SANTIAGO DE CHILE, 1 april 2009: Latin America and the Caribbean will have negative growth of -0. per cent in 2009, the region’s first setback after six years of continuous growth. Unemployment in the region will rise to almost 9 per cent, from the nearly 7.5 per cent in 2008, increasing poverty.
The effects of the international crisis will impact the region harshly this year, said Alicia Bárcena, Executive Secretary of the UN Economic Commission for Latin America and the Caribbean, ECLAC, during the Latin America Emerging Markets Forum 2009 which opened Wednesday in Bogotá, Colombia.
Those worst hit will be Mexico, (-2.0 per cent), Brazil (-1.0 per cent), Costa Rica (-0.5 per cent) and Paraguay (-0.5 per cent), while Panama, Peru, Cuba and Bolivia will maintain positive growth of 3.0 per cent or over. Ecuador and Chile will experience zero growth during 2009, says ECLAC.
The negative effects of the crisis are reflected in declining international trade and falling commodity prices, with which the region’s terms of trade will decrease 15 per cent. There will also be a sharp drop in exports -particularly affecting countries with open economies such as Central American nations and Mexico-, lower remittances, less tourism-related income -especially in the Caribbean and Central America-, and diminishing flows of foreign direct investment.
This occurs in a context of growing uncertainty at a regional and global level, which is affecting expectations in the private sector, with negative consequences on investment and consumption.
Limited available international financing and the increasing prime risk of Latin America’s sovereign debt will also take their toll on the region, said the ECLAC Executive Secretary.
For now, the region’s economies have proved solid enough to bear the financial impact, thanks to the fact that during the economic boom of previous years, they accumulated reserves and reduced their debts and/or renegotiated them in better terms, added Bárcena.
However, if the current scenario is protracted or deepens, a situation that cannot be discarded, several countries will face increasing difficulties next year.
Governments are facing the need to implement countercyclical policies, but at the same time they come up against their limited economic capabilities to implement the necessary measures.
The region’s fiscal and external accounts deficit will surpass 2 per cent of GDP, although the situation will vary greatly from country to country.
This is why it is so important for international financial bodies to increase and ease financing to countries so they may implement measures to mitigate the impact of the crisis.
– A global perspective must be adopted on how to overcome the crisis and strengthen the efforts that each individual country is making, but this means providing many of them with the financial resources they need to face the challenges of the moment, stated Bárcena.
The crisis may provide an opportunity to redefine the predominant paradigms of economic development, as well as think of a new international financial architecture and a renewed role for the State, asserted Bárcena.
The State, she said, should play an active role in the protection of the most vulnerable sectors of society, in the promotion of a productive base that incorporate more knowledge, and in the regulation of economic activity so that seeking private profit does not conspire against the general welfare.
To mitigate the negative impact, Bárcena suggested taking into account the lessons of prior crises: avoid protectionism and measures that may aggravate inequality; preserve social expenditure, especially with regard to human capital; and concentrate investment in productive and social infrastructure.
ECLAC has prepared a complete summary of the measures countries in the region have announced so far to address the crisis, which will be permanently updated. These measures are grouped in four main areas: fiscal policies, monetary policies, exchange and trade policies, and sectorial policies. For more information follow the link above, or see www.cepal.org/especialcrisis.
The forum is organized by the Government of Colombia and the international consulting firm Emerging Markets Forum. Participants include authorities, experts and opinion leaders from all over the world.
