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Contents • External context • Macroeconomic trends • Policy trends • Prospects External context • Low GDP growth continued in Latin America and the Caribbean in 2013, at around 2.6% • Growth has been conditioned by three factors: ₋ Less dynamic external demand, though with signs of a point of inflexion during the second half of 2013 ₋ Increased financial volatility associated with the prospects of a reduction in monetary stimulus in the United States ₋ Less dynamic regional consumption that has not been compensated by investment or net exports Global growth declined in 2013, with some improvement in 2014 REAL GDP GROWTH BY SELECTED REGIONS AND COUNTRIES, 2010-2014 (In percentages) 12 10.3 10 9.2 8 7.7 7.6 5.8 6 2 5.1 4.7 4.3 4 2.5 2 7.5 5.8 4.7 4 7.6 2.9 2.8 2.4 2.8 1.8 1.6 4.5 2 2.9 2.6 2.1 1.9 1.5 3.2 2.5 1.1 0 -0.6 -0.7 -0.5 -2 2010 2011 World United States Developing countries Japan Source: UN/DESA, Link GEO October 2013. a Estimations. 2012a 2013a 2014a Eurozone Latin America and the Caribbean China 1.3 External demand remains subdued, but there are signs of a recovery IMPORTS OF THE EUROPEAN UNION*, THE UNITED STATES AND CHINA (Year-on-year change in percentages) 40 China 30 EU27 20 USA 10 0 -10 2011.I 2011.II 2011.III 2011.IV 2012.I 2012.II 2012.III 2012.IV 2013.I 2013.II 2013.III Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. * EU 27: 27 countries, extraregional trade. In 2013, the monetary and fiscal policies of the USA served to increase international financial volatility SELECTED EMERGING COUNTRIES: NOMINAL EXCHANGE RATES AGAINST THE UNITED STATES DOLLAR (Index of December of 2012=100) 130 125 120 South Africa Australia India Brazil Chile Russia 115 110 105 100 95 90 85 80 May Possible end of stimulus of FED August Evidence of disagreements in the FED about stimulus September Announcement of delay in ending stimulus October Fiscal problems in the USA are temporarily resolved Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. Macroeconomic trends The trend of slowing growth in the region appears to have halted in 2013, but at a low rate LATIN AMERICA AND THE CARIBBEAN: YEAR-ON-YEAR QUARTERLY VARIATIONS OF GROSS DOMESTIC PRODUCT (Percentages based on dollars at constant 2005 prices) 8 7 6 5 4 3 2 1 0 I II III IV 2010 I II III IV 2011 I II III IV 2012 I II III IV 2013 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. Consumption continued to be the component of demand that sustained growth (be it low) LATIN AMERICA: CHANGE IN GDP AND CONTRIBUTION OF DEMAND (Percentages based on dollars at constant 2005 prices) 10 8 6 4 2 0 -2 Net exports Investment Total consumption Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a Projections. 2013 a 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 -4 GDP Modest growth persisted in 2013 LATIN AMERICA: GDP GROWTH RATES, 2013 a (In percentages) Paraguay 13.0 Panama 7.5 Bolivia (Plur. State. of) 6.4 Peru 5.2 Nicaragua 4.6 Uruguay 4.5 Argentina 4.5 Chile 4.2 Colombia 4.0 Haiti 4.0 Ecuador 3.8 Guatemala 3.4 Costa Rica 3.2 Dominican Republic 3.0 Cuba 3.0 LAC 2.6 Honduras 2.6 Brazil 2.4 El Salvador 1.7 Mexico 1.3 The Caribbean 1.3 Venezuela (Bol. Rep. of) 1.2 0 5 10 15 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a Projections. Modest growth persisted in 2013 THE CARIBBEAN: GDP GROWTH RATES, 2013 a (In percentages) Guyana 4.8 Suriname 3.9 St Vincent and the Grenadines 2.1 Trinidad and Tobago 1.6 St Kitts and Nevis 1.6 Belize 1.6 Bahamas 1.6 Granada 1.5 Antigua and Barbuda 1.5 The Caribbean 1.3 Santa Lucia 1.1 Jamaica 0.1 Dominica -0.5 Barbados -0.7 -1 0 1 2 3 4 5 6 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a