What is wrong Latin American countries to be like?
Mar 2, 2009
As the crisis passes, the same questions are a different response when they are raised: how Latin America will face this 2009? How to grow their economies? Do any of them enter into recession?
Disconnect the famous Latin American economies that experience was just a mirage that only lasted a few months. The depth of this crisis destroyed the historic arguments with which the region to prevent a deep impact on their economies.
Latin America existed five years of growth at an average annual rate of 5%, with solid macroeconomic indicators and a strengthened domestic demand as improved social indicators (with a decrease in unemployment, reduction of the indicators of poverty and indigence and improvement of the average wage). With these arguments, it was the idea that Latin American countries could offset their inner strength (not shown, in general, signs of wear), the deterioration in the external context.
But the reality today shows that the crisis is hitting hard to the region. The crisis affected Latin American countries from multiple fronts and has also modified the internal context of Latin American economies. Thus, the crisis hit the region both from the external sector with a collapse in demand and prices, as in the financial markets with capital flight and its impact on exchange rates and from the banking sector by increasing the uncertainty and making institutions are less willing to lend. The crisis has also changed the habits of families who are more prudent in the consumption and less willing to borrow.
In my group of friends, a few days ago, I conducted a brief interview at which I have submitted (not that they would realize) and I noticed how they have changed their consumption habits and postponed major expenditures such as buying a new car or appliances. Not that I believe that my friends are a benchmark on the behavior of families in Latin America, but are in line with what is perceived at the level of macroeconomic variables that indicate a sharp slowdown in domestic demand.
International agencies have also lowered their growth projections for the region. Since the World Bank, turned down to correct the projected growth for the region. In its latest projection, the WB felt that Latin America can only grow 0.3% this year.
What caused the drastic change in the projected growth of the WB for Latin America? Worth remembering that in the month of January, the international agency had anticipated that the region would expand by 1%, whereas in the month of September 2008, their growth projections for Latin America were in the 3.7%.
Sure, the World Bank observed that not only the external environment has continued to deteriorate, but also the internal conditions of Latin American economies have experienced a decline. Is that the external impact on them has caused a vicious cycle that has affected the labor market, in turn impacting on consumption and so on to derive a greater contraction in GDP.
A little more optimistic show both the International Monetary Fund (IMF) and from the Andean Development Corporation (CAF), who argue that Latin America could achieve a growth of 1% and 1.5% this year, respectively.
Anyway, despite showing more optimistic than the World Bank, both have experienced a sharp correction in their projections of economic growth for the region.
Latin America, 2009 will be a challenging years. And according to ECLAC warns it will be even more challenging with the economic stimulus plan that Obama will impact negatively on the economies of the region seek to reduce the energy dependence and enhance productivity in the U.S. manufacturing sector. One of the most significant environmental impacts come from the clause "Buy American", considered a protectionist measure by the major U.S. trading partners.
This situation in which Latin American economies are going to think that there are no minor errors in the economic policies of these countries. However, when a revision is made, in general, the economic policy pursued Latin American governments are, with exceptions (as in the case of Argentina and Venezuela), they have followed a policy of taking care of sound macroeconomic fiscal and external performance, controlling the dynamics of inflation with a monetary policy priority on the stability and predictability of the rules to generate an environment friendly to investment.
So What is the Latin American economies have wrong? The impact of the international financial crisis on Latin America comes not from the mistakes made by governments in the region. Perhaps you may think that the lack of development of Latin American economies was that the impact appears to be greater than initially expected.
Certainly Latin American governments must work to limit the vulnerability of key sectors in their economies to limit the impact of future external shocks. For example, Chile should continue working on the energy issue, Colombia and Peru in foreign trade, Argentina to improve its infrastructure and restore fiscal discipline.
If anything should be clear that Latin American governments have implemented sound macroeconomic policies, is that they must maintain this course of action because it will enable them to ensure economic development and maintain long-term growth.
