Despite the images of violence and social protests that we are seeing in much of Latin America, top international economists specializing in the region are surprisingly confident that Latin American economies will grow in 2020. It won’t be a great year, but it will be better than 2019, they say.
That’s the message I got after talking with the lead economists for Latin America of the International Monetary Fund (IMF), the Economic Commission for Latin America and the Caribbean of the United Nations (ECLAC), and other major international institutions.
Their consensus was that the region will grow by about 1.4% this year, compared with its near-stagnant growth rate of 0.2% last year.
Aren’t they being too optimistic? After all, Venezuela’s economy has collapsed, Argentina is in crisis, Mexico’s economy has slowed to a halt, and even some of the region’s most solid economies- like Chile and Colombia — are being shaken by massive street riots.
And that’s without taking into account that China, a major importer of Latin American commodities, is growing at a slower pace, and that there could be an escalation of the U.S.-Iran conflict that could hurt world trade.
Alejandro Werner, the director of the IMF’s Latin America department, told me that despite all these threats, “Latin America’s economy will do better in 2020.” Among other things, there will be rebound effect after four years of economic stagnation, and the region’s two largest economies — Brazil and Mexico — will do somewhat better than last year, he said.
According to the IMF’s forecast, Brazil’s economy will grow by about 2% this year, thanks to the congressional passage of a much-awaited pensions reform and other pro-business measures that will draw more investments to the country. Brazil — alongside Colombia — has now become one of the fastest-growing economies among Latin America’s biggest countries.
In addition to Brazil and Colombia, Mexico’s economy will probably to grow by up to 1.4% this year, after a sluggish 0.4% last year, Werner said.
That’s because the United States, Mexico and Canada are likely to ratify their newly negotiated free trade agreement, which would eliminate fears of higher tariffs and prompt business to reinvest in export industries.
Also, Mexico’s manufacturing sector is likely to benefit from the preliminary trade agreement between the United States and China, Werner said. If the U.S.-China trade picks up, Mexican factories that supply U.S. producers will increase their exports.
“We think that Brazil and Mexico, among others, will do better in 2020 than in 2019,” Werner told me. “But it’s worth noticing that it won’t be a panacea. These growth rates are not worth celebrating.”
Venezuela’s economy will continue sliding down by 10% this year after a 35% decline last year, and Argentina’s economy is likely to keep struggling, he added.
Alicia Bárcena, the head of the U.N.’s ECLAC, told me likewise that she expects the region’s overall economy to grow by 1.3% this year, mainly thanks to Brazil’s expected recovery. Brazil’s economy weighs a lot in the regional average, she said.
My opinion: It’s great to hear that Latin America’s overall economy may be on the upswing — even if it’s by a tiny bit — after four bad years. But we have to keep in mind that the region’s projected 1.4% growth rate in 2020 would still be below its population growth rate. That means that countries will not be growing fast enough to provide jobs for the millions of young people who join the work force every year.
And we shouldn’t forget that Latin America’s expected growth rate will be far below the 3.4% global economic growth rate projected for 2020. In fact, Latin America is growing at a much slower pace than Asia, Eastern Europe and Africa, and is one of the world’s slowest-growing regions.
Many Latin American politicians have not yet realized that without investment there is no growth, and without growth there is no reduction of poverty.
So, while forecasts of a small recovery in 2020 are good news, I’m afraid we won’t see any significant upswing until countries in the region step up efforts to draw investments, instead of scaring them away.
ABOUT THE WRITER
Andres Oppenheimer is a Latin America correspondent for the Miami Herald, 3511 N.W. 91 Avenue, Doral, Fla. 33172; email: firstname.lastname@example.org.
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