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Latin American economies likely to do better in 2014 – report
December 12, 2013, 8:46 pm

Latin American currencies, such as the Argentine Peso, have been falling for several years [Xinhua]

Latin American currencies, such as the Argentine Peso, have been falling for several years [Xinhua]

Decreased demand for exported goods and continuing currency market instability have contributed to slowing the performance of many Latin American emerging economies this year, a report from the Economic Commission for Latin America and the Caribbean (ECLAC; CEPAL in Spanish) has shown.

ECLAC’s Preliminary Overview of the Economies of Latin America and the Caribbean 2013 report emphasises that volatility in European and Asian markets has also contributed to the less-than-forecast GDP growth in the region.

In July, ECLAC had forecast an average of 3 per cent growth for its member countries but poor performance – chiefly, from Mexico and Brazil – cut that figure down to 2.6 per cent.

The Brazilian economy suffered its largest quarterly slowdown in nearly five years, contracting 0.5 per cent from the second quarter this year, according to government statistics agency IBGE, and registered 2013 growth at just 2.4 per cent.

And in Mexico, ECLAC reports that GDP growth will register at only 1.3 per cent, just slightly over Venezuela – the worst performing economy in the bloc at 1. 2 per cent.

Meanwhile, other countries in ECLAC appear to be outperforming traditional powerhouses due to increased domestic demand and slightly hire domestic investments.

Peru’s GDP, for example, is expected to grow at a rate of over 5 per cent for 2013, surpassed by Bolivia at 6.4 and Panama at 7.5 per cent.

Paraguay is expected to report 13 per cent growth.

Meanwhile, Argentina, Chile, Colombia, Guyana, Nicaragua and Uruguay posted growth of between 4 and 5 per cent, the report showed.

Currency depreciation has also played a role, particularly on fears that the US Federal Reserve may be prompted by positive economic indicators to taper its stimulus programme some time in 2014.

The Brazilian real has fallen nearly 12 per cent year-to-date, while the Argentinian peso has declined by 19.57 per cent year-to-date.

Colombia’s peso and Chile’s peso fell 8.43 and 9 per cent, respectively, since January 1.

But the ECLAC report anticipates better conditions for economic growth in 2014.

The currency depreciation seen in several countries in the region in recent months, possibly strengthened by a shift in future financial flows towards developed countries, could, if sustained, increase incentives for investment in tradable sectors other than the region’s traditional exports (commodities), while redirecting expenditure to ease pressure on the current account,” it said.

The report anticipates that 2014 will likely offer better prospects as domestic consumption for manufactured goods and services will likely increase and contribute to GDP growth, while better-than-expected growth in China could fuel external demand in the bloc’s markets.

But it cautions that “an upturn in the regional growth rate will depend, in part, on continued recovery in Mexico and better growth performance in Brazil, both of whose growth rates lagged the regional average in 2013”.

The BRICS Post with inputs from Agencies

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