Projections. Job creation in the region decelerated 7.0 1.0 6.0 0.8 5.0 0.6 4.0 3.0 0.4 2.0 0.2 1.0 0.0 0.0 -0.2 -1.0 GDP (left axis) 2013 a 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 -0.6 2002 -3.0 2001 -0.4 2000 -2.0 Change in employment rate (% points) GDP (%) LATIN AMERICA AND THE CARIBBEAN: ECONOMIC GROWTH AND EMPLOYMENT RATE, 2000-2013 Employment rate (right axis) Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a Projections. Growth in real salaries also slowed LATIN AMERICA (SELECTED COUNTRIES): REAL AVERAGE SALARIES INTHE FORMAL SECTOR, 2011 – FIRST TO THIRD QUARTER OF 2013 (Year-on-year change in percentages) 8 6 4 2 0 BRA CHI COL CRI MEX NIC PAN PRY URY VEN -2 -4 -6 2011 2012 Q1-Q3 2013 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. Commodities prices continued to trend downwards PRICE INDICES FOR EXPORT COMMODITIES (WEIGHTED BY THE VALUE OF EXPORTS) (2005=100) 300 280 260 240 220 200 180 160 140 120 Minerals and metals Oil and oilseeds Energy Food Forestry and agricultural raw materials Tropical beverages 100 80 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures from the United Nations Conference on Trade and Development (UNCTAD) and the Netherlands Bureau of Economic Policy Analysis(CBP). Terms of trade deteriorated generally across the region LATIN AMERICA: ESTIMATED VARIATION IN TERMS OF TRADE, 2011-2013a (In percentages) Mexico Brazil The Caribbean (except T&T) Exporters of hydrocarbons (BO,CO,EC,VE,TT) Central America and the Dominican Republic Exporters of agro-industrial products (AR,PY,UY) Exporters of minerals and metals (CL,PE) Latin America and the Caribbean -15% -10% -5% 2011 0% 5% 2012 10% 15% 20% 2013 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a The figures for 2013 are projections. Exports: lower prices were compensated (partially) by increased volume LATIN AMERICA: VARIATION IN EXPORTS BY VOLUME AND PRICE, 2013 a (In percentages) 4 3 2 1 0 -1 -2 -3 -4 -5 Latin America South America (except Brazil) Volume Central America Price Brazil Mexico Value Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a Projections. The deterioration of the trade balance deepened the current account deficit LATIN AMERICA: STRUCTURE OF THE CURRENT ACCOUNT, 2006-2013a (In percentages of GDP) 6 5 4 3 2 1 0 -1 -2 -3 -4 2006 2007 2008 2009 2010 Goods balance Services balance Current transfers balance Current account balance 2011 2012 Income balance Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a The figures for 2013 are projections. 2013 The investment ratio stagnated but registered increased external financing (saving) LATIN AMERICA: FINANCING OF GROSS DOMESTIC INVESTMENT, 2000-2013 a (Percentages based on dollars at constant 2005 prices) 25 23 20 18 15 13 10 8 5 3 External saving Gross national saving 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 -3 2000 0 Gross domestic investment Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a The figures for 2013 are projections. Short-term capital exited the region while FDI and portfolio investment grew LATIN AMERICA (17 COUNTRIES): COMPONENTS OF THE FINANCIAL ACCOUNT, 2006-2013 a (In percentages of GDP) 5 4 3 2 1 0 -1 -2 2006 2007 2008 2009 2010 2011 2012 2013 Other Net Investment Liabilities Net Portfolio Investment Net Foreign Direct Investment Financial Account Balance Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a The figures for 2013 are projections. Portfolio investment: continued access to international financial markets LATIN AMERICA: EXTERNAL BOND ISSUES AND COUNTRY RISK (Millions of dollars and basis points) 25,000 600 500 20,000 400 15,000 300 10,000 200 5,000 100 0 0 Private Banks Sovereign Quasi-sovereign