Latin American GDP growth rate in 2019 is estimated to be a meagre 0.1 %, according to the 12 December annual report of the UN Commission for Latin America and Caribbean (ECLAC). The growth has gone down from 1% in 2018.
The decade of 2010-19 has seen an average growth of just 1.87%. The region started off with an impressive 6.2% in 2010 but thereafter slowed down and went into negative growth in 2015 and 2016.
In 2019, Brazil grew by 1%, Mexico by 0 % , Colombia 3.2% , Chile 0.8%, Peru 2.3% and Central America 2.4%.
Four countries suffered GDP contraction: Venezuela by 25.5%, Argentina by 3%, Nicaragua by 5.3% and Ecuador 1.2%.
Venezuela’s cumulative GDP contraction since 2014 is an astonishing 87.9%. The country has been bleeding with GDP contraction every year since 2014. Argentina has had economic contraction five out of the last ten years.
Fall in domestic demand, investment, commodity prices and demand as well as political uncertainties are the reasons for the slow growth. The unfavourable external trade and economic situation has also contributed to the region’s slow down.
Total exports of the region are estimated to have declined slightly to 1.05 trillion dollars in 2019 from 1.07 trillion in 2018. The imports have also gone down to 1.03 trillion from 1.05 trillion dollars.
Argentina is back to its favourite external debt crisis. The country has to negotiate debt restructuring with IMF which has given 57 billion dollars as well as with private creditors and bondholders.
The only good news is that the average inflation of the region (excluding Venezuela and Argentina) would be a historic low of 2.4% in 2019. Inflation of Venezuela in 2019 is estimated at 39114 % and Argentina - 50 % .
Forecast for 2020
In 2020, the regional growth is forecast to increase to 1.4% . Brazil is expected to grow by 1.7%, Mexico by 1.3%, Colombia by 3.5%, Peru by 3.2%, Chile by 1% and Central America 2.6%.
Venezuela, Argentina and Nicaragua will suffer further GDP contraction of 14%, 1.3% and 1.4% respectively.
Political situation
Unlike the first decade of the twenty first century which saw unprecedented political stability, the second decade has seen crisis and uncertainty. Both Left and Right have suffered electoral setbacks. Left has been beaten in the elections in Brazil, Uruguay and Peru while the right has been brought down in Argentina and Mexico. The region has witnessed mass protests against inequality, corruption and unpopular policies. In recent months Colombia, Chile, Peru and Ecuador have been convulsed by mass protests.
The masses, who have been empowered by democracy, have started assertively exercising their power by voting in those who promise pro-people policies, voting out those who fail to deliver and forcing governments to change unpopular policies. This is the clear message for the current and future rulers in the region that they need to be more responsible and accountable. The presidents cannot take their full terms for granted if they fail to fulfil their promises. This power of the masses is a clear signal and positive trend of the strengthening of the democracies in the twenty first century. This should bring about better governance in the region in the future.
Both the Left and the Right have learnt that neither pure socialism nor uncontrolled Free Market have the complete solutions for the problems faced by the region. What the region needs is the Brasilia Consensus of pragmatic and balanced mix of pro-poor programmes and business-friendly policies. So the Left and the Right should go beyond their ideological boundaries and show flexibility, moderation and pragmatism in their governance and development policies.
Brazil’s political situation is getting better. The ultra right wing Bolsonaro has been tempered and forced to change his prejudiced policies against China, Argentina and Climate Change Accords in recent months. The Tropical Trump Bolsonaro is now disillusioned with the unfriendly policy announcements of his idol Trump. So he is likely to become more realistic and responsible in his world view.
The maverick Mexican President is pursuing his agenda for social equality in his own eccentric way but he is unable to boost economic growth or control the crime and violence of the drug cartels. He has no interest or agenda in foreign policy and has refused to make any foreign trips.
The just-elected President of Argentina Alberto Fernandez is expected to reduce poverty and be a moderate in foreign policy.
Chile, Colombia, Peru and Ecuador have got wake up calls for the need to focus on social inequalities.
The only countries which face continuation of political crisis are Venezuela, Bolivia and Nicaragua.
With the lessons learnt in this Decade of Disappointment, one hopes that Latin America will become politically more stable with higher Inclusive economic growth in the coming decade.
With the lessons learnt in this Decade of Disappointment, one hopes that Latin America will become politically more stable with higher Inclusive economic growth in the coming decade.
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