Blog posts tagged by tag: Latin America
The commodities prices and volumes in Latin America are showing signs of recovery, after the four years of poor performance that followed the slowdown caused by the global economic and financial crisis. The renewed momentum comes within a context in which global trade is expected to expand by 3.6% in 2017, according to the Latin American and Caribbean Economic Commission (ECLAC) Perspectives on International Trade in Latin America and the Caribbean.
Economic crises are part of Latin America’s collective unconscious. In the beginning of the 1980s, the exhaustion of the economic model based on industrialization led to the debt crisis that gave rise to what is known as the "lost decade". From then on, over the course of more than twenty years, crises affected most of the countries of the region at various points in time. This stage however, is now in the past. "Dictatorships have ceased to be the norm and in most of the region, government institutions have improved, there is more responsible economic policy in place, and better and stricter fiscal and monetary policies have been implemented," according to a study by Pablo Bejar, a researcher at the Inter-American Development Bank (IDB).
The quality of infrastructure in Latin American countries compared to other regions of the world is only better than that of African countries and is not even half as good as that of developed countries. According to the Latin America Development Infrastructure (CAF) report, published in 2016, the infrastructure gap remains significant. Taking into consideration current trends, it is estimated that the region would have to work for two decades to reach the current level of infrastructure in the OECD countries.
Several studies recommend that in order to catch up, Latin American countries must invest around 5% of annual GDP. In recent years, investment in infrastructure has oscillated between just 2.4% and 3.2% of GDP. In order to address this situation, involving both the public and private sectors is essential.
Foreign direct investment (FDI) to Latin America and the Caribbean will drop 5% this year following the 7.9% drop in 2016 over the previous year, according to a new report from the Economic Commission for Latin America and the Caribbean (ECLAC). Although Latin America received 10% of global FDI in 2016—quite high compared to other regions—the amount was actually lower compared to the 2011–2014 period, when it received 14% of all foreign investment.
This fall in investment in the region is due to three fundamental factors. The decline in raw material prices has impacted investments directed toward the natural resources sector; several economies in the region have seen a slowdown; and "technological sophistication and expansion of the digital economy that tends towards a concentration of transnational investments in developed economies," is also having an impact, according to the annual report on Foreign Direct Investment in Latin America and the Caribbean.
What a renegotiation of NAFTA could mean for Mexico, and for the economies of Latin America as a whole, has been at top of mind for markets and the region since 18 May when U.S. Trade Representative Robert Lighthizer sent formal notice to Congress of the administration’s intention of renegotiating the agreement.
President Trump has repeatedly stated that the main objective of his trade policy is to reduce trade deficits with several of the U.S.’ trading partners and to review 20 of its agreements that contain "possible abuses and violations." The executive order explicitly states that all trade relations and preferential trade programs must contribute favorably to the United States’ trade balance and strengthen its manufacturing industry. Yet many of the agreements are failing in this regard.
Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
This year’s economic outlook for Latin America and the Caribbean is optimistic. However, in 2015 and 2016, the region experienced a deep economic recession, which was felt across all of the countries in the region, although it affected Brazil, Argentina and Venezuela in particular. Against this backdrop, how was it possible for the region to sustain the social advances it had achieved in the decades before the recession?
Chile's economy has slowed in recent quarters, as the once booming mining sector has performed poorly and fixed investment has fallen sharply, taking business and consumer confidence with it. These issues continue to plague the economy as we move into Q3, with that in mind FocusEconomics Economist Oliver Reynolds interviewed Senior Economist for the Chamber of Commerce of Santiago, Maria del Pilar Cruz, about the potential future of the all-important mining sector as well as future economic growth prospects, President Bachelet's reforms, and inequality in Chile.
How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
Latin America will soon enter into an electoral cycle that will last about a year and a half and, depending on the results, some countries could face difficulties in terms of their credit ratings. This is because of one important factor: The ongoing fiscal consolidation continues to be a challenge for many governments that are facing a context of low economic growth and lower tax revenues, especially those related to low commodity prices, which makes it even more difficult to curb the current debt dynamics in the region.
*Guest blog post from Latinoamerica21.
Presidential elections are scheduled in seven countries: Brazil, Chile, Colombia, Costa Rica, Mexico, Paraguay and Venezuela. All of the countries, with the exception of Venezuela, will see their current presidents’ terms ending and new leaders taking on the role. In addition, congressional elections will be held in Argentina— which could test Mauricio Macri’s reform agenda—and in El Salvador, where months of political paralysis has led to a significant decline in sources of funding for the government in addition to a debt default.
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The elections will be of particular importance for the future of credit ratings for countries that have a negative outlook: Brazil, Chile and Mexico.
Mobile technologies and services generated 5% of Latin America's GDP in 2015 and nearly 2 million jobs, direct and indirect. In addition, the mobile ecosystem has contributed USD 40 billion to the public coffers for tax purposes, according to the report, The Mobile Economy Latin America and the Caribbean 2016, from the GSMA which represents the interests of mobile operators around the world.
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Latin America has the highest level of inequality in the world despite having made notable gains
Income inequality in Latin America and the Caribbean declined substantially between 2002 and 2014. This is important because inequality is directly related to poverty reduction. If inequality remains stable, poverty can only be reduced by rising incomes, but if it falls, this increases the effect of increased incomes, which makes poverty even lower. In fact, an improvement in income distribution can reduce poverty, even though it does not increase incomes.
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