First modification:
The Economic Commission for Latin America and the Caribbean (ECLAC) warns that Latin America will show lower growth next year. The unfavorable international context, “in which a slowdown is expected in both growth and global trade, higher interest rates and less global liquidity”, as a result of the war between Russia and Ukraine, will accentuate the economic slowdown in the countries of the region.
All Latin American subregions will show lower growth next year: South America will grow 1.2% compared to 3.4% in 2022, while Central America and Mexico will grow 1.7% versus 2.5% . The Caribbean, meanwhile, will grow 3.1%, not including Guyana, compared to 4.3% this year.
The rise in interest rates in the world to contain inflation, which will have a negative impact on private consumption and investment, complicate the prospects for the economies of Latin America, which is why ECLAC forecasts an economic slowdown in 2023.
“Some oil-exporting countries benefit from the current context, such as Mexico, Ecuador or Venezuela. But the rest of the countries are importers of oil and energy in general, so this is a shock that generally raises production costs and has a potentially negative effect on the level of activity”, analyzes the Chilean, Andrés Solimano, president of the International Center for Globalization and Development.
The Economic Commission for Latin America and the Caribbean (ECLAC) explains that most of the countries in the region “are particularly affected by the low dynamism of China, which is an important market for its exports of goods.” Certain countries are compounded by complex internal economic problems.
“Argentina, with very high inflation, around 83%, Venezuela also has a lot of inflation. So their banks are making restrictive monetary policies that also, as in the case of Chile, affect the pace of economic growth”, says Solimano.
The most affected country in the region in 2023 will be Chile. It will have a drop of 0.9% of its Gross Domestic Product. Economist Andrés Solimano explains some of the reasons. “The Central Bank of Chile has applied a very aggressive policy of increasing interest rates, more than 10 percentage points in one year. Later, the Ministry of Finance reduced this year public spending by 25%. And the other factor is that companies in Chile are distributing a very high percentage of profits to their shareholders, postponing investment projects,” says the economist.
As trade with the United States and remittances weaken, the economies of Central America will also slow down, despite the fact that they will benefit from the lower prices of the raw materials of which they are buyers.
