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THE ECONOMIES OF LATIN AMERICA AND THE
CARIBBEAN: SITUATION AND PROSPECTS
Inés BustilloDirector, Washington Office
Economic Commission for Latin America and the Caribbean
Washington DC – 20 May 2009
The developed countries have entered a recession
DEVELOPED COUNTRIES: “GDP GROWTH” (Percentages)
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
United States Euro Zone Japan
2006 20082007 2009
Real GDP 2009 2010 Date of Forecast A. What Government Agencies Say
FED* -1.3 to -0.5% 2.5 to 3.3% Jan-09 CBO -3.0% 2.9% Mar-09
B. What Markets Say Goldman Sachs -3.2% 1.2% Mar-09
National Association of Realtors -2.9% 1.4% May-09 Bank of America/Merrill Lynch -3.0% 2.0% May-09
Moody's Economy.com -3.0% 1.4% May-09 The Economist Intelligence Unit -3.1% 0.7% Mar-09
JPMorgan -2.5% 2.7% May-09 Wachovia -2.9% 0.9% May-09
Mortgage Bankers Association* -1.1% 2.8% Apr-09 Market Average** -2.9%
C. What International Organizations Say United Nations DESA (Baseline) -3.5% 1.0% May-09
World Bank -2.4% 2.0% Mar-09 OECD -4.0% 0.0% Mar-09
IMF -2.8% 0.0% Apr-09
* Forecast on a Q4 to Q4 basis. ** Average does not include the Mortgage Bankers Association.Note: the CBO, IMF, and OECD forecasts on a Q4 to Q4 basis are -1.5%, -2.2%, and -3.5%, respectively, for 2009.
Projections on US economic growth
Economic situationprior to crisis
Regional GDP was up by 4.6% in 2008, completing sixth consecutive years of economic
growth
1.51.8
3.03.0
3.33.3
3.8
4.85.8
6.56.8
7.09.2
9.411.5
4.4
2.4
5.9
4.6
4.3
3.0
4.5
3.8
5.9
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0
HaitiMexico
CaribbeanColombia
El SalvadorNicaragua
Costa RicaGuatemala
ChileHonduras
CubaCentral America
Dominican RepublicLatin America and the Caribbean
Venezuela (Bol. Rep. of)Bolivia
South AmericaBrazil
EcuadorArgentinaParaguayPanama
PeruUruguay
LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH, 2008(Percentages)
The per capita GDP of the Latin American and Caribbean region grew by more than 3% for the fifth year in a row
Higher growth rates, lower unemployment and better-quality jobs have helped improving poverty indicators.
LATIN AMERICA AND THE CARIBBEAN: EMPLOYMENT AND UNEMPLOYMENT
Growth has been coupled with improvements in labour-market
indicators
50.0
51.0
52.0
53.0
54.0
55.0
56.0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
6.00
7.00
8.00
9.00
10.00
11.00
12.00
Employment rate (left axis) Unemployment rate (right axis)
LATIN AMERICA: EVOLUTION OF POVERTY AND INDIGENCE LEVELS, 1980 – 2008 a
(In percentages and millions of people)
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of household surveys conducted in relevant countries.a Estimate for 19 countries of the region, including Haiti. The figures appearing above the bars in each chart represent the percentage of the population and the total number of poor persons (indigents plus non-indigent poor).b Projections.
