Latin American Slowdown

By Isaac Cohen*

When the performance of the major Latin American economies coincides, the regional average moves in the same direction. The reason is Brazil and Mexico together contribute almost two thirds to the region’s output.

According to recently released projections, by the International Monetary Fund and the World Bank, the rates of growth of the Brazilian and the Mexican economies this year will slow down to 2.5 and 1.2 percent, respectively. For Brazil, this represents an improvement from the meager 0.9 percent growth of 2012, while the Mexican economy lesser performance surprised, after the relatively strong 3.6 percent of 2012. Therefore, the regional average growth rate for this year is estimated by the Fund at 2.7 percent, the lowest in four years, while the World Bank estimates 2.5 percent.

Still, there are some mid-sized and smaller economies which are expected to grow above the regional average. Panama stands out with almost 8 percent growth, together with Bolivia and Peru with almost 5.5 percent. In Central America, growth above the regional average is projected in Costa Rica, Guatemala and Nicaragua. Only Jamaica and Venezuela are expected to grow less than one percent in 2013.

The slowdown in Latin America and the Caribbean is the result of lower commodity prices and less capital inflows, caused by the decrease in Chinese demand for commodities and the anticipated changes in monetary policy in the United States.

*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC Washington Office.

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