Latin American economies beginning to point upward

Good news for Latin America: a new United Nations study projects that the region's economy will start recovering in the second half this year, and that it will grow by a respectable 3.1 percent next year.

Before getting into whether the forecast released Wednesday by the U.N. Economic Commission on Latin America and the Caribbean (ECLAC) is realistic or too optimistic, let's look at the key points of the report.

According to the study, Latin America's recovery will follow a grim 2009: the region's economy will contract by 1.9 percent this year, and unemployment in the region is expected to reach 9 percent by the end of the year, adding another three illion people to the 180 million living below the poverty line.

But, barring surprises, the region's economy will start picking up in coming months thanks to, among other things, China's growing purchases of raw materials, a recovery of world commodity prices, a slow but gradual increase in world trade, and signs that the region is beginning to regain access to foreign loans.

Among ECLAC's projections for specific countries in the region:

• Argentina's economy will grow by 1.5 percent this year, and by 3 percent next year.

• Brazil's economy will contract by 0.8 percent this year, and grow by 3.5 percent next year.

• Chile's economy will shrink by 1 percent this year, and grow by 3.5 percent next year.

• Colombia's economy will grow by 0.6 percent this year, and 3.5 percent next year.

• Cuba's economy will grow by 1 percent this year, and 3 percent next year.

• Ecuador's economy will grow by 1 percent this year, and 2.5 percent next year.

• El Salvador and Guatemala, whose economies will contract by 2 percent and 1 percent respectively this year, will see their economies grow by 2.5 percent each next year.

• Haiti's economy will grow by 2 percent this year and next year.

• Mexico's economy will plunge by 7 percent this year, and grow by 2.5 percent next year.

• Panama's economy will grow by 2.5 percent this year, and a significant 5 percent next year.

• Peru's economy will grow by 2 percent this year, and 5 percent next year.

• Venezuela's economy will grow by 0.3 percent this year, and by 3.5 percent next year.

``We believe that we reached the bottom of the crisis in March 2009, ECLAC's head Alicia Bárcena told me in a telephone interview.

``The recovery is likely to be slow, but there are signs that the worst is over.''

Many independent economists agree with the U.N. projections.

Sebastian Briozzo, a senior analyst with the Standard and Poor's ratings agency, told me that his company's projections for 2010 are slightly lower, but generally close to ECLAC's. Standard and Poor's forecasting growth rates of 2.5 percent for Brazil, 1 percent for Mexico and Argentina, and 4.5 percent for Peru next year.

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By Andres Oppenheimer
Source: The Miami Herald