2019 Panaroma: Latin America

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In 2019, The economic slowdown of Latin America and the Caribbean extended to most countries in the region. In several cases, there are deep recessions!

Growth 2019 (Source CEPAL)

Deep recession in Venezuela -25,3% / Nicaragua -5,3% / Argentina -3,0% / Ecuador -0,2% / Brazil 1,0% / Chile 0,8% / Mexico 0,0% / Bolivia, Colombia, Guatemala, Panama, Peru, in the order of 3,0 to 3,5%

Near stagnation, the period between 2015-2019 has been the one of the less growth over the past 70 years,

 Average growth of the region (Source CEPAL):

  • 2015 – 2020 : 0,5% per year,
  • 2000 – 2014: 3,1% 
  • 1986 -1999: 2,5%
  • 1955 -1985: 5,0 to 5,5%

The crisis in the region has two main reasons:

  • Latam countries are over-dependent on the primary sector. Local economies are not sufficiently diversified and rely on exporting raw-material, with low added-value; Mexico, Venezuela, and Ecuador depend on oil, Brazil, and Argentina on the soybean and meat, Brazil again on sugar, Chile on copper, Bolivia on Gas. As such, the price drop of the commodities has severely impacted them since 2014.
  • Large scale corruption in most countries suffocates development.

Therefore in a region of significant inequities, the people are angry. The political powers in place are suffering a broad rejection. As a result, many exceptional events and even insurrections in several cases happened in the recent past.

  • The election of the far-right populist Jair Bolsorano in Brazil,
  • The return to the power of the populist Peronism party in Argentina,
  • The revolt of middle and low-classes in Chile, Colombia, Equator, countries that pursued liberal economic policies,
  • The uprising of the Bolivian People following fraudulent elections. Evo Morales, the populist president, was forced to abandon his power,
  • Bloody repressions in Haiti, Nicaragua, and Venezuela.

In this framework, the credit insurers placed most of the countries on negative watch

As am author once said, however, “all motion is relative, and maybe it is you who have moved away by standing still.” As such, Brazil, the country that used to be pointed out in red over the past years, now appears to be the most stable and with a better perspective and has recently seen its rating upgraded. 

All that said, the overall situation shall start to improve or at least stabilize in 2020. 

Among the hopeful points are the low inflation except in Argentina and Venezuela, relatively high exchange reserves, and access to the capital market, which was not the case during the deep crisis of the 1980s. 

Written by Gilles Viguier