EMBI+ Latin America (right axis) Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures from JP Morgan and Latin Finance. Policy trends Moderately counter cyclical fiscal policies were adopted in response to slow growth… LATIN AMERICA (19 COUNTRIES): CENTRAL GOVERNMENT FISCAL INDICATORS, 2000-2013 a (In percentages of GDP) 24 10 22 8 6 20 4 18 2 16 0.0 0.2 14 12 - 2.3 - 1.7 - 1.0 - 2.9 - 2.7 - 2.6 0 - 0.5 - 1.8 - 1.6 - 2.1 - 2.4 - 2.8 10 -2 -4 -6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Overall balance (right axis) Total revenue (left axis) Total expenditure (left axis) Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures of official budgets and estimations. a Simple averages. Data for 2013 are estimates. …which led to a certain easing of fiscal targets in the countries of Latin America… LATIN AMERICA: OVERALL BALANCE AND GROSS PUBLIC DEBT, 2013 a (In percentages of GDP) 4 Overall balance 2013 2 PER 0 CHL BOL NIC HTI URY ARG COL LAT. AM. PRY SLV GTM MEX DOM PAN -2 -4 ECU -6 BRA OECD CRI HON -8 -10 0 20 40 60 80 Gross public debt 2013 Source: Economic Commission for Latin America and the Caribbean (ECLAC) and OECDstat. a Data for 2013 are estimates. 100 120 …and the Caribbean THE CARIBBEAN: OVERALL BALANCE AND GROSS PUBLIC DEBT, 2013 a (In percentages of GDP) 15 KNA Overall balance 2013 10 5 0 ATG VCT BLZ CARIBBEAN SUR TTO GUY BRB BHS LCA GRE LAT. AM. -5 JAM OECD DMA -10 0 20 40 60 80 100 Gross public debt 2013 Source: Economic Commission for Latin America and the Caribbean (ECLAC) and OECDstat. a Data for 2013 are estimates. 120 140 Public expenditure maintained its upward trend with a modest increase in investment (capital) levels LATIN AMERICA AND THE CARIBBEAN: CENTRAL GOVERNMENT EXPENDITURES, 2012-2013 (In percentages of GDP) 35 30 25 20 15 10 5 0 2012 2013 Latin America and the Caribbean (33 countries) 2012 2013 2012 2013 Latin America (19 countries) The Caribbean (13 countries) Primary current expenditure Capital expenditure Interest Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures of official budgets and estimations. The international context generated an increase in exchange rate volatility… SELECTED COUNTRIES: NOMINAL EXCHANGE RATES AGAINST THE UNITED STATES DOLLAR (Index of January of 2008=100) 140 130 Brazil 120 Mexico 110 Chile 100 90 80 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. Uruguay Colombia Peru 0 Source: Bloomberg. Brazil Chile Colombia Mexico Peru (right axis) 01-10-2013 01-07-2013 01-04-2013 01-01-2013 01-10-2012 01-07-2012 01-04-2012 01-01-2012 01-10-2011 01-07-2011 01-04-2011 01-01-2011 01-10-2010 01-07-2010 01-04-2010 01-01-2010 01-10-2009 01-07-2009 01-04-2009 01-01-2009 01-10-2008 01-07-2008 01-04-2008 01-01-2008 01-10-2007 01-07-2007 01-04-2007 01-01-2007 …as well as fluctuations in the region’s stock markets SELECTED COUNTRIES: STOCK MARKETS (Index of January of 2006=100) 250 450 400 200 350 300 150 250 100 200 150 50 100 50 0 With the exception of Brazil, lower inflationary pressures have permitted the reduction of monetary policy rates COUNTRIES WITH INFLATION TARGETS: CHANGES IN MONETARY POLICY RATES BY DATE, 2013 Country Brazil Increase Decrease April 18 May 30 July 11 August 29 October 10 November 28 Chile October 18 November 20 Colombia January 29 February 25 March 26 Guatemala April 25 October 30 Mexico March 8 September 6 October 25 Peru November 7 Source: Central banks. The majority of countries using a monetary aggregates approach maintained money growth rates of around 10% GROWTH OF MONETARY AGGREGATES, ANUALIZED VARIATION OF M1 (In percentages) 35 30 South America * 25 20 South America (excl Argentina and Venezuela (Bol. Rep. of)) Dollarized