despite the ‘headwinds’ suffered by Latin America in the wake of inflation, high interest rates and global economic weakness, the region is heading towards a “cyclical upturn“at the end of the year that will last through 2024, according to the Intelligence Unit of the British group The Economist.
(See: OECD: Latin American countries, those that suffered the most from the pandemic).
Analysts anticipate that in the coming months inflation will begin to moderate and the Latin American central banks will cut rates, although the Gross Domestic Product (GDP) of the region as a whole will grow “only” 1.3% in 2023.
During a virtual conference, experts from The Economist anticipate that Brazil, Chile and Peru will lower their interest rates in the second half of 2023, followed by Colombia and Mexico in 2024.
It is worth remembering that on Friday, April 28, the Colombian Bank of the Republic raised the interest rate to 13.25%.
“This will be the seed of a cyclical upturn in the economy that will extend to 2024“said Robert Wood, chief economist at the Intelligence Unit for Latin America and the Caribbean.
With everything, “without progress on productivity-boosting reforms, we don’t expect a stellar year either“, stressed the analyst, who anticipates a growth of between 2% and 2.5% in 2024.
(See: IDB proposes to reduce debt in Latin America to a ‘prudent’ range).
The decisions made by the central banks of large countries such as Brazil and Mexico will mark the state of mind of investors, said Wood, who stressed that countries such as Costa Rica and Uruguay they have already led the way with rate cuts.
the intelligence unit of The Economist too stressed that the Foreign Direct Investment (FDI) in Latin America it rebounded in 2022 to its highest level in a decade.
Investments that were delayed by the covid-19 pandemic, together with the high price of raw materials, have contributed to that “boom“said analyst Erica Fraga.
(See: The dispute between China and the United States over lithium in Latin America).
As a third determining factor for this increase in investment, Fraga pointed to the trend in which US firms bet on nearest production points, in the face of geopolitical tensions in the Pacific and global problems in supply chains.
Latin American economy
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“This has been particularly evident in Mexico, due to its proximity to the United States, but we believe that other countries in the region may be benefiting or may potentially benefit.“added the expert.
(See: IMF decreases prospects for economic growth in Colombia).
The diversification of some Latin American economies regarding raw materials has also been “positive“for the regional economy, he stressed.
EFE
