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Latin America's commodities-fueled growth slowing
by Staff Writers
Brasilia, Brazil (UPI) Oct 11, 2013

disclaimer: image is for illustration purposes only

As the IMF and the World Bank see Latin American economic growth faltering and a recovery unlikely before 2014, a dim outlook for Brazil is emerging -- with the biggest surprise of all in revised projections from the two international bodies in Washington.

After a record high of 7.5 percent growth in 2010, Brazil's growth has been on the slide, though still strong when compared with performance of neighbors in Latin America and the Caribbean.

Brazil has staked a lot on growth -- big spending on the FIFA World Cup next year and the Olympics in 2016, expectation of regional leadership and of a permanent seat on the U.N. Security Council and multibillion dollar military modernization.

For President Dilma Rousseff, as for former President Luiz Inacio Lula da Silva, it's all interconnected -- and global pre-eminence is seen in Brasilia as the reward of economic prosperity.

But prosperity remains limited to less than 1 percent of Brazil's 200 million population, which controls 13 percent of all household income.

Similar scenarios are repeated in other Latin American countries, which means slower growth across the continent this year and in 2014 will likely increase those income disparities, new research showed.

The IMF said lower commodity prices had combined with poor infrastructural networks. Individual countries weren't singled out but Brazil has faced congestion and slowdown at its ports this year, while Argentina was hit by dockers' strikes, Chile faced street riots and other countries had similar woes.

IMF data showed the slowdown would likely affect the Caribbean and Central America, too, with Mexico suffering from both slow growth and lower worker remittances from the United States.

Gross domestic product forecasts for this year are down to 2.7 percent -- a dramatic 0.3 percentage points lower than IMF forecasts in July. Latin American growth next year will also be 0.3 percentage points lower at 3.1 percent.

The IMF urged governments to stabilize economies and guard against volatile financial policies, and called for tougher monetary measures to keep exports competitive. Overvaluation of local currencies dampened demand for regional exports and inflation remains a problem in Argentina, Venezuela and Peru.

The biggest challenge for Latin America remains the region's dependence on commodity exports, IMF experts say, and less than expected economic diversification. This is despite strong foreign direct investment, which props up national currencies but doesn't help the economies gain stronger foothold as industrializing trading partners.

FDI rose 6 percent in the first half of this year, with more than $102 billion going to 13 reporting countries, the Economic Commission for Latin America and the Caribbean said in a report. ECLAC said Brazil and Mexico remain magnets for FDI.

Regional investment across Latin American borders also played a part in the FDI growth.


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