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Latin America Slowing? Or Just Brazil and Argentina?

Is Latin America in for a rough ride, or is it just Brazil and Argentina that are making the region’s economic prospects look bad?

The 2012 Economic Survey (via BBC News), which is put out by the UN’s Economic Commission for Latin America and the Caribbean (ECLAC), predicts that the region’s growth as a whole will be mediocre for the foreseeable future. The survey suggests growth this year will be just 3.25 percent, down from a June estimate of 3.7 percent.

According to the report, there is a global reason for the drop: a decrease in trade due to the Euro crisis and China’s slowdown. Furthermore, the ECLAC press release carefully notes that the Latin American slowdown is mostly because of Brazil and Argentina:

The findings of the Economic Survey 2012 indicate that the majority of South American and Central American countries (plus Mexico) will have GDP growth rates in 2012 that are similar or slightly lower than those in 2011, because of the increase in consumption and, to a lesser extent, the growth in investment. Argentina and Brazil, however, which account for a considerable proportion of the region’s weighted GDP, will have slower growth than the rest (2.0% and 1.6%, respectively).  This explains most of the reduction in the region’s growth in 2012 compared with 2011 (when it was 4.3%).

The Brazilian government is attacking the problem head on. It recently cut back its own predictions of growth from 3 percent to 2 percent (still more than the UN’s 1.6 percent), and President Rousseff announced an unconventional stimulus plan that involves competition among the private sector for grants to build infrastructure. The plan, to be implemented next year, should spur investment, as well as help prepare the country for the Olympics and World Cup.

In Argentina, the story is a little different. Here, the drop in trade is accompanied by uncertainty and distrust in President Fernandez de Kirchner. The President has worried investors with her interventionist policies, not to mention her legal persecution of economists with inconvenient inflation estimates that dispute the government’s official — but widely mocked — numbers.

On the other hand, a number of Latin American/Caribbean countries are still doing well.Mexico (the region’s second-biggest economy) is even gaining from (and contributing to) China’s downturn, as companies move factories back to North America. Mexico’s economy stands to grow 4.1 percent, which may be a far cry from its boom years but is not a decrease from 2011.



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