Latin Economy: Mixed Outlook

BY CHRONICLE STAFF

After five years of strong growth, Latin America is bracing for a slowdown this year. The region’s GDP will likely grow by 1.9 percent in 2009, forecasts the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). That will be its worst result since 2002, when the region grew by 0.5 percent.  

In some cases – like Guatemala and El Salvador – this year’s results are the worst since the 1980’s, while another five nations will see their worst performance since the 1990’s. Half of Latin America’s countries will likely post their lowest growth since 2002 or 2003.

COMMODITY BOOM OVER

“It’s a challenging [outlook],” says Alberto Ramos, the senior Latin America economist at U.S. investment bank Goldman Sachs. “The external background was extremely positive between 2003 and 2007 and….until the first half of 2008 and turned adverse since then. The reality is that most countries will face in 2009 and 2010 much lower commodities prices, and …very high risk aversion. The appetite for capital [investments will] certainly [be lower than] during the boom years.”

Some countries like Chile and Peru and to a certain extent Colombia have capitalized on the boom years by reducing their debt load, while others – including Venezuela – have followed policies of “instant satisfaction,” Ramos says. “They got a lot of money and spent it all,” he says.