Looking Ahead To Latin America In 2014

At the beginning of the month, the United Nations Economic Commission on Latin America, or ECLAC, released their preliminary overview of Latin American economies. Although the ECLAC make rough predictions about the economy’s growth or shrinking, we can gain a lot from looking at the figures. In July 2013, the ECLAC estimated that the region would grow by 3%; however the real growth seen in Latin America was actually closer to 2.6%. Nevertheless, their 2014 projection of an improved 3.2% growth rate in the region makes the case that the growth of Latin American economies looks set to continue.

Today In Latin America

This projection of 3.2% growth is extremely significant as it translates into the highest rise of all the economies in the world for 2014. The estimated rise in the economies is mainly due to the volatility of international markets, the increase of external demand for products produced within Latin America, and finally the growth of the levels of consumption by the emerging middle-class. Within the report, previously quieter nations such as Paraguay, Panama, Bolivia and Peru led the region in economic growth. Peru’s GDP for example, is expected to show an impressive growth rate over 5% for 2013 and Panama’s economic rise looks set to be approximately 7.5% for this year. Some of the larger countries seemed to struggle with the lowest projected growth rates seen in Brazil, Venezuela and Argentina. The Brazilian economy suffered its largest quarterly slowdown in almost five years, with the economy shrinking by 0.5% since the second quarter of 2013.

Opportunities For Latin America In 2014

The executive secretary for the ECLAC, Alicia Bárcena, stated that the global context of the economy in Latin America in 2014 brings with it a number of positives and opportunities as well as consequences and threats. With a growth in investment and the steadying rates of unemployment that have put the previously powerful European nations to shame, the region also benefitted from a rise in international trade. This in turn allowed Latin American countries to make the best out of the currency depreciations in order to secure sustained changes in relative prices. The Brazilian Real has fallen almost 12% since December 2012 and the Argentine Peso has also declined by 19.57% during the same period of time. However, the depreciation of currencies in the region is not all doom and gloom as this could strengthen the economies due to a shift in financial activity and flows towards developed countries. If sustained at a reasonable level, the region could see an increase in investment as a result of incentives and favourable investment conditions. The ECLAC Report anticipates that there will be a rise in domestic consumption for manufactured goods and services which will contribute towards healthy GDP results. Latin America’s most influential outsider, China, could fuel growth and development that the region is set to see in 2014.

Problems Latin America May Face In 2014

However, there are always two sides to the story and the projected rise in Latin America’s economies may be overshadowed or come under strain due to a number of old time problems. Although the region did see a rise in investment and favourable unemployment rates, there was a reduction in consumption levels which in turn brought a slowdown to wages and the use of credit cards.  The inflation rates for 2013 produced a mixed bag of results for Latin America with the difference in the rates varying widely from country to country. The majority of nations managed to sustain 5% inflation rates but the case of Argentina perfectly demonstrates the problem within the region. Independent analysts put inflation at approximately 25% which in fact is more than double the official estimate of 10%.  There is something obviously going wrong, when Argentina’s official inflation figures are conspicuously much lower than other estimates by private analysts.

Looking Into 2014

With 2014 fast approaching, the Latin American governments will need to overcome the challenges that they are set to encounter by evaluating and pushing forward new agreements to attract more investment, whilst increasing levels of productivity and economic growth for the region. It is important to note that an increase in the regional growth is very much reliant on the larger nations of Latin America. The likes of Mexico and Brazil will have to report better growth rates and continue to recover in order to help Latin America obtain its continued growth and obtain the highest rise in its economy compared to the other regions of the world.

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