(13 July 2011) According to an ECLAC report, in 2011 Latin America and the Caribbean will maintain the recovery that began in the second half of 2009 following the international economic crisis, and will grow by 4.7% thanks to the boost of internal demand.
In the Economic Survey of Latin America and the Caribbean 2010-2011, presented today by the Executive Secretary of the United Nations body, Alicia Bárcena, ECLAC points out that this growth implies a 3.6% rise in per capital GDP, and declares that the current situation calls for close attention to be paid to the macroeconomic policy challenges that will be facing the region.
Ms. Bárcena wonders "How prepared is Latin America and the Caribbean for managing economic growth? We must recover the fiscal space in order to be able to take measures to ensure sustained growth with productive employment and equality".
In 2011, regional growth is mainly being driven by private consumption, which is attributable to improved labour indicators and increased credit. At the same time, the fact that idle productive capacity is being used up to sustain internal demand is pushing up investment, which is benefiting from greater credit availability to return to pre-crisis levels.
According to the report, growth will also have a positive impact on the region's labour market, which means that the unemployment rate may fall from 7.3% in 2010 to between 6.7% and 7% in 2011.
As in previous years, the region has three tier growth. On the one hand, the highest growth rates are in South America, which will grow by 5.1% in 2011, on the back of a significant improvement in its terms of trade by virtue of higher prices for its commodity exports (its specialization) . Meanwhile, Central America will grow by 4.3% and the Caribbean by 1.9%.
In terms of countries, the fastest growing this year will be Panama (8.5%), followed by Argentina (8.3%), Haiti (8.0%) and Peru (7.1%). They are followed by Uruguay with 6.8%, Ecuador (6.4%), Chile (6.3%) and Paraguay (5.7%). At the same time, Brazil and Mexico will grow by 4.0%, the Bolivarian Republic of Venezuela by 4.5% and Colombia by 5.3%.
In the Economic Survey 2010-2011, ECLAC states that rising international food and fuel prices, in a context of higher internal demand, have given rise to inflationary pressures. As a result, several of the region's countries have toughened their monetary policy, which has increased the difference between internal and international interest rates. In a context characterized by extremely high external liquidity, this may lead to exchange rate appreciation in the region.
Latin America and the Caribbean is expected to grow by 4.1% in 2012, which is the equivalent of a 3.0% rise in per capita GDP, although much uncertainty remains in the light of the situation in the rest of the world.
In its report, ECLAC highlights the macroeconomic policy challenges facing the region's government in a context of high commodity prices, considerable international liquidity and the robustness of certain Latin American economies.
In the current scenario, the region's attractiveness to capital inflows and appreciation pressure on local currencies could be of benefit in the short term by helping to relieve poverty and bring down food prices. However, this situation involves a series of risks and difficulties.
First, the region becomes vulnerable to speculative capital movements in the quest for short-term gains, and this may create bubbles in the prices of financial assets and property markets.
Second, high international liquidity pushes down real exchange rates while pushing up commodity prices (which encourages intensive specialization in commodity exports and production). This increases the vulnerability of the region's economies to external shocks and creates greater investment volatility, thereby negatively affecting the capacity to grow, generate productive employment and reduce inequality.
According to ECLAC, the region's economic authorities should implement measures to contain currency appreciation by combining foreign exchange market interventions, checks on capital inflows and financial regulations. Such measures would be boosted by an accompanying fiscal policy aimed at increasing public sector savings.
Lastly, the report points out the uncertainties in the international economy, particularly in the United States, Europe and Japan, and the possibility of a worsening international climate limiting the region's growth potential. It is therefore advisable to take advantage of the current favourable conditions to recover the policy space that was lost in the crisis.
- Table. Latin America and the Caribbean: Total growth of GDP, variation rates by country, 2008-2012.
- Presentation by Alicia Bárcena, ECLAC Executive Secretary
The Economic Survey of Latin America and the Caribbean 2010-2011 will be available on the ECLAC website from 13 July.
Any queries should be addressed to the ECLAC Public Information and Web Services Section. E-mail: email@example.com ; Telephone: (56 2) 210 2040.