countries ** The Caribbean (English speaking) Central America *** 15 10 5 -5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 0 2011 2012 2013 The Caribbean (English speaking) Central America* South America** South America (excl Argentina and Venezuela (Bol. Rep. of )) Dollarized countries*** Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. *Argentina, Bolivia (Plur. State. of), Paraguay, Uruguay and Venezuela (Bol. Rep. of). **Ecuador, El Salvador and Panama. ***Costa Rica, Honduras and Nicaragua Inflation trajectories differed across the region depending on the monetary policies adopted LATIN AMERICA AND THE CARIBBEAN: 12-MONTH INFLATION, JANUARY 2007 TO OCTOBER 2013 (Simple average) 16 14 12 10 8 6 4 2 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep 0 2007 2008 2009 2010 2011 2012 2013 Latin America and the Caribbean The Caribbean South America México South America (excl. Argentina, Brazil and Venezuela (Bol. Rep. of)) Brazil Central America Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. International reserves ceased to grow as in previous years, while debt remained low GROSS INTERNATIONAL RESERVES AND TOTAL GROSS EXTERNAL DEBT (Millions of dollars and percentages of GDP) 900,000 60 800,000 50 600,000 40 500,000 30 400,000 300,000 20 200,000 10 100,000 0 0 2002 2003 2004 2005 2006 Latin America and the Caribbean 2007 2008 Brazil 2009 2010 2011 2012 2013 Gross external debt (right axis) Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. Percentage of GDP Millions of dollars 700,000 Prospects A moderate recovery in growth is projected for 2014 LATIN AMERICA: GDP GROWTH RATES, 2014 a (In percentages) Panama 7.0 Bolivia (Plur. State. of) 5.5 Peru 5.5 Nicaragua 5.0 Dominican Republic 5.0 Colombia 4.5 Haiti 4.5 Ecuador 4.5 Paraguay 4.3 Chile 4.0 Costa Rica 4.0 Uruguay 3.5 Guatemala 3.5 Mexico 3.5 LAC 3.2 Cuba 3.0 Honduras 3.0 Argentina 2.6 Brazil 2.6 El Salvador 2.6 The Caribbean 2.1 Venezuela (Bol. Rep. of) 1.0 0 2 4 6 8 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a Projections. A moderate recovery in growth is projected for 2014 THE CARIBBEAN: GDP GROWTH RATES, 2014 a (In percentages) Suriname 4.7 Guyana 4.6 St Kitts and Nevis 2.9 Belize 2.8 Bahamas 2.5 Santa Lucia 2.3 The Caribbean 2.1 Trinidad and Tobago 2.1 Antigua and Barbuda 1.5 St Vincent and the Grenadines 1.4 Granada 1.3 Jamaica 1.2 Dominica 1.2 Barbados 1.0 0 1 2 3 4 5 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a Projections. Threats and opportunities Threats External context Volatility and an increased cost of external financing Limited contribution of consumption to GDP growth: Regional context Slowdown in wages and credit Limited fiscal impulse External vulnerability: Deterioration of the current account with a growing cost to finance its deficit Threats and opportunities Opportunities External context Moderate growth of global trade Larger deficit of the current account: Regional context results in depreciation that modifies relative prices Complementary policies: macro, industrial, SMEs, environmental, social and trade, as well as infrastructure. Opportunity to: Invest more in diversified tradables and exports Reduce structural heterogeneity Regional integration: trade and complementary specialization The challenge of fostering growth with equality: social covenants for investment (productivity) with three dimensions SOCIAL COVENANT DIAGRAM Institutional framework: Clear rules, certainty and equal participation of actors Short-term policies (counter cyclical) : nominal and real stability Source: Economic Commission for Latin America and the Caribbean (ECLAC). Long-term policies: investment in the diversification of tradables