Latin America and Caribbean Record Lowest Growth in 70 Years

RIO DE JANEIRO, BRAZIL – Latin America and the Caribbean showed a generalized and synchronized economic slowdown, both in an analysis of countries and productive sectors. The new report of the Economic Commission for Latin America and the Caribbean (ECLAC) points to the worst growth in the region in seven decades.

By 2019, overall regional growth should be only 0.1 percent. By 2020, the projection is 1.3 percent growth. ECLAC’s projection for Brazil is for growth of one percent in 2019 and 1.7 percent in 2020.

The commission’s data show that, as of 2014, a low growth trajectory has been established and continues to this day. Among the 33 countries in the region, 23 (18 out of 20 in Latin America) are expected to experience a slowdown in their growth this year, while 14 countries will record growth of less than one percent.

The balance sheet shows that in 2019 the country with the highest growth will be Dominica (9 percent), followed by Antigua and Barbuda (6.2 percent), the Dominican Republic (4.8 percent) and Guyana (4.5 percent). On the other hand, Venezuela will record the greatest decline, with a contraction of -25.5 percent, followed by Nicaragua (-5.3 percent), Argentina (-3.0 percent) and Haiti (-0.7 percent). Central America will grow 2.4 percent; the Caribbean 1.4 percent and South America will contract -0.1 percent.

The release of the new study, entitled Preliminary Balance of the Economies of Latin America and the Caribbean 2019, took place yesterday, December 12th, in Santiago, Chile. Alicia Bárcena, the organization’s executive secretary, stressed the importance of the state’s role in restoring regional growth.

“The role of the state is crucial. We need countries to review their policies. The market will not solve everything on its own. We must prioritize sustainable development policies. We are at a very bad time, the worst in the past 70 years, and we have to solve growth, inequality and environmental sustainability,” said Alicia, during the release of the report.

She pointed out three major stagnation indicators and uncertainties for the region’s growth. First, in 2019, the world economy grew at its lowest rate since the global financial crisis and, by 2020, no significant improvements are expected. Second, world trade is proving increasingly fragile amidst trade tensions.

The economy of China and the United States, the region’s two main trading partners, has also slowed. And third, financial vulnerabilities are increasing. In addition to this context, there are growing and urgent social demands and pressures to increase social inclusion, both in terms of income and public goods.

“The region cannot withstand a policy of readjustments and requires policies to spur growth and reduce inequality. Inequality is inefficient and attacks growth; it is at the heart of social discontent due to worsening employment, insufficient income, poor provision of public goods and low social protection,” said Alicia.

The report also provides warning signs for the region. In 2019, the sixth year of low growth in the region was recorded, a situation that will continue in 2020. In addition, per capita GDP fell by four percent between 2014 and 2019. There is a lower volume of trade. Consumption and investment slow down or contract. There is a low contribution of public spending to growth and domestic credit is reduced.

Unemployment

This year, Latin America and the Caribbean recorded one million more vacancies and reached a new record: 25.2 million people unemployed. The unemployment rate increased from eight percent to 8.2 percent. In addition, there was a worsening of the quality of jobs in most countries and an increase in informal work (three percent), which is double the increase in formal employment (1.5 percent).

In nine of the 12 countries for which information is available, employment in the agricultural sector declined, the only exceptions being Brazil (with a slight increase of 0.3 percent), Ecuador, and Peru.

ECLAC believes that the region needs fiscal incentives (not fiscal adjustments) coupled with fiscal sustainability policies to reduce idle capacity. Incentives focused on tax increases, greater progressivity in tax structure and reforms in social protection systems.

According to the report, despite the difficulties and limitations currently faced, unlike in previous years, most countries in the region have historically low inflation rates (2.6 percent of the regional average, not including Venezuela, Argentina, and Haiti). In addition, they have relatively high international reserves and, in general, economies retain access to international financial markets. For ECLAC, these conditions favor the ability to implement macroeconomic policies aimed at reversing the current low growth scenario.

Source: Agência Brasil