So far, the following conduct which shows that Latin American governments that seek to remain on track. Probably will not be easy to overcome so much this year, but when they do, they recover quickly without doubt the path of sustained growth.
Disconnect the famous Latin American economies that experience was just a mirage that only lasted a few months. The depth of this crisis destroyed the historic arguments with which the region to prevent a deep impact on their economies.
Latin America existed five years of growth at an average annual rate of 5%, with solid macroeconomic indicators and a strengthened domestic demand as improved social indicators (with a decrease in unemployment, reduction of the indicators of poverty and indigence and improvement of the average wage). With these arguments, it was the idea that Latin American countries could offset their inner strength (not shown, in general, signs of wear), the deterioration in the external context.
But the reality today shows that the crisis is hitting hard to the region. The crisis affected Latin American countries from multiple fronts and has also modified the internal context of Latin American economies. Thus, the crisis hit the region both from the external sector with a collapse in demand and prices, as in the financial markets with capital flight and its impact on exchange rates and from the banking sector by increasing the uncertainty and making institutions are less willing to lend. The crisis has also changed the habits of families who are more prudent in the consumption and less willing to borrow.
In my group of friends, a few days ago, I conducted a brief interview at which I have submitted (not that they would realize) and I noticed how they have changed their consumption habits and postponed major expenditures such as buying a new car or appliances. Not that I believe that my friends are a benchmark on the behavior of families in Latin America, but are in line with what is perceived at the level of macroeconomic variables that indicate a sharp slowdown in domestic demand.
International agencies have also lowered their growth projections for the region. Since the World Bank, turned down to correct the projected growth for the region. In its latest projection, the WB felt that Latin America can only grow 0.3% this year.
What caused the drastic change in the projected growth of the WB for Latin America? Worth remembering that in the month of January, the international agency had anticipated that the region would expand by 1%, whereas in the month of September 2008, their growth projections for Latin America were in the 3.7%.
Sure, the World Bank observed that not only the external environment has continued to deteriorate, but also the internal conditions of Latin American economies have experienced a decline. Is that the external impact on them has caused a vicious cycle that has affected the labor market, in turn impacting on consumption and so on to derive a greater contraction in GDP.
A little more optimistic show both the International Monetary Fund (IMF) and from the Andean Development Corporation (CAF), who argue that Latin America could achieve a growth of 1% and 1.5% this year, respectively.
Anyway, despite showing more optimistic than the World Bank, both have experienced a sharp correction in their projections of economic growth for the region.
Latin America, 2009 will be a challenging years. And according to ECLAC warns it will be even more challenging with the economic stimulus plan that Obama will impact negatively on the economies of the region seek to reduce the energy dependence and enhance productivity in the U.S. manufacturing sector. One of the most significant environmental impacts come from the clause "Buy American", considered a protectionist measure by the major U.S. trading partners.
This situation in which Latin American economies are going to think that there are no minor errors in the economic policies of these countries. However, when a revision is made, in general, the economic policy pursued Latin American governments are, with exceptions (as in the case of Argentina and Venezuela), they have followed a policy of taking care of sound macroeconomic fiscal and external performance, controlling the dynamics of inflation with a monetary policy priority on the stability and predictability of the rules to generate an environment friendly to investment.
So What is the Latin American economies have wrong? The impact of the international financial crisis on Latin America comes not from the mistakes made by governments in the region. Perhaps you may think that the lack of development of Latin American economies was that the impact appears to be greater than initially expected.
Certainly Latin American governments must work to limit the vulnerability of key sectors in their economies to limit the impact of future external shocks. For example, Chile should continue working on the energy issue, Colombia and Peru in foreign trade, Argentina to improve its infrastructure and restore fiscal discipline.
If anything should be clear that Latin American governments have implemented sound macroeconomic policies, is that they must maintain this course of action because it will enable them to ensure economic development and maintain long-term growth.
So far, the following conduct which shows that Latin American governments that seek to remain on track. Probably will not be easy to overcome so much this year, but when they do, they recover quickly without doubt the path of sustained growth.
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