's greater economic activity reduced unemployment, which is expected to drop from 8.2% in 2009 to 7.8% in 2010.
The consolidation of some the region's economies this year is a result of three factors: private consumption, which reacted positively to the gradual improvement of employment and greater lending, higher investment and to a lesser extent, an increase in exports.
The swift economic recovery following a crisis of proportions rarely experienced in modern economic history has been driven largely by public policies, says ECLAC.
The macroeconomic soundness observed in most countries of Latin America and the Caribbean in the years preceding the global crisis made a significant difference. Governments made the most of a period of exceptional international economic and financial boom to straighten their public accounts, reduce and improve the profile of their debts and increase their international reserves.
This process allowed them to apply countercyclical public policies that contributed to economic recovery starting the second half of 2009.
Fiscal and monetary stimulation programmes, receding uncertainty, the relative normalization of financial markets, greater access to loans and a more dynamic world economy led to a gradual recovery throughout the year, with this process consolidating in 2010.
Prospects for 2011
Although recovery has been relatively quick, lingering questions and doubts regarding the evolution of the global economy may dampen the regional outlook in the medium-term.
The economic crisis in some European countries may have negative consequences on the volume and price of regional exports, as well as in the amount of remittances to Latin America and the Caribbean. In Ecuador, the fall in remittances may have a significant impact, given that remittances from Spain make up 3% of Ecuador's GDP.
There is also concern about some highly-indebted Caribbean economies, which are already in a situation of great vulnerability. The average indebtedness of Caribbean nations reached approximately 50% of GDP in 2009 and in some cases it is even higher, such as in Grenada (83%) and Barbados (93%).
Growth is expected to slow down around the second half of 2010. Although the region will continue to expand in 2011, it will do so at only 3.8% approximately - equivalent to a 2.6% increase in per capita GDP.
With the exception of Chile and especially Haiti, given the need for reconstruction and recovery after the earthquakes that struck them earlier this year, economic deceleration in the region will be generalized, particularly in South America, whose 5.9% growth in 2010 is expected to drop to 4.3% in 2011.
Faced with this scenario, ECLAC calls on countries in the region to maintain public policies geared at protecting the most vulnerable as part of a broader strategy that encompasses not only social areas but also macroeconomic and production policies.
ECLAC presented member countries a roadmap for a more inclusive development model during its Thirty-third Session held recently in Brazil in its document Time for Equality. Closing Gaps, Opening Trails.
The Economic Survey of Latin America and the Caribbean 2009-2010 also discusses this issue and analyzes the distributive impact of macroeconomic policies.
The report Economic Survey of Latin America and the Caribbean 2009-2010 is available on ECLAC's webpage.
For enquiries, please contact ECLAC's Public Information and Web Services Section. Email: email@example.com; telephone: (56-2) 210-2040/2149.