Latin America: growth and current scenario

Latin America’s GDP is growing and is expected to continue to rise in 2012 and 2013. According to the report “Current Situation and Prospects of the World Economy” published by the United Nations Conference on Trade and Development (UNCTAD), a permanent intergovernmental body of the United Nations, GDP is projected to grow by 3.31% in 2012 and 4.21% in 2013. The entire macro-region had experienced growth of 4.31% in 2011 and 6.1% in 2010.

Breaking down these percentage increases by region, UNCTAD economists projected GDP growth of 3.61% in 2012 and 4.51% for the following year in South America (in 2011, growth was 4.61%); for Mexico and Central America, an increase of 2.71% in 2012 and 3.61% in 2013; for the Caribbean countries, projections indicate +3.61% and +4.31%, respectively.

If South America's growth in 2011 was attributable to job creation (which in turn reduced poverty and inequality), a significant increase in private consumption, and commodity prices, the slowdown predicted for 2012 is mainly due to the threats of recession coming from the Western world, and particularly from the Eurozone, strangled by the debt crisis: it is therefore logical that the repercussions of what is happening in Brussels are also felt in Brasilia, Buenos Aires, and Santiago.

Despite Europe’s difficulties and the implications they entail, South America—and Latin America more broadly—is currently one of the fastest-growing regions economically, finally able to rely on political stability and credibility: to give just one example, Brazil now ranks sixth in the world in terms of GDP, has enormous growth prospects, a public debt of around 55.1% of GDP, and a budget surplus of 2.91% of GDP.

Countries like Brazil and Chile have very low foreign debt, hold substantial foreign currency reserves, and are capable of attracting huge amounts of foreign investment. In short, their foreign financial exposure has progressively improved over time, leading to a reversal of money flows: no longer from developed to developing countries, but vice versa. The consequences of all this in terms of global governance these could be truly explosive, especially concerning Brazil's position: if in the 80s and 90s it was the United States dictating the terms for public finance recovery (precisely with Latin American countries) through the Washington Consensus, it cannot be ruled out, especially if the IMF were to intervene more forcefully with countries belonging to the Euro, that the roles of the participating actors will change in the coming years.

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