In 2008, poverty levels decreased slightly, but no reduction was seen in
indigence
18,622,5
19,0 18,5 19,413,3 12,6 12,9
40,5
48,343,5 43,8 44,0
36,3 34,1 33,2
0
10
20
30
40
50
60
1980 1990 1997 1999 2002 2006 2007 2008b/
Indigents Non-indigent poor
6293 89 89 97
71 68 71
136
200 204 211 221193 184 182
0
50
100
150
200
250
300
1980 1990 1997 1999 2002 2006 2007 2008b/
Indigents Non-indigent poor
Transmission channels and
impact
One by one, the engines of growthare shutting down
The real economy Slowdown in exports Falling commodity prices Lower remittances Reduced revenues from tourism Smaller inflows of foreign direct investment (FDI)
The financial sector Higher cost of external credit Reduced availability of international financing
The international crisis is being transmitted to the region through various channels, though not to the same extent in all the
countries
Commodity prices are falling but they may remain relatively high
COMMODITY PRICE INDICES(2000=100)
50
100
150
200
250
300
350
400
450
500
Jan-
00
Apr
-00
Jul-0
0
Oct
-00
Jan-
01
Apr
-01
Jul-0
1
Oct
-01
Jan-
02
Apr
-02
Jul-0
2
Oct
-02
Jan-
03
Apr
-03
Jul-0
3
Oct
-03
Jan-
04
Apr
-04
Jul-0
4
Oct
-04
Jan-
05
Apr
-05
Jul-0
5
Oct
-05
Jan-
06
Apr
-06
Jul-0
6
Oct
-06
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Food Minerals Petroleum
The region’s terms of trade continued to improve in 2008 but are expected to
worsen in 2009LATIN AMERICA (19 COUNTRIES): TERMS OF TRADE, 2008-2009
(Percentages)
4.65.9 4.9
7.9
-7.5
20.9
2.8
-12.8
-18.6
-7.5
-29.4
2.1
-5.3-3.4
-30.5
-27.2-32.0
-28.0
-24.0
-20.0
-16.0
-12.0
-8.0
-4.0
0.0
4.0
8.0
12.0
16.0
20.0
24.0
Latin Am (19) South Am (10) Mercosur (4) Rest South Am (6) Chi+Per Bol+Col+Ecu+Ven Central Am (8) Mexico2008 2009
Not all the economies are exposed in the same way
Latin America: degree of exposure of the demand components (% of GDP)
0 10 20 30 40 50 60 70 80
Brazil
Colombia
Argentina
Uruguay
Peru
Guatemala
Haiti
R. Dominicana
Mexico
Bolivia
El Salvador
Venezuela
Costa Rica
Chile
Ecuador
Paraguay
Nicaragua
Honduras
Panama
Exports Private consumption Public consumption Investment
Amidst increased volatility, the perceived risk associated with emerging economies is
on the riseLatin America: EMBI+ spread, 1996-2009
(In basis points, end of period; for 2009, end of January)
0
100
200
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
1500
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Risk has increased less than in other crises
Preparedness to face crisis:
Reserves Public debt
LATIN AMERICA AND THE CARIBBEAN: ESTIMATED GROWTH FOR 2009 (%)
-2.0-1.0
-0.5-0.5
-0.30.00.00.1
0.50.50.5
1.01.0
1.51.51.51.5
2.53.03.0
3.54.0
-3 -2 -1 0 1 2 3 4 5
M éxicoBrasil
Costa RicaParaguay
América Latina y el CaribeChile
EcuadorCaribe
El SalvadorHaití
ColombiaVenezuelaNicaraguaArgentina
GuatemalaHonduras
República DominicanaUruguay
BoliviaCubaPerú
Panamá
In 2009, the region’s growth is expected to slow dramatically
Evolution in the level of activity will have a negative impact on labor-market
indicators
50,0
51,0
52,0
53,0
54,0
55,0
56,0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
6,0
7,0
8,0
9,0
10,0
11,0
12,0
Employment rate (left axis) Unemployment rate (right axis)
LATIN AMERICA AND THE CARIBBEAN: OCCUPATION AND UNEMPLOYMENT
Economic policy responses
The response capacity to the crisis is also different
Scope of measures to tackle the crisis
f
Monetary and Financial Policy
ab
c
a
c
e
gh
ij
k
lm
a
cd
Reduction or relaxation of reserve requirements
Exchange-rate and external trade policy
Financing of exportersTariff cuts
Obtaining credit from international financial bodies
Sectoral Policies
HousingSmall and medium-sized enterprisesSectoral policies
Employment and social policiesPromoting job creationSocial programmes
Increased tariff or import restrictions
Provision of liquidity in national currency
Fiscal Policy
Tax cuts or increased subsidiesSpending increased or brought forward (infrastructure)
The impact of the announced measures is different
COUNTRIES THAT ANNOUNCED QUANTIFIABLE INCREMENTS IN 2009 PUBLIC EXPENDITURE Estimated impact as % of GDP
0,6%
0,6%
0,7%
0,8%
1,0%
1,4%
1,9%
2,2%
2,4%
4,2%
5,7%
0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 6,0%
Honduras
México
Costa Rica
Guatemala
Brasil
América Latina
Bolivia
Chile
Perú
Colombia
Argentina
Beyond thecurrent cycle
Lessons learned
Avoiding protectionism Preventing the crisis from increasing inequity
as a result of biased measures Protecting the countries’ capacity to maintain
social spending, especially spending aimed at building human capital
Continuing to invest in infrastructure “Green deal”
THE ECONOMIES OF LATIN AMERICA AND THE
CARIBBEAN: SITUATION AND PROSPECTS
Inés BustilloDirector, Washington Office
Economic Commission for Latin America and the Caribbean
Washington DC – 20